Source: https://dianedrain.com/bankruptcy-law/bankruptcy-case-law/case-law-discharge/
Timestamp: 2019-03-24 13:43:40
Document Index: 331319874

Matched Legal Cases: ['§ 1307', '§ 362', '§ 524', '§ 1327', '§ 1307', 'in fine', '§ 507', '§ 1322', '§ 1328', '§ 524', '§ 523']

Discharge in Bankruptcy | Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney
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1 DISCHARGE IN BANKRUPTCY
1.1 DISCHARGE IN BANKRUPTCY, INCLUDING VIOLATIONS
1.2 The Fair Credit Reporting Act “FCRA” and the Bankruptcy Code
1.2.1 The Automatic Stay v. The Discharge
1.2.2 An order discharging the debt alters the legal nature of the debt and prohibits collection efforts.
1.2.3 Reorganizations
1.2.4 If a case is dismissed the debts return to the same position as before the bankruptcy was filed, offset by any monies the creditors received during the case. (11 U.S.C. § 1307)
1.2.4.1 Can someone name debtor in lawsuit even after discharge?
1.2.5 A discharge in bankruptcy does not extinguish the debt itself; it merely releases the debtor from personal liability for the debt.
DISCHARGE IN BANKRUPTCY, INCLUDING VIOLATIONS
See Community Property & Community Discharge
CREDITOR NOT LISTED IN CHAPTER - DISCHARGE ENTERED
See Creditors, including Omitted Creditors
The Automatic Stay v. The Discharge
The Fair Credit Reporting Act “FCRA” and the Bankruptcy Code deal with debt differently and this difference can become confusing for everyone, including experienced bankruptcy attorneys. For instance, the legal status of a debt changes as a bankruptcy moves to conclusion. At the beginning of a bankruptcy the automatic stay stops most creditors seizing assets from the bankruptcy estate’s assets without an order from the Bankruptcy Court. (11 U.S.C. § 362(a)(1)) But the debt is still the same as before the bankruptcy was filed. If the case is dismissed the creditor has all the same rights as before the case was filed. Reporting the debt has raised many issues in bankruptcy. Many courts have found there is no liability under the FCRA to report a debt as being in default, at least until the case is discharged liability under the FCRA. (See, e.g., Nissou-Rabban v. Capital One Bank (USA), No. 15-CV-1675-JLS, 2016 WL 4508241, at *3-4 (S.D. Cal. June 6, 2016); Abbot v. Experian Info. Solutions, 179 F. Supp. 3d 940, 946 (N.D. Cal. 2016)
Once the order of discharge is entered it “operates as an injunction against the commencement or continuation of an action … to collect, recover or offset any such debt as a personal liability of the debtor.” (11 U.S.C. § 524(a)(2)) Therefore, a discharge order (unlike the automatic stay) alters the legal nature of the debt. Many courts have interpreted the FCRA to require credit reporting agencies “CRA” and furnishers to adjust credit reports after an order of discharge. Where a CRA fails to use reasonable methods to ensure that credit reports show the discharge of debts or where the furnisher fails to correct a report showing that a discharged debt is in default, CRAs and furnishers are subject to liability under the FCRA. (White v. Trans Union LLC, 462 F. Supp. 2d 1079 (C.D. Cal. 2006)
Plans of reorganization are a key component of Chapter 11 and 13 cases. In order for a reorganization to be successful a plan must be confirmed and completed. The challenge for the courts is to determine how the debts should be reported on a credit report before completion of the plan. The order confirming the plan binds the debtor and creditors to the plan’s provisions, (11 U.S.C. § 1327(a)) and controls any pre-existing contracts, including the amount to be paid and lien priority. Once the plan is confirmed the creditors may not relitigate their treatment under the plan (United Student Aid Funds Inc. v. Espinosa, 559 U.S. 260, 269-70 (2010). Although confirmation binds the parties to the plan’s terms, it does so only as long as the case is active and is subsequently discharged.
If a case is dismissed the debts return to the same position as before the bankruptcy was filed, offset by any monies the creditors received during the case. (11 U.S.C. § 1307)
DISCHARGE INJUNCTION UNDER 524(a)
a) A discharge in a case under this title—
OCWEN Loan Servicing v. Marino, Nos. 16-1229, 16-1238 (B.A.P. 9th Cir. Dec. 22, 2017). Continuous confusing contact with the discharged debtors by the mortgage servicer was appropriately sanctioned at $1,000 per violation notwithstanding the servicer’s formulaic and contradictory disclaimers in some of the correspondence.
Debtors, Christopher and Valerie Marino, surrendered their real property in their chapter 7 bankruptcy. After they received their discharge in June, 2013, the court granted the mortgagee relief from the automatic stay and closed the case. From June, 2013, through April, 2015, OCWEN, as servicer for the mortgagee, sent nineteen letters stating the amount owed on the debt as the “amount you must pay,” and providing payment due dates. Some of the letters contained the disclaimer that, “if you have received a discharge in bankruptcy, this notification is for informational purposes only and is not intended to collect a pre-petition or discharged debt.” OCWEN also made approximately one hundred calls to the Marinos seeking payment on the discharged debt.
Chapter 7 debtors Christopher Michael Marino and Valerie Margaret Marino sought sanctions against creditor Ocwen Loan Servicing, LLC (“Ocwen”) for its violation of the discharge injunction. The bankruptcy court held a trial and awarded the Marinos $119,000 – one thousand dollars for each improper contact.
On appeal Ocwen argues that the bankruptcy court erred because its correspondence with the Marinos was in compliance with state or federal law. It also contends that the court improperly considered telephone calls, which were not the subject of the motion and not supported by evidence, and that there was no evidence of injury to the Marinos. We discern no error and AFFIRM
In re Taggart – 09-39216-RLD7, BAP OR-15-1119 & OR-15-1158 (9th Cir BAP April 12, 2016) Detailed discussion o f post-discharge litigation. Did Debtor participate in post-discharge state litigation sufficiently so as to open him up to attorney fees and other sanctions for pre-petition lawsuit continued post-discharge?
In re Hebner vs. Wells Fargo for continuing violations of the stay, BK08-82938 (Dist of NV 1/2015): The debtors received a Chapter 7 discharge of their debts in August 2011. Throughout the course of the bankruptcy case and thereafter, Wells Fargo communicated with the debtors concerning the bank’s interest in the debtors’ real property. In September 2014, the court granted the debtors’ motion for contempt for what was characterized as the bank’s continuing collection efforts despite being aware of the bankruptcy discharge.
To the extent Wells Fargo argues that the disclaimers printed on correspondence (emphasis added) with the debtors protects them from sanctions, it is clear that a legal disclaimer is not carte blanche to otherwise violate statutory prohibitions. “A creditor cannot avoid the consequences of violating the automatic stay or discharge injunction simply by burying an alternative explanation for a clear demand for payment in fine print.” In re Zine, ___ B.R. ___, 2014 WL 5426628, at *7 (Bankr. D. Mass. Oct. 22, 2014). The court further explained:
Put simply, fine print that provides that a creditor, who is clearly seeking to collect a debt, should not be viewed as seeking to collect a debt in the event that the creditor is prohibited from doing so is deserving of no weight. See In re Curtis, 322 B.R. 470, 485 n.19 [(Bankr. D. Mass. 2005)] (“The Court acknowledges, but discounts, the unhighlighted language in the April 15, 2002 letter, which suggests that, in the event of discharge in a Chapter 7 case, no personal liability is asserted. This reservation is of little moment. The lender was continuing to insist that the Debtor make payments on the discharged second mortgage.”). Id. at n.64.
IT IS ORDERED: The debtors’ motion for summary judgment (Fil. No. 312) is granted, and:
1. Wells Fargo is ordered to pay to the debtors punitive damages in the amount of $10,000.00 within 15 days of the filing of this Order; and
2. Wells Fargo is ordered to pay to the debtors their actual damages, exclusive of legal fees and expenses, in the amount of $2,500.00 within 15 days of the filing of this Order; and
3. Wells Fargo is ordered to pay to debtors’ attorneys the full, actual amount of legal fees and expenses debtors have incurred with respect to this matter. Mr. Quinn shall provide a detailed statement of such fees and expenses to counsel for Wells Fargo within 10 days after the filing of this Order and Wells Fargo shall make payment within 15 days thereafter.
Snowden v. Check into Cash of Washington, Inc. (In the Matter of: Rupanjali Snowden), 769 F.3d 651 (9th Cir. 2014), The debtor may recover against a creditor who violates the automatic stay by seizing property of the estate and fails to cure that violation before the debtor files an action under sec. 362(k). Recovery includes debtor’s attorney’s fees for prosecuting the stay violation under sec. 362(k). The Ninth Circuit Court of Appeals recently ruled that, in these circumstances, attorney’s fees incurred in prosecuting a stay violation are recoverable by a debtor against the creditor committing the violation.
This decision should be heeded by creditors in the Ninth Circuit. CIC, a payday lender, clearly violated the automatic stay when it effected a post-petition electronic funds transfer from the debtor’s bank account to pay its pre-petition debt. Once the transactionn was discovered by the Debtor demand was made to return the funds. The payday lender refused, from the language of the opinion, may have had actual knowledge of the case at the time it effected the transfer. Had it done so, its liability for the debtor’s attorney’s fees could have been limited to those incurred prior to its settlement offer.
US v. Marston, No. 11-2100 (United States First Circuit, 09/20/2012) Defendant’s convictions for bankruptcy fraud is affirmed in part, reversed in part and remanded where: 1) the evidence was sufficient for the jury to conclude that defendant’s failure to reveal the aliases she had used to apply for credit cards, plus listed fraudulent debts (in her alias) against collateral, was done with the kind of dishonest or fraudulent awareness required by the statute; but 2) the government failed to establish the element of falsity with regard to the charge for knowingly and fraudulently failing and refusing to disclose credit card debts. Read more…
Second bankruptcy case – limit on discharge: use the 2-4-6-8 rule.
There is a 2 year waiting period to file a Chapter 13 case in which a discharge has been granted in a prior Chapter 13. You need to count from the filing date of old cases to the filing date of new case. This effectively enables you to refile in almost all circumstances.
There is a 4 year waiting period to file a Chapter 13 case in which a discharge has been granted in a prior Chapter 7. Once again, count filing date to filing date. The 4 year rule allows you to obtain a discharge in the subsequent Chapter 13. You may file a Chapter 13 subsequent to a Chapter 7 discharge in less than 4 years; however, you would not obtain the benefit of a discharge. Strategic considerations may deem it necessary to file under such circumstances (potentially stripping off a wholly unsecured secured mortgage subject to a good faith analysis and approval in your local court, or paying off priority taxes in a 100% Plan are examples).
There is a 6 year waiting period for filing a Chapter 7 case in which a discharge has been granted in a prior Chapter 13 case. In addition, the prior Chapter 13 must have been a 100% payout to allowed unsecured claims or there was a payout of 70% of allowed unsecured claims and “the plan was proposed in good faith and was the debtor’s best efforts” {11 U.S.C. 727 (a) (9)}.
Finally, there is an 8 year waiting period for filing a Chapter 7 case in which a discharge has been granted in a prior Chapter 7 case; most people are familiar with this rule. Sometimes attorneys confuse these rules; a reread of the discharge provisions coming out of 727 and 1328 is always instructive.
Branigan v. Bateman, No. 07-1030, 07-1307 (4th Cir Ct App, 2/4/08)
Orders denying motions to dismiss Chapter 13 petitions and confirming debtors’ plans are affirmed over claims that, since the debtors are ineligible for discharges under 11 U.S.C. section 1328(f), they should not be allowed to file a Chapter 13 petition. Not bad faith to file case where no discharge can be entered. Time frame for filing runs from date of Petition to date of Petition, not date of discharge.
There is no rule or local rule allowing for the ex parte reopening. However, customary practice, as recognized by case law, allows for the ex parte reopening without a hearing. See Menk v. LaPaglia (In re Menk), 241 B.R. 896, 916–17 (9th Cir. BAP 1999); Watson v. Shandell (In re Watson), 192 B.R. 739, 744 (9th Cir. BAP 1996), aff’d mem., 116 F.3d 488, 1997 WL 330895 (9th Cir. 1997); Abbott v. Daff (In re Abbott), 183 B.R. 198, 200 (9th Cir. BAP 1995).
Weil v. Elliott (In re Elliott) (9th Cir. June 14, 2017). The one-year deadline for seeking revocation of a discharge order is not jurisdictional and may therefore be waived.
Edward Elliott filed his chapter 7 bankruptcy petition and failed to list his home. He received a discharge under section 727(a). Fifteen months later, when the trustee discovered the fraudulent nondisclosure, she filed an adversary complaint seeking an order vacating the discharge under section 727(d)(1). Section 727(e)(1) permits a trustee to seek revocation of discharge within one year of the discharge order. Mr. Elliott did not raise the issue of untimeliness in his response to the adversary complaint. The bankruptcy court revoked his discharge.
FRBP 4004(a)(1)(B) and 4004(a)(1)(E) make clear that the discharge shouldn’t have been entered with a pending 727 action and/or a pending motion to extend the time to file a 727 action.
The outcome of a 523 action, if the creditor wins, excludes the debt(s) at issue from the discharge no matter when the discharge is entered, so that is an area where it varies by district whether the court will hold off until after the 523 actions are resolved or not.
Some debts are automatically not discharged in bankruptcy (child support/alimony, certain taxes, restitution which is part of a DUI conviction, etc) Other debts may be discharged unless a creditor obtains a court order determining those debts to be non-dischargeable (such as fraud). 523(a)(9) prevents the discharge of damages for death or personal injury caused by the debtor unlawfully operating a motor vehicle, vessel or aircraft while intoxicated. There is no requirement to file an objection to discharge under 523(a)(9). See 523( c)(1) which requires an objection for 523(a)(2), (4) and (6).
If a claim is a claim under 523(a)(6) for willful and malicious injury by the debtor to another entity or the property of another entity – is only for property damage and there is no criminal restitution order then see In re Su, 290 F.3d 1140 (9th Cir., 2002) (whether running a red light creates a nondischargeable debt). The answer appears to be that the debtor may discharge the civil damages under 523 unless the debtor was both willful and malicious.
A.”Willful” means the debtor had either (1) a subjective intent to harm, or (2) a subjective belief that harm is substantially certain,
B. “Malicious” means (1) a wrongful act, (2) done intentionally, (3) which necessarily causes injury, and (4) is done without just cause or excuse.
CHAPTER 13 - EXCEPTIONS TO DISCHARGE
Bankruptcy Court Form 3180W Chapter 13 Discharge (12/18)
Some debts are not discharged. Some examples of debts that are not discharged are:
debts for certain types of taxes specified in 11 U.S.C. §§ 507(a)(8)(C), 523(a)(1)(B), or 523(a)(1)(C) to the extent not paid in full under the plan;
debts that the bankruptcy court has decided or will decide are not discharged in this bankruptcy case;
debts for restitution, or a criminal fine, included in a sentence on debtor’s criminal conviction;
some debts which the debtors did not properly list;
debts provided for under 11 U.S.C. § 1322(b)(5) and on which the last payment or other transfer is due after the date on which the final payment under the plan was due;
debts for certain consumer purchases made after the bankruptcy case was filed if obtaining the trustee’s prior approval of incurring the debt was practicable but was not obtained;
debts for restitution, or damages, awarded in a civil action against the debtor as a result of malicious or willful injury by the debtor that caused personal injury to an individual or the death of an individual; and
debts for death or personal injury caused by operating a vehicle while intoxicated.
This information is only a general summary of a chapter 13 discharge; some exceptions exist. Because the law is complicated, you should consult an attorney to determine the exact effect of the discharge in this case.
HOW TO OBTAIN A HARDSHIP DISCHARGE IN CHAPTER 13
By: Peter M. Lively petermlively@aol.com And: Hillary C. ColemanThe loss of so many jobs in the current recession will negatively impact many debtors who are making plan payments pursuant to their confirmed Chapter 13 plans but have yet reached plan completion.
Post-confirmation Chapter 13 debtors who experi­ence a decrease in disposable income may become eligible for either conversion to Chapter 7 or a Chapter 13 hard­ship discharge. In circumstances where debtors have not incurred post-petition debt that may be discharged in a case converted to Chapter 7, it is most advantageous for them to proceed with a request for hardship discharge.
Obtaining a hardship discharge under 11 U.S.C. section 1328(b) helps debtors to become eligible for a subse­quent Chapter 7 or 13 discharge two (2) years earlier than they would be if they converted their case and received a Chapter 7 discharge. See Discharge Analysis article in last issue of CDCBAA’s Newsletter.
A motion brought under 11 U.S.C. section 1328(b) is made on grounds that (1) the debtors are not able to complete the payments under their Plan due to circum­stances for which they should not be held accountable, (2) creditors have received more than would have been paid under a hypothetical liquidation of debtors’ estate, and (3) modification of the Plan is not practicable. Such a motion should set forth facts supporting lack of accountability on the debtors’ part for the hardship circumstances and a discharge analysis, evidenced, of course, by declarations, then quote and cite the statute, and finally, explain why debtors’ particular facts and circumstances meet each of the elements of the statute.
For example, where one spouse in a joint case (“Husband”) has lost his job, has been unable to secure replacement income and is receiving unemployment bene­fits that do not provide sufficient disposable income to pay the existing or a modified plan payment, an example of a format for such motion is:
MEMORANDUM OF POINTS AND AUTHORI­TIES:
I. INTRODUCTION/STATEMENT OF FACTS.
Debtors WARREN WAGE EARNER (“HUSBAND”) and SALLY SALARIED (“WIFE”) (collectively “Debtors”) filed their joint petition as husband and wife under Chapter 13. Debtors’ Chapter 13 Plan was confirmed on [date], 2008. Debtors remained current with their plan payments of $1,500.00 through [date], 2008. See Declaration of HUSBAND, attached hereto and incorporated herein by reference (“HUSBAND Dec.”).
Unfortunately, Debtors have suffered some unexpected consequences since the filing of their case. Specifically, HUSBAND, a widget installer, was laid off from his job in late [date], 2008. He received just two weeks’ sever­ance pay, and now receives only $1,250.00 per month in unemployment benefits. While he has been seeking, and continues to seek, gainful employment, the negative impact of the current economic crisis on the job market is evident. As of even date, HUSBAND has been unable, despite his diligent efforts, to secure new employment. HUSBAND Declaration:
HUSBAND was the primary wage earner for the house­hold, earning base pay of $3,000.00 per month. WIFE earns a gross salary of only $2,500.00 per month. Debtors’ household expenses far exceed WIFE’s salary, and there is certainly no excess available with which to make plan payments of $1,500.00. Debtors’ plan was premised on contributions by both spouses. Without the income from HUSBAND’s employment, Debtors cannot possibly meet their obligations under their confirmed Chapter 13 Plan. HUSBAND Dec.
A liquidation analysis of the case shows that Debtors have already paid more to their unsecured creditors under their Chapter 13 Plan than such creditors would receive if the case proceeds as a Chapter 7. See Declaration of ATTORNEY FOR DEBTORS, attached hereto and incor­porated herein by reference. Under these circumstances, a hardship discharge is warranted.
II. A HARDSHIP DISCHARGE IS WARRANTED HERE BECAUSE THE DEBTORS ARE NOT ABLE TO COMPLETE THE PAYMENTS UNDER THE PLAN, CREDITORS HAVE RECEIVED MORE THAN WOULD HAVE BEEN PAID UNDER A HYPOTHETICAL LIQUI­DATION OF DEBTORS’ ESTATE, AND MODIFI­CATION OF THE PLAN IS NOT PRACTICABLE.
Under certain limited circumstances, the Bankruptcy Code provides for entry of a discharge order despite failure to pay all of the plan payments. Specifically, 11 U.S.C. section 1328(b) provides:
Subject to subsection (d)2, at any time after the confir­mation of the plan and after notice and a hearing, the court may grant a discharge to a Debtor that has not completed payments under the plan only if–
(2) the value, as of the effective date of the plan, or property actually distributed under the plan on account of each allowed unsecured claim is not less than the amount that would have been paid on such claim if the estate of the Debtor had been liqui­dated under chapter 7 of this title on such date; and
Debtors’ circumstances here fall squarely within the statute. First, HUSBAND was laid off by his employer. This has eliminated HUSBAND’s ability to contribute to household expenses, including the plan payments. HUSBAND has attempted to secure new employment, but his efforts have been unsuccessful. This is certainly a situ­ation that is beyond HUSBAND’s control, and accordingly, Debtors’ resulting inability to make their plan payments is a circumstance for which Debtors should not justly be held accountable. Thus, one condition for a hardship discharge, as set forth in 11 U.S.C. section 1328(b)(1), is met.
Second, a hypothetical Chapter 7 liquidation would yield nothing for general unsecured creditors. Thus, another condition for a hardship discharge, as required by 11 U.S.C. section 1328(b)(2), is met here.
Finally, a modification of Debtors’ plan is pointless here as their current household income falls so far below their household expenses that there is clearly no means by which to modify the Chapter 13 Plan feasibly. Thus, all conditions for hardship discharge, including impractica­bility of modification of the Plan, required under 11 U.S.C. section 1328(b)(3) are met here.
Under these circumstances, 11 U.S.C. section 1328(b) permits this honorable Court to enter a discharge order.
When, as here, the value paid into the plan is no less than a hypothetical Chapter 7 liquidation payment to general unsecured creditors, and Debtors’ reduced income resulting from unexpected and uncontrollable separation from employment make further plan payments and plan modification infeasible, the Bankruptcy Code permits this honorable Court to enter a discharge order. Debtors respectfully request that the Court grant them a discharge.
TRUSTEE ABANDONS PROPERTY OF THE ESTATE
554 (a) After notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. (b) On request of a party in interest and after notice and a hearing, the court may order the trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. (c) Unless the court orders otherwise, any property scheduled under section 521(1) of this title not otherwise administered at the time of the closing of a case is abandoned to the debtor and administered for purposes of section 350 of this title. (d) Unless the court orders otherwise, property of the estate that is not abandoned under this section and that is not administered in the case remains property of the estate.
FILING CHAPTER 13 WHEN DEBTORS NOT ELIGIBLE FOR DISCHARGE
CAN A DEBTOR BE NAMED IN LAWSUIT AFTER DISCHARGE
Can someone name debtor in lawsuit even after discharge?
Yes, if the court enters an order or if there is insurance. The insurance company remains on the hook despite the debtor’s discharge. The plaintiff does a stay lift to file the suit against the debtor with a provision that it is only for purposes of collecting on the insurance. The plaintiff cannot sue the insurance company directly. See the procedure described in Stallings v. Spring Meadows Apartment Complex Ltd. Partnership, 185 Ariz. 156, 913 P.2d 496 (Ariz., 1996). In Stallings the Arizona Supreme Court reversed the Arizona Court Of Appeals. Stallings v. Spring Meadows Apartment Complex Ltd. Partnership, 886 P.2d 1373, 180 Ariz. 617 (Ariz. App. Div. 1, 1994) . The dissent in the Arizona Court of Appeals (which turned out to be correct) stated: most courts hold that a discharge in bankruptcy does not preclude an action against a discharged debtor as the nominal defendant where he is insured against liability for negligence. See, e.g., In re Edgeworth, 993 F.2d 51 (5th Cir.1993); First Fidelity Bank v. McAteer, 985 F.2d 114 (3rd Cir.1993); Green v. Welsh, 956 F.2d 30, 35 (2nd Cir.1992); In re Fernstrom Storage and Van Co., 938 F.2d 731, 733-34 (7th Cir.1991); In re Jet Florida Sys., Inc., 883 F.2d 970, 976 (11th Cir.1989); In re Beeney, 142 B.R. 360, 362-63 (Bankr. 9th Cir.1992); In re Greenway, 126 B.R. 253, 255 (Bankr.E.D.Tex.1991); In re Peterson, 118 B.R. 801, 804 (Bankr.D.N.M.1990); In re Traylor, 94 B.R. 292, 293 (Bankr.E.D.N.Y.1989); In re Lembke, 93 B.R. 701, 702-03 (Bankr.D.N.D.1988); In re White, 73 B.R. 983 (Bankr.D.D.C.1987); In re Mann, 58 B.R. 953, 958 (Bankr.W.D.Va.1986).
A discharge in bankruptcy does not extinguish the debt itself; it merely releases the debtor from personal liability for the debt.
Edgeworth, 993 F.2d at 53. Section 524(e) 10 of the Bankruptcy Code specifies that the debt still exists and can be collected from any other entity that may be liable. Edgeworth, 993 F.2d at 53. Thus, courts have held that the scope of a section 524 injunction does not prevent a proceeding against the discharged debtor to establish a claim against the debtor’s liability insurer. Id. at 54.
DISCHARGE PROBLEMS IN A CHAPTER 20
Using Till in chapter 13, shortly after discharge in chapter 7: Till could be used for the plan, but the problem is that without a discharge a lien remains in place unless the debt is paid pursuant to non-bk law. 1325(a)(5)(B)(i). Lien strip-offs are OK because there is no allowed secured claim (per 506), but here you are talking about some 506 value, so there is an allowed secured claim. Thus, you could pay Till if you need to in order to make the plan feasible, but the lien has to be retained and will be in default (for non-payment of the interest) once the plan completes. But see this additional argument: If this is a Chapter 20, the Debtor’s personal liability on the car loan was discharged in the first Chapter 7. This would include a discharge on any interest claim over and above the Till rate in the subsequent Chapter 13. Therefore it seems that one can do a cram down on the rate in the subsequent 13 without problem. But, a third thought: the issue is neither the personal discharge or the cramdown rate. The issue is whether the contract interest rate survives as a lien against the vehicle after the completion of the 13. Must the lender release the title after being paid less than whats owed under the contract ? In addition to the contract interest “surviving”, what about the lenders fees and expenses in getting advice about the surviving contract interest rate ?
DISCHARGE OF GOVERNMENT FINES & PENALTIES - 7 vs 13
In re Andrews, Adv. Proc. No. 15-04724 (Bankr E.D. Mich., October 2, 2015). The Michigan Unemployment Insurance Agency alleged that the debtor was overpaid $6,897 in unemployment benefits because she intentionally failed to report wages from two jobs. The Agency imposed a quadruple-damage statutory penalty with interest, and demanded payment of more than $34,000.
The bankruptcy court explained that, in 2005, Congress significantly narrowed the so-called Chapter 13 “super discharge” by limiting the debts specified in 11 U.S.C. § 1328(a)(2) by specifically noting the number of subsections of section 523(a) that are non-dischargeable. Congress omitted section 523(a)(7) debts – governmental penalties – from the list in section 1328(a)(2). The bankruptcy court reasoned that, by omitting penalty debts from the winnowing of the super discharge, “Congress intended that they remain dischargeable under Chapter 13.” This is true even if the penalty debt arises from fraud.
Perez v. Campbell, 402 U.S. 637 (1971) holds that the bankruptcy discharge releases any suspension of a driver’s license for a judgment for uninsured vehicle.
FILING PROOF OF CLAIM VIOLATION OF DISCHARGE INJUNCTION
§ 524(a)(2) Green Point Credit, LLC v. McLean (In re McLean), 2015 U.S. App. LEXIS 12736 (11th Cir. July 23, 2015) (Pryor, C.J.).
Creditor violated the discharge injunction by filing a proof of claim for debt that was discharged in debtor’s prior bankruptcy case.
In the Matter of McGee (12/23/03 – No. 032297) (U.S. 7th Circuit Court of Appeals) Having demanded and received a security deposit under statutory terms designed to ensure that the money would be available for return to the tenants if they kept their own promises, the landlord was obliged to act as the tenants’ fiduciary in investing and preserving the funds. Her making off with the money was an act of defalcation disqualifying her from a discharge per Bankruptcy Code section 523(a)(4).
FILING PROOF OF CLAIM WAIVES SOVEREIGN IMMUNITY
In re: Harleston (06/05/03 – No. 02-55770) (9th Cir) The California Board of Equalization waived its sovereign immunity by filing a proof of claim in a previous bankruptcy proceeding, thus the debt to the Board was discharged.
DEBT COLLECTORS and FDCPA
Walls v. Wells Fargo Bank, N.A. (01/08/02 – No. 00-17036)(9th Cir. Ct App) There is no implied private right of action for violations of 11 USC 524, which enjoins debt collection against a debtor after a discharge in bankruptcy, nor may a debtor file a simultaneous claim under the Fair Debt Collections Practices Act.
ESCROW FUNDS AND BANKRUPTCY
Stratosphere Litig.. LLC v. Grand Casinos, Inc. (08/13/02 – No. 01-15947) (9th Cir Ct App) In a contract dispute, one party’s obligation to fund an escrow account (a concurrent condition) was discharged when the other party, charged with raising additional equity, filed for bankruptcy, and a third-party beneficiary’s claims are subject to that defense.
ATTORNEY DISCIPLINARY FEES
The State Bar of California v. Taggart (05/10/01 – No. 99-56343) Costs of attorney disciplinary proceedings brought by California State Bar are compensation for the bar’s pecuniary loss and are thus dischargeable in bankruptcy under 11 USC 523(a)(7)
In re: Marilyn S. Scheer, No. 14–56622 (US Court of appeals, 9th Cir., April 14, 2016) Pro se appellant Marilyn Scheer, an attorney with a suspended California law license, contends that the district court erred when it held that her debt to a former client was nondischargeable under 11 U.S.C. § 523(a)(7). We agree with Scheer that this particular type of debt does not fall within the scope of section 523(a)(7), so we reverse the district court and remand for further proceedings.
Scheer’s performance as an attorney leaves much to be desired, and it is unsettling that she can use bankruptcy to avoid refunding her client’s improperly collected fees. But our moral take on Scheer’s conduct does not control—the statutory language and policies underlying section 523(a)(7) do. And under the current state of the law, the debt to her client does not fall within the section 523(a)(7) nondischargeability exception.
CAN A DEBTOR WAIVE THEIR RIGHT TO A DISCHARGE?
Normally that type of contract provision is void. Even a stipulated judgment stating that the debt is not discharged in bankruptcy is not entitled to res judicata as the issue of “discharge” because it was not litigated in the Superior Court (most likely the bankruptcy had not yet occurred). If the stipulation had findings of fact listing the elements of common law fraud (state law elements are not identical to applicable federal law); those findings are entitled to collateral estoppel in a timely filed adversary in the Bankruptcy Court. For instance: some of the elements of fraud are a knowing, material misrepresentation of fact reasonably relied upon and where there were damages.However, a default judgment with no appearance by the Debtor, does not preclude any issues.
Deadline to file a non-dischargeability action: An Adversary action would need to be filed in the Bankruptcy Court within sixty days of the meeting of creditors to determine if the debt is not discharge