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by: Chris Thackston
American Bankruptcy Institute
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Chapter 7 Debtor May Not Expense 26 U.S.C. §401(k) Loan Repayment
by: William Andrew McNeal
Becket & Lee LLP; Malvern, Pa.
The U.S. Court of Appeals for the Ninth Circuit recently affirmed a bankruptcy court’s decision to dismiss a chapter 7 case pursuant to §707(b)(3) in In re Egebjerg.[1] The bankruptcy court concluded that the debtor’s loan from his §401(k) plan was a secured loan, repayment of which can be expensed pursuant to §707(b)(2)(A)(iii). Nevertheless, the court found that the debtor could pay a significant portion of his debts after the loan was repaid, finding the case abusive under §707(b)(3).
1. Egebjerg v. Anderson (In re Egebjerg), No. 08-55301, 2009 U.S. App. LEXIS 11651 (9th Cir. May 29, 2009).
Lien Stripping: Is It Worth It?
by: Brett Border
Schneiderman and Sherman PC; Southfield, Mich.
In In re Lane,( George Lane, et. Al v. Western Interstate Bancorp), 280 F.3d 663 (6th Cir. 2002), the Sixth Circuit Court of Appeals, following the direction of the U.S. Supreme Court’s decision in Nobleman v. American Savings Bank, 508 U.S. 324, 113 S.Ct. 2106 (1993), held that §1322(b)(2), or what is commonly known as the anti-modification clause, did not protect an unsecured mortgage-holder from modification of its lien through the chapter 13 plan process. What this means is that if the mortgage creditor is not a holder of an allowed “secured claim” as defined by §506(a), the debtor may “strip off” the mortgage and treat it as an allowed “unsecured claim,” thus receiving the same treatment as all other general unsecured creditors through a confirmed chapter 13 plan. Through this process, if the chapter 13 debtor completes his plan and receives a discharge, the court’s ruling effectively allows the debtor to remove the lien from the property while paying possibly only pennies on the loan. This could be an attractive prospect for a debtor whose home value is slumping in the current economic downturn. This article’s focus is on whether this process is beneficial for either party.
Dealing with Automobile Leases Post-BAPCPA
by: Stephen Z. Starr
Starr & Starr, PLLC; New York
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) added a new provision regarding personal property leases, §365(p), which provides:
(1) If a lease of personal property is rejected or not timely assumed by the trustee under subsection (d), the leased property is no longer property of the estate and the stay under §362(a) is automatically terminated.
(2) (A) If the debtor in a case under chapter 7 is an individual, the debtor may notify the creditor in writing that the debtor desires to assume the lease. Upon being so notified, the creditor may, at its option, notify the debtor that it is willing to have the lease assumed by the debtor and may condition such assumption on cure of any outstanding default on terms set by the contract.
(B) If, not later than 30 days after notice is provided under subparagraph (A), the debtor notifies the lessor in writing that the lease is assumed, the liability under the lease will be assumed by the debtor and not by the estate.
(C) The stay under §362 and the injunction under §524(a)(2) shall not be violated by notification of the debtor and negotiation of cure under this subsection.
(3) In a case under chapter 11 in which the debtor is an individual and in a case under chapter 13, if the debtor is the lessee with respect to personal property and the lease is not assumed in the plan confirmed by the court, the lease is deemed rejected as of the conclusion of the hearing on confirmation. If the lease is rejected, the stay under §362 and any stay under §1301 is automatically terminated with respect to the property subject to the lease.