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THE CONSUMER BANKRUPTCY LETTER
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In This Issue:
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October 6, 2003
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BANKRUPTCY THIS WEEK . . .
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LEGISLATION & REFORM NEWS . . .
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NUMBER OF PEOPLE WITHOUT HEALTH INSURANCE INCREASES -JOB LOSSES BLAMED
The Labor Department reports that in the entire United States, the number of people without health insurance the entire year rose to 43.6 million people -- an increase of almost 6 percent. It happened as more Americans either lost their jobs, work in jobs that don't provide health insurance or are the victims of state budget cuts.
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SUPREME COURT TO REVIEW STATE SOVEREIGN IMMUNITY IN BANKRUPTCY DISCHARGE
The issue in this case is whether the Constitution‚s Bankruptcy Clause, Art I, Section 8, permits Congress to abrogate states‚ sovereign immunity.
Between 1988 and 1990, Pamela L. Hood (Hood) signed promissory notes for educational loans guaranteed by the Tennessee Student Assistance Corporation (TSAC). On February 26, 1999, Hood filed a Chapter 7 bankruptcy petition and was granted discharge on June 4, 1999. Hood, who still owed TSAC money on her student loans, then filed an adversary proceeding requesting discharge from her student loans on the grounds of undue hardship pursuant to 11 U.S.C.S. Section §523. TSAC responded by moving to dismiss the complaint for lack of jurisdiction on grounds of sovereign immunity. The Bankruptcy Court for the Western District of Tennessee denied the motion to dismiss and TSAC filed a timely appeal.
On appeal, the Bankruptcy Appellate Panel (Appellate Panel) unanimously affirmed, ruling that the Constitutional Convention intended that the states cede to Congress their sovereignty over bankruptcy discharge matters. TSAC appealed to the United States Court of Appeals for the Sixth District (Court of Appeals). The Court of Appeals agreed with the Appellate Panel‚s reasoning that Congress‚s power to make laws concerning bankruptcy carried with it the power to abrogate the states‚ sovereignty and that Congress clearly exercised its Bankruptcy Clause power in 11 U.S.C.S. Section §106(a).
Hood v. TN Student Assistance Corp.
Certiorari granted: 09/30/03
Court below: 319 F.3d 755 (6th Cir. 2003)
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CURRENTLY FEATURED . . .
KING'S DISCHARGING TAXES IN BANKRUPTCY
5th ed. • 915 pages • 75 exhibits and checklists • over 1,000 cases cited • indexed
This book has been called "the bible" for discharging taxes in consumer bankruptcy cases. Used by thousands of lawyers, trustees, judges and other tax professionals across the country, it explains in simple yet comprehensive terms what kinds of taxes can be erased, when they can be erased, and how they can be erased in chapter 7, 13, or 11. It covers all the issues and traps for the unwary. This book is even used by revenue officers!
Says Ike Shulman, former President of the National Association of Consumer Bankruptcy Attorneys, "Every serious bankruptcy practitioner should have this book!"
2002 SUPPLEMENT AVAILABLE
Gold's TAX DISCHARGE CHRONOMETER also available
BankruptcyBooks.com . . . LARGEST SELECTION OF BOOKS, SOFTWARE & PERIODICALS FOR BANKRUPTCY PROFESSIONALS . . .
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HELD, CHAPTER 7 DEBTOR MAY NOT "STRIP OFF" VALUELESS LIEN
This bankruptcy appeal presents purely a legal question that has split the bankruptcy and federal district courts, namely, whether a debtor who has filed for Chapter 7 bankruptcy may avoid a valueless lien under §506(d) of the Bankruptcy Code, 11 U.S.C. § 506(d). Because the Supreme Court's reasoning in Dewsnup v. Timm, 502 U.S. 410 (1992), applies with equal force and logic to the issue at hand, we hold that a Chapter 7 debtor may not use §506 to "strip off" an allowed junior lien where the senior lien exceeds the fair market value of the real property in question. Accordingly, we AFFIRM the judgment of the district court.
In re Talbert, No. No. 02-1845 (6th Cir. 09/24/2003)
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HELD, HOMESTEAD EXEMPTION LOST WHEN DEBTOR MOVES AWAY FROM PROPERTY
Although a debtor's declared homestead remained effective after he moved away from the property, in the context of bankruptcy the exemption was of no aid to the debtor, since a declared homestead in which a debtor does not live is not protected from forced sale.
In re Kelley, __ B.R. __ (9th Cir. BAP 2003)
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HELD, DEBTOR MAY KEEP COLLATERAL WITHOUT REAFFIRMING
9th Cir. McClellan Fed. Credit Union v. Parker (In re Parker), 139 F.3d 668 (9th Cir. 1998), which allows a consumer debtor to file a statement of intention and keep collateral without reaffirming, remains good law.
In re Lopez, __ F.3d __ (9th Cir. 2003)
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HELD, CRIMINAL RESTITUTION ORDERED PAID TO INJURED PARTY WAS DISCHARGEABLE
Debtor, who disposed of a motor vehicle that was subject to a lien, was charged with a felony under Virginia law. Prior to debtor's trial on this charge, he entered into a plea agreement under which he pled guilty to the misdemeanor crime of fraud as an accessory after the fact. The Richmond Circuit Court found debtor guilty and additionally entered an order on April 30, 2002, requiring debtor to pay criminal restitution to plaintiff.
Plaintiff, a secured creditor, objected to discharge. The Court looked at split in authority on this issue, and opted for the plain language of the Bankruptcy Code, which makes restitution “payable to or for the benefit of a governmental unit” is nondischargeable.
In re Wilson, __ B.R. __ (E.D.Va. 2003)
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RULES AMENDMENTS PROPOSED
The Advisory Committee on Rules of Bankruptcy Procedure have proposed amendments to the following rules:
Bankruptcy Rules: 1007, 3004, 3005, 4008, 7004, and 9006.
The text of the proposed rule amendments and the accompanying Committee Notes can be found at the United States Federal Courts' Home Page at http://www.uscourts.gov/rules on the Internet.
The Judicial Conference Committee on Rules of Practice and Procedure submits these amendments for public comment. All comments and suggestions with respect to them must be placed in the hands of the Secretary not later than February 16, 2004.
All written comments on the proposed rule amendments can be sent by one of the following four ways: electronic mail via the Internet at http://www.uscourts.gov/rules ; regular mail to Peter G. McCabe, Secretary, Committee on Rules of Practice and Procedure of the Judicial Conference of the United States, Thurgood Marshall Federal Judiciary Building, Washington, DC 20544; overnight mail to Peter G. McCabe, Secretary, Committee on Rules of Practice and Procedure of the Judicial Conference of the United States, Thurgood Marshall Federal Judiciary Building, One Columbus Circle, NE., Washington, DC 20002; or facsimile to Peter G. McCabe at (22) 502-1755.
Public hearings are scheduled to be held in Washington, DC, on January 30, 2004
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On the NACBA "Listserve" Bankruptcy attorney Gary Holt, San Diego, posed this question:
WHAT COULD A CLIENT SAY TO YOU IN HIS OR HER FIRST TWO INTRODUCTORY SENTENCES THAT WOULD MAKE YOU IMMEDIATELY WANT TO SEND THAT CLIENT TO ANOTHER ATTORNEY?
Responses received to date:
If I had the money to pay you (900.00), I would pay my creditors
(40,000.00+).
How do you expect me to pay for a bankruptcy if I am bankrupt?
Upon being asked if they know what real property is the client responds: "yes, it is anything that is not imagined"
My name is Donna Debtor and I recently had a car stolen and burned. The insurance company believed I was involved in the crime and does not want to pay for cost of the car.
I had an incompetent attorney. He did just what I told him to.
Hello, this is the AT&T operator, will you accept a collect call from inmate Smith?
What if I were to tell you I owned a boat?
What if I came back in about a week with about $20,000 more in debt? Would that make a difference?
I don't own any real estate in my name. I gave the house to my parents last week. That's OK, right?
This is confidential, right?
When was the last time you used any of your credit cards?
Never. I just got them for a friend of mine to use. He gave them
back to me when he was done with all the money.
I see from the Court's website that the cost for you to do my bankruptcy case is $200. Is there any way you can do it for less, that's a lot of money!
I'd like a free consultation so you can tell me how to file my own case. What are these exemptions all about anyway? Can you just tell me how to do them?
Well, I own this house but there are 6 of us on title...
I've had 6 other attorneys and every one of them is a lying crook.
Can I tell you the truth?
In response to, "Can I get you a glass of water or a soft drink?"---"Do you got a beer?"
And the ever popular: "Do you have an adjustable fee, 'cause I don't got no money?"
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