Source: https://dianedrain.com/tag/can-i-keep-my-car-in-a-bankruptcy/
Timestamp: 2017-10-19 05:18:25
Document Index: 667518648

Matched Legal Cases: ['§ 554', '§ 554', '§ 33', '§1325', '§ 1325', '§ 506', '§ 1325', '§ 506', '§ 506', '§ 502', '§ 1325', '§362', '§362', '§ 707', '§ 1325', '§ 707', '§707', '§707', '§ 5', '§524', '§ 524', '§ 524', '§ 1692', '§ 524', '§ 541', '§ 25', '§ 524']

can I keep my car in a bankruptcy Archives | Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney
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June 18, 2014 /0 Comments/by Diane Drain
Debtor moves to abandon homestead, trustee objects
n re Rich Bankruptcy Number 10-21536 (District of Utah), Nice discussion about abandonment. Creditor obtained unopposed staylift order to foreclose on debtors residence. Debtor then filed motion to abandon so he could do a short sale, with no money to debtor. Trustee opposed abandonment but did not assert any equity in the property:
The Debtor’s stated purpose for seeking abandonment of the Real Property is to effectuate a short sale of the Real Property prior to a scheduled foreclosure sale. The Court finds that a party in interest’s motivation for seeking abandonment is irrelevant. The only question the Court should properly address under § 554(b) is whether the property is burdensome or of inconsequential value to the estate.
When faced with a § 554(b) motion a Trustee has two options: He may concede that the property is burdensome or of inconsequential value and abandon the property or he may demonstrate to the court that his administration of the property will result in a benefit to the estate and he should be allowed to administer the property. Failure to administer property that is of value and benefit to the estate is not an acceptable option and failure to abandon property that is burdensome is not an acceptable option.
The Trustee has had since November of 2011 to administer the Real Property which is an asset of this estate. There is no evidence in the docket that the Trustee has attempted to market the Real Property by employing the services of a real estate professional or appraiser, nor does the Trustee allege in his objection that he is attempting to sell, or intends to sell the Real Property sometime in the future.6 Importantly, the Trustee does not allege that there is equity or even the possibility of equity in the Real Property. Accordingly, the Court finds that the Real Property is burdensome to the estate and is of inconsequential value to the estate and the Debtor’s motion to abandon the Real Property shall be granted.
https://dianedrain.com/wp-content/uploads/2015/10/home-house-abandoned.bmp 159 240 Diane Drain https://dianedrain.com/wp-content/uploads/2017/01/DianeDrain-logo-2.png Diane Drain2014-06-18 01:09:212017-09-23 20:16:47Abandonment of Assets in Bankruptcy
CREDITOR’S FAILURE TO RETURN VEHICLE AFTER BANKRUPTCY FILED
Failure to return vehicle after bankruptcy filed:
chapter 13 filed: Weber v. SEFCU, No. 12-1632 (2nd Cir, 05/08/2013) Judgment finding that defendant violated the Bankruptcy Code’s automatic stay provision, 11 U.S.C. section 362, is affirmed, where: 1) defendant exercised control over property of the debtor’s bankruptcy estate in contravention of section 362 when it failed to relinquish the debtor’s vehicle promptly after it learned that a Chapter 13 petition was filed; and 2) because defendant willfully violated section 362(a), it is liable under section 362(k) for debtor’s actual damages, costs, and attorney’s fees and the matter is remanded for a determination of the same. Read more…
More case law on creditor’s failure to return vehicle post-petition.
How should the debtor proceed? In the vast majority of cases, creditors likely are committing a willful stay violation by refusing to return a vehicle to a debtor where the debtor has an interest in the vehicle, the debtor shows the vehicle is insured, and the demand for turnover is in writing. The Debtor can file an emergency motion or adversary proceeding seeking the Court order turnover of the vehicle.
SUSPENSION OF DRIVER’S LICENSE and BANKRUPTCY
Once the petition is filed, Debtor may go to the MVD with an official notice of bankruptcy filing, along with a Form SR22, and pay the applicable fees for reinstatement. Form SR22 is a Certificate of Insurance from any insurance company licensed to conduct business in Arizona.
Additional information about that can be found here:
FAQ re: Driver’s License Reinstatement
Proof of Future Financial Responsibility (SR22)
For bankruptcy purposes make sure to use private party value.
KC Appraisal Service (623-780-0189)
Sierra Auction (one of the auction houses that some of the Arizona trustees use) (602- 242-7121).
PMSI, VEHICLE TRADE and NEGATIVE EQUITY
Lender claiming purchase money secured interest in “negative equity” in vehicle traded during purchase of new vehicle. In re Penrod vs Americredit Financial, No. 08-60037 (9th Circuit Ct of Appeals) The bankruptcy court held that AmeriCredit did not have a purchase money security interest in the portion of the loan related to the negative equity charges. However, the bankruptcy court acknowledged that AmeriCredit had a purchase money security interest in the remaining balance. In doing so, the bankruptcy court adopted the dual status rule, which allows part of a loan to have non-purchase money status, while the remainder is covered by a purchase money security interest.2 BAP and 9th Cir upheld lower court’s decision. Disagreeing with the Second, Fourth, Fifth, Sixth, Seventh, Eighth, Tenth and Eleventh Circuits, the Ninth Circuit concluded that held a creditor which financed the debtor’s automobile purchase did not have a purchase money security interest in the “negative equity” of the debtor’s trade-in. Payment of the remaining debt on the trade-in was not an “expense” or “other similar obligation,” within the definition of “purchase-money obligation.”
In Re: Peaslee, No. 073962 U.S. 2nd Circuit Court of Appeals, October 20, 2008 In appeal from judgment reversing a Bankruptcy Court finding that negative equity on a trade-vehicle is included in the purchase money security accompanying a new car’s purchase and is therefore protected from cram down by the Hanging Paragraph of Section 1325 of the Bankruptcy code, the court here certifies the question of whether negative equity is included in a purchase money security interest under state’s interpretation of the Uniform Commercial code (UCC).
PERFECTION OF LIEN MORE THAN 20/30 DAYS PRE-BANKRUPTCY - 547(c)
In re: Taylor, No. 08-60033 (U.S. 9th Circuit Court of Appeals, March 22, 2010) In debtors’ appeal from the bankruptcy court’s order avoiding a transfer of a security interest in an automobile to a bank, the order is reversed where the bankruptcy court’s determination of the value of the security interest was clearly erroneous, because there was no evidence to support the bankruptcy court’s finding that the value of the security interest equaled the amount of the original loan at the time the bank perfected its security interest.
A.R.S. 28-2133 Index and filing of liens, encumbrances or instruments; constructive notice (2011)
B. The filing and issuance of a new certificate of title as provided in this article is constructive notice to creditors of the owner or to subsequent purchasers of all liens and encumbrances against the vehicle described in the certificate of title, except those that are authorized by law and that are dependent on possession. If the documents referred to in this article are received and filed in a registering office of the department within thirty business days after the date of their execution, the constructive notice dates from the time of execution. Otherwise, the notice dates from the time of receipt and filing of the documents by the department as shown by its endorsement.
C. The method provided in subsection B of this section for giving constructive notice of a lien or encumbrance on a vehicle required to be titled and registered under section 28-2153 or a mobile home required to be titled under section 28-2063 is exclusive, except for liens dependent on possession. A lien, encumbrance or title retention instrument or document that evidences any of them and that is filed as provided by this article is exempt from the provisions of law that otherwise require or relate to the recording or filing of instruments creating or evidencing title retention or other liens or encumbrances on vehicles of a type subject to registration under this chapter.
In re Roser, (C.A.10 (Colo.)) July 23, 2010: Avoidance – Trustee could not avoid, as hypothetical lien creditor, bank’s lien against debtor’s motor vehicle perfected postpetition. Pursuant to the bankruptcy statute making a trustee’s avoidance powers subject to any generally applicable law permitting the perfection of an interest in property to be effective against an entity acquiring rights in the property before the date of perfection, a Chapter 7 trustee could not avoid, as a hypothetical lien creditor under his strong-arm powers, the lien against a debtor’s motor vehicle held by a bank that had a purchase money security interest in the vehicle and filed its motor-vehicle lien within 20 days of the debtor obtaining the vehicle. Pursuant to Colorado’s version of the Uniform Commercial Code (UCC), the bank’s timely acts gave it priority over any interests in the vehicle that arose between the prepetition attachment of its security interest at the loan closing and its postpetition perfection of its lien, including the trustee’s hypothetical judgment lien that arose on the intervening petition date. In so holding, the Tenth Circuit Court of Appeals rejected an earlier decision in which a Bankruptcy Appellate Panel had ruled that the UCC provision did not apply to liens, such as that of the bank, that were perfected under the Colorado Certificate of Title Act (CCTA)
· In re Anderson, 2007 WL 1839699 (D. Ariz. June 26, 2007). An auto dealer that sold the debtor a vehicle submitted a title application to the Tempe MVD that was rejected because the debtor had an outstanding fine owed to ADOT. The dealer then re-submitted the application with funds sufficient to pay the fine. After the application was re-submitted, the debtor filed her Chapter 7 bankruptcy. Subsequent to the debtor’s bankruptcy filing — and more than 10 days after the debtor and the dealer had signed the security agreement — the application was granted. On these facts, the District Court affirmed the Bankruptcy Court’s grant of summary judgment in favor of the Chapter 7 trustee, determining that the dealer’s claim was unsecured because (a) the dealer did not obtain perfection until after the debtor had filed her bankruptcy, and (b) the post-petition granting of the application did not relate back.
VEHICLE ACQUIRED FOR BUSINESS USE
In re LETIZIA and CHEN, 3:13-bk-09233-RJH (AZ Bankruptcy court, January 14, 2014) In a Chapter 13 a creditor filed an objection to the debtor using the personal vehicle exemption on a vehicle used primarily for business purposes. The issue presented is whether the Debtors may exempt two vehicles, utilized primarily for business purposes in a sole proprietorship, using Arizona’s personal item exemptions provided in A.R.S. § 33-1125(8). As this specific question has not been addressed in Arizona case law, the Court took this matter under advisement. The Court holds that debtors in Arizona, doing business as sole proprietors, may not exempt vehicles used primarily for business using Arizona personal item exemptions, and instead must use Arizona’s tools of the trade exemptions.
910 RULE. LIEN STRIPPING and ‘HANGING PARAGRAPH’
A dump truck purchased less than one year prepetition was found to be covered by the hanging paragraph in In re Littlefield, 388 B.R. 1 (Bankr. D. Me. 2008). In that ruling, Judge Haines said “Reading the statute as I do means just this: Congress extended (910 days, as opposed to 1-year) anti-modification protection to creditors holding PMSIs in motor vehicles acquired for a debtor’s personal use. It did not target PMSIs in motor vehicles generally as a category of security that, but for the personal use proviso, would receive less anti-modification protection than all other things of value.”
In re Quevedo, 345 B,R, 238 (Bankr.S.D.Cal. 2006). Decent case. Used background from Congressional proceedings, various changes as proposed to Sect. 1325 over the years, and Collier and Brown and Ahern comments.
In re Rodriguez, 375 B.R. 535, 2007 WL 2701295 (9th Cir. BAP August 28, 2007). Reversing the Bankruptcy Court for the Western District of Washington, the BAP decided to follow the minority line of decisions and held that under the “hanging paragraph” following §1325(a)(9), a Chapter 13 debtor surrendering a motor vehicle acquired within 910 days of the petition date cannot thereby eliminate any remaining deficiency claim.
Capital One Auto Fin. v. Osborn, No. 07-1726 (8th Cir Ct App, 2/5/08) The hanging paragraph in 11 U.S.C. section 1325 does not eliminate an under-secured creditor’s deficiency claim when, in a Chapter 13 plan, debtors propose to surrender a car purchased within 910 days before filing for bankruptcy. The creditor is entitled to an unsecured deficiency claim if there is a right to a deficiency judgment under state law.
In re Brown, 346 B.R. 868 (Bkrtcy.N.D.Fla. 2006) Lewis M. Killian, Jr., Bankruptcy Judge: creditor holding PMSI not entitled to deficiency claim in chapter 13 where debtor surrenders vehicle in full satisfaction of debt § 1325(a)5) (hanging paragraph), § 506, 502.
Debtor proposed to surrender a motor vehicle subject to a PMSI and purchased for personal use within 910 days of filing the petition, in full satisfaction of the undersecured debt. Creditor objected.
The court first held that despite language in § 1325(a) (hanging paragraph) that Code § 506 does not apply to a PMSI debt, the debt is still a secured debt. The court ruled that “just because § 506 does not apply does not mean that there is no secured claim. Section 506(a) simply provides for the bifurcation of claims into secured and unsecured portions in accordance with the value of the collateral; it does not form the basis for a secured debt.” The court essentially held that § 502 is the section that determines the secured status of a claim.
The court then observed that “Secured creditors, like every other party to a bankruptcy case, have to take both the good and the bad,” held that . . . the Hanging Paragraph following § 1325(a)(9) allows the Debtor to surrender his vehicle, which is the subject of a 910 claim, in full satisfaction of the debt owed to Wells Fargo.”
CROSS-COLLATERALIZED ISSUES
In re Gibson, 234 B.R. 776, 3 Cal. Bankr. Ct.Rep. 88 (Bankr.N.D.Cal. Jun 03, 1999) in which the court held that “Pursuant to choice of law clause contained in loan and security agreement executed by Chapter 13 debtors, Illinois law, not California law, governed determination of whether agreement’s dragnet clause was enforceable; although debtors’ collateral presumably had always been in California, enforceability of dragnet clause was not an issue of perfection or the effect of perfection or non-perfection”, then held that the dragnet clause was too vague and unenforceable. The Court said that: “agreement consisted of one page, with text on two sides and, although debtors expressly agreed to items and conditions on both sides of document, front side of agreement contained all key terms of agreement other than dragnet clause in conspicuous, easy-to-read print, dragnet clause was buried in long, complex paragraph on reverse side of document, which was packed from margin to margin with a multitude of single- spaced provisions in minute, difficult-to-read type, parties were of unequal bargaining power, and nothing called debtors’ attention to substance of the dragnet clause in particular.”
Additional Cross-Collateralization cases:
Also look at In re Dumlao, Slip Copy, 2011 WL 45014029th Cir.BAP (Nev.),2011 and In re Zaochney, 2011 WL 6148727, *3+, 76 UCC Rep.Serv.2d 340+ (Bankr.D.Alaska Dec 12, 2011) – “I conclude that the dragnet clauses found in the debtor’s loan documents with Alaska USA are valid and enforceable. The debtor’s vehicle is valued at $12,950.00. Because Alaska USA is owed less than this, $11,097.87, on the vehicle loan, it wants to use the balance of the equity in the vehicle to secure roughly $1,852.13 of the outstanding balance on the debtor’s credit line. It may do so under the terms of the loan documents. The debtor’s motion to value security interest is granted, in part. Alaska USA’s secured claim is valued at $12,950.00.”
IS THE ‘RIDE THROUGH’ STILL AVAILABLE AFTER BAPCPA?
10/08: The prevailing view is that BAPCPA eliminated the “fourth option” of staying current on collateral but not reaffirming. However, there are some recent decisions saying that while the automatic stay may terminate, there may be state law limitations on when a creditor may repossess the collateral. See In re Steinhaus, 349 B.R. 694 (Bankr. D. Idaho 2006) and In re Malachin, 2007 Pa. Dist. & Cnty. Dec. LEXIS 158 (October 2008), in which a state court refused a creditor’s efforts to repo a car post-bankruptcy when the debtor was current on payments. The case is a reminder that ride through may be a state law issue, not a bankruptcy issue.
· In re Dumont, 383 B.R. 481 (9th Cir. BAP 2007). In a decision authored by Judge Baum, the BAP joined all the other courts that have considered the issue in confirming that the former “ride-through” option for retaining collateral simply by continuing to make payments on the relevant debt was eliminated by BAPCPA’s changes to 11 U.S.C. §§362 and 521. The BAP also held that the bankruptcy court lacked jurisdiction to determine whether the creditor’s subsequent repossession of the debtor’s vehicle violated state law.
· In re Moustafi, 371 B.R. 434 (Bkrtcy. Ariz. 2007). In a case involving a pro-se Chapter 7 debtor, Judge Hollowell held that (a) a proposed reaffirmation agreement relating to a car loan where the debtor had no equity in the vehicle was not in the debtor’s best interest, and (b) despite §§362 and 521, because the debtor had made an effort to reaffirm (even though disapproved by the Bankruptcy Court), the car loan would “ride through” the bankruptcy and the debtor would be entitled to retain the vehicle so long as she met her obligations under the loan contract.
hysically disabled, plus is motor home a motor vehicle: In re Sleeth, 300 B.R. 351, 30-00628-YUM-EWH Trustee had burden of proving that the debtors were not entitled to increased motor vehicle exemption (physically disabled). Court holds Trustee failed that burden. (pre-BAPCPA)
OWNERSHIP ALLOWANCE vs OPERATION EXPENSES - means test
Ransom v. MBNA Am. Bank, N.A., 380 B.R. 799 (B.A.P. 9th Cir., 2007, No. 08-15066 US Supreme Court 09-907 1-11-11 (affirmed) U.S. 9th Cir Ct of Appeals, August 14, 2009. Considered the issue of ownership allowance vs operation expenses in the context of a Chapter 13 plan confirmation rather than dismissal under Section 707(b). In an appeal from the Bankruptcy Court’s refusal to approve Debtor’s Chapter 13 plan, the Bankruptcy Court’s order is affirmed, where an above-median income debtor seeking bankruptcy relief under Chapter 13 may not deduct from his projected disposable income a vehicle “ownership cost” for a vehicle he owns free and clear. The BAP held that in determining projected disposable income for purposes of Chapter 13 plan confirmation, a debtor is not able to deduct a vehicle ownership expense pursuant to § 707(b)(2)(A)(ii)(I) when a debtor owns the vehicle free and clear of any liens or encumbrances. (Although Ransom deals with the confirmation of a plan under Chapter 13, it is instructive in Chapter 7 cases because § 1325 uses the means test under § 707(b)(2)(A) to determine the debtor’s projected disposable income.) In re Sawicki, Debtor., WL No. 2-07-bk-3493-CGC. (Feb. 12, 2008) Judge Case followed Ransum, but did not like it. (Thorough discussion on BAP decisions and why judges should follow despite their differences.)
· In re Chamberlain, 369 B.R. 519 (Bkrtcy. Ariz. 2007). Judge Haines held that where the debtor owned a vehicle free and clear, the debtor nevertheless could claim an ownership expense deduction in calculating “the debtor’s projected disposable income” under §707 for purposes of a Chapter 13 plan.
· In re Garcia, 2007 WL 2692232 (Bkrtcy. Ariz. September 11, 2007). In contrast to Judge Haines’ ruling in In re Chamberlain discussed immediately above, Judge Marlar held that where the debtor owned a vehicle free and clear, the debtor may not claim an ownership expense deduction in calculating “the debtor’s projected disposable income” under §707 for purposes of a Chapter 13 plan.
LEASED VEHICLE - means test
A lease payment should be deducted as ownership expense on lines 23 and/or 24 of the means test and is not deducted as a secured debt. The lease payment is limited to standard deduction.
‘TIRED IRON’ - VEHICLES MORE THAN 6 YRS OLD or MORE THAN 75,000 MILES - means test
Each of these cases were decided by a different Arizona bankruptcy judge.
In re Luedtke, MT-13-1313-KuPaJu (9th Cir BAP 3,14,2014)
Because we agree with the trustee that above-median-income debtors cannot claim the $200 older vehicle operating expense, we REVERSE and REMAND for further proceedings.
1. In re Chamberlain, 369 B.R. 519 (Bankr.Ariz., 2007): This case touched upon the tired-iron deduction in footnotes 6 and 7. The heart of the case was whether an ownership expense could be taken on a free and clear vehicle. Judge Haines ruled in debtor’s favor, but this case has been overturned by In re Ransom, 577 F.3d 1026 (9th Cir., 2009) as to the ownership expense issue.
2. In re Sawicki, Case No. 2-07-bk-343-CGC (Bankr.Ariz., 2008): Judge Case, in summarizing the U.S. Trustee’s position in the case on page 2, states that “The U.S. Trustee relies on the Internal Revenue Manual (IRM), 5.8.5 Financial Analysis, for a determination that Debtor is entitled only to a $200.00 monthly allowance under the vehicle ownership expense rather than a $471.00 expense allowance. The $200.00 is allowed under IRM (Internal Revenue Manual) 5.8.5 for vehicles, such as debtor’s, that are not encumbered with a loan or lease and are over six years old and/or have a reported 75,000 miles of usage.”
3. In re Steven & Donna Watkins, Case No. 07-6317-PHX-SSC (Bankr.Ariz., 2008): Pages 9 and 10: ” The Debtors also urge that they should be allowed to take a vehicle ownership expense because their vehicles are older and unreliable. The Court notes that as of the petition date, the Debtors had a five-year-old vehicle; the other was three years old. The Ransom decision also addressed this issue, stating that the debtors might be entitled to an”older vehicle” expense for vehicles that were older than six years, or that had mileage above 75,000 miles. In this case, as of the petition date, neither of the Debtors’ vehicles was more than six years old. The Debtors have never alleged that either of the vehicles has high mileage, nor have they requested an evidentiary hearing on this issue.
Therefore, the Court declines to allow an “older vehicle” expense to the Debtors… Footnote 11: “Although the Debtors have never asserted, or requested an evidentiary hearing as to the mileage of their vehicles for purposes of claiming an “older vehicle” expense, the United States Trustee indicated that she would allow the Debtors to claim such an expense if appropriate. The Court notes that when the petition was filed in 2007, the Debtors’ 2002 Ford Focus would have been only five years old. Therefore, the only way the Debtors could claim the “older vehicle” deduction would be to show that the vehicle had more than 75,000 miles on it. As noted, the Court is unable to address this issue.”
The official cite for this IRS deduction is found in the Internal Revenue Manual § 5.8.5.5.2 (09-01-2005).
https://dianedrain.com/wp-content/uploads/2012/10/vehicle.jpg 360 640 Diane Drain https://dianedrain.com/wp-content/uploads/2017/01/DianeDrain-logo-2.png Diane Drain2012-10-07 11:59:412017-09-26 17:17:15Vehicles and Bankruptcy
COMMUNITY PROPERTY (SPECIFIC TO ARIZONA)
Can pre-marriage separate debts of the non-filing spouse be discharged, via the community discharge?
Some attorneys say “yes” and others “no”.
25-215. Liability of community property and separate property for community and separate debts
B. The community property is liable for the premarital separate debts or other liabilities of a spouse, incurred after September 1, 1973 but only to the extent of the value of that spouse’s contribution to the community property which would have been such spouse’s separate property if single.
C. The community property is liable for a spouse’s debts incurred outside of this state during the marriage which would have been community debts if incurred in this state.
In Schilling v. Embree , 118 Ariz 236, 575 P2d 1262 (App. 1977), the court of Appeals held that this language subjects community property only to pre-marital separate debts, not separate debts incurred during marriage.
25-214. Management and control
A. Each spouse has the sole management, control and disposition rights of each spouse’s separate property.
3. To bind the community, irrespective of any person’s intent with respect to that binder, after service of a petition for dissolution of marriage, legal separation or annulment if the petition results in a decree of dissolution of marriage, legal separation or annulment.
Both spouses must be named in an Arizona lawsuit to obtain a judgment which is collectable from any portion of the community property. The non-liable spouse is entitled to litigate two issues: 1. The whether the other spouse is in fact liable, and 2. The other spouse’s contribution to the community. Flexmaster Aluminum Awning Co. v. Hirschbert, 173 Ariz. 83, 839 P.2d 1128 (App. 1992). Flexmaster involved a premarital debt.
Beware that, as with many areas of law, lawyers will disagree about the applicability of these statutes to certain factual situations.
Community Discharge received in bankruptcy
Subsection (a) of 11 U.S.C. §524(a)(3) addresses the split discharge, when only one spouse attains a discharge in bankruptcy, in community property states. The legislative history of this section says that “if community property was in the [bankruptcy] estate and community claims were discharged, the discharge is effective against the community creditors of the nondebtor spouse as well as of the debtor spouse. House Report No. 95-595, 95th Cong., 1st Sess. 365-6 (1977), Senate Report No. 95-989, 95th Cong., 2d Sess. 80 (1978). § 524(a)(3) treats the effect on the nondebtor spouse of a discharge of a debtor in a community property state when the nondebtor spouse is liable on the community claim, but has not filed a bankruptcy petition. That is, if one spouse in a community property state has commenced a bankruptcy case where, as here, no claim is excepted from the debtor’s discharge and is not otherwise found to be nondischargeable, and if the nondebtor spouse would not have had a claim excepted from her discharge in a hypothetical case commenced on the same day as the commencement of the debtor’s case, then the creditors of either spouse holding community claims on the date of bankruptcy are thereafter barred from asserting claims against after acquired community property. It was the duty of the scheduled creditors in the Braden Jay Karber bankruptcy proceedings to object to the hypothetical discharge of Valerie Karber, as the nondebtor spouse, within the same time limits as their objections to the discharge of Braden Jay Karber. 11 U.S.C. § 524(b). No such objections were filed and thus all community creditors before the Court in that case are now barred from seeking to collect their deficiencies from the after acquired community property of either Braden Jay Karber or Valerie Karber. In re Karber 25 B.R. 9, 12 (Bkrtcy.Tex.,1982) See also In re Dyson 277 B.R. 84 (Bkrtcy.M.D.La.,2002)
Community Guardian Bank v. Hamlin, 182 Ariz. at 629, 898 P.2d at 1007. A creditor obtained a default judgment against the wife for unjust enrichment based on her husband’s unauthorized use of funds for the benefit of the community. In determining whether the creditor could garnish the wife’s post-dissolution earnings, we found that the default judgment established a community obligation for which the wife was jointly liable. Id.at 630-32, 898 P.2d at 1008-10. Applying Arizona law, the court held that the former spouses remained jointly liable for the community debt after their divorce, and therefore the creditor could garnish the wife’s post-dissolution wages.Id. at 631, 898 P.2d at 1009.
Creditor has a judgment against a debtor, but does not name debtor’s wife.
Question: Creditor has a judgment against a debtor. The judgment does not name debtor’s wife. Creditor is trying to go after the wife’s separate property. Is there a statute or case that says that even if the debt is a community debt (again, not clear if it is or not), the creditor can’t go after the separate property of the spouse who is not named in the judgment?
Answer: Yes. See ARS 25-215(A) and (D). In fact, the judgment creditor cannot even go after the community property. Both spouses must be joined as defendants in the lawsuit before a creditor can obtain and execute on a judgment against the marital community and community property. ARS 25-215(D) (“[I]n an action on [a debt against the community] the spouses shall be sued jointly….”) Additionally, see Flexmaster v. Hirschberg, 173 Ariz. 83 (1992) and the law cited therein. Similarly, the non-debtor spouse is a necessary and proper party in a suit to establish the limited liability of the marital community for the separate, premarital debt of the other spouse. Flexmaster v. Hirschberg, supra.
Community Discharge & Divorce - good case describing issues
Parker vs First Step Group, No. CV-15-01217-PHX-GMS (Arizona District Court, 1/15/16) On June 30, 2015, Plaintiff filed his Complaint (Doc. 1) alleging that Defendants violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et. seq. (FDCPA) by attempting to collect a debt that is no longer valid because it was discharged in Plaintiff’s ex-wife’s bankruptcy. Section 524(e) provides that “[e]xcept as provided in subsection (a)(3) of this section, discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt.” Subsection (a)(3), through reference to section 541(a)(2), provides that (with some exceptions) a creditor cannot recover from the “interests of the debtor and the debtor’s spouse in community property that is under the . . . joint management and control of the debtor.” 11 U.S.C. § 524(a)(3);id.§ 541(a)(2). Under Arizona law, “spouses have equal management, control and disposition rights over their community property.” A.R.S. § 25–214(B). Thus, “the effect of § 524(a)(3) is that all community property acquired post-bankruptcy is protected by the discharge.” In re Kimmel, 378 B.R. at 636.
Here, Plaintiff is no longer married to his ex-wife, and therefore he no longer has any community property for section 524(a)(3) to protect . His ex-wife’s bankruptcy did not discharge any liability he may have had for the debt.
CONCLUSION: Plaintiff remains liable for debts discharged as to his ex-wife in his ex-wife’s bankruptcy, and therefore Defendants did not violate FDCPA by attempting to collect on such a debt.
https://dianedrain.com/wp-content/uploads/2012/10/man-woman-and-kids-family.jpg 350 525 Diane Drain https://dianedrain.com/wp-content/uploads/2017/01/DianeDrain-logo-2.png Diane Drain2012-10-07 11:45:012017-09-23 20:26:21Community Property (Arizona law)