23rd Annual DFW chapter 13 Final

1

Lisa Lambert, Assistant U.S. Trustee
October 21, 2013
DFW Area Chapter 13 Seminar
2

Kent Anderson, Kent Anderson Law Office
October 21, 2013
DFW Area Chapter 13 Seminar
3


Stephen Wilcox, Wilcox Law
Alice Whitten, Ascension Capital Group
October 21, 2013
DFW Area Chapter 13 Seminar
4
What’s a Car Creditor
To Do ?
Alice Whitten, AIS Data Services, LP
Stephen Wilcox & Clare Russell, Wilcox
Law, PLLC
The DSO Problem
NO PRORATA
The Effect of Conversion or
Dismissal
(f)(1) Except as provided in paragraph (2), when a case under chapter 13 of this title is
converted to a case under another chapter under this title—
(A)
property of the estate in the converted case shall consist of property of the estate,
as of the date of filing of the petition, that remains in the possession of or is under the control
of the debtor on the date of conversion; and
(B)
valuations of property and of allowed secured claims in the chapter 13 case shall
apply in the converted case only in a case converted to a case under chapter 11 or 12, but not
in a case converted to a case under chapter 7, with allowed secured claims in cases under
chapters 11 and 12 reduced to the extent that they have been paid in accordance with the
chapter 13 plan.; and
(C)
with respect to cases converted from chapter 13—
(i)
the claim of any creditor holding security as of the date of the petition
shall continue tobe secured by that security unless the full amount of such claim
determined under applicable nonbankruptcy law has been paid in full as of the date
of conversion, notwithstanding any valuation or determination of the amount of an
allowed secured claim made for the purposes of the case under chapter 13; and
(ii)
unless a prebankruptcy default has been fully cured under the plan at the
time of conversion, in any proceeding under this title or otherwise, the default shall
have the effect given under applicable nonbankruptcy law.
Years
in
Ch 13
1
2
3
Years
in
Ch 13
1
2
3
Claim
Amount
Claim
Paid
$20,000.00
$20,000.00
$20,000.00
$20,000.00
$20,000.00
$20,000.00
Contract
Plan
Interest Interest
7.99%
7.99%
7.99%
4.75%
4.75%
4.75%
Monthly Payment
under plan
Monthly Payment
under contract
$370.00 x 12 =
$4,440.00
$470.00 X 12 =
$5,640.00
$370.00 x 24 =
$8,880.00
$470.00 x 24 =
$11,280.00
$370.00 x 36 =
$13,320.00
$470.00 X 36 =
$16,920.00
Claim
Amount
Cram
Down
Contract
Interest
Plan
Interest
Monthly Payment
under plan
Monthly Payment
under contract
$20,000.00
$15,000.00
7.99%
4.75%
$280.00 x 12 =
$3,360.00
$470.00 X 12 =
$5,640.00
$280.00 x 24 =
$6,720.00
$470.00 x 24 =
$11,280.00
$280.00 x 36 =
$10,080.00
$470.00 X 36 =
$16,920.00
$20,000.00
$20,000.00
$15,000.00
$15,000.00
7.99%
7.99%
4.75%
4.75%
Difference
not including
late fees
$1,200.00
$2,400.00
$3,600.00
Difference
not including
late fees
$2,280.00
$4,560.00
$6,840.00
Competing Plans and Non-Filling
Co-Buyers
THREE CASES TO CONSIDER
In re Rodriguez, 156 B.R. 659 (Bankr.E.D.Ca. 1993) –
Debtor cannot use §506 to value collateral if there is
a co-buyer.
In re Faulkner, 2013 Westlaw 2154790 (Bankr.C.D.Ill
2013) – Secured creditor does not have to release its
lien after discharge if there is a co-buyer.
In re Register, 2001 Westlaw 36390710 (Bankr.S.D.Ga.
2001) – “Surrender” requires actually returning the
collateral to the lienholder.
Insurance Payoffs
ANOTHER INTERESTING RECENT CASE
In re Kelley, 2012 Westlaw 5457331 (Bankr.E.D.Ky
2012) – Court ordered excess insurance proceeds
held in trust by Debtor’s attorney until discharge
The Lockbox
October 21, 2013
DFW Area Chapter 13 Seminar
16


Alice Whitten, Ascension Capital Group
Pam Bassel, Chapter 13 Trustee
October 21, 2013
DFW Area Chapter 13 Seminar
17
MID CASE MORTGAGE AUDIT PROCEDURES
NOW THAT WE HAVE YOUR ATTENTION . . .
L.B.R. 3002-2 - THE NOTICE
WHO DOES IT APPLY TO AND WHY DO I CARE?
THE MID-CASE NOTICE APPLIES TO
CLAIMS THAT ARE
SECURED BY THE PRINCIPAL
RESIDENCE OF THE DEBTOR
AND
PROVIDED FOR UNDER 1322(B)(5) OF THE CODE IN THE
DEBTOR’S PLAN
TRANSLATION - YOU ARE PAYING THE ARREARS
THROUGH THE PLAN AND THE ONGOING
PAYMENTS DIRECT*
* Thank goodness you translated. I don’t speak
bankruptcy.
WHEN WILL I GET THE MIDCASE NOTICE?
I DON’T WANT TO MISS IT!
MONTH 18 - 22
AND
MONTH 42-46 OF THE PLAN
TWICE THE FUN!!!!!!!!!
WHO SENDS IT?
THE TRUSTEES!
Well, yeah, the debtor can send it if the Trustee
does not, but DON’T.
Just bring it to the Trustee’s attention.
MEAN
DEBTOR’S
LAWYER
INNOCENT TRUSTEE
WHO GETS SERVED?
The Debtor
The Debtor’s Attorney
The Mortgage Holder
The Mortgage Holder’s Attorney
WHAT DOES THE NOTICE
CONTAIN?
It lists the remaining principal balance on:
The pre-petition arrears being paid
through the Trustee
The post-petition arrears being paid
through the Trustee
And the Notice includes a statement that it is
presumed that the post-petition direct payments
are current.*
YES, MORTGAGE HOLDER, A
RESPONSE
IS REQUIRED!
HOW LONG HAVE I GOT TO
RESPOND?
60 DAYS
THE RESPONSE MUST
[ ] ITEMIZE ANY CURE AMOUNTS AS OF
THE RESPONSE DATE
[ ] ITEMIZE ANY POST-PETITION
ARREARS AS OF THE RESPONSE DATE.
[
] ITEMIZE THE CASES IN WHICH THE
TRUSTEE HAS HAD TO OBJECT TO YOUR
UNTIMELY MORTGAGE CLAIM.
[
] ALL OF THE ABOVE.
[
] NONE OF THE ABOVE. [ ]
AND, IF THE PARTIES CANNOT
WORK IT OUT, OUR
PHENOMENAL, TALENTED,
INTELLIGENT, ESTEEMED,
HARD WORKING, AWESOME,
AMAZING, YOUTHFUL,
AND
GOOD LOOKING
JUDGES WILL DECIDE*
*THE RULE ACTUALLY SAYS THE COURT WILL DETERMINE WHETHER THE DEBTOR
IS CURRENT ON ALL REQUIRED POST-PETITION AMOUNTS.
WHAT HAPPENS IF I DON’T
TIMELY RESPOND?
STUBBORN MORTGAGE HOLDER
WELL, THEN, YOU ARE AN
OBJECT ATTACHED
TO ANOTHER OBJECT
BY AN INCLINED PLANE WRAPPED
HELICALLY AROUND AN AXIS*
*WITH MANY THANKS TO DR. LEONARD
HOFSTADTER
UNLESS . . .
THE MORTGAGE HOLDER CAN
SHOW THAT
THE FAILURE TO RESPOND WAS
SUBSTANTIALLY JUSTIFIED*
OR HARMLESS**
* I HAVE A DARN GOOD REASON - MY
COMPUTER ATE MY RESPONSE.
**AWE, COME ON, JUDGE.
NOBODY GOT HURT!
ATTENDING A BEACH PARTY IS
PROBABLY NOT A SUBSTANTIAL
JUSTIFICATION*
(*UNLESS ONE OF THESE FOLKS
IS THE JUDGE)
PROBABLY
NOT
HARMLESS
WHAT IS THE EFFECT OF THE ORDER?
*THAT IS TO SAY, THE MORTGAGE HOLDER IS
PRECLUDED FROM ASSERTING A DIFFERENT CURE
AMOUNT OR POST-PETITION ARREARAGE AMOUNT IN
THE CASE, AN ADVERSARY, OR, AFTER DISCHARGE, ANY
OTHER PROCEEDING
UNLESS . . .
THE MORTGAGE HOLDER CAN
SHOW THAT:
THE FAILURE TO RESPOND WAS
SUBSTANTIALLY JUSTIFIED
OR HARMLESS
You: Say, didn’t we just go through that?
Us: Yes, but it bears repeating.
SO, DOES THIS MEAN NOBODY HAS TO
COMPLY WITH
NATIONAL BANKRUPTCY RULE 3002-1?
SHORT ANSWER: ARE YOU KIDDING?
SLIGHTLY LONGER ANSWER, AND MUCH MORE
RELEVANT: NO, YOU HAVE TO COMPLY.
LONG ANSWER: LBR 3002-2(g) (HINT, THE
ANSWER IS STILL “NO”)
SO, DOES THIS NEW RULE WORK?

Alane Beckett, Beckett & Lee, LLP
October 21, 2013
DFW Area Chapter 13 Seminar
50
PRESENTED TO THE
DALLAS FORT WORTH AREA
CHAPTER 13 BANKRUPTCY CONFERENCE
NOVEMBER 21, 2013
ALANE A. BECKET
BECKET & LEE LLP
MALVERN, PA
[email protected]




1976: discharge of student loans in bankruptcy
prohibited for first 5 years of repayment unless debtor
could establish undue hardship.
1990: discharge exception extended to 7 years.
1998: Code amended to provide that federally
guaranteed student loans could not be discharged at
all absent showing of undue hardship.
2005: discharge exception extended to all education
loans.
52
11 U.S.C. § 523(a)(8): a discharge under section 727, 1141, 1228(a), 1228(b), or
1328(b) does not discharge an individual debtor from any debt:
(8) unless excepting such debt from discharge under this paragraph would impose
an undue hardship on the debtor and the debtor’s dependents, for –
(A) (i) an educational benefit overpayment or loan made, insured, or guaranteed
by a governmental unit, or made under any program funded in whole or in part by
a governmental unit or nonprofit institution; or
(ii) an obligation to repay funds received as an educational benefit,
scholarship, or stipend; or
(B) any other educational loan that is a qualified education loan, as defined in
section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who
is an individual …
53

Lender: must establish the existence of the debt and
that it is in one of the non-dischargeable categories
◦ Educational nature: based upon “substance of the
transaction”, i.e., the stated purpose of the loan, not how
proceeds were actually used

Debtor: must prove undue hardship
54
(1) that the debtor cannot maintain, based on current income
and expenses, a “minimal” standard of living for herself and her
dependents if forced to repay the loans;
(2) that additional circumstances exist indicating that this state
of affairs is likely to persist for a significant portion of the
repayment period of the student loans; and
(3) that the debtor has made good faith efforts to repay the
loans.
55






Shelter
Basic utilities
Food and personal products
Vehicles and associated costs
Health insurance
Recreation
56


Temporary hardship or a “certainty of
hopelessness”?
Career choices and future success.
57

Efforts measured by efforts to:
◦ obtain employment
◦ minimize expenses
◦ maximize income


History of repayment?
Use of alternate repayment options
58


Student Loan Repayment as a Special Circumstance to
rebut the presumption of abuse or as a deduction
Separate classification of student loans
◦ Payment as long term debt via 1322(b)(5) vs
◦ Separate classification via 1322(b)(5) and (10)
◦ In re Leser, 939 F.2d 669 (8th Cir 1991)




The discrimination has a reasonable basis
The debtor can carry out a plan without the discrimination
The discrimination is proposed in good faith
The degree of discrimination is directly related to the basis or
rationale for the discrimination
59
60
61
62
1. Quality of education, school closings
2. Partial discharge
3. Proof of medical conditions
4.
Timing of litigation in Chapter 13 cases
5.
Effect of claim disallowance
6.
Alternate means to discharge
63
October 21, 2013
DFW Area Chapter 13 Seminar
65




Hon. Barbara Houser, Dallas
Hon. Harlin “Cooter” Hale, Dallas
Hon. Russell Nelms, Fort Worth
Hon. Stacey Jernigan, Dallas
October 21, 2013
DFW Area Chapter 13 Seminar
66


Gerrit Pronske, Pronske & Patel PC
Hon. Harlin “Cooter” Hale, Dallas
October 21, 2013
DFW Area Chapter 13 Seminar
67
October 21, 2013
DFW Area Chapter 13 Seminar
68


Mark Castillo, Curtis I Castillo, PC
Behrooz Vida, Vida Law Firm
October 21, 2013
DFW Area Chapter 13 Seminar
69



Tim Truman, Fort Worth
Tom Powers, Dallas
Pam Bassel, Fort Worth
October 21, 2013
DFW Area Chapter 13 Seminar
70
Please complete
evaluations and
leave them at the
registration table.
October 21, 2013
DFW Area Chapter 13 Seminar
71