Consumer Bankruptcy Committee

ABI Committee News

Must A Debtor Who Converts From Chapter 13 To Chapter 7 “Retake” The Means Test?

by: William Andrew McNeal

Becket & Lee LLP; Malvern, PA

A debtor who files his petition under chapter 7 must show whether the relief he seeks would be an abuse of that chapter’s provisions by completing the so-called “means test.” 11 U.S.C. §707(b)(1). He accomplishes this by completing official form 22A, statement of current monthly income, pursuant to Interim Fed. R. Bankr. P. 1007(b)(4).

In a parallelism, a chapter 13 petitioner must show his disposable income by completing official form 22C, which, under certain circumstances, draws on the means test for permissible expenses, see 11 U.S.C. §1325(b)(3). But must a debtor who files an initial petition under chapter 13 (along with the requisite chapter 13 statement of current monthly income, official form 22C), and subsequently converts

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Postscript to Sommersdorf’s Progeny: Can a Wrong Credit Report Trigger a Debtor Claim under the Code?

by: Debra Lee Hovatter

Spilman Thomas and Battle PLLC; Morgantown, W.Va.

In the June 2007 issue of the ABI Journal, I analyzed recent cases considering whether a creditor’s non-updating of a credit report post-petition or post-discharge could violate the Code. Two additional cases have been decided after submitting the article for publication.

In May 2007, the Southern District of New York entered its opinion in In re Torres on the defendant/creditor’s motion for judgment on the pleadings and to dismiss the complaint. --- B.R. ---, 2007 WL 1300955 (Bankr. S.D.N.Y. 2007). In Torres, the creditor relied on Irby and Bruno, arguing there was no duty under the Code to revise its reporting of the pre-petition debt and that the reporting of the debt was not inaccurate. The case has the “typical” fact pattern I discussed in the ABI Journal article, with one exception. The Torres court notes numerous times the allegation made by the debtors that they requested the creditor revise the way the debt was reported

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Court’s Diverge on What Constitutes a “Statement of Financial Condition” in Non-Dischargeability Actions

by: Donald S. Maurice

Maurice & Needleman PC; Flemington, N.J.

An imprudent debtor whose predilection for gambling exceeded his skills sought protection from his creditors under chapter 7. One of his creditors was an old friend who, unfortunately, took a note for $30,000 at 10 percent per annum. As “security,” such as it was, the debtor had offered his friend his oral promise to repay him from his end-of-year bonus. At the time, the debtor seemed to his friend to be very earnest and convincing with his assurances that his success as an investment banker, although with only a year of experience, would bring him a windfall of several hundreds of thousands of dollars in his bonus – at least a quarter of a million in a “worst-case” scenario. Sadly, the loan repayment never materialized, thanks to the debtor’s firing and resultant loss of his bonus.

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Means Testing and Payment of Secured on "Luxury" Items—In re Carleton and the Tirade Over the Escalade

by: Steven L. Rayman

The collateral a debtor is entitled to keep in a chapter 13 proceeding (assuming the debtor can pay for it), is determined by the application of 11 U.S.C. §1325 and 11 U.S.C. §707(b). Uncontested Chapter 13 plans should be confirmed only if the plan meets the requirements of 11 U.S.C. §1325(a). If the Chapter 13 Trustee or an unsecured creditor objects, the court may approve a plan only if the requirements of the 11 U.S.C. §1325(b) are not.

Read the full article. (Materials from the 2007 Central States Bankruptcy Workshop)