SECURED CLAIMS
Nobelman v. American Sav.
Bank, 508
U.S. 324, 113 S.Ct. 2106, 124 L.Ed.2d (1993) (Justice Thomas)
(9:0)
http://supct.law.cornell.edu/supct/html/92-641.ZS.html
certiorari
to the U.S. Court of Appeals for the 5th Circuit
This case means that
chapter 13 bifurcation of undersecured claim secured by lien on
debtor's principal residence is not permissible. Chapter 13
debtors attempted to reduce, pursuant to 11 U.S.C. § 506(a),
value of secured claim under mortgage to fair market value of
collateral and classify remainder of mortgage as an unsecured
claim. The Court held 11 U.S.C. § 1322(b)(2) prohibited debtors
from modifying the "rights" of the secured creditor
and bifurcating the secured claim into secured and unsecured
portions. The Court held that Congress intended for state law to
control and to define the secured claim holder's property rights
pursuant to 11 U.S.C. § 1322(b)(2). Therefore, the rights
established in the mortgage document are the "rights"
under 11 U.S.C. § 1322(b)(2) which may not be modified. 11
U.S.C. § 506(a) is only used for judicial valuation of the
"claim," which is distinguishable from the
"rights" language under 11 U.S.C. § 1322(b)(2).
Rake v. Wade,
508 U.S. 464, 113 S.Ct. 2187, 124 L.Ed.2d 424 (1993). (Justice
Thomas) (9:0)
http://supct.law.cornell.edu/supct/html/92-621.ZS.html
certiorari
to the U.S. Court of Appeals for the 10th Circuit
Oversecured creditor in
chapter 13 was entitled to preconfirmation and postconfirmation
interest on mortage arrearages. Chapter 13 debtors proposed to
pay post confirmation, but not post-petition, pre-confirmation,
interest to oversecured mortgage creditor on the amount of the
prepetition arrearage in mortgage payments. A unanimous Court
held 11 U.S.C. § 506(b) directs debtors to pay post-petition
interest on arrearage to oversecured creditors even if the
mortgage instrument and state law do not provide for such
interest. In addition, the plain language of 11 U.S.C. § 506(b)
provides for interest on all oversecured claims, and therefore,
the debtors must pay interest on the prepetition arrearage. 11
U.S.C. § 1322 does not conflict with 11 U.S.C. § 506(b)
because while 11 U.S.C. § 1322(b)(5) authorized Chapter 13
debtors to cure a default on a residential mortgage by making
payments on the arrearage, it does not establish any terms of
the cure or mention interest payments.
Dewsnup v. Timm,
502 U.S. 410, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992). (Justice
Blackmun) (6:2)
http://laws.findlaw.com/US/502/410.html
The Supreme Court held that
a chapter 7 debtor may not "strip down" under 11 U.S.C.
§ 506(a) & (d) a creditor's lien on real property to the
value of the collateral, as judicially determined, when the
value is less than the amount of the claim secured by the lien.
The Court reasoned that, in a chapter 7 case, a lien must pass
through bankruptcy unaffected and is fully allowed under 11
U.S.C. § 502, and, therefore, contracted value of the lien may
not be bifurcated into secured and unsecured portions under 11
U.S.C. § 506(a) & (d).
Johnson v. Home State Bank,
111 S.Ct. 2150 (1991).
(Justice Marshall) (9:0)
http://supct.law.cornell.edu/supct/html/90-693.ZS.html
certiorari
to the U.S. Court of Appeals for the 10th Circuit
The Supreme Court held that a
debtor can include a mortgage lien in a chapter 13 bankruptcy
reorganization plan once the personal obligation secured by the
mortgaged property has been discharged in a chapter 7
proceeding. The mortgage lien in such a circumstances remains a
"claim" against the debtor that can be rescheduled
under chapter 13.
PRIORITY CLAIMS
CLASSIFICATION OF CLAIMS
 Mickelson v. Leser,
939 F.2d 669 (8th Cir. 1991)
A chapter 13 plan providing for
the separate classification and treatment of unsecured claims
for child support arrearages assigned to county collection
departments did not unfairly discriminate against other
unsecured claims, though the counties' claims would be paid in
full and only 8% of the other unsecured claims would be paid.
Child support obligations are nondischargeable and the
assignment of a claim for delinquent child support to a county
agency does not render the obligation dischargeable.
Groves v. LaBarge,
39 F.3d 212 (8th Cir. 1994)
A chapter 13 plan that proposes
to separately classify and fully repay nondischargeable student
loans discriminates unfairly against other unsecured creditors
who will not be paid in full.
NON-DISCHARGEABLE CLAIMS
Ulwelling v. Dick Wehner
Crane Service, Inc.,
(8th Cir. 1998) unpublished appeal from the United
States District Court for the District of Minnesota, filed
February 5, 1998.
http://www.wulaw.wustl.edu/8th.cir/Opinions/980205/971577.U8
Court held that the lower
courts properly granted appellee's motion for summary in an
adversary proceeding to determine the dischargeability of a debt
for restitution under chapter 13. Debtor/appellant embezzled
approximately $70,000 from Wehner, her former employer; and pled
guilty to theft in Minnesota state court. In a sentencing order,
the state court stayed imposition of sentence and placed debtor
on supervised probation subject to her paying restitution to her
former employer. The state court also entered a civil judgment
for restitution against the debtor. When the debtor did not pay
the restitution payments, the state court ordered the debtor
jailed. The appellate court held that the restitution payments
were nondischargeable pursuant to 11 U.S.C. § 1328(a)(3).
Holliday v. Kline (In Re Kline),
65 F.3d 749 (8th Cir. 1995)(Chapter 7) (Circuit Judge
Bowman) (before Bowman, Heaney, Morris Arnold)
The Court of Appeals held that
judgment against chapter 7 debtor for former wife’s attorney
fees in divorce action was nondischargeable maintenance, even
though payable directly to attorney.
Carter v. Van Buskirk,
3 F.3d 1174 (8th Cir.1982)
The Court held that losses lender
sustained to foreclose on original note and executed renewal
note constituted sufficient grounds for refusing to discharge
fraudulently renewed credit. Debtor fraudulently obtained
renewal of loan from his mother-in-law by intentionally failed
to disclose his deteriorating relationship with wife. Debtor's
intent to divorce lender's daughter constituted "material
fact," nondisclosure of which would render debtor's
obligation on renewal note nondischargeable in bankruptcy.
In Re McDaniel,
Bk. No. 97-80661 (Bankr. D. Neb. October 10, 1997) (Judge
Timothy J. Mahoney)
Chapter 13 debtor’s marriage
was dissolved in Sarpy County District, and custody of the
children was awarded to the ex-wife who later relocated to
Texas. During the children’s summer visitation with the
debtor, Steven McDaniel filed a Motion for Temporary Custody in
Sarpy County District Court. Ex-wife had to travel to Nebraska
to litigate the matter, and the state district court found that
under the UCCJA (Uniform Child Custody Jurisdiction Act) that
Texas was a more appropriate forum to litigate the custody and
visitation matters. The state district court also ordered the
debtor to pay $1500 toward the ex-wife’s attorney fees, but
did not specifically state that such award was for support and
did not, in the order, compare the financial status of the
parties. Debtor and his current wife filed chapter 13 bankruptcy
and sought to treat the $1500 attorney fee award as a general
unsecured claim which would be discharged with little or no
payment under the plan. The Bankruptcy Court ruled in favor of
the ex wife and held that the award of attorney fees was in the
nature of support and was excepted from discharge by 11 U.S.C.
§ § 523(a)(5) and 1328(a)(2).
In Re Frye,
Neb. Bkr. 93:575 (Bankr. D. Neb. 1993) (Chapter 13) (Judge John
C. Minahan, Jr.)
Court concluded that the
interest accruing on a nondischargeable child support obligation
is excepted from discharge pursuant to 11 U.S.C. § 523(a)(5).
DIRECT PAYMENTS BY DEBTORS
In Re Centineo,
4 B.R. 654 (D. Neb. 1980), Neb. Bkr. 80:25,30 (Crawford, J.)
very old law
CO-SIGNED DEBTS
ALIMONY, MAINTENANCE, AND SUPPORT
Holliday v. Kline (In Re Kline),
65 F.3d 749 (8th Cir. 1995)(Chapter 7) (Circuit Judge
Bowman) (before Bowman, Heaney, Morris Arnold)
The Court of Appeals held that
judgment against chapter 7 debtor for former wife’s attorney
fees in divorce action was nondischargeable maintenance, even
though payable directly to attorney.
Boyle v. Donovan,
724 F.2d 681 (8th Cir. 1984). The debtor had
promised, as part of a property settlement agreement
incorporated into his divorce decree, to pay all college and
professional school education expenses for his two minor
children. Years later, the debtor became delinquent in the
payments, and his ex-wife was awarded a state court judgment on
the debt. The debtor filed bankruptcy and sought to have the
debt discharged. The Eighth Circuit, affirming the bankruptcy
court's determination that the college expenses constituted
support within the meaning of 11 U.S.C. § 523(a)(5), held that
"the crucial question is what function did the parties
intend the agreement to serve when they entered into it." Id.
at 683.
Draper v. Draper,
790 F.2d 52 (8th Cir. 1986). A husband's obligations
under settlement agreement for child support, education, medical
& dental expenses of the parties' children were
nondischargeable and the "needs" test was irrelevant
in determining whether the obligations were actually in the
nature of support and thus nondischargeable.
Williams v. Williams (In Re
Williams),
703 F.2d 1055 (8th Cir. 1983)
With regard to the issue of
dischargeability, the determination of whether a particular debt
constitutes maintenance or support is an issue of federal, not
state law.
Adams v. Zentz (In Re Zentz),
703 F.2d 1055 (8th Cir. 1983)
With regard to the issue of
dischargeability, the determination of whether a particular debt
constitutes maintenance or support is an issue of federal, not
state law.
Scholl v. McLain (In Re McLain),
No. 99-6060SI (B.A.P. 8th Cir. November 30, 1999)
(Judge Kressel) (before Kressel, Hill, and Dreher)
(chapter 7)
Bankruptcy Court erred, and
the Appellate Court found that debt between ex-spouse was in the
nature of alimony, support, or maintenance and therefore not
except from discharge pursuant to 11 U.S.C. § 523(a)(5). The
language of the divorce decree being unambiguous, there was no
reason to give undue consideration to the debtor's brief,
conclusory, and self serving testimony as to what he thought the
language meant or what he and School did or did not intent it to
mean. The agreement left no question as to the parties'
intentions. Because the debtor's obligation on the credit card
debts was meant to constitute support, and because it was, in
reality, in the nature of support, the debt was nondischargeable.
In Re McDaniel,
Bk. No. 97-80661 (Bankr. D. Neb. October 10, 1997) (Judge
Timothy J. Mahoney)
Chapter 13 debtor’s marriage
was dissolved in Sarpy County District, and custody of the
children was awarded to the ex-wife who later relocated to
Texas. During the children’s summer visitation with the
debtor, Steven McDaniel filed a Motion for Temporary Custody in
Sarpy County District Court. Ex-wife had to travel to Nebraska
to litigate the matter, and the state district court found that
under the UCCJA (Uniform Child Custody Jurisdiction Act) that
Texas was a more appropriate forum to litigate the custody and
visitation matters. The state district court also ordered the
debtor to pay $1500 toward the ex-wife’s attorney fees, but
did not specifically state that such award was for support and
did not, in the order, compare the financial status of the
parties. Debtor and his current wife filed chapter 13 bankruptcy
and sought to treat the $1500 attorney fee award as a general
unsecured claim which would be discharged with little or no
payment under the plan. The Bankruptcy Court ruled in favor of
the ex wife and held that the award of attorney fees was in the
nature of support and was excepted from discharge by 11 U.S.C.
§ § 523(a)(5) and 1328(a)(2).
In Re Frye,
Neb. Bkr. 93:575 (Bankr. D. Neb. 1993) (Chapter 13) (Judge John
C. Minahan, Jr.)
Court concluded that the
interest accruing on a nondischargeable child support obligation
is excepted from discharge pursuant to 11 U.S.C. § 523(a)(5).
CRIMINAL CONDUCT
Pennsylvania Dept. of Public
Welfare v. Davenport,
110 S.Ct. 2126 (1990). (Justice Marshall) (7:2)
certiorari
to the U.S. Court of Appeals for the 3rd Circuit
http://laws.findlaw.com/US/495/552.html
The Supreme Court held that
restitution obligations imposed as conditions of probation in
state criminal actions are "debts" as defined by 11
U.S.C. § 101(11) and are dischargeable under chapter 13.
Ulwelling v. Dick Wehner
Crane Service, Inc.,
(8th Cir. 1998) unpublished appeal from the United
States District Court for the District of Minnesota, filed
February 5, 1998.
http://www.wulaw.wustl.edu/8th.cir/Opinions/980205/971577.U8
Court held that the lower
courts properly granted appellee's motion for summary in an
adversary proceeding to determine the dischargeability of a debt
for restitution under chapter 13. Debtor/appellant embezzled
approximately $70,000 from Wehner, her former employer; and pled
guilty to theft in Minnesota state court. In a sentencing order,
the state court stayed imposition of sentence and placed debtor
on supervised probation subject to her paying restitution to her
former employer. The state court also entered a civil judgment
for restitution against the debtor. When the debtor did not pay
the restitution payments, the state court ordered the debtor
jailed. The appellate court held that the restitution payments
were nondischargeable pursuant to 11 U.S.C. § 1328(a)(3).
Handeen v. LeMaire,
112 F.3d 1339 (8th Cir. 1997).
ftp://server.wulaw.wustl.edu/8th.cir/970507/953678.P8
An allegation that debtor's
attorneys conspired with debtor and the debtor's parents to
minimize a creditor's recovery in a chapter 13 case by inflating
expenses and hiding income were sufficient to state a cause of
action for civil RICO. Victim of debtor's prepetition claimed
that the law firm "instructed the debtor to inflate the
amount of his debts by agreeing to pay his parents rent and by
executing a false promissory note payable to the debtor's
parents." Complaint alleged that the debtor concealed from
the trustee a higher paying job which required moving from
Minneapolis to Houston, Texas. "Specifically, the ruse
called for the debtor to mail his father a parcel every month.
Within that package would be an enveloped addressed to the
bankruptcy trustee and containing a check representing the
debtor's monthly payment under the plan. The debtor's father
would, in turn, place the enclosed envelope in the mails, and
the trustee would thus receive a letter postmarked from
Minneapolis rather than Houston. The object, it is clear, was to
fool the trustee into believing that the status quo ante
existed." These allegations could constitute a
"pattern of racketeering activity" for purposes of
RICO. Complaint was remanded for trial.
STUDENT LOANS
Groves v. LaBarge,
39 F.3d 212 (8th Cir. 1994)
A chapter 13 plan that proposes
to separately classify and fully repay nondischargeable student
loans discriminates unfairly against other unsecured creditors
who will not be paid in full.
PAWN AND "TITLE LOAN"
TRANSACTIONS
In Re McAtee,
Bk. No. 99-80004 (Bankr. D. Neb. March 22, 1999)
http://www.nebar.com/bankruptcy/Mcatee.htm
Court sustained debtor's motion
for turnover because lease had not been terminated by
repossession, and the debtors did have an interest in the lease,
and in the vehicle on the bankruptcy petition date. Prior to
bankruptcy, the debtors entered into an agreement with Cash In A
Flash, Inc., who paid the debtors $1000 in exchange for debtors
transferring title to their automobile to the creditor. In a
separate transaction, the debtors executed a document entitled
"Automobile Lease Agreement" whereby they leased the
same vehicle back from Cash In A Flash for a given period. The
lease contained numerous provisions which were reviewed by the
Court and found to be ambiguous and inconsistent with each
other. Debtors defaulted in the payments, and creditor obtained
possession of the vehicle. Debtors filed a chapter 13 petition
and the motion for turnover, and the creditor resisted on the
theory that the lease was terminated by repossession.
Court did not resolve another
pending dispute between the debtors and Cash In A Flash
regarding the legal significance of the document which had been
referred to as a lease. The debtors suggested that the actual
transaction was a loan of $1000 and the granting of a security
interest in the vehicle. Cash In A Flash asserted that the
document was a true lease with an option to purchase. Court
stated that particular issue could only be resolved by an
appropriate adversary proceeding.
CURING DEFAULT
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