Consumer Bankruptcy Committee

ABI Committee News

National Adequate Protection Debate and the 1½ Percent Solution? Three Principles and Two Cases

by: Richard J. Hayden
Richard J. Hayden, P.S.; Seattle

Pursuant to 11 U.S.C. §§1325(a)(5)(B)(iii)(I), added by The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), for a chapter 13 plan to be confirmed, adequate protection payments are required “in equal monthly amounts” for claims secured by personal property. Pursuant to new §1326(a)(1)(C), payments must commence within 30 days of the order for relief.

This article reviews two decisions related to the amount and timing of adequate protection payments post-BAPCPA; Fin. Md. LLC v Smith (In re Smith), 355 B.R. 519 (Bankr. D. Md. 2006), and In re Desardi, 340 B.R. 790 (Bankr. S.D. Tex., 2006). These cases form the current “polar extremes.” This author suggests that Smith is the more correct interpretation of the statute, and bases this position on three concepts closely related to adequate protection.

Read the full article.

Garnishee Liability for Failure to Answer a Writ of Garnishment and the Automatic Stay

by: Kimberly Ross Clayson
Schneider Miller, PC; Detroit

Court rules for some states, such as Michigan, allow for a judgment creditor to seek judgment against a garnishee for failure to answer a writ of garnishment. Grounds for liability are based on contempt of court and damages incurred by the judgment creditor due to the garnishee’s failure to respond to the garnishment. (See M.C.R. 3.101). In the context of bankruptcy, an issue has arisen in some jurisdictions as to whether enforcement of a judgment against a garnishee is a violation of the automatic stay as to a judgment debtor who files for bankruptcy.

There is a split of authority on this matter. Some jurisdictions hold that an action against the garnishee is an action against the debtor in violation of the automatic stay. However, the majority opinion is that there is no violation of the automatic stay to enforce a judgment against a garnishee that fails to respond to a writ of garnishment.

Read the full article.

Hit the Road Jack! Is It Easier to Evict a Residential Tenant after BAPCPA?

by: Isabel C. Balboa
Chapter 13 Standing Trustee; Cherry Hill, N.J.

Almost two years after the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), it would appear that some of its provisions are meeting their objectives better than others. In the case of residential tenancy issues, the number of new disclosure requirements, coupled with submissions required to overcome the exceptions to the automatic stay, have had their intended effect. In reviewing this particular area of BAPCPA, the number of reported cases is scant, reflecting the limited issues subject to challenge.

With regard to the treatment accorded residential tenancy issues, where a judgment for possession has not been entered pre-petition, the state of the law remains unchanged. With regard to cases where the judgment for possession in the debtor’s residence has been entered pre-petition, the amendments and modifications brought about by BAPCPA have had a marked impact on the number of cases filed with the principal goal of retaining an interest in a residential lease.

Read the full article.

Third Circuit Rules “Cause” under §707(a) Must Be More than Ability to Pay

by: William Andrew McNeal
Becket & Lee LLP; Malvern, Pa.

In Perlin v. Hitachi Capital Am. Corp (In re Perlin), the U.S. Court of Appeals for the Third Circuit affirmed a bankruptcy court’s order denying a creditor’s motion to dismiss the debtors’ chapter 7 petition. Creditor Hitachi Capital moved to dismiss the Perlins’ chapter 7 petition pursuant to 11 U.S.C. §707(a), which permits dismissal after notice and hearing only for cause. The statute furnishes three nonexclusive examples of cause, but does not include bad faith among them. Hitachi Capital alleged that the petition was filed in bad faith, finding the debtors’ substantial income and expenses especially objectionable. The bankruptcy court refused to consider the debtors’ high income and expenses, reasoning that the presumption of abuse provisions in the context of the means test in 11 U.S.C. §707(b) precluded such an examination in adjudging a motion to dismiss pursuant to 11 U.S.C. §707(a). It found that other indicia of bad faith, e.g., debtors’ lack of truthfulness with the court and creditors and manipulative conduct, were absent. Consequently, the bankruptcy court found no bad faith and denied Hitachi Capital’s motion.

Read the full article.

Upcoming Consumer Programs

Consumer Bankruptcy In Practice: A Webinar Series
Explore Current Developments With Experts In Consumer Bankruptcy.

The ABI is pleased to offer a series of webinars on consumer bankruptcy issues that address the biggest challenges facing practitioners today. Held throughout the year, ABI will address issues of national importance from a local point of view. Topics will include:

  • Income, expenses and related issues under BAPCPA
  • Credit counseling and debtor education
  • Individual debtor audits in chapters 7 and 13
  • Issues and developments related to the automatic stay
  • The Debt Relief Agency provisions of BAPCPA and other attorney liability issues
Cities on the tour:
  • Atlanta
  • Seattle
  • Los Angeles
  • Memphis
  • Houston
  • Denver
The topics will be of significance to any consumer bankruptcy practitioner from any city, but the webinars will be "localized" to the city by their speakers. You can attend any webinar at any time you are interested, or you can wait until that topic comes to the city closest to your area.

Register Today

Other Upcoming Programs:

ABI has several educational opportunities for consumer practitioners this fall. On Nov. 12, 2007, the American Bankruptcy Institute and the Detroit Consumer Bankruptcy Association will join forces to present the one-day Detroit Consumer Program. The program features an experienced faculty tackling some of the most contentious areas of litigation after BAPCPA, including means testing and litigating the presumption of abuse, a mock appellate argument on “projected” disposable income and a judges’ panel.

The Winter Leadership Conference, Dec. 6–8, 2007, at the Westin Mission Hills Resort and Spa in Rancho Mirage, Calif., has several offerings designed for the consumer practitioner, including: “BAPCPA in the Courts: How Judicial Interpretation of the New Provisions Affects Your Cases,” and “Trying Valuation (on a Budget),” among others.

The Consumer Committee will hold a joint meeting with the Bankruptcy Taxation Committee from 9:30-11:00 on Saturday, Dec. 8, at the Winter Leadership Conference. Tax practitioner Kenneth C. Weil, Willis Douglas from the Department of Justice and Hank Hildebrand, a chapter 13 trustee from Nashville, Tenn., will discuss the intersection of these two areas in a practical and informative format. All committee members at the conference are encouraged to attend.

The American Board of Certification Exam will be offered on Dec. 6, and attendees will be treated to a Rock ’n Roll Dance Party on Saturday night starring ABI’s own Indubitable Equivalents.

Other News:

Oct. 1, 2007, marks our Judicial Chair Hon. Thomas Waldron’s official retirement from the bench. Fortunately for the committee, however, Judge Waldron will stay on as chair. After relocating to Tucson, Ariz., Judge Waldron will be focusing his energies on bankruptcy-related educational endeavors.

On a personal note from the editor: I will miss Judge Waldron tremendously and thank him for his guidance and support over the past several years. I know there are many, many others who feel the same way. I am sure everyone is happy to hear that he is not abandoning us, but will remain a part of the bankruptcy community, and we look forward to enjoying his company in the years to come.