Monday, October 27, 2014

Florida Bankruptcy Exemptions

Florida Exemptionsproperty exempt in bankruptcy6

Florida is an "opt-out" state, which means that the federal exemptions are not used, except those referenced in Florid Statutes and others.

Homestead

Florida provides for a very generous homestead exemption, which though limited in the size of the parcel, the value of the real property is unlimited.

Personal Property

Personal property in the amount of $1,000 is exempt, bu another $4,000 is allowed if a person does not have the benefit of a homestead exemption. Another $1,000 in equity in a vehicle is also exmption.

Intangible Personal Property

Various other intangible prersonal property is also exempt, including some aspects of life insurance,  disability insurance, social security, retirement benefits, workers's compensation, and unemployment benefits.

Thursday, October 16, 2014

Chapter 13 Budget for Plan Confirmation & Modification



Chapter 13 Bankruptcy Attorney

Expenses based on IRS Collection Standards 

On May 9, 2014, the U.S. District Court of the Southern District of Florida issued its decision in In  re Claudio Lorenzo,  Case No. 13-23100 (S.D. Florida 2013) which affirmed the Bankruptcy Court's order in Case No. 09-28532.  The issue in this case involved what expense standards applied in a modification of a chapter 13 plan.  The Court upheld the Bankruptcy Court's ruling that 11  U.S.C. §1329 incorporates the requirements of section 1325(a) but not the requirements of section 1325(a), which incorporates the provisions of section 707(b)(2)(A) [the standardized IRS collection standard expense].   The Court agreed with other courts that have held that section 1325(b) only comes into effect in the confirmation of a plan, but not in the modification of a plan.  

"Plain Meaning"  

District Court found that the "plain meaning" of section 1329 of the Bankruptcy Code supported the Bankruptcy Court's finding that Section 1329 only incorporates four specific four statutory provisions and "implicitly excluded other provisions" ("expressio unius est exclusio alterius") - that is, it included Section 1325(a), but not 1325(b) [which mandates the use of the expense amounts set forth by the IRS collection standards used in the "means test"). The Court favorably cited the case of In re David, 439 BR 863 (Bankr. N.D. Ill. 2010). 

Different Processes: Confirmation - Modification 

The Court explained that modification is not a type of confirmation, but is instead "a process that takes place after confirmation."  The Court cited In re Sunahara, 326 B.R. 768, 781 (BAP 9th Cir. 2005) where the Court held that "[s]ection 1329 (b) expressly applies certain specific Code sections to plan modifications but does not apply §1325(b). Period." 

Judges Lundin & Brown: Varying Positions 

The treatise Keith M. Lundin & William H. Brown,  Chapter 13 Bankruptcy, 4th Edition, §255.1 states that the Bankruptcy Code is "unclear whether the disposable income 1325 (b) applies at modification, that different rules of statutory construction lead to contrary results and that the legislative history is not illustrative. Judge Lundin opines that the language of sections 1329 and 1325 "somewhat favors" the interpretation that section 1325(b) applies at plan modification as well as plan confirmation.  But Judge Lundin further noted that some courts hedge the application of section 1325(b) to only "egregious" or "extraordinary" facts.  

Wednesday, October 1, 2014

11th Circuit - Two Days - Two 506 Decisions


Lien Stripping in Chapter 7 

Last week, the 11th Circuit issued two back-to-back ("not for publication") decisions in  In re Phillip, 2014 WL 4802758 (11th Cir. Sept. 29, 2014) and  In re Vaner Iest, 2014 WL 4825253 (11th Cir. Sept. 30, 2014).  The mortgage lender in both cases was Bank of America, N.A.

In both Phillips and Vaner Iest, the second mortgage on the chapter 7 debtor's home was wholly "underwater" and had been "lien stripped" by the Bankruptcy Court.  In both cases, the 11th Circuit help that it was bound by its "prior panel precedent" rule and upheld the Bankruptcy Court's lien avoidance in the same manner it did previously in McNeal v. GMAC Mortgage, LLC, 735 F.3d 1263 (11th Cir. 2012)("not for publication"). In McNeal the Court ruled that it was bound by its 1989 decision in  Folendore v. Small Business Administration, 862 F.2d 1537 (11th Cir. 1989), which held that section 506 (d) of the Bankruptcy Code permits a chapter 7 debtor to avoid ("strip off") a wholly "underwater" second mortgage.

Bank of America, N.A. is a taking tremendous efforts to prohibit the ability of chapter 7 debtors to avoid wholly underwater second mortgages.  A motion filed in one such case indicates that there were 21 appeals pending before the 11th Circuit on this issue and that Bank of America was trying to consolidate them for appeal. But it is not clear how quickly this issue will obtain an en banc review as it was denied recently on an attempt in June, 2014 in the case of the In Re Trina Renee Banks, No. 13-13867 as "no Judge in regular active service on the Court having requested that the Court be polled."

Dewsnup

The problem the decisions of the 11th Circuit have on this issue is that Folendore pre-dates the U.S. Supreme Court's decision in the landmark case of Dewsnup v. Timm, 502 U.S. 410 (1992). The Court's ruling in McNeal indicated that if it were not bound by the "prior panel precedent" rule it would not apply Folendore as Dewsnup appears to reject the reasoning of Folendore.  This article indicates that the 7th Circuit in Ryan v. United States (reviewed here) and 10th Circuit in In re Woolsey, 696 F.3d 1266 (2012)  have already held that Dewsnup prohibits the avoidance of "underwater" junior liens in chapter 7. Dewsnup is reviewed  here and here. 

Prior Panel Precedent Rule - "Clear Contrary Opinion" Required

In McNeal, the Court held that it was bound by the Court's "prior panel precedent" rule to apply Folendore and allow the strip down of wholly underwater liens in a chapter 7 case despite the Supreme Court's decision in Dewsnup. Timm, 502 U.S. 410 (1992). Under the prior precedent rule, "a panel cannot overrule a prior one's holding even though convinced it was wrong." United States v. Steele, 147 F. 3d 1316 (11th Cir. 1998)(en banc). This article explains that the 11th Circuit in the case of Main Drug, Inc. v. Aetna U.S. Healthcare, Inc., 475 F.3d 1228 (11th Cir. 207), held that “‘[w]ithout a clearly contrary opinion of the Supreme Court or of this court sitting en banc, we cannot overrule a decision of a prior panel of  this court.’”
"
Apparrently, the Judges in Phillips were not very happy to be bound by the "prior precedent rule" as they wrote that the Supreme Court in Dewsnup  "rejected the reasoning of  Folendore" and that if Bank of America sought  "to petition this Court for en banc consideration of the issue it raises here, this Court should seriously consider the petition."

Motion for "Summary Affirmance" against Itself

The Court's docket in Phillips, indicates that Bank of America got to the 11th Circuit after it moved for and was granted "summary affirmance" against itself  by the District Court of the Bankruptcy Court against itself.   Bank of America, N.A. did so so as to permit it to seek "en banc review and/or petition the Supreme Court for a writ of certiorari regarding the continued viability of Folendore."

Sinkfield in the 11th Circuit

In another case which reached the 11th Circuit after "summary affirmance" in the District Court (Sinkfield), took the following course:
  1. 11th Circuit granted summary affirmance to permit Bank of America to seek en banc review and/or petition the Supreme Court for a writ of certiorari regarding the continued viability of Folendore
  2. Bank of American's petition for rehearing en banc was construed as a motion for reconsideration of the summary affirmance order and referred to the panel
  3. Panel denied the motion without explanation
  4. Writ of Certiorari to the Supreme Court was denied on March 31, 2014 - "presumably to permit the en banc Eleventh Circuit to resolve the issue"