Here is a list of the notable Bankruptcy Court decisions from the past 2 years:
1. Rash. In this case, the US Supreme Court determined that the value of a secured creditor’s claim in a Chapter 13 cram down is based on the value of the property retained is based on “the cost the cost the debtor would incur to obtain a like asset for the same ‘proposed . . . use’.”
2. Dewsnup. In this case, the Court held that despite the provisions of 11 USC 506(d) – the under secured portion of a mortgage remains a valid lien in a Chapter 7 proceeding.
3. Lamie. In this case, the Court affirmed the decision of the 4th Circuit Court and maintained that 11 USC 330(a)(1) does not allow for the payment of attorneys fees to an attorney for fees incurred in a Chapter 11 proceeding after that case is converted to a Chapter 7 proceeding. By implication, the same rule would apply to any fees accrued by an attorney in a Chapter 13 proceeding that is subsequently converted to a Chapter 7.
4. Rake. In this case, the Court respected the 1994 Congressional amendments to the Bankruptcy Code codified in 11 USC 1322(e) and maintained that interest cannot accrue on a mortgage arrearage claim.
5. Till. In this case, the Court established that the interest rate on a secured claim in a Chapter 13 proceeding is determined by the prime-plus or formula rate – the prime rate at the time of the Chapter 13 plan confirmation plus 1% to 3% – “to compensate a creditor for its risk but not so high as to doom the bankruptcy plan.”
6. Patterson. In this case, the Court interpreted the plain language of the Bankruptcy Code and ERISA to conclude “that an anti alienation provision in a qualified pension plan constitutes a restriction on transfer enforceable under ‘applicable non bankruptcy law’ for purposes os 11 USC 541(c)(2)’.” In other words, a qualified pension plan in not considered part of the bankruptcy estate and is beyond the reach of the debtor’s creditors; non bankruptcy law can define what constitutes property of the bankruptcy estate.
7. Johnson. In this case, the Court was confronted with a crafty debtor who filed a Chapter 7 and was relieved of his personal liability under a mortgage. After the Chapter 7 discharge, the debtor filed a Chapter 13 proceeding and successfully included a mortgage lien in his plan for reorganization – the mortgage interest survives a Chapter 7 liquidation and can be included in a Chapter 13 plan.
8. Espinoza. In this case, the Court determined that student loans could only be discharged if “that debt would impose an ‘undue hardship‘ on the debtor and his dependents.” See 11 USC 523(a)(8).
9. Lanning. In this case, the Court held that a debtor’s “disposable monthly income” controls a Chapter 13 plan payment – as opposed to that payment being determined under the means test.
10. Ransom. In this case, the Court disallowed a “means test” deduction for an automobile that is not subject to loan or lease payments. If the vehicle is owned free and clear, the “means test” deduction for that vehicle cannot be claimed.
11. Schwab. In this case, the Court interpreted the exemption provisions of 11 USC 522 to allow a Chapter 7 debtor to use a portion of their “wild card” exemption to exempt the otherwise unexempt portion of “business equipment” (tools of the trade). This ruling allows a debtor to use their “wild card” exemption in tandem with other exemption provisions.
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