All items from Georgia Bankruptcy Blog

In In re Cochran, Ch. 7 Case No. 13-43242, 2014 Bankr. LEXIS 1178 (Bankr. N.D. Ga. Feb. 10, 2014), the issue in the motion to avoid lien was whether funds paid into court pursuant to a Summons of Garnishment are property of the Bankruptcy estate after a case is filed.  Judge Mary Grace Diehl held as follows:

Posted 38 weeks 6 days ago

In Howell v. U.S. Foods, Inc., Ch. 7 Case No. 11-13160, Adv. Proc. No. 13-1054, 2014 Bankr. LEXIS 681 (Bankr. N.D. Ga. Feb. 5, 2014) (click here for .pdf of Order), the individual debtor owned and managed a restaurant incorporated as Bilbo’s Bar-B-Que, Inc.  However, the Trustee alleged that the Debtor operated the business as a sole proprietorship known as “Bilbo’s BBQ.”    During the 90 day preference period, payments were made to U.S. Foods by checks which identified the drawer as “Bilbo’s BBQ.”  The account agreement states that the account is owned by a “Corporation-For Profit,” with another individual identified as the “Owner/Signer” and Debtor as the “Non-Individual Owner.”    The Trustee filed a complaint against U.S. Foods to recover the alleged preferential transfers, contending that because Debtor operated the business as a sole proprietorship rather than a corporate entity, the payments were a transfer of an “interest in the debtor” in property and on account of an antecedent debt owed by the Debtor.  U.S. Foods filed a motion to dismiss for failure to state a claim, contending “that the corporation is distinct and separate from the Debtor and that the complaint is ‘devoid’ of any justification for attributing the corporation’s debts and asset transfers to the Debtor.”  Judge Drake granted the Motion.

Posted 42 weeks 4 days ago

In In re Mooney, Ch. 7 Case No. 13-10835, 503 B.R. 916, 2014 Bankr. LEXIS 29 (Bankr. M.D. Ga. January 3, 2014), the issue before the Court was whether a health savings account (“HSA”) is exempt. Judge Walker held that an HSA is not exempt under Georgia state exemptions, even though Georgia has enacted legislation to encourage the establishment of HSAs (O.C.G.A. §33-51-02).  The Debtor argued that her HSA was exempt pursuant to O.C.G.A. §44-13-100(a)(2)(C) & (E), which provides for the exemption of:
(2) The debtor’s right to receive: … (C) A disability, illness, or unemployment benefit; … (E) A payment under a pension, annuity, or similar plan or contract on account of illness … to the extent reasonably necessary for the support of the debtor and any dependent of the debtor[.]
The Court did not agree with the Debtor’s argument that the legislature must have intended on exempting HSAs and that the accounts fall within the exemption for “illness benefit.”

Posted 42 weeks 5 days ago

In In re Kulakowski, No. 12-15294, 2013 U.S. App. LEXIS 23110 (11th Cir. Nov. 15, 2013) (click here for .pdf of opinion), the issue was the extent to the Court could consider the income and expenses of the non-filing spouse in determining whether a Chapter 7 case could be dismissed for “substantial abuse” under 11 U.S.C. 707(b)(3)(B).  The basic facts are as follows: Debtor and her spouse have been married for over 20 years.  Debtor is unemployed, and they use her spouse’s income for their household expenses.  They have always operated as one “financial unit,” with joint checking, joint tax returns and pooling their income and expenses.  The spouse’s monthly take-home pay is $5,491, or $1,100 more than their household expenses.  Most of the debtor’s debt was credit card debt, much of which was incurred for household expenses or the sole benefit of the spouse.  The U.S. Trustee sought dismissal of the Chapter 7 case based on “substantial abuse.”  The Bankruptcy Court dismissed the case, and the District Court affirmed.  On appeal, the question before the 11th Circuit was the statutory interpretation of Section 707(b)(3)(B).

Posted 51 weeks 3 days ago

In the case of In re Conner, Ch. 7 Case No. 09-42532, 2013 Bankr. LEXIS 4481 (Bankr. S.D. Ga. October 25, 2013), the issue was whether the Debtors could reopen their Chapter 7 case about three years after it was closed in order to enter into a reaffirmation agreement with Wells Fargo Home Mortgage.  Debtors argued that Wells Fargo had offered to enter into a reaffirmation agreement in order to assist Debtors with a modification of their home loan.  The Court declined to reopen the case, as any reaffirmation would be unenforceable pursuant to 11 U.S.C. §524(c)(1).
Reaffirmation agreements are unenforceable unless the “agreement was made before the granting of the discharge . . . .”11 U.S.C. § 524(c)(1).. “[B]ecause reaffirmation agreements are not favored, strict compliance with § 524(c) is mandated.” … For the purposes of § 524(c)(1), “a reaffirmation agreement is ‘made’ no earlier than the time when the requisite writing which embodies it has been fully executed by the debtor…”

Posted 1 year 8 weeks ago

In In re Brown, Ch. 13 Case No. 12-12316, 2013 Bankr. LEXIS 3696 (Bankr. S.D. Ga. Sept. 6, 2013), the Chapter 13 debtor deducted, on Line 57 of the Means Test, monthly student loan payments of $500 as a “deduction for special circumstances.”  In her Chapter 13 plan, she proposed to make direct payments of $500 on her student loans and make a 1% distribution to unsecured creditors.  The Chapter 13 Trustee objected to the plan on the grounds that the debtor was not contributing all of her disposable income to the plan.  The Court sustained the objection.
Section 707(b)(2) states:
(B)(i) In any proceeding brought under this subsection, the presumption of abuse may only be rebutted by demonstrating special circumstances, such as a serious medical condition or a call or order to active duty in the Armed Forces, to the extent such special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.

Posted 1 year 12 weeks ago

In the case of Hope v. Acorn Financial, Inc., Case No. 12-10709, 2013 U.S. App. LEXIS 19661 (11th Cir. September 26, 2013) (click here for .pdf of opinion) the Court addressed whether 11 U.S.C. §1327(a) binds the Chapter 13 Trustee to the terms of the plan, even though the Trustee is not mentioned in the statute.  Section 1327(a) provides the following:
The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.

Posted 1 year 12 weeks ago

Last week I was at a final hearing on fee applications on behalf of a Chapter 7 Trustee, in a case in which the debtor had failed to disclose a pre-petition personal injury case  pending in another state.  The defendants in that case ultimately founds out about the Bankruptcy case about a year after it was closed and the debtor received her discharge.  They contacted the Trustee and the case was reopened more than a year after debtor’s discharge to administer the asset (the proceeds of the personal injury case settled by the Trustee).  The Judge questioned why we had not pursued revocation of the debtor’s discharge based on the obvious failure to disclose the lawsuit, false schedules and other issues in the case.  It was a good question and one that the Chapter 7 Trustee and United States Trustee had considered.  Unfortunately, no matter how egregious or fraudulent the debtor’s conduct, the Bankruptcy Code has strict time limits for seeking revocation of a discharge.  The case below is an example of the strict limitations periods.

Posted 1 year 12 weeks ago

It is not uncommon for Bankruptcy lawyers to get requests from individuals to just help them fill out the Bankruptcy paperwork, or act as the occasional sounding board behind the scenes, without actually representing the debtor in the Bankruptcy Court.  This often happens when the client either does not have the money for fees or simply does not believe they need to pay the full fee for a lawyer.  Most reputable lawyers decline to act in this capacity.  In the Northern District of Georgia, which is one of the busiest districts in the country, scores of petition preparers have also popped up.  This case shows the dangers of acting as behind-the-scenes” lawyers for a debtor, not having procedures and safeguards in place to confirm the scope of employment, and not having clear confirmation from the debtor that he/she approves the filing of a case.

Posted 1 year 15 weeks ago

Bankruptcy lawyers regularly caution debtors to avoid unusual financial transactions, including credit card charges, cash withdrawals, and the like, prior to filing their case.  This is a case in which a pro se debtor withdrew several thousand dollars in the week before filing and got caught.  In addition, Debtor also requested, and initially received, approval for a waiver of her filing fee because she appeared destitute.  In re Ricks, Ch. 7 Case No. 13-60100, 2013 Bankr. LEXIS 3355 (Bankr. S.D. Ga. July 15, 2013) (click here for opinion).  Based upon her testimony at the 341 meeting, and bank statements, it appeared Debtor omitted material information from her schedules, gave her mother a $1,000 gift within 90 days prior to filing, and withdrew $8854 from her accounts in the week before filing.   A hearing on the Trustee’s Motion for Turnover was held, and Judge Dalis found the Debtor’s testimony that she spent the money on living expenses “evasive.”   Not surprisingly, the docket reflects that an objection to the Debtor’s discharge has been filed.  This case is a lesson – Trustees usually find out.

Posted 1 year 17 weeks ago