- 844-322-6932
In this case, In re Simmons, C/A No. 22-00680-eg, slip op. (Bankr. D.S.C. Aug 31, 2022, the Court awarded attorney’s fees and costs to Debtor who had to object to the mortgage company’s proof of claim.
The court found that payments were omitted from the mortgage claim history when the claim was originally filed. Even though the creditor amended it’s claim, payments were still missing and the creditor had not attempted to review the still incorrect claim with Debtor’s counsel until it’s own witness was testifying at the hearing and concluded that the claim was indeed still incorrect.
In re Flint, C/A No. 21-00702-hb, slip op. (Bankr. D.S.C. May 5, 2022) In this case, the purchaser of a business owned by the Debtor tries to move forward as secured by an interest in the business reflected in a contract for sale. The trustee objects because she claims his interest does not exist due to problems with the business sale paperwork, specifically lacking stock certificates. The trustee wins and seizes the business interest to liquidate as property of the estate.
In re Ellenburg, C/A No. 22-00811-hb, slip op. (Bankr. D.S.C. May 18, 2022) Debtor’s case was dismissed with prejudice (can’t refile) after the Court determined that Debtor photo shopped the date on the Credit Counseling certificate.
Dischargeability of Tax Debt
Section 523(a) of the Bankruptcy Code
(a) A discharge under section 727, 1141, 1192, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt- (1) for a tax or a customs duty-
(A) of the kind and for the periods specified in section 507(a)(3) or 507(a)(8) of this title, whether or not a claim for such tax was filed or allowed;
(B) with respect to which a return, or equivalent report or notice, if required- (i) was not filed or given; or
(ii) was filed or given after the date on which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or
(C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax;
11 U.S.C. § 523(a)(1). The exception under § 523(a)(1)(A) excepts from discharge any tax debt or unsecured claim(s) of the government that is entitled to priority status pursuant to § 507(a)(8).
Priority status is afforded to claims for, among other things, income taxes attributable to the tax years for which a return was due within three years prior to the filing of the bankruptcy case. 11 U.S.C. § 507(a)(8) provides in pertinent part as follows:
(a) The following expenses and claims have priority in the following order:
. . .
(8) Eighth, allowed unsecured claims of governmental units, only to the extent that such claims are for-
(A) a tax on or measured by income or gross receipts for a taxable year ending on or before the date of the filing of the petition-
(i) for which a return, if required, is last due, including extensions, after three years before the date of the filing of the petition[.]
11 U.S.C. § 507(a)(8)(A)(i).
Dischargeability of Penalties under § 523(a)(7)
11 U.S.C. § 523(a)(7) further provides that:
(a) A discharge under section 727, 1141, 1192, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt- . . .
(7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty-
(A) relating to a tax of a kind not specified in paragraph (1) of this subsection; or
(B) imposed with respect to a transaction or event that occurred before three years before the date of the filing of the petition[.]
Interest on the Nondischargeable Tax Claim
Pre-petition interest is nondischargeable when it relates to an otherwise nondischargeable tax debt. See Cinquegrani v. United States (In re Cinquegrani), 1993 Bankr. LEXIS 985 (Bankr. N.D.Ill. 1993); In re Garcia, 955 F.2d 16 (5th Cir. 1992); Burns v. United States (In re Burns), 887 F.2d 1541 (11th Cir. 1989); In re Hanna, 872 F.2d 829 (8th Cir. 1989); and In re Larson, 862 F.2d 112 (7th Cir. 1988). Furthermore, the Supreme Court in Bruning v. United States, 376 U.S. 358 (1964), held that post-petition interest on an unpaid nondischargeable tax debt continues to be a personal liability of the debtor after bankruptcy. “[T]he government may recover post-petition interest on nondischarged debts for taxes regardless of whether the underlying debt has been paid or not.” United States v. River Coal Co., 748 F.2d 1103, 1107 (6th Cir. 1984). In this case, there remains, among other things, unpaid post-petition interest on the taxes and unpaid pre-petition and post-petition interest on penalties relating to the Priority Claim. As the Court has concluded that the Priority Claim is a nondischargeable debt, the interest related to same is also nondischargeable.
Effect of Confirmation of the Plan of Reorganization
Priority Claim are Nondischargeable
The effect of confirmation is governed by 11 U.S.C. § 1141 and provides in pertinent part as follows:
(a) Except as provided in subsections (d)(2) and (d)(3) of this section, the provisions of a confirmed plan bind the debtor, . . . and any creditor, . . . whether or not the claim or interest of such creditor . . . is impaired under the plan and whether or not such creditor . . . has accepted the plan.
. . .
(d)(2) A discharge under this chapter does not discharge a debtor who is an individual from any debt excepted from discharge under section 523 of this title.
11 U.S.C. § 1141(a) and (d)(2). Although a confirmed plan generally binds a creditor to the treatment as provided in the plan, a debt that is excepted from discharge under § 523 will survive issuance of the debtor’s discharge, and the creditor entitled to payment of its nondischargeable debt may pursue collection of same upon the completion of the debtor’s plan. “[T]he confirmation of a plan of reorganization does not fix tax liabilities made nondischargeable under 11 U.S.C. § 523.” In re Gurwitch, 794 F.2d 584, 585 (11th Cir. 1986). In re Sprout (Bankr. S.D. Ohio 2021)
Foreclosure Order interest rate upheld in Chapter 13
In this South Carolina bankruptcy case, the Court held that for Debtor’s Chapter 13, the mortgage creditor was required to use the interest rate set in a previous foreclosure Order, not the penalty interest rate from the original loan documents.
In this case the Court does not approve a Chapter 13 plan that does not cure Debtor’s lease arrearage: In this case the Court denied Chapter 13 confirmation because Debtor’s plan failed to adequately treat Debtor’s residential past due lease. The Court found that Debtor had not sufficiently proposed to “cure postpetition arrears or promptly cure prepetition arrears” and that she had not convinced the court she could pay her rent stating that her “performance since filing [was] more credible than the written budget.”
The court denied creditor, Lexington Health Services District, Inc. d/b/a Lexington Medical Center, who asked to dismiss the damages adversary claim arguing that it is a political subdivision and that pursuant S.C. Code §12-60-80(C), made applicable to this action by Federal Rule of Civil Procedure 17, it lacks the capacity to be named as a party in a class action lawsuit, plaintiffs’ claims against it are barred by sovereign immunity, plaintiffs had not exhausted their
administrative remedies, as required by the Setoff Debt Collection Act.
Debtor has taken inherently inconsistent positions between her
petition, schedules, statements and her testimony at her deposition and before the Court.
Attorney’s fees distribution upheld when plan remained unconfirmed: https://www.scb.uscourts.gov/sites/default/files/opinions/Judge%20Waites/opn_84_18-05885_637297154136560503.pdf
SCLBR 3070-1(b)(2) & §1326(a)(2)
In re Jones, 591 F.3d 308 (4th Cir. 2010)
SECTION 37-5-109. Default.
An agreement of the parties to a consumer credit transaction with respect to default on the part of the consumer is enforceable only to the extent that:
(1) the consumer fails to make a payment as required by agreement; provided, with respect to a consumer rental-purchase agreement, a lessee defaults when he fails to renew an agreement and fails to return the rented property or make arrangements for its return as provided for by the agreement; or
(2) the prospect of payment, performance, or realization of collateral is significantly impaired; the burden of establishing the prospect of significant impairment is on the creditor.
HISTORY: 1976 Act No. 686 Section 39; 1985 Act No. 121, Section 12.
Copely v United States In this May 2020 upset case for Debtor’s attorney’s throughout the 4th Circuit, the Court allowed IRS set off against Debtor’s tax refund (overpayment) vacating the District Court’s Opinion, which upheld the bankruptcy Court’s Opinion stating as well settled 4th circuit law that the IRS could not seize (“set off”) a Debtor’s exempt tax refund (overpayment).
This IRS win may also complicate bankruptcy planning for Chapter 13 and Chapter 13 plans.
The HAVEN Act excludes VA and DoD disability payments from the monthly income calculation used for bankruptcy means testing.
https://www.va.gov/pension/veterans-pension-rates/
Interim Rules Adopted to accommodate the Small Business Reorganization Act of 2019
$2.725 million or less of business debt may reorganize under a new subchapter of Chapter 11 that eliminates some of the most cumbersome aspects of Chapter 11.
Eliminates the absolute priority rule. Allowing individuals to retain non-exempt assets, and business owners to retain equity, even if all creditors are not paid in full.
Eliminates:
11 U.S.C. §523(a)(15)
In relevant part, §523(a)(15) provides:
A discharge under Section 727… of this title does not discharge an individual from any debt… to a spouse, former spouse or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a court of record.
A debt that is nondischargeable under this provision must (1) be to a spouse, former spouse or child of the debtor, (2) not be the type of debt described in §523(a)(5), and (3) be incurred in the course of a divorce or separation, or in relation to a separation agreement, divorce decree or court order. Section 523(a)(5) excepts from discharge debts “for a domestic support obligation.” A domestic support obligation is defined in 11 U.S.C. §101(14A) as a debt
“owed to or recoverable by a spouse, former spouse or child of the debtor… or a governmental unit in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit) of such spouse, former spouse, or child of the debtor… by reason of applicable provisions of a separation agreement, divorce decree, or property settlement agreement; an order of a court of record.”
Debts that are not support or maintenance but are, in fact, a division of property or debts between the two parties are not the type of debts described in §523 (a)(5). Johns v. Washburn (In re Washburn) (Bankr. N.D. Ga. 2010)
Court holding that the Divorce Orders contain Priority Debt
South Carolina Court Order discussing support and threatening sanctions.
New case MAY affect retirement deductions in the means test in South Carolina. “the remaining issue is whether sections 541(b)(7) and 1322(f) impact the outcome of an ability to pay analysis under section 707(b)(3)(B).
That said, an ability to pay analysis under section 707(b)(3)(B) is generally considered within the context of a hypothetical chapter 13 case. Therefore, a strict application of Anes would yield the anomalous result that the Debtors’ retirement funds are counted as disposable income in disqualifying them from chapter 7, but excluded from disposable income in chapter 13.
The Trustee asserts that this outcome is simply a function of the difference between chapters 7 and 13, a position that the Court finds frustratingly myopic. Although he cites a string of post-BAPCPA cases that considered retirement funds as part of an ability to pay analysis under a section 707(b)(3)(B), the Court finds that upon a closer review these cases are less persuasive than the Trustee would suggest. ”
Retirement repayment not an allowable means test expense: majority of courts that have considered whether debtors are
allowed deductions for loan repayments on their retirement savings plans have found that no such deduction should be allowed.
Trustee successfully disputes means test application. VA income, Thrift savings account, income calculation, retirement loan repayment, tax calculations, marital deduction
SC Bankruptcy court limits a creditor’s claim for fees and costs in the Chapter 13 Plan. In re Longhurst, C/A No. 19-01926-hb, slip op. (Bankr. D.S.C. Oct 29, 2019)
ORDER REGARDING MOTION TO
DETERMINE MORTGAGE FEES
AND EXPENSES
SC Bankruptcy Court agrees to hear request for hardship discharge of student loans after the lender forecloses other options. Lagueux 08/15/2019
Debtor awarded $10,000 towards his truck after Court holds that repossessing creditor engaged in an egregious violation of the automatic stay. Chambers v Auto Brokers, 2018
Payments towards college student expenses and tuition may be held to be preference or fraudulent transfers if the student is above the age of majority. This issue has not been heard in South Carolina as of 10-9-19. Geltzer v. Oberlin Coll. (In re Sterman), 594 B.R. 229 (Bankr. S.D.N.Y., 2018)
Case law concerning mortgage creditor’s request for reaffirmation agreement. In this case, the court holds that to force reaffirmation upon the Debtor would deny the Debtor a fresh start. Additionally, the termination of the automatic stay in the instance that a Debtor does not reaffirm, redeem or surrender, applies only to personal property. In re: Wilson, 07-00668
The South Carolina Ride Through for Mortgages
Walker v. UpRight Law (In re Walker), C/A No. 18-04406-hb, Adv. Pro. No. 18-80075-hb, slip op. (Bankr. D.S.C. Jun 21, 2019)
It is important that you are counseled by a local bankruptcy attorney prior to deciding to file bankruptcy. SC Court denies, Chicago based, Upright Law’s Motion to Dismiss, finding that
There was no evidence that the people seeing to get bankruptcy advice (the Plaintiffs) “spoke with an appropriately licensed or knowledgeable attorney prior to executing this Chapter 13 Retainer Agreement. There is also no indication how Plaintiffs obtained sufficient information to decide it was appropriate to sign a fee agreement to file bankruptcy, to decide to file under Chapter 13, to understand what the Chapter 13 plan distribution process mentioned in the Chapter 13 Retainer Agreement entails, or more importantly, to determine whether that process would provide sufficiently prompt relief to adequately address Plaintiffs’ problems.
Although the Chapter 13 Retainer Agreement had SC Partner I’s [the first local attorney] name affixed to it, Plaintiffs’ case was not called to his attention until after its execution. After SC Partner I did not respond to Upright’s communications requesting he contact Plaintiffs, the case was reassigned to SC Partner II [the second local attorney] on June 25, 2018. Plaintiffs’ initial contact with SC Partner II occurred on July 2, 2018 – two weeks after Plaintiffs contacted Upright, executed the Chapter 13 Retainer Agreement, and began paying fees.“
The clients “contracted with and paid Upright for legal services for a Chapter 13 case before they consulted with appropriate counsel.”
Walker v. UpRight Law (In re Walker), C/A No. 18-04406-hb, Adv. Pro. No. 18-80075-hb, slip op. (Bankr. D.S.C. Jun 21, 2019)
Means Test: Expenses above the standards
In re Shinkle, 382 B.R. 85 (Bankr. E.D. Ky., 2008)
Code section 707(b)(2)(B) gives examples of special circumstances such as a serious medical condition or a call to active duty in the armed services. The statute also requires that a debtor’s special circumstances leave him with “no reasonable alternative” to incurring additional expenses or an adjustment of current monthly income. The court in In re Scarafiotti, 375 B.R. 618, 631 (Bankr.D.Colo.2007), found that the debtors had demonstrated special circumstances in their son’s need to be in a particular school where his mental and emotional difficulties were being successfully addressed, and that a modest increase in the debtors’ housing allowance was justified. Id.
The UST argues that the Debtors herein have failed to cite any circumstances which offer them no reasonable alternative. He states that while the Debtors contend that they must live in Boone County, they have made no showing of inability to find less expensive housing there, They further have made no showing that it is necessary for them to live in a house, rather than an apartment, and certainly not that it is necessary for them to live in their current house, aside from the fact that they might have an opportunity to own it. By contrast, special circumstances were demonstrated in In re Graham, 363 B.R. 844, 847 (Bankr.S.D.Ohio 2007), where the debtor husband had to move 800 miles from his wife and her two children from a previous marriage in order to find gainful employment. The debtor wife could not join her husband because of the constraints of her shared custody agreement. These debtors were allowed to claim a second set of housing expenses for the husband. Id.
The UST further notes that while the Debtors herein have cited the cost of moving as a factor justifying their remaining in their current home, they have provided no documentation of the cost of moving as required by Code section 707(b)(2)(B)(ii). That cost is, obviously, a one time cost to the debtors. The UST finally contends that the Debtors only want to become homeowners at the expense of their creditors, and that there is no demonstrable justification for their housing expense outside the parameters contemplated by the IRS Local Standards. The potential to become homeowners again is not limited to this particular property.
While the Bankruptcy Code allows some flexibility in regard to the allowable amount debtors’ may claim for housing expenses, the court agrees with the UST that the Debtors have not demonstrated special circumstances that justify their claim for an additional housing allowance. The amount shown on Line 21 of their Form B22A should therefore be zero. With this adjustment the Debtors’ 60 month disposable income is far greater than $10,000.00, resulting in the presumption of abuse under section 707(b)(2). The Debtors’ case therefore will be DISMISSED unless debtor’s file an appropriate motion to convert their case to Chapter 13, or another chapter of the Bankruptcy Code, within 15 days of entry of this Memorandum Opinion. In re Shinkle, 382 B.R. 85 (Bankr. E.D. Ky., 2008)
Debt limit: Pursuant to § 109(e) “only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $360,475 . . . may be a debtor under chapter 13 of this title.”12 For Chapter 13 relief, it is clear that only individuals qualify. C/A No. 12-04833-HB
A debt is considered “liquidated” if the “amount is readily ascertainable.” In re Glance, 487 F.3d 317 (6th Cir. 2007) (citations omitted); see also 2 Collier on Bankruptcy § 109.06(2)(c) (rev. 15th ed. 2006). “In determining whether the amount owed is easily ascertainable, such that the debt is liquidated, it is enough that a minimum claim amount can easily be determined.” In re Sappah, 2012 WL 6139644 at *5.
The Bankruptcy Code does not specifically define “unsecured debt” or “secured debt,” however, the Supreme Court has found that the “definition of ‘debt’ as a ‘liability on a claim’ reveals Congress’ intent that the meanings of ‘debt’ and ‘claim’ be coextensive.” Pennsylvania Dep’t of Public Welfare v. Davenport, 495 U.S. 552, 557–58, 110 S.Ct. 2126, 109 L.Ed.2d 588 (1990) (superseded by statute in Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991)). As a result, this examination of § 109(e) requires reference to the “secured claim” language in § 506(a) that provides that an “allowed claim of a creditor by a lien on property in which the estate has an interest . . . is a secured claim to the extent of the value of
such creditor’s interest in the estate’s interest in such property.” Additionally, pursuant to § 506(a) a claim “is an unsecured claim to the extent that the value of such creditor’s interest . . . is less than the amount of such allowed claim.”
Student loans and Debt limit
Texas declines to follow In re Pratola, 578 B.R. 414 (Bankr. N.D. Ill. 2017). In re Petty (Bankr. E.D. Tex., 2018)
Colorado declines to follow, citing Bailey-Pfeiffer line of cases In re Alonzo, 594 B.R. 693 (Bankr. Colo., 2018)
Illinois declines to follow – The court noted that this conclusion was overwhelmingly supported by both the Seventh Circuit and other authority. Among the cases cited by the court were In re Day, 747 F.2d 405, 407 (7th Cir. 1984) and In re Knight, 55 F.3d 231, 232 (7th Cir. 1995), in which the Seventh Circuit affirmed the dismissal of Chapter 13 cases where the debtors failed to satisfy the eligibility requirements of § 109(e). In re Mosley (Bankr. S.D. Ill., 2018)
United States v. Martin (In re Martin), 542 B.R. 479 (B.A.P. 9th Cir., 2015)
11 U.S. Code § 523.Exceptions to discharge
(a)A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—(1)for a tax or a customs duty—(A)of the kind and for the periods specified in section 507(a)(3) or 507(a)(8) of this title, whether or not aclaim for such tax was filed or allowed;(B)with respect to which a return, or equivalent report or notice, if required—(i)was not filed or given; or(ii)was filed or given after the date on which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or(C)with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax;
“applicable filing requirements” effectively excepts from discharge all taxes associated with untimely-filed returns, but the second sentence adds right back into the definition returns prepared by taxing authorities under 26 U.S.C. § 6020(a) or under equivalent state statutes. That subsection provides:
(a) Preparation of return by Secretary. —If any person shall fail to make a return required by this title or by regulations prescribed thereunder, but shall consent to disclose all information necessary for the preparation thereof, then, and in that case, the Secretary may prepare such return, which, being signed by such person, may be received by the Secretary as the return of such person. United States v. Martin (In re Martin), 542 B.R. 479 (B.A.P. 9th Cir., 2015)
“applicable filing requirements” effectively excepts from discharge all taxes associated with untimely-filed returns, but the second sentence adds right back into the definition returns prepared by taxing authorities under 26 U.S.C. § 6020(a) or under equivalent state statutes. That subsection provides:
(a) Preparation of return by Secretary. —If any person shall fail to make a return required by this title or by regulations prescribed thereunder, but shall consent to disclose all information necessary for the preparation thereof, then, and in that case, the Secretary may prepare such return, which, being signed by such person, may be received by the Secretary as the return of such person. United States v. Martin (In re Martin), 542 B.R. 479 (B.A.P. 9th Cir., 2015)
Our rejection of the literal construction of the “return” definition leaves us with the task of articulating what the definition of “return” in the hanging paragraph is supposed to mean. The generic terms “applicable bankruptcy law” and “applicable filing requirements” necessarily reflect that the answer will depend on which nonbankruptcy laws are applicable (federal or state or local) and what the applicable filing requirements say. “[N]early all courts” pre-BAPCPA utilized some version of the Beard test. In re Mallo, 774 F.3d at 1318.
In other words, for purposes of determining the dischargeability of federal income tax debt, the “return” definition added by Congress in 2005 effectively codified the Beard test, except that Congress in the second sentence of the hanging paragraph carved out some specific rules for tax returns prepared by taxing authorities.
In this appeal, in the context of late-filed federal income tax returns prepared and filed by the taxpayers, there is no convincing or persuasive indication that BAPCPA or the hanging paragraph abrogated Hatton II’s holding that we should use In re Hindenlang’s version of the Beard test—a test derived from nonbankruptcy law—to determine whether the Martins’ untimely tax returns qualify as tax returns for nondischargeability purposes. That version of the Beard test provides:
(1) it must purport to be a return;
(2) it must be executed under penalty of perjury;
(3) it must contain sufficient data to allow calculation of tax; and
(4) it must represent an honest and reasonable attempt to satisfy the requirements of the tax law.
In re Hindenlang, 164 F.3d at 1033.8
Similar to what this Panel held in In re Nunez, the bankruptcy court here concluded that it should utilize a different version of the Beard test. In this alternate version, the prong of the test focusing on the honesty and reasonableness of the debtor’s efforts to file the return is narrow in scope and considers only the form and substance of the purported return while ignoring the length of delay, the reason for the delay, and the number of tax years missed. As we stated at the outset of this discussion, this alternate version of the Beard test is inconsistent with the holding and reasoning set forth in Hatton II , so we cannot uphold the bankruptcy court’s usage of this alternate test.
Hatton II offered two distinct reasons why the taxpayer there did not satisfy the Beard test. Hatton II , 220 F.3d at 1061. First, Hatton II explained the taxpayer had not signed any document under penalty of perjury, so the second Beard test factor was not met. Id. In addition, Hatton II explained that the taxpayer indisputably took no steps to cure his delinquency in filing his 1983 federal income tax return, and did not begin to cooperate with the IRS’s efforts, until the IRS threatened to levy on his wages and his bank account. Id. According to Hatton II , these undisputed facts established that the taxpayer had not engaged in “an honest and reasonable attempt to comply with the requirements of the tax law” as required by the fourth Beard test factor. Id. The bankruptcy court posited that, because Hatton II offered two separate and independent reasons why the Beard test was not met, the second reason given—regarding the honesty and reasonableness of the taxpayer’s efforts—perhaps was non-binding dicta. We disagree. When alternate grounds are given for a holding, neither ground constitutes non-binding dicta. Exp. Grp. v. Reef Indus., Inc. , 54 F.3d 1466, 1471 (9th Cir.1995). United States v. Martin (In re Martin), 542 B.R. 479 (B.A.P. 9th Cir., 2015)
11 U.S.C. 523(a) “[f]or purposes of this subsection, the term ‘return’ means a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements).”
In re Giacchi, No. 15-3761 (3rd Cir. May 5, 2017) “any . . . debt for a tax . . . with respect to which a return, or equivalent report or notice, if required, . . . was not filed or given.”
BAPCPA changes to § 523, the court adopted the oft-cited Beard standard for tax returns, which sets forth the four elements of a proper tax return: “(1) it must purport to be a return, (2) it must be executed under penalty of perjury, (3) it must contain sufficient data to allow calculation of tax, and (4) it must represent an honest and reasonable attempt to satisfy the requirements of the tax law.”
In re Van Arsdale, No. 14-04035 (Bankr. N.D. Cal. May 18, 2017)
In that case, the IRS argued that a document filed after the IRS files a substitute for return does not constitute a return and is not an honest and reasonable attempt to address a tax obligation.
Preference. Why you may owe after a bankruptcy or why you may need to wait to file.
11 U.S. Code § 547.Preferences
(b)Except as provided in subsections (c) and (i) of this section, the trustee may avoid any transfer of an interest of the debtor in property—
(1)to or for the benefit of a creditor;
(2)for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3)made while the debtor was insolvent;
(4)made—
(A)on or within 90 days before the date of the filing of the petition; or
(B)between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider
11 U.S. Code § 548.Fraudulent transfers and obligations
(a)(1)The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily—
(A)made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtorwas or became, on or after the date that such transfer was made or such obligation was incurred, indebted;
or
(B)(i)received less than a reasonably equivalent value in exchange for such transfer or obligation;
and(ii)(I)was insolvent on the date that such transfer was made or such obligation was incurred,
or became insolvent as a result of such transfer or obligation;
(II)was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital;(III)intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor’s ability to pay as such debts matured;
or (IV)made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.
Wyoming Court holds that adult children are not included in the means test
Student Loan Discharge and Retirement Accounts
Tax Refunds, Retirement Deductions and the Means Test
Debtors are not entitled to a deduction for Mr. Stanley’s monthly
repayments of their retirement loan. The majority of courts that have considered whether debtors are allowed deductions for loan repayments on their retirement savings plans have found that no such deduction should be allowed. The [South Carolina] Court agrees with the majority approach. In re Stanley
Debtors also omitted their substantial tax refund of from the calculation. Debtors over-withheld. Debtors have recently been informed they owe Debtors should be given a credit for this repayment obligation; however, this credit will have a minimal impact on Debtor’s monthly disposable income. With the addition of Debtors’ tax refund, Debtors have monthly disposable income. In re Stanley
Regarding retirement loan repayments.
The [South Carolina} Court adopts the first, narrower interpretation of section 707(b)(2)(B) as the better approach, which is consistent with the statutory scheme and encourages chapter 13 filings, requiring that the additional expense or decrease in income be extraordinary in some way. In re Siler, 426 B.R. 167, 172 (Bankr. W.D.N.C. 2010). Under this approach, rebuttal of the presumption of abuse under section 707(b)(2) appears to be a two step process. First, a debtor must show that some sort of special circumstances exist, such as a serious medical condition or “a call or order to active duty in the Armed Forces.” 11 U.S.C. § 707(b)(2)(B); Siler, 426 B.R. at 172. Next, the debtor must show that these special circumstances leave him with “‘necessary and reasonable’ expenses ‘for which there is no reasonable alternative.’” Siler, 426 B.R. at 172 (quoting In re Tauter, 402 B.R. 903 (Bankr. M.D. Fla. 2009)). In re Stanley
Vehicle purchase prior to bankruptcy.
Court disallows cash exemption for cash surrender value in life insurance.
Nice overview of bankruptcy written by the Appleseed Justice Center in Columbia SC.
Is my kid’s vehicle property of the estate? Pursuant to 11 U.S.C. § 541(a), property of the estate is comprised of “all legal and equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a). Section 541(d) of the Bankruptcy Code provides,
Property in which the debtor holds, as of the commencement of the case, only legal title and not an equitable interest, such as a mortgage secured by real property, or an interest in such a mortgage, sold by the debtor but as to which the debtor retains legal title to service or supervise the servicing of such mortgage or interest, becomes property of the estate under subsection (a)(1) or (2) of this section only to the extent of the debtor\’s legal title to such property, but not to the extent of any equitable interest in such property that the debtor does not hold. In re Daugherty, 261 B.R. 735 (Bankr. M.D. Fla., 2000)
Some Courts have extended the scope of this exception and have held, under varying factual situations, that property other than real property may be held in trust for the benefit of a third party and does not become part of the bankruptcy estate. See Matter of McBarnette, 173 B.R. at 249, 250 (Bankr.N.D.Ga.1994). In re Daugherty, 261 B.R. 735 (Bankr. M.D. Fla., 2000)
See In re Signal Hill-Liberia Avenue Ltd. P’ship, 189 B.R. 648, 651-52 (E.D. Va. 1995). See also Mid-Atlantic Supplv Inc. v. Three Rivers Aluminum Co. (In re Mid Atlantic Supplv Co.), 790 F.2d 1121 (4′ Cir. 1986) (property of the estate does not
include property in which debtor only legal title but not an equitable interest pursuant to 541(d)).
Who’s tax refund is it? In re Gartman, 372 B.R. 790 (Bankr. S.C., 2007) In re Gartman, 372 B.R. 790 (Bankr. S.C., 2007) This is an issue of first impression in this district. Bankruptcy courts in other districts have adopted three different approaches to determine the portion of a tax refund to which a debtor’s estate is entitled when a joint tax return has been filed with a non-debtor spouse. The majority approach holds that the tax refund from a joint tax return should be allocated proportionally between the husband and wife in accordance with their respective tax withholdings during the relevant year. See In re Kleinfeldt, 287 B.R. 291, 292 (10th Cir. BAP 2002); In re Edwards, 363 B.R. 55, 58-59 (Bankr.D.Conn.2007); In re Lock, 329 B.R. 856, 860 (Bankr.S.D.Ill. 2005); In re Smith, 310 B.R. at 323; In re WDH Howell, LLC, 294 B.R. 613 (Bankr. D.N.J.2003); In re Lyall, 191 B.R. 78, 85 (E.D.Va.1996); In re Gleason, 193 B.R. 387, 389 (Bankr.D.N.H.1996). Similarly, other courts have allocated the joint tax refund proportionally in accordance with income produced, which is the approach proposed by the Trustee in this case. See In re Levine, 50 B.R. 587 (Bankr.S.D.Fla. 1985); In re Verill, 17 B.R. 652, 655 (Bankr.D.Md.1982); In re Kestner, 9 B.R. 334, 336 (Bankr.E.D.Va.1981); In re Colbert, 5 B.R. 646, 648-49 (Bankr.S.D.Ohio 1980). The minority approach, advocated by the Debtor, holds that joint tax refund should be allocated equally between the husband and wife without regard to tax withholdings or income produced. See In re Innis, 331 B.R. 784, 787 (Bankr.C.D.Ill. 2005); In re Barrow, 306 B.R. 28 (Bankr. W.D.N.Y.2004); In re Aldrich, 250 B.R. In re Gartman, 372 B.R. 790 (Bankr. S.C., 2007) . . .
This Court finds that South Carolina law is most consistent with the majority’s approach of dividing the tax return based on the parties’ respective withholdings. This approach is easy to administer and results in a fair allocation of the joint tax refund. The Trustee’s proposed approach of allocation based on the parties’ respective incomes appears to produce a similar outcome but has the potential of resulting in an inequitable distribution when one spouse withholds substantially more than the other. In re Gartman, 372 B.R. 790 (Bankr. S.C., 2007)
South Carolina Lawsuit Against Upright Law
Chapter 7 Filing Fee Waiver
For your fee to be waived, all of these statements must be true:
> You are filing for bankruptcy under
chapter 7.
> You are an individual.
> The total combined monthly income for your family is less than 150% of the official poverty guideline last published by the U.S. Department of Health and Human Services (DHHS). (For more information about the guidelines, go to http://www.uscourts.gov.)
> You cannot afford to pay the fee in
installments.
Your family includes you, your spouse, and any dependents listed on Schedule I. Your family may be different from your household, referenced on Schedules I and J. Your household may include your unmarried partner and others who live with you and with whom you share income and expenses.
Coordination of Benefits and Recovery
Bankruptcy and Personal Injury Settlements:
District of South Carolina
S.C. Code § 15-41-30(A)(12)(b), which states, in relevant part: (A)The following real and personal property of a debtor domiciled in this State is exempt from attachment, levy, and sale under any mesne or final process issued by a court or bankruptcy proceeding: . . . (12) The debtor’s right to receive or property that is traceable to: . . . (b) a payment on account of the bodily injury of the debtor or of the wrongful death or bodily injury of another individual of whom the debtor was or is a dependent.
In this case the trustee argued that a portion of Debtor’s personal injury settlement funds were for medical damages, not bodily injury, and were therefore not exempt. Debtor argued that all of the funds are directly attributable to Debtor’s personal, bodily injuries as a result of the accident, and were therefore fully exempt.
While some damages related to personal injury might be non-exempt, for example claims of loss of services and loss of consortium, In re McWhorter, C/A No. 05- 03135-JW (Bankr. D.S.C. Mar. 24, 2006), generally if the settlement agreement does not allocate settlement proceeds between the various causes of action and medical expenses are only one separate category of damages.
In this case the Court explained that it is not uncommon to send medical records and billing statements when making demands to insurance companies. However, the mere fact that the demand letters with attached medical records and billing statements does not establish the payments made by those companies were for medical expenses.
To prevail, the Trustee must produce evidence that the settlement contains a specific, non exempt, allocation of the proceeds.
If the settlement proceeds were paid to Debtor as a direct result ofan accident, and to compensate him for his bodily injuries. The entire amount of the settlement proceeds are exempt under S.C. Code § 15-41-30(A)(12)(b).
Some of Debtor’s payment to sister for her credit card use held to be a preference: Section 548 provides in relevant part: (a) The trustee may avoid any transfer of an interest of the debtor in property . . . that was made . . . within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily (2)(A) received less than a reasonably equivalent value in exchange for such transfer or obligation.
Transfers made or obligations incurred solely for the benefit of third parties do not furnish reasonably equivalent value, . . . unless the debtor’s net worth is unaffected because [she] received a direct or indirect economic benefit from the transfer. In Re Guerrera, 225 B.R. 32 (Bankr. D. Conn. 1998)
Reopening a Chapter 7 no asset case to add a creditor: To reopen a Chapter 7 bankruptcy case, the Debtor must must met his / her burden to
establish cause to reopen. In this case, Debtor was held to not have met his burden because reopening the case merely to amend schedules would not affect the dischargeability of the debts to be added. If the debt was fraud, it was not dischargeable and if the debt was not fraud, it was already discharged.
“In a no-asset chapter 7 case, unless ordered otherwise, all of a debtor’s prepetition debts—both those scheduled and those not scheduled—are discharged upon entry of the discharge order, except for those debts which are of the kind specified in section 523(a)(2), (4), or (6)(Fraud).” Rollison, Western District of Virginia
Automatic stay under 11 U.S.C. § 362(a) is inapplicable LLC equipment for which Debtor is a personal guarantor. Citing In re Brittain, 435 B.R. 318, 320 (Bankr. D.S.C. 2010), the court holds that “the record here clearly indicates that the Equipment is property of the
LLC and not the Debtor. After reviewing §§ 362, 541, and 1207, the Court cannot find any language therein, and Debtor failed to call the Court’s attention to any language or applicable authority, that justifies the inclusion of the Equipment as property of Debtor’s bankruptcy estate or extends the automatic stay to the Equipment based on this record.” C/A No. 18-04549-HB
$1,500.00 for the attorney’s fees awarded for post-petition repossession of a vehicle. The court determined that review of the “evidence and testimony makes clear that Defendant received notice of the bankruptcy case, had actual knowledge, and chose to proceed with repossession of Plaintiff’s vehicle despite this notice.” Adv. Pro. No. 18-80074-HB, p7
South Carolina Bankruptcy Case Law Update
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