Ninth Circuit Takes a Hard Line Against Waiving Discharge Inadvertently
The Ninth Circuit may be backing off from Ybarra, a case that waives discharge for attorneys’ fees if the debtor ‘returns to the fray.’
%1
HAVEN Act May Be Employed to Reduce Payments Under a Confirmed Chapter 13 Plan
Judge Shefferly writes a complicated opinion on the retroactivity of the HAVEN Act to cases filed prior to enactment.
Fifth Circuit Rules that the Penalty under the ACA Isn’t a Priority Tax Claim
The exaction for failure to purchase health insurance isn’t an excise tax ‘on a transaction’ under Section 507(a)(8)(E)(i).
Must a Debtor Be Destitute Before Discharging Student Loans?
Unemployed for 16 months, surviving on food stamps, and living rent-free enabled a debtor to discharge student loans.
Ex-Uber Engineer Goes Bankrupt in $179 Million Google Vice-Grip
One of Silicon Valley’s most highly prized engineers filed for bankruptcy after Google won a $179 million award against him over his defection to Uber Technologies Inc., Bloomberg News reported. Anthony Levandowski’s understanding of self-driving cars spawned multimillion-dollar bidding wars for his talent, but he got caught between the companies’ fierce competition in the race to own the technology. Financial and legal liabilities that had steadily mounted for years finally proved too much when a San Francisco state judge refused Wednesday to release Levandowski from an award that Google won in arbitration over his violation of an agreement to not poach employees. The ruling leaves Levandowski on the hook to repay a $120 million bonus Google once paid him, and when interest and attorney fees were added, the amount swelled enough that the judge called it “pretty staggering.” Adding to the pressure, Levandowski faces criminal charges that he stole trade secrets from Google. He’s denied wrongdoing and retained top-flight lawyers to try to avoid a conviction at a trial next year that could send him to prison. One of those lawyers told a federal judge soon after Levandowski was charged that his net worth had diminished to $72 million after accounting for taxes and a divorce.
Bankruptcy Discharge Cuts Off Future Liability on a Guaranty
Courts are split on whether a personal guaranty survives bankruptcy.
California Man Arrested on Indictment Alleging He Repeatedly Caused False Statements to Be Made in Bankruptcy Court Petitions
A San Bernardino County, Calif., man who worked as a bankruptcy petition preparer (BPP) was arrested on Friday on federal criminal charges that allege he acted as an unlicensed attorney in bankruptcy cases, charged fees well over those permitted by law and then repeatedly lied to the U.S. bankruptcy court, according to a DOJ press release. Richard Allen Mease of Victorville, Calif., was taken into custody this morning by special agents with the FBI. The indictment, which was returned on Wednesday by federal grand jury, charges Mease with four counts of making a false statement in a bankruptcy proceeding. The indictment alleges that, on at least four separate occasions, Mease concealed his identity as a BPP on bankruptcy petitions he prepared on behalf of clients. Under applicable law and regulations, a BPP is permitted to charge fees of up to $200 to prepare and file a bankruptcy petition, but is not permitted to offer or provide legal advice. Mease repeatedly violated these laws and regulations since at least September 2009, charging clients fees well over the legally permitted limit and acting as an unlicensed lawyer, the indictment alleges. In response to these violations, a bankruptcy court in 2011 barred him from acting as a BPP after he had charged a client more than $1,000 for BPP services and provided legal advice, according to the indictment. In 2013, the bankruptcy court issued another order holding Mease in contempt of court for continuing to prepare bankruptcy petitions in violation of the injunction. But Mease allegedly continued to break the law and violate the court’s injunction against him. If convicted of all charges, Mease would face a statutory maximum sentence of 20 years in federal prison.
Silence in the Face of a Duty to Disclose Is Not a ‘Statement,’ 9th Cir. BAP Holds
The Ninth Circuit BAP closed a loophole that would have allowed a recipient of public assistance benefits to discharge a debt for overpayment.
No Fees for a Chapter 13 Trustee in a Case Dismissed Before Confirmation
Trustees in chapter 12 fare better than chapter 13 trustees if a case is dismissed before confirmation.
ABI Journal Article Examines How Reserve Fund Concept Keeps Chapter 13 Plans Alive for Debtors and Benefits Unsecured Creditors
Alexandria, Va. — As chapter 13 bankruptcy plans are typically structured without a buffer for any unforeseen costs (such as a car repair or medical procedure), an article in the February ABI Journal explores how establishing a reserve fund in these cases helps both debtors and creditors. Chapter 13 of the Bankruptcy Code provides for the adjustment of debts of an individual with regular income by allowing a debtor to keep property and pay debts over time, usually three to five years. The chapter 13 reserve fund concept will “provide flexibility to the rigid projected-expense calculations that the Bankruptcy Code mandates, which puts debtors in a better position to withstand unexpected financial events, which are virtually certain to occur, without having their plans derailed,” judicial clerks John Andreasen and Samuel Rabuck of the U.S. Bankruptcy Court for the Northern District of Illinois (Chicago) write in their article. “Although unsecured creditors do not seem like the obvious beneficiaries of the reserve funds discussed, some simple math and common sense reveal just how much they stand to gain.”
Research pointed out that plan failure is the ultimate result of 66 percent of all chapter 13 cases filed nationwide, according to data reviewed by Andreasen and Rabuck from a 12-month-period ending June 30, 2017. “Most of these failures are due to nonpayment of monthly plans,” they write. “After a chapter 13 plan fails, debtors typically do one of two things: (1) refile a chapter 13 case; or (2) stay out of bankruptcy and allow the race to the courthouse to commence among creditors.”
To avoid jeopardizing chapter 13 plans, the authors found that the Southern District of Texas started creating reserve funds for chapter 13 debtors to allow these debtors to pay for unforeseen costs that may arise throughout the life of the plan. “Under the Southern District of Texas’s approach, the appropriateness of each reserve fund is determined on a case-by-case basis, and participation in this program is completely voluntary,” according to Andreasen and Rabuck. “Upon completion of the plan, any money remaining in the reserve fund is returned to the debtor.”
Inspired by the Southern District of Texas's initiative, the ABI Consumer Commission formally recommended adoption of this practice nationwide. Under the ABI Consumer Commission's proposed statutory amendment, the chapter 13 reserve fund would be limited to one month of the debtor's scheduled expenses, and the fund may be restored by additional debtor contributions to the extent of any disbursements from the fund. “For debtors with incomes above the median, the excess funds would be disbursed to unsecured creditors after the plan is completed,” Andreasen and Rabuck write. “Debtors with incomes below the median retain the funds at the completion of their plans.”
As debtors are provided a better cushion to make payments on their chapter 13 plans, the authors also show that reserve funds will benefit unsecured creditors “because empirical evidence suggests they lengthen the average lifespans of chapter 13 plans, which means that unsecured creditors receive more money in plan payments.”
To obtain your copy of “Water for Plants: How Reserve Funds Keep Chapter 13 Plans Alive on Rainy Days and Benefit Unsecured Creditors,” please click here.
###
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/education-events.