A debtor's attempt to have her bankruptcy filing fee waived was ultimately denied by Judge Bucki in Buffalo, after it was revealed the debtor was entitled to a large tax refund when the case was filed. This tax refund was treated as income, at least for the purpose of determining eligibility to have the filing fee waived, and the reasoning of the case could potentially be applied elsewhere. In re Brooks, WDNY Bk #12-10456; Hon. Carl L. Bucki; decision July 19, 2012. The debtor filed bankruptcy February 17, 2012. She was represented by an attorney, who had charged $915 for his services. The debtor filed an application for waiver of the $306 bankruptcy filing fee, under 28 U.S.C. §1930(f)(1), which states "the bankruptcy court may waive the filing fee in a case under chapter 7 of title 11 for an individual if the court determines that such individual has income less than 150 percent of the income official poverty line . . . and is unable to pay that fee in installments". Therefore, the debtor must show both that he or she is under the 150% of the poverty line and is unable to pay the filing fee even in installments. Even then, the waiver is discretionary ("The court MAY waive. . .")
If a debtor has recently run up a credit card account, will the bank seek to have its debt excepted from discharge? How much debt and over what sort of time period might cause a bank to file an exception-to-discharge lawsuit in the bankruptcy case? One review of discharge exception lawsuits filed by one bank in particular would suggest that charges and cash advances of $4,000 or more incurred during the five months prior to filing could provoke a lawsuit.
In re Gallagher Bk 07-22720; Gordon v. Kinney AP 09-2003 (Judge Ninfo, 9/30/2009): Another ring case. The debtor filed bankruptcy in October 2007. Two and a half years earlier, she gave the engagement ring back to Mr. Kinney. The 2 1/2 years is significant because it takes the transfer out of the bankruptcy fraudulent transfer period (2 years) and also places the transfer before the increase in the New York homestead exemption from $10,000 to $50.000. To avoid a transfer, the trustee had the burden to prove the debtor was insolvent when the transfer took place. The trustee had thought that the judge had accepted this conclusion prior to trial, but the judge found that there was a clerical error, so that it appeared the debtor was ever-so-slightly solvent when the transfer was made. Solvency is determined by adding up all the debtor's unexempt assets and debts at the time of transfer. The decision includes a chart showing $183,704 in assets and $169,983 in debts. The decision does not explicitly say so, but the $183,704 in assets should have been reduced by $10,000, the debtor's homestead exemption (she apparently had about $45,000 in equity in her house.) As the trustee had not shown the debtor to be insolvent, the transfer was not considered to be fraudulent under New York law. Note that had the transfer taken place after August 2005, when the homestead exemption rose to $50,000, the debtor would have been insolvent and the transfer avoidable.
In re Badagliacca 06-22132; Arnold as Trustee v. Bank of New York AP 08-2032 (Decision February 23, 2009; Judge Ninfo) Mortgage misspelled the debtor's surname on its mortgage document ('Badaglicca' rather than 'Badagliacca'), so that a search of the index of land records does not reveal the mortgage. Held, the mortgage lien is avoided as against the trustee (acting as a hypothetical bona fide purchased.)
In re: Doherty 06-22278 & Benedetti 07-21620 (Decision February 23, 2009; Judge Ninfo): Proofs of claims were filed in each case by alleged successors to the original creditors. The Trustee objected to the claims, and the Court disallowed them, as the claimant failed to show the chain of title or anything else that would prove ownership of the claim.
In re MacDonald 08-11741 (Decision March 10, 2009; Judge Bucki, Buffalo) Motion by debtors to compel trustee to return life insurance proceeds turned over pursuant to the 2002 decision in Teufel etc. Prior to 2008, Western District of New York courts held that when a husband and a wife both file bankruptcy and one spouse has a life insurance policy with cash value and the other spouse as the beneficiary, the bankruptcy trustee, as trustee for both the owner and beneficiary of the policy, could claim in the cash value. The Second Circuit overruled this line of cases Wornick v. Gaffney 554 F3d 486, decision 9/24/08, and ruled that the cash value of reciprocal life insurance policies in joint cases are exempt. The MacDonald debtors then amended their exemptions to add the life insurance and then moved to have the trustee return funds previously turned over. Judge Bucki granted that motion, noting that the exemption issue had not previously been litigated in this particular case, so no "law of the case" had been established to preclude the debtors from exempting the asset now.
In re: Maiorino 08-21335 (Decision March 11, 2009; Judge Ninfo) In this case a Chapter 13 debtor attempted to modify a long-term mortgage by paying it off in full within the plan at below-contract rate of interest (See the case note in Laimer, in the 2008 cases.) The debtor argued that as a judgment of foreclosure has accelerated the mortgage, it was all now due-in-full and, as the last payment was now due within the period of a Chapter 13 plan, it could be modified. Judge Ninfo disagreed and held that the Sect. 1322(c)(2) provision, which states that residential mortgages cannot be modified if the last payment is due after the term of the Chapter 13 plan, applies to the original payment schedule of the mortgage, not the shorter tern caused by the acceleration of the mortgage in foreclosure. Note this phrase (which may return if new legislation allows modification of home mortgages in Chapter 13): "Although all of the circumstances under which a debtor might be better off by intentionally going into default on a mortgage, so that it could be modified in a Chapter 13 proceeding may be numerous and unclear, if a mortgage that has been accelerated by a debtor's default is held to be eligible for modification under Section 1322(c)(2), such a holding could open up the possibility of abuse"
In re Dziedzic 08-14061 (Decision March 24, 2009; Judge Bucki, Buffalo): Personal services income exemption for self-employed applies to net income only. Debtor, a self-employed chiropractor, asserted a 90% personal services exemption for services rendered 60 days prior to filing, pursuant to NY CPLR Sect. 5205(d). According to debtor's schedules, only 18.2% of gross business revenue represented personal income, the rest was for overhead. Debtor had $5,625.49 in the bank when the case was filed, plus $100 cash. $2,500 was exempt cash and the debtor did not claim an exemption for another $2,079.38. Of the balance of $1,146.11, the debtor claimed 90% exempt. The court agreed with the trustee that only 90% of 18.2% of this money was exempt, as only 18.2% was actual "earnings" as that word is used in the exemption statute, CPLR 5205(d).
CFCU Community Credit Union v. Hayward (Scribner as trustee); WDNY Bk07-4369bk; 552 F.3d 253; Second Circuit Court of Appeals decision January 9, 2009: The NY homestead exemption was increased from $10,000 to $50,000 in August 2005, and the Haywards filed Chapter 7 shortly thereafter. CFCU, by Attorney Edward Crossmore, argued that the $40,000 increase should only apply to debts incurred after the law went into effect. The WDNY, EDNY, and NDNY bankruptcy courts disagreed, as did the District Court in WDNY and NDNY. CFCU appealed to the Second Circuit. Held: as an interpretation of New York law, the increase in the homestead was retroactive to debts incurred before the law was modified. Specific holdings: 1) The Commerce Clause of the U.S. Constitution (forbidding the impairment of contracts) was not infringed. The change did not substantially impair the contractual expectations of the parties, and even if it did, the changes was constitutionally justified as furthering a "significant and legitimate public purpose." 2) Other than the Commerce Clause issue, this was a matter of New York law interpretation, not federal law interpretation. The Supreme Court decision in Owen v. Owen did not apply. Owen was a Florida case where a creditor obtained a judgment against the debtor's condo, Florida then changed its exemption laws to include condos as homesteads but the change specifically excluded pre-change judgment liens; the debtor then filed bankruptcy and sought to avoid the judicial lien. The Supreme Court allowed the judgment to be avoided because the property being exempted - the condo - was exempt property and Florida's limitation on that exemption - excluding older judgments - did not carry into bankruptcy. Somehow the Hayward court concluded that "Owen holds no sway here." 3) Under New York law remedial legislation can apply retroactively and the legislative history here, especially the sponsoring legislator's memorandum, indicated that the legislature intended that the change would be retroactive.
Bankruptcy Exchange, Inc. v Langsland 2009 U.S. Dist. LEXIS 84005 (W.D.N.Y., District Judge Scretny, decision September 15, 2009: This is a District Court decision out of Buffalo which upholds a Bankruptcy Court decision from 2008. In April 2005, Deborah Langslands filed a Chapter 7 case in Buffalo. She jointly owned her home with her mother, Eleanor Landsley, and claimed the $10,000 homestead exemption (unknown to the debtor at the time, the homestead exemption would jump up to $50,000 four months after the case was filed.) A speculative company, Bankruptcy Exchange, Inc., made a $12,500 offer to the trustee for the debtor's interest in the house. $10,000 would go to the debtor (the exemption) and $2,500 would go to the trustee. On March 22, 2006, a notice of intent to sell was served on all creditors by the court clerk. However, Eleanor Langslands, the non-debtor co-owner of the property, was not served. There was no opposition filed against the intent to sell so, presumably, the trustee completed the sale to Bankruptcy Exchange.On November 9, 2007, Eleanor Langslands, the co-owner filed a motion to vacate the sale on the grounds that she was never notified of the sale and she now had a hostile co-owner. A letter from her attorney filed later stated, among other things, that she lost her STAR property tax exemption because of the new non-resident co-owner. The issue, as framed by the court, was whether the co-owner was a "creditor" as that term is used in bankruptcy and, therefore, a party that must be served with notice of sale. Bankruptcy Judge Kaplan wrote a decision, entered April 2, 2008, stating that the term "creditor" was broad enough to include the non-debtor co-owner. Interestingly, Bankruptcy Judge Bucki, who was not the judge in the case, co-signed the decision, indicating that this would be the rule at least in the Buffalo Division of the Western District of New York Bankruptcy Court. This decision is NOT found on the court website under Judge Kaplan's written decisions, but it can be found and viewed, at no charge, under the April 2, 2008 PACER docket entry for this case.Bankruptcy Exchange, Inc. appealed to District Court, which upheld the bankruptcy court's decision. The District Court noted that "joint tenants", which Deborah and Eleanor Langsland were before the filing of the bankruptcy, must have the four "unities" of ownership: time, title, interest and possession. When Deborah Langsland filed her case, the trustee became the real estate owner, breaking at two of the unities. The court said the trustee became "tenant-in-common", rather than joint tenant, with Eleanor Landsland. The change in Eleanor Landsland's interest gave her a possible claim in the case. Therefore, as a creditor, she was entitled to notice of sale. This case appears to be an effort of the courts to find grounds to give the co-owner the right to object to this egregious sale. It is odd that the bankruptcy code does not give co-owners a direct right to notice of a cale of a co-owner's interest. An interesting unforseen consequence of the District Court's decision is the conclusion that a joint tenancy becomes a tenancy-in-common upon filing. Would that also happen if only one spouse of married tenants-by-the-entireties filed? Is the joint tenancy restored when the real estate is abandoned back to the debtor at the conclusion of the case? What if both owners filed? Further complications can be imagined.