"Something went awry in this case", and indeed it did. This understated line opens the conclusory paragraph of the decision by Judge Robert E. Littlefield Jr. in In re Leone, Bankruptcy Court Northern District of New York (Albany Division) Chapter 7 #05-16603; AP #07-90199; Decision Dec. 9, 2011.) The debtors refinanced their home, filed bankruptcy, and transferred the refinance funds to an annuity while the petition was being filed. The original chapter 13 trustee did not go after the refinance cash or object to the annuity exemption. When converted to chapter 7, the new trustee objected to exempting the annuity, but by them the money was mostly spent. The chapter 7 trustee sought to deny the debtors a discharge.
Syracuse bankruptcy judge Margaret Cangilos-Ruiz has ruled that a bankruptcy debtor can claim a homestead exemption on an entire parcel or residential property, even if the debtor only resides in part of the property.
In re Craig Michael McCarthy; WDNY Bk #11-31499; decision Nov. 18, 2011. Mr. McCarthy owned property containing a two family house, both units of which were rented out, and a smaller building in the back where the debtor both worked and lived. In my review of the docket, it appears that the debtor moved to avoid the judicial lien of a creditor, and the creditor, in turn, objected to the debtor's homestead exemption claim. The creditor argued that the homestead exemption should only be allocated to that portion of the lot that is used as the debtor's residence. The court ruled that the debtor could exempt the entire parcel.
A bankruptcy court in Syracuse ruled that, in chapter 13, the interest rate owed to a private purchaser of a property tax lien is the same as the government interest rate. In re Meyhoefer, Bankruptcy Court Northern District of New York chapter 13 #10-33272; Hon. Margaret Cangilos-Ruiz decision June 27, 2011. In chapter 13, secured claims being paid through the plan normally receive a "till" rate of interest on that claim, named after the U.S. Supreme Court decision Till v. SCS Credit Corp., 541 U.S. 465 (2004). Locally, the current "Till" interest rate is 5.25%. But Bankruptcy Code Section 511(a) requires payment of the statutory interest rate when paying tax claims. In most counties in New York, property taxes accrue 12% interest until paid. Monroe County (Rochester) and Erie County (Buffalo) charge 18% interest on unpaid property taxes. In this case, Onondaga County's property tax lien was sold off to a private entity, American Tax Funding LLC. The debtor filed a chapter 13 to cure their property tax default to this private creditor, and the creditor wanted to be paid Onondaga County's 12% interest rate, rather than a much-lower "Till" interest rate. In a detailed opinion, the court concluded that this lien was still a tax claim, as that term is used in Section 511(a), and that the creditor was entitled to the statutory interest rate. Stopping a tax foreclosure through a chapter 13 bankruptcy action is a complicated and delicate situation, as this case shows. If you are in a tax foreclosure and wish to see if a bankruptcy can stop the process and allow you to cure the default, please see the chapter 13 page of my web site. You may also contact me for a phone consultation of your situation, at no charge.
Following Western District of New York precedent, a bankruptcy judge in the Northern District of New York concluded that, in a New York tax foreclosure, title to real estate does not transfer from the property owner to the taxing authority (here, a village) until the entry of a court order approving the transfer. In this unusual case, it was the debtor, not the village, arguing that the transfer took place earlier, when the redemption period ran. Onteora Associates v. Village of Fleismann, Northern District of New York Chapter 11 #09-63106; Adversary Proceeding #09-80076 (Judge Davis; decision August 11, 2011; on appeal). The property in question in the Onteora case is a movie theater, two stores and an apartment, valued on the bankruptcy schedules at $331,717, and subject to $31,820 in property taxes and a mortgage of $62,400. There would appear to be substantial equity in the property. The village filed a tax foreclosure petition December 11, 2008. Under New York tax foreclosure law, a property owner has a limited time period - three months - to redeem the property by paying off the back taxes. In this case, the redemption deadline was May 5, 2009. The taxes were not paid by then, and the village filed for a default judgment transferring title on September 25, 2009. The property owner and the mortgage bank both opposed the application; the court disallowed the debtor's objection, but agreed with the bank and, on December 14, 2009, denied entry of a default judgment transferring title.
As a reminder that passing the means test does not end the possibility of a chapter 7 case being considered abusive, a debtor in Albany had just such a case dismissed in June. In re Glavin; Northern District of New York Bankruptcy #10-10094 Judge Littlefield; June 22, 2011). This is also a reminder that Chapter 7 cases with high income are reviewed very closely by the bankruptcy system, and need to be reviewed by an experienced chapter 7 and Chapter 13 bankruptcy practitioner before being filed. For more information about chapter 7, see my bankruptcy website or contact me directly. The debtor in the Glavin case filed chapter 7 than a year ago, January 15, 2010. According to his amended schedule of income and expenses, he was, at that time, single with no dependents and employed in marketing for three months.
The Hon. Robert E. Littlefield, Jr., Chief Judge of the United States Bankruptcy Court for the Norther District of New York has denied Joseph J. O'Hara a bankruptcy discharge. In re O'Hara, NDNY Bk #08-12108; AP #09-90055; decision April 18, 2011.
When confirming a Chapter 13 plan in the bankruptcy court in Rochester, Judge John C. Ninfo II emphasizes to every debtor the need to maintain accurate records of mortgage payments made after the case is filed ('post-petition.) Standing Trustee George M. Reiber also emphasizes this record-keeping requirement, and provides all Chapter 13 debtors with the 'yellow folder', a file pre-printed on the cover with spaces to note down every post-petition payment. A recent decision from the Bankruptcy Court for the Eastern District of Louisiana underscores the importance of that record-keeping. Judge Elizabeth W. Magner has sanction a mortgage servicing company for misrepresenting the debtor's post-petition payments and 'robo-signing' of court affidavits:
In re Wilson, ED La. Ch. 13 bk #07-11862, decision April 7, 2011. The decision is available at no charge on the Pacer docket of the case. See also New York Times: "Homework Regulators Aren't Doing"' Article April 16, 2011; author: Gretchen Morgenson. Se also Reuters April 13, 2011, article by Scot Paltrow.
Is a 401(k) retirement plan exempt in bankruptcy under New York law? Does it make a difference if the funds were transferred into the retirement account when the debtor was insolvent (a constructive fraudulent conveyance)? What about funds transferred into the account within 90 days of filing bankruptcy? These were the issues presented in a long, torturous Eastern District of New York bankruptcy case, In re Morra, resulting in four court decisions from 2006 to 2009. To be precise, the 90 day transfer issue was not present in Morra, but the analysis reached would apply to that issue as well. These decisions came out a while ago, but I have not seen any other on-line analysis of their significance.
Utica Bankruptcy Judge Diane Davis has issued a decision disagreeing with a previous decision by Northern District of New York Chief Judge Robert E. Littlefeld Jr., and that debtors with above-median income Chapter 13 cases must file a plan that runs a full five years, unless creditors are paid in full. In re Eaton Ch 13 #08-62201; Bankr. NDNY; decision March 31, 2011.) In the earlier case, In re Green, 378 BR 30 (Bankr. NDNY 2007), Judge Littlefield concluded that Bankruptcy Code 1325(b)(1)(B), which requires a five year "commitment period" for above-median income debtors in Ch. 13, was not a measurement of time ('temporal') but rather a measurement of the amount that must be paid into the plan (a 'multiplier'). As Judge Littlefield saw it, if a debtor's projected disposable income was $500 per month, the plan was required to pay at least $30,000 to unsecured creditors ($500 time the 60 month commitment period), not that the plan actually had to go a full five years. If a debtor's projected disposable income was negative, as it actually was in the Green
case, then the five year commitment period did not even apply. Judge Davis, after reviewing extensive caselaw and legal studies ("Following its review of nearly two dozen cases, leading authoritative treatises, and several scholarly articles addressing this question, the Court may fairly state that there is little, if anything, to be added by this Court that has not already been said by other jurists and scholars since BAPCPA became law." - Eaton, page 5), concluded that the correct interpretation is that five years represents the actual length of time the plan must run, no matter what the projected or actual disposable income. This conclusion is based on opinions rendered since
Green was decided, including Supreme Court decisions.
A judge form the Bankruptcy Court for the Northern District of New York has ruled that the recent Supreme Court decisions in Hamilton v. Lannin, 130 S. Ct. 2464, 2468-69 (2010), and Ransom v. FIA CardServices, 131 S. Ct. 716 (2011), do not permit a bankruptcy court to disallow "means test" expenses in calculating the minimum payment to unsecured creditors in an above-median income Chapter 13 case. In re Joest, Ch. 13 Bk #10-60028; Bankr. NDNY, Hon. Diane Davis, decision March 17, 2011.) The specific issue in Joest was whether a single debtor (no dependents) with income above the median in New York who has two car loans can deduct the 'ownership cost' for both in calculating 'projected disposable income' in a Chapter 13 case. The debtor, represented by attorney Steven R. Dolson, Esq., said yes; the chapoter 13 trustee, Mark W. Swimlar (represented by staff attorney Maxsen D. Champion, Esq.) siad no. The court went with the debtor.