Case Law Update: Is Income of a Nonfiling Spouse Includable in a Debtor’s CMI?
Bankruptcy courts addressing the issue have reached a consensus regarding the extent to which a nonfiling spouse’s income should be included in the calculation of current monthly income. The nonfiling spouse’s income is included in current monthly income only to the extent that it is received on a regular basis for the benefit of the household expenses of the debtor or the debtor’s dependents. The nonfiling spouse’s income not dedicated to household expenses may be deducted from current monthly income through a marital adjustment. The burden of proof lies on the debtor to prove that the excluded nonfiling spouse’s income is not for the benefit of the household.
Case Update: May Debtors Deduct Vehicle Ownership Expenses for Vehicles that are Owned Outright?
Since the enactment of BAPCPA, both bankruptcy and appellate courts have been split on the issue of whether debtors may deduct vehicle ownership expenses for vehicles that are not encumbered and for which debtors do not make an actual monthly loan or lease payment. To date, the Seventh Circuit Court of Appeals and four Bankruptcy Appellate Panels have ruled on this issue: Two hold that debtors may not take such deduction (Eighth and Ninth Circuits), and two hold that debtors may take such deduction (Sixth and Tenth Circuits). Six district courts have also published opinions on this issue, five of which deny debtors such deduction and one that allows such deduction.
Limitations on the Reach of Taylor v. Freeland & Kronz
by: Stephen W. Sather
Barron & Newburger PC/Barron, Newburger, Sinsley & Wier PLLC; Austin, Texas
Section 522(c) of the Bankruptcy Code states that “unless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of the debtor that arose, or that is determined under §502 of this title as if such debt had arisen, before the commencement of the case” with certain limited exceptions. Section 522(l) states that “unless a party in interest objects, the property claimed on (Schedule C) is exempt.” Rule 4003(b) gives creditors 30 days after the initial meeting of creditors in which to object. The Supreme Court has held that the statute and rule mean what they say, that is, that failure to make a timely objection precludes a challenge, even if there was no colorable basis for the exemption. Taylor v. Freeland & Kronz, 503 U.S. 638 (1992).
Hanging Paragraph Update
by: William A. McNeal
Becket & Lee LLP; Malvern, Pa.
One of the myriad changes made to bankruptcy practice by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) is the treatment of a claim for a debt collateralized by a motor vehicle or other personal property of the debtor. More specifically, new language inserted by BAPCPA at the end of 11 U.S.C. §1325(a), nicknamed the “hanging paragraph” because of its physical location and appearance on the page, addresses the treatment of a secured claim arising from a debt.
Materials from the Detroit Consumer Bankruptcy Conference
The ABI held the 2nd Detroit Consumer Bankruptcy Conference in Troy, Mich. on November 11, 2008. The conference, co-sponsored by the Detroit Consumer Bankruptcy Association was designed specifically for the consumer practitioner and provided viewpoints from both the debtor and creditor sides. Several local judges gave helpful insight into issues like the means test and chapter 13 plan modifications. Summaries and materials from several of the sessions are listed below.
In the session “Means Test: Its Latest Meaning (or Meanings…),” Judge Eugene R. Wedoff of the U.S. Bankruptcy Court (N.D. Ill.) discussed the latest developments and changes. Please click the link below to review the relevant materials.
Panelists for the session “Chapter 13 Plan Modifications: The Legal Standards and Practical Challenges” discussed the different interpretations of section 1329 of the Bankruptcy Code as it applies to obtaining approval of a post-confirmation plan modification. Judge Philip J. Shefferly, U.S. Bankruptcy Court (E.D. Mich.), moderated the panel, and it included Krispen S. Carroll, a standing Chapter 13 Trustee, Sonya Nicole Goll of Weik & Associates in Royal Oak, Mich. and David J. Montera of Trott & Trotts, PC in Farmington Hills, Mich. Please click the link below to view the materials.
In the session “The Only Cramdown Left? Lien Stripping and Valuation,” the panel discussed different interpretations of lien stripping in chapter 7 and chapter 11 cases. Judge Thomas J. Tucker of the U.S. Bankruptcy Court (E.D. Mich.) moderated the panel, which included Charles D. Bullock of Stevenson & Bullock, PLC in Southfield, Mich. and Mark E. Bredow of Potestivo & Associates, P.C. in Rochester Hills, Mich. Please click the link below to view the materials.
In the session “Discharge Violations and Mortgage Claim Issues,” panelists discussed the intricacies of defending a debtor who has been issued a discharge order and common problems with mortgage creditors after a bankruptcy has been processed. Panelists included James P. Frego of Frego & Brodsky, PLC in Dearborn Heights, Mich. and John Rao of the National Consumer Law Center in Boston. Judge Daniel S. Opperman, U.S. Bankruptcy Court (E.D. Mich.) moderated. Please click on the link below to view the materials.
Discharge Violations and Mortgage Claim Issues
Panelists for the session “Did Marrama Change Anything? Conversion Issues – 7 to 13 and 13 to 7,” discussed the subjectivity of the term “bad faith” and its effect on bankruptcy cases since Marrama. Judge Marcy McIvor, U.S. Bankruptcy Court (E.D. Mich.) moderated the panel which also included David W. Allard of Allard & Fish, PC in Detroit and Michelle Lee Marrs of Marrs & Terry, PLLC in Ann Arbor, Mich. Please click below to view the materials.
Check Out The Consumer Bankruptcy Center
Rising bankruptcy cases, dropping home values, and the near vanishing of credit are just some of the elements tainting our financial picture. While the ABI provides the most comprehensive resources available to deal with this less than perfect economy, we continually improve our resources and have devoted an entire section of the web site to consumer bankruptcy. Visit the "Consumer Bankruptcy Center" and explore a limitless selection of ever-increasing resources including publications, online educational opportunities and dedicated web sources—all at your fingertips! This new section is easily located by going to consumer.abiworld.org or you can connect directly through ABI’s home page at www.abiworld.org.