Consumer Bankruptcy

In In re Lee[1] the United States Bankruptcy Appellate Panel for the Sixth Circuit (the “BAP”) held that the bankruptcy court properly dismissed the debtor’s Chapter 11 bankruptcy petition because the debtor’s filing was abusive.[2] The debtor defaulted on her mortgage loan with Chase Home Finance (“Chase”) on one of her investment properties.[3] Chase sought to foreclose on the property, and the debtor filed bankruptcy, staying the foreclosure action.[4] This case was dismissed and Chase sought to foreclose a second time.[5] Once again, however, the debtor filed bankruptcy.[6] After the case was dismissed and Chase again attempted to foreclose, the debtor filed bankruptcy a third time.[7] This time Chase made a motion to dismiss the case, asserting that the debtor was acting in bad faith and was abusing the bankruptcy process in order to evade foreclosure by filing bankruptcy petitions whenever Chase made progress in the foreclosure action.[8] The bankruptcy court found that the debtor had been filing bankruptcy petitions “as a buffer to prevent the foreclosure proceedings from going forward” and it dismissed her case for acting in bad faith, which the court determined constituted sufficient “cause” under section 1112(b).[9]

Specific Intent is not Required to Establish a Willful Injury under Section 523(a)(6)

By: Robert Garafola

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In Jendusa-Nicolai v. Larsen, the Seventh Circuit held that section 523(a)(6) of the Bankruptcy Code prevented the debtor, David Larsen, from discharging his debt from a civil judgment stemming from the attempted murder of his former wife, Teri Jendusa-Nicolai.[1] Larsen savagely beat Jendusa-Nicolai with a baseball bat, sealed her in a snow-filled trash can, and left her to die in a storage facility.[2] Jendusa-Nicolai miraculously survived, but she lost all of her toes to frostbite and suffered a miscarriage.[3] Larsen was sentenced to life imprisonment for his crimes and lost a civil action to Jendusa-Nicolai and her family, who were awarded a judgment in excess of $3.4 million.[4] Larsen attempted to discharge the debt from the judgment by filing for bankruptcy under Chapter 7. Larsen argued that his debt should be discharged because he did not willfully injure his ex-wife within the meaning of section 523(a)(6) since he did not specifically intend to cause his ex-wife to lose her unborn child and toes.[5] However, the court found that the statute did not require that the debtor intend to cause specific injuries and that a broader analysis of the debtor’s intended results is proper.[6]

Failure to Apply for Income Based Repayment Does Not Bar Discharge of Student Loans

By: Gabriella Formosa

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

In In re Krieger,[1] the Bankruptcy Court for the Southern District of Illinois permitted a discharge of federal student loans despite the debtor’s failure to apply for an Income Contingent Repayment Plan (“ICRP”).[2] Under an ICRP, a borrower’s annual loan payments can be reduced after applying a formula that takes into account poverty guidelines and the borrower’s adjusted gross income.[3] However, if the borrower has no discretionary income, the monthly payment due will be zero.[4] Here, the debtor, a twice divorced, fifty-two year old woman had been unemployed for over ten years despite countless attempts to secure employment.[5] She lives with her elderly mother and her sole income is a monthly government assistance check for $200.[6] She is unable to afford health or dental care, a cellular phone, or her car payments.[7] The court held that application for an ICRP would be nothing more than a formality because the debtor was currently destitute, and was likely to remain that way for rest of her life.[8] As such, application was not dispositive of a good faith attempt to repay her loans.[9]

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