Memorandum Opinion Regarding Plaintiff's Motion for Summary Judgment on Her Claim Under 11 U.S.C. 523(a)(8)(A)(ii) that the Debt Owed to Her by the Debtor is Nondischargeable
Friday, March 23, 2018
The Debtor's (the Defendant) debt is nondischargeable pursuant to 11 U.S.C. § 523(a)(8)(A)(ii) because the debt is an obligation to repay borrowed funds received by the Defendant as an educational benefit and the Defendant has not established that this repayment would cause her an undue hardship.
Findings of Fact and Conclusions of Law Regarding the United States of America's (Internal Revenue Service) Motion for Relief from the Stay Regarding District Court Case
Thursday, November 9, 2017
Pending before the Court was a motion to lift stay filed by the United States of America ("USA"), requesting that the Court lift the automatic stay, so that the USA could submit an agreed judgment between Laurance Coleman Mosher, Jr. (the "Debtor") and the USA in a lawsuit pending before Judge Keith Ellison. There are two ways for a creditor to obtain a lifting of the stay pursuant to 11 U.S.C. § 362: either under § 362(d)(1) or § 362(d)(2). Section 362(d)(2) did not apply here because the property that was the subject of the motion had substantial equity. The other avenue to lift the automatic stay is pursuant to § 362(d)(1), which provides that a creditor can obtain a lifting of the stay "for cause." As "cause" is not defined in the Bankruptcy Code, the Court examined a number of factors when assessing whether to lift the automatic stay, which were: (1) good or bad faith of the debtor; (2) injury to the debtor and other creditors if the stay is lifted; (3) injury to the movant if the stay is not lifted; (4) whether the relief will result in a partial or complete resolution of the issues; (5) whether the judgment claim arising from the other action is subject to equitable subordination; and (6) whether the movant's success would result in a judicial lien avoidable by the debtor. The Court found that the proceeding factors strongly weighed in favor of immediately lifting the automatic stay for cause. An order granting the USA's motion for relief from the stay was entered simultaneously with these Findings of Fact and Conclusions of Law.
In this case, the Court denied confirmation of the Turcottes' plan without prejudice to refiling for failure to calculate interest on their car loan according to the prime-plus approach articulated in the Supreme Court's opinion of Till v. SCS Credit Corp., 541 U.S. 465 (2004). The prime plus approach requires the interest rate to be whatever the current prime loan rate is as of the plan confirmation date plus a risk factor, generally between 1-3%. Here, the Turcottes assigned their interest according to the previously negotiated contract rate, which was lower than the Till rate. However, the Debtors needed to start at 4.0%, the current prime rate, and adjust for risk. The Court found that the Debtors were low risk and assigned a risk factor of 1%, for a total interest rate of 5%, permitting that the prime rate does not change on the day the plan is confirmed.
Mr. Sinclair, one of the debtors in this case, filed a non-standard motion for discharge, which this Court DENIES. John W. Sinclair and his wife, Linda L. Sinclair filed a Chapter 13 bankruptcy petition and completed all the fundamental requirements for obtaining a discharge. However, Mr. Sinclair informed this Court that he had pending against him criminal charges for a sexual assault of a minor child. The state criminal court where Mr. Sinclair was indicted has not convicted him or found him guilty, however, there is a rub. 11 U.S.C. sec. 1328(h)(2) only permits this Court to grant a discharge if it finds “that there is no reasonable cause to believe that . . . there is pending any proceeding in which the debtor may be found . . . liable for a debt of the kind described in section 522(q)(1)(B).” Section 522(q)(1)(B)(iv) describes certain types of debts, including “a debt arising from . . . any criminal act . . . that caused serious physical injury or death to another individual in the preceding 5 years.” Read together, these two provisions only permit this Court to grant a discharge if the Court finds that there is no reasonable cause to believe that the Debtors can somehow become liable for a debt arising from a criminal act. The Court has reasonable cause to believe that the indictment Mr. Sinclair faces for sexually assaulting a child is of the kind contemplated by Section 522(q)(1)(B)(iv) and that a debt could arise from that act, and therefore, the Court cannot grant Mr. Sinclair's discharge pursuant to Section 1328(h)(2).
In re Lightfoot (re: Chapter 13 Trustee's Objection to Debtor's Motion to Modify Confirmed Plan)
Monday, June 22, 2015
The Debtor's Motion to Modify Confirmed Plan GRANTED. This Memorandum Opinion decides whether a Chapter 13 plan may provide for post-petition interest on child support debt without providing for full payment to all creditors, despite § 1322(b)(10) of the Bankruptcy Code, which requires 100% payment of all allowed claims if post-petition interest is to be paid on nondischargeable debt (such as child support). This Court addresses the apparent conflict between § 1322(b)(10) and § 1322(a)(2), which requires that all domestic support obligations (DSOs), defined to include interest in § 101(14A), be paid in full. The Court concludes that the inclusion of interest on DSOs, by definition, removes DSOs from the ambit of § 1322(b)(10), which applies to the payment of interest on allowed claims, not claims that themselves include interest. Therefore, § 1322(b)(10) does not prevent confirmation of a Chapter 13 plan that includes state-mandated interest on DSOs. The Code’s prohibitions on unmatured interest and unmatured child support do not apply to DSO interest provided for by the Texas Family Code because the definition of DSO includes post-petition interest under state law “notwithstanding any other provision of this title.” This Court has determined that, because DSO is defined in the Code as including post-petition interest, such interest is considered part of the underlying claim and not considered interest on a claim; therefore, the Proposed Plan is not barred by § 1322(b)(10). Having resolved this issue in favor of the Debtors, this Court has no further reason to delay approval of the Motion to Modify. So long as the Debtors successfully make all of the payments under the Proposed Plan, they will be able to certify that they have paid all of the DSO payments due under applicable Texas law, as required by § 1328(a), and they will therefore be eligible to obtain their discharge.
Confirmation of Debtors' Second Amended Chapter 13 Plan DENIED. Pat W. Gaetje and Janet A. Gaetje (the “Debtors”) filed a Chapter 13 bankruptcy petition, and their pending plan proposes to modify contractual terms of the promissory note held by their home mortgage lender. Bank of America (“BoA”), the servicing agent for the mortgage lender, has objected to the confirmation of the Debtors’ plan asserting that the Debtors may not (1) convert an adjustable rate loan into a fixed rate loan; or (2) pay the loan in full before the maturity date. This Memorandum Opinion addresses whether either of these proposed changes constitutes prohibited modifications under Section 1322(b)(2) of the Bankruptcy Code. There is no dispute that § 1322(b)(2) “prohibit[s] any fundamental alteration in the debtor’s obligation." Converting an adjustable interest rate to a fixed interest rate thus constitutes a modification as contemplated by § 1322(b)(2). However, prepayment with no penalty is expressly allowed by Section 6 of the Note and therefore does not constitute a modification. BoA argues that the following language nonetheless prevents the Debtors from fully paying off the Note early: “If I make a partial prepayment, there will be no changes in the due dates of my monthly payments unless the Note Holder agrees in writing to those changes.” BoA’s reliance on this language is misguided. The Note explicitly provides in Section 4 that the Debtors “will make payments every month until [they] have paid all of the principal and interest and any other charges . . . .” Although that same section provides that the Debtors “will make monthly payments beginning in JANUARY 15, 2006 and continuing through DECEMBER 15, 2030,” such provision is meaningless after the Note has been fully paid, at which point the monthly “payment” due would be $0.00. Moreover, the language BoA relies on refers only to partial prepayments. The obvious implication is that, if a full prepayment is made, monthly payments would necessarily terminate. Consequently, this Court concludes that the Second Amended Plan does not violate § 1322(b)(2) by virtue of the Debtors making prepayments in excess of the minimum monthly amount, whether such prepayments be made in installments or in a lump sum. There is no impermissible modification of the Note because the very terms of the Note allow for prepayment without a penalty. For the reasons set forth in the Opinion, this Court sustains the objection in part and overrules it in part, finding that the Debtors (1) may not convert the adjustable rate to a fixed rate; but (2) may pay the loan in full during the plan period. Consequently, the Court denies confirmation of the Debtors’ proposed plan without prejudice to their refiling an amended plan consistent with this Court’s ruling.
Post-BAPCPA, the debtor confirmed and substantially consummated a Chapter 11 Plan. He never received a discharge in the Chapter 11 case, and it remained conditionally open. The debtor later defaulted under the Chapter 11 plan, and his secured creditor posted his real property for foreclosure, as bargained for in the Chapter 11 plan. On the eve of the foreclosure sale, the debtor filed a Chapter 13 case in which he materially altered the treatment of his creditors. By attempting to prosecute a Chapter 13 case, the debtor was impermissibly trying to modify his Chapter 11 plan. An individual debtor may modify a Chapter 11 plan through the Chapter 11 Code provisions alone. Additionally, a debtor whose case remains conditionally open may not file a simultaneous bankruptcy case. Finally, the debtor's Chapter 13 case was bad faith as a serial filing.
Compensation for debtor's counsel had no priority over payments to the mortgagee as the original payments to the mortgagee were adequate-protection payments. Moreover, counsel was not entitled to any additional payments because his services did not benefit the estate.
The Court granted a motion for contempt when Wells Fargo failed to correct the debtors' loan records pursuant to an agreed judgment that it signed in order to settle an adversary proceeding and avoid a trial
If a creditor properly files its proofs of claim, a creditor avails itself of prima facie validity for that claim and avoids the strictures of the post-objection amendment process while shifting the evidentiary burden to a debtor.
When a debtor is forced to needlessly incur attorney's fees due to a creditor's failure to comply with the requirements of bankruptcy Rule 3001, this Court will sustain objections to that creditor's proof of claim and also impose sanctions and award attorney's fees to the debtor.
The opinion concerns the importance of drafting loan documents and home mortgage contracts in a clear and deliberate manner and the consequences of failing to do so. Namely, the Court will not give home lenders the benefit of the doubt relating to documents that they themselves drafted. As such, The language of the loan documents prevented certain lenders from collecting fees and costs from Chapter 13 estates.
Debtors are not permitted to surrender a vehicle in full satisfaction of the creditor's entire claim. However, as a matter of equity, a plan may be modified so that the creditor has an entirely unsecured claim (the sum of the unsecured portion of the bifurcated claim on the date of the confirmed plan plus the difference between the secured portion of the bifurcated claim on the date of the confirmed plan and the amount of post-confirmation payments that have actually been made on this
The Court will not permit creditors to file proofs of claim without attaching the required documentation, and then hold out until the debtor objects and hearings are held before providing the necessary documents to prove up their claims.
This Court will not tolerate lenders who attempt to nickel and dime Chapter 13 debtors with unsupported fees and charges only to expect absolution when, due to objections challenging these charges, they file an amended proof of claim.
(1) 11 USC 511 applies to tax claims, and not to tax liens; (2) pursuant to Texas Tax Code 32.06 and 32.064, a third party lender who pays another's real property tax does not own a tax claim; and (3) a debtor may properly modify the interest rate on a promissory note held by a third-party lender under 11 U.S.C. 1322(b)(2).
Under 11 U.S.C. 1325, negative equity is not subject to a purchase-money security interest and the Court prorated the prepetition payments made under the loan to determine what amount of the claim was still secured by the PMSI and what amount was non-PMSI
Sanchez v. Ameriquest Mortgage Co. (In re Sanchez)
Tuesday, July 24, 2007
A creditor holding a lien interest on a debtor's homestead may not assess post-petition charges without giving notice to the debtor and without seeking court approval, even if those charges are specifically allowed under a pre-petition contract.
Cadengo v. Consolidated Fund Mgmt. LLC (In re Cadengo)
Tuesday, June 26, 2007
Title plus possession is sufficient to establish a homestead under Texas law. Moreover, if a creditor has actual knowledge of a debtor's use and possession of property, that creditor may not rely upon a homestead waiver executed by a debtor. Finally, home equity loans that violate certain provisions of the Texas Constitution result in forfeiture of principal and interest of a loan.
After the passage of 11 U.S.C. 511, the Court is without discretion to set an equitable rate of interest on tax claims and Texas statute does not allow for a claim to interest on anything above the principal.
Once a debtor has completely repaid a 401(k) loan repayment, the debtor may no longer claim that amount as a qualified retirement deduction. Instead, the freed up funds are considered part of a debtor's "projected disposable income."
11 U.S.C. 1322(b)(5) contemplated that debtors could have a broad range of possibilities for repayment of mortgage arrearages within the period of a Chapter 13 plan if the repayment occurred within a reasonable time. Moreover, 11 U.S.C. 1322(e) is the proper provision to seek interest on pre-petition arrearages.