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Chapter 13

The Chapter 13 Debtor may retain Covid Relief Payments

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The Chapter 13 Debtor may retain Covid Relief Payments.

Normally the Debtor must contribute all tax refunds received during a Chapter 13 Plan to the Chapter 13 Trustee unless the plan already provides a 100% to the unsecured creditors.

There is an exception pursuant to the American Rescue Plan Act of 2021 Pub L. No. 117-2. (The “ARP”) for Covid Relief Payments.

The ARP was enacted on March 11th, 2021. It provides relief for qualified individuals t address the impact of COVID-19 including additional recovery rebates and expanded child t creditors. The ARP provided for a third round of recovery rebates, which total at most $1,400 per individual or $2,800 per married couple filing jointly, with an additional $1,400 paid for each qualifying dependent.

The rebates were payable in full to qualifying individuals earning les than $75,000, married couples filing jointly earning less than $150,000, and heads of household earning less than $112,500.

As part of the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260 (the “CAA”) Congress amended 11 U.S.C. Sec. 541 to exclude “recovery rebates made under section 6428 of the Internal Revenue Code of 1986” from bankruptcy estate property. Former 11 U.S.C. Sec. 54l(b)(l 1). These are Covid Relief Payments.

Section 6428 implemented the first round of recovery rebates under the CARE Act. Pub. L. No. 116-136, 6 U.S.C. Sec. 6428.

The CAA also provided for a second round of recovery rebates by adding section 6428A to the Internal Revenue Code, providing that those rebates were “in addition to the credit allowed under section 6428.” 26 U.S.C. Sec. 6428A.

The ARP similarly implemented the third round of recovery rebates under new section 6428B. U.S.C. Sec. 6428B.

The best reading of 11 U.S.C. Sec. 54l(b)(l l) is that it applies to all three round of recovery rebates, including those made under the ARP, to exclude them from bankruptcy estates.

This interpretation is consistent with the plain language of section 541 (b )( 11) standing alone, as well as 26 U.S.C. Sec. 6428, 6428A, and 6428B read in conjunction. It is also consistent with congressional intent as expressed by the CAA’ s amendments to section 541 (b ).

By Anerio Altman.

Chapter 13, Uncategorized

Voluntary Contributions to Retirement in Chapter 13

By Anerio Altman

This is you if you continue to make voluntary retirement contributions during your Chapter 13 proceeding.

Voluntary contributions to retirement are allowed expenses in Chapter 13 Bankruptcies for “below median” debtors if they are reasonable and necessary. Generally a Debtor is not allowed to make voluntary contributions to their retirement during a Chapter 13 if the Debtor’s income makes them a “Below Median Income” filer. There are certain situations in which it is acceptable.

The Means Test in Chapter 13

When a bankruptcy petition is filed, a bankruptcy estate is created, which includes all the Debtor’s property unless otherwise excluded by law.  11 U.S.C. Sec 541(a).  Under Chapter 13, the bankruptcy estate also includes the Debtor’s property and earnings acquired “after the commencement of the case but before the case is closed, dismissed, or converted.”  11 U.S.C. Sec. 1306(a)(1) & (2). 

Section 1325(b) requires that, if the trustee or the holder of an allowed unsecured claim objects to the Debtor’s Chapter 13 plan, the debtor must either pay all allowed claims in full or the plan must provide that “all of the debtor’s projected disposable income” be devoted to the Chapter 13 plan.  11 U.S.C. Sec. 1325(b)(1)(B). 

Debtors can be “above median” or “below median”. If the Debtors’ income is higher than the median income for a household of it size in the county in which they reside, they are considered an “above median” household. If less than the average, they are “below median”.

For above-median debtors, disposable income is measured by the means test contained in Sec. 1325(b)(2),(3), and 707(b).  For below-median debtors, disposable income is only determined by case law that existed prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”).

Pre-BAPCPA reasoning is embodied in the current code as the “current monthly income received by the Debtor…less amounts reasonably necessary to be expended…for the maintenance or support of the debtor or a dependent of the debtor, or for a domestic support obligation.”  11 U.S.C. Sec. 1325(b)(2). 

In Re Bruce and “reasonably necessary”

Whether an expense is “reasonably necessary” under Sec. 1325(b)(2) is a factual determination by the court.  In Re Bruce 484 B.R. 387, 389 (Bankr. W.D. Wash. 2012); Keith M. Lundin & William H. Brown, Chapter 13 Bankruptcy, 4th Ed. Sec. 165.1 at Sec. 1, Sec. Rev. 6/14/04, www.Ch13online.com.

This reasoning is displayed in the case of In Re Bruce 484 B.R. 387, 389 (Bankr. W.D. Wash. 2012). In the matter of In re Bruce, the Debtor was a below median Debtor with a household of 3, who proposed a 36 month 0% Chapter 13 Plan which allowed for a monthly contribution of $160.33 a month to a retirement account.

The Chapter 13 Trustee in Bruce opposed the Debtor’s plan citing to the case of In Re Parks 475 B.R. 703 (B.A.P. 9th Cir. 2012) for the proposition that deductions for voluntary retirement are not permitted as allowable deduction as reasonable and necessary.  The court in Bruce  distinguished Parks because the Debtor in Parks was an above median income Debtor, where the Debtor in Bruce was not, and the expense of $160 a month was reasonable and necessary.  

in Bruce the Debtor was allowed a match by his employer for the contribution enhancing the value of the contribution.  There was no objection to the expenses on the Debtor’s Schedule J budget, and the employer offered no other form of pension or retirement.  Bruce, supra 484 B.R. 387, 390.  The court noted that except for the largest employers and government agencies, the cost of traditional pension plans is prohibitive, and that 401(k) plans, TSP’s, and IRA’s have become the primary retirement vehicle for private employees in this country.  Id.

Below median debtors must often address pre-BAPCPA determinations of what is “reasonably necessary” as cases involving that analysis pre-date BAPCPA.  However, historical cases that have held that voluntary contributions to a pension plan were not reasonably necessary were written at a time when employers were more likely to maintain defined benefit pension plans.  Id. 

Post BAPCPA rulings have looked at the code’s considerate treatment of 401(k) contributions.  In Re Smith No. 09-64409, 2010 WL 2400065, 3 (Bankr. N.D. Ohio, June 15th, 2010)(“The enactment of section 541(b)(7) injected a policy favoring retirement savings into the bankruptcy code.  Therefore, the harsh approach toward 401(k) contributions taken by courts pre-BAPCPA is no longer warranted.”) 

The court in Bruce cautioned that a reviewing court should consider that it is manifestly unfair, and probably a due process violation, to discriminate against poor Debtors making reasonable contributions to a 401(k) plan who may be barred from deducting those amounts in determining disposable income, while similarly situated employees with involuntary contributions to a defined plan are allowed to fully deduct those contributions before determining disposable income.  Bruce, supra.

So below median Debtors can contribute to their retirement plans if such contributions are reasonable and necessary.

341A Hearing, COVID-19 ISSUES, Santa Ana Hearings

341A HEARINGS IN THE CENTRAL DISTRICT OF CALIFORNIA WILL LIKELY REMAIN BY TELEPHONE AND ZOOM

By Anerio Altman

After two years of holding 341a hearings remotely, it appears that 341a hearings will continue to be held by telephone or “zoom”.

Previously, back in the “old world” pre-pandemic, a Debtor would show up at a physical location with their picture ID and proof of their social security. The hearing would be called and they would amble up to the table. A recording would begin. They would physically meet with the Trustee and demonstrate this proof. They would then testify as to the veracity of the information in the petition.

The Trustee would then ask them questions in person about their petition. It could last 10 minutes, or it could last an hour. The Trustee would have anywhere from 45 to 90 hearings to go through in a day.

Creditors could also physically show up and “participate” in the meeting. “Participation” could consist of asking questions of the Debtor, or just grousing generally as to the bankruptcy process.

The hearings moved to telephonic or zoom, depending on the Trustee, when the pandemic started. At first there was a great deal of confusion as everyone got used to the new set up. As of today, it is working quite well. Whether a Trustee utilizes a telephone line or a zoom connection is up to the individual Trustee.

I general this has been very successful.

For Debtors, it is convenient because they no longer need to take a day off of work, or arrange childcare, to come to the hearing. Further, depending on your county, actually getting to the physical hearing room could in itself have been a challenge. Now, Debtors can call up on an iphone or use a computer with camera to appear.

For Trustees it is convenient because Trustees often rely upon fasts access to their computer system to review files. The prior 341a meeting rooms did not always have particularly good internet access so all the hearings would be slowed down by the Trustee trying to get better wifi access. Further Trustees can effectively bring their case administrator’s with them during the hearings.

For Creditors it is not as convenient because they will seldom understand what is going on unless they have counsel familiar with the set up. That said, 341a hearings are administrative hearings only, in which no decisions are reached. It is only a hearing in which the Debtor may make statements under penalty of perjury, but it is not the penultimate hearing of the matter. If the Creditor doesn’t like the 341a set up, they can always hold a 2004 exam.

Overall, holding these hearings remotely has improved the entire process.

Uncategorized

FDCPA and the bankruptcy discharge-modifying walls v. wells fargo IN MANKIAN V. PETERS & FREEDMAN

A new case out of the 9th Circuit has opens the door to raising FDCPA Claims for discharged obligations.

Previously, the case of Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 510 (9th Cir. 2002)  had effectively eliminated the ability of individual debtors in the 9th circuit to bring claims under the Fair Debt Collection Practices Act 15 U.S.C. Sec. 1692 for any debt that was discharged in bankruptcy. Effectively, once a debt was discharged, the individual’s sole remedy for a debt collection violation was to request the bankruptcy court issue sanctions for a violation of the court’s discharge order. This sometimes eliminated the individual’s remedy as each remedy would depend upon the preference of the judge as to how such a violation would be addressed. Sometimes it would be helpful, sometimes not. The bankruptcy remedy however did not necessarily include attorney’s fees or costs for curing or addressing the violation, meaning that individuals often had to pay an attorney to address the bad acts of a third party.

The ninth circuit has now issued a new ruling which may resurrect these rights.

In Mankian v. Peters & Freedman, et al. (Case No. 19-55393) (9th Circuit COA) the court found that violations that are not rooted in the violation of the discharge order are not precluded from applying for a remedy under the FDCPA.

The court found that Walls did not extend to the circumstance of a cause of action that arose separately under the Fair Debt Collection Practices Act without reference to the discharge order.

In this case the Debtor, Mankian, had completed a Chapter 13 Plan and paid off an HOA debt through the plan. The entry of the discharge did not discharge any obligation owed to the HOA because there was no obligation to discharge at the end of the case.

Post bankruptcy, the HOA committed a billing error and initiated foreclosure on the Debtor and serving the Debtor with a Notice of Default after having a process server break into his yard and scare his family. They called the police on the server. Thereafter the server gave the Notice of Default to the Debtor. Soon thereafter it was resolved that there was no debt.

The Debtor sued under the FDCPA and the HOA responded that such a suit was precluded by the discharge injunction as stated in Walls. The trial court upheld and what followed was 8 years of litigation up to the Ninth Circuit Court of Appeals.

The Ninth Circuit took note that the debt in question was not discharged by the Debtor, and the violation in question had nothing to do , nor derived from, the entry of discharge in the case. As such the FDCPA remedy was available to the Debtor.

California Evictions, California Legal issues, COVID-19 ISSUES

ALL CALIFORNIA EVICTIONS CAN BE POSTPONED 60 DAYS AS LONG AS YOU ASK FOR THE EXTENSION FROM THE LANDLORD WITHIN 7 DAYS OF THE DATE THE RENT IS DUE!

By Anerio Altman

If you fall behind on your residential rent, and you cannot make the rent because of the issues created by Covid-19, you can ask for a 60 day extension on paying your rent SO LONG AS you ask for that extension within 7 days of the due date.

If the Landlord then seeks to evict you, you can respond in court requesting an extension to respond and receive at least 60 days to file your response to the complaint.

THIS DOES NOT MEAN YOU GET TO SKIP PAYING RENT! It just provides you time to catch up with the rent owed.

This protection has been issued per the Governor of California. The text of the Executive Order follows:

EXECUTIVE ORDER N-37-20
WHEREAS on March 4, 2020, I proclaimed a State of Emergency to exist in California as a result of the threat of COVID-19; and

WHEREAS in a short period of time, COVID-19 has rapidly spread
throughout California, necessitating stringent public health emergency orders as well as guidance from federal, state, and local public health officials; and


WHEREAS on March 16, 2020, I issued Executive Order N-28-20, suspending state law limitations on local jurisdictions that impose restrictions on evictions; and


WHEREAS on March 19, 2020, I issued Executive Order N-33-20, ordering all residents to immediately heed the Order of the State Public Health Officer for all residents, unless exempted, to stay home or at their place of residence; and


WHEREAS many Californians are experiencing or will experience
substantial losses of income as a result of business closures, the loss of hours or wages, or layoffs related to COVID-19, hindering their ability to keep up with their rent, and leaving them vulnerable to eviction; and

WHEREAS minimizing evictions during this period is critical to reducing the spread of COVID-19 in vulnerable populations by allowing all residents to stay home or at their place of residence in compliance with Executive Order N-33-20; and


WHEREAS Chief Justice Tani Cantil-Sakauye issued advisory guidance on March 20, 2020 for superior courts to suspend most civil trials and hearings for at least 60 days, and on March 23, 2020, suspended all jury trials for a period of 60 days, and extended by 60 days the time period for the holding of a civil trial; and


WHEREAS on March 25, 2020 the Department of Business Oversight secured support from national banks, state banks and credit unions for temporary delays in mortgage payments and foreclosure sales and evictions for homeowners who have economic impacts from COVID-19 with the objective of maximizing consistency and minimizing hurdles potentially faced by borrowers.

NOW, THEREFORE, I, GAVIN NEWSOM, Governor of the State of California, in accordance with the authority vested in me by the State Constitution and statutes of the State of California, and in particular, Government Code sections 8567 and 8571, do hereby issue the following Order to become effective immediately:


IT IS HEREBY ORDERED THAT:


1) The deadline specified in Code of Civil Procedure section 1167 shall be extended for a period of 60 days for any tenant who is served, while this Order is in effect, with a complaint that seeks to evict the tenant from a residence or dwelling unit for nonpayment of rent and who satisfies all of the following requirements:

a. Prior to the date of this Order, the tenant paid rent due to the
landlord pursuant to an agreement.


b. The tenant notifies the landlord in writing before the rent is due,
or within a reasonable period of time afterwards not to exceed 7
days, that the tenant needs to delay all or some payment of rent
because of an inability to pay the full amount due to reasons
related to COVID-19, including but not limited to the following:


(i) The tenant was unavailable to work because the tenant
was sick with a suspected or confirmed case of COVID-19
or caring for a household or family member who was sick
with a suspected or confirmed case of COVID-19;


(ii) The tenant experienced a lay-off, loss of hours, or other
income reduction resulting from COVID-19, the state of
emergency, or related government response; or


(iii) The tenant needed to miss work to care for a child whose
school was closed in response to COVID-19.


c. The tenant retains verifiable documentation, such as termination
notices, payroll checks, pay stubs, bank statements, medical
bills, or signed letters or statements from an employer or
supervisor explaining the tenant’s changed financial
circumstances, to support the tenant’s assertion of an inability to
pay. This documentation may be provided to the landlord no
later than the time upon payment of back-due rent.


2) No writ may be enforced while this Order is in effect to evict a tenant from a residence or dwelling unit for nonpayment of rent who satisfies the requirements of subparagraphs (a)-(c) of paragraph 1.


3) The protections in paragraphs 1 and 2 shall be in effect through May 31, 2020.


Nothing in this Order shall prevent a tenant who is able to pay all or some of the rent due from paying that rent in a timely manner or relieve a tenant of liability for unpaid rent.


Nothing in this Order shall in any way restrict state or local governmental authority to order any quarantine, isolation, or other public health measure that may compel an individual to remain physically present in a particular residential property.


IT IS FURTHER ORDERED that this Order supersedes Executive Order N-28-20 to the extent that there is any conflict with that Order.

This Order is not intended to, and does not, create any rights or benefits, substantive or procedural, enforceable at law or in equity, against the State of California, its agencies, departments, entities, officers, employees, or any other person.
I FURTHER DIRECT that as soon as hereafter possible, this proclamation be filed in the Office of the Secretary of State and that widespread publicity and notice be given of this Order.
IN WITNESS WHEREOF I have hereunto set
my hand and caused the Great Seal of the
State of California to be affixed this 27th
day of March 2020.

GAVIN NEWSOM
Governor of California

Uncategorized

Bankruptcy in the era of a Quarantine

Bankruptcy filings may continue during the Covid-19 quarantine. In many ways this has not affected the basic practice. In other ways, it has been seriously affected.

Bankruptcy practice takes place in the Federal Court system, and Federal Courts were already set up for this type of situation; For the past two decades, many hearings in Bankruptcy Court were able to be held by telephonic or video conferencing. Further, most of the arguments in Bankruptcy Court are based upon written documents filed weeks in advance of any given hearing. While it doesn’t make for great TV, it is efficient.

As of March 19th, 2020, the Chief Presiding Judge of the Central District of California has ordered that all hearings will be moved to telephonic or video conferencing; No one is going to a hearing in the courthouse. This is a temporary measure, but it is absolute. For the individual filer, this makes almost no difference to them. This is just something the attorneys have to deal with in their practice.

Individuals however must generally appear at a 341a hearing in their individual Bankruptcy Filing. It is not clear yet how that is to be held, or when it is to be held, but rules will be promulgated shortly.

As far as meeting with our office, it is 2020 and we can meet by telephone, Skype, Zoom or a variety of other non-personal methods. Really, it isn’t a problem. We just need to know you want to meet this way in advance.

If you need to file, give us a call.

Life continues.

Phone: (949) 218-2002 or email us avaesq@lakeforestbkoffice.com.

523(a)(2), 9011, 9th Circuit, Appellate Decisions, Non-Dischargeable Debts

Case Report: Weinstein, Pinson & Riley v. Nelson 14-56103

A strike against abusive debt collectors in Bankruptcy Court.

Authority:  9th Circuit Court of Appeals.

Why relevant:  A 9011 motion may be well taken where even one of the causes of action is without merit.

Relevant Code Section:  523(a)(2)

Note: Not Published

In this matter, Weinstein, Pinson & Riley (formally Weinstein & Riley) sued another Debtor yet again with insufficient evidence to back up their claim and were sanctioned under F.R.B.P. 9011 for meritless litigation.  Weinstein is a national law firm, renowned for filing claims against Debtors under 11 U.S.C. 523(a)(2) without a sufficient basis for alleging fraud.  Their goals are to scare the Debtors into some form of settlement by taking advantage of individual Debtors who have insufficient resources to defend themselves.  In this matter which comes out of the 9th Circuit court of appeals, the appellate court upheld a lower court ruling finding Weinstein to have filed their complaint without a sufficient legal basis even though at least one of their causes of action did have merit.

11 U.S.C. 523(a)(2) concerns debts incurred through fraud. Weinstein often sues for debts to be determined as non-dischargeable under 11 U.S.C. 523(a)(2)(c)(1) on the basis that debts incurred within the 90 days pre-petition that are incurred for the purchase of luxury goods or services with knowledge of the Debtor’s intent to discharge the debts prior to Bankruptcy should likewise be considered non-dischargeable.

In our experience, Weinstein can be scared off by an aggressive defense.  As a defending party, if the Debtor can cause Weinstein sufficient grief such that they do not want to continue litigation, they often dismiss the matter.  Further, our recommendation is to always proceed to trial.  Most Bankruptcy Judges are unfriendly to Weinstein’s tactics and the majority of Debtors will find themselves in a receptive court if they put forward a good, honest and solid defense regarding the nature of the claimed non-dischargeable debts.

Chapter 13

Paying for attorney services during a Chapter 13: Fee Applications

By Anerio Altman

Once you are in a Chapter 13 Case in which the Chapter 13 Plan has been confirmed, you won’t pay for your attorney’s services again, at least not directly.

During a Chapter 13 case, any attorney’s fees you incur for further services after confirmation must be reviewed and approved by the Bankruptcy Judge before they can be paid.  Those fees will be paid by the Chapter 13 estate.  Specifically, the Chapter 13 Trustee will pay the attorney’s fees from the fees you pay into the Chapter 13 estate.  However all the fees will be reviewed by the court and approved by the Judge before your attorney can be paid.