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Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
The U.S. Supreme Court previously issued its decision on an important issue of chapter 13 bankruptcy law in the case of Hamilton, Chapter 13 Trustee v. Lanning. Justice Samuel Alito authored the Court's decision in which only Justice Scalia dissented. The issue involved was how "a bankruptcy court should calculate a debtor's 'projected disposable income'" which is one of the factors upon which the amount of a chapter 13 debtor's monthly plan payment is based. The Court rejected the "mechanical approach" and adopted the "forward-looking approach" pursuant to which the Court may, in the "the most unusual cases," go beyond the statutory formula for determining "disposable income" and "take into account other known or virtually known certain information about the debtor's future income or expenses."
The Court first reviewed the pre-BAPCPA (which was enacted in 2005) situation in which the Bankruptcy Code only "loosely defined 'disposable income'" and did "not define term 'projected disposable income.'" The Court stated that "in most cases, bankruptcy courts used a 'mechanical approach' in calculating projected disposable income" pursuant to which monthly income was multiplied by the number of the months of the plan and then the portion of the result that was "excess" or "disposable" was determined for dedication to the chapter 13 plan. "In exceptional cases, the bankruptcy courts took into account foreseeable changes in a debtor's income or expenses."
The Court noted that the BAPCPA "left the term 'projected disposable income' undefined but specified in some detail" the manner in which it is to be calculated. In general "disposable income" is based upon "current monthly income" less certain "amounts reasonably necessary to be expended" for maintenance and support and other items. The term current monthly income is statutorily defined and generally based on the 6-month period prior to the date preceding the filing of the bankrkuptcy case. "Amounts reasonably necessary to be expended" is calculated in a different manner for those below and those above the State median income amount.
The Court adopted the "forward-looking approach" which would allow for the consideration of the debtor's actual projected income in addition to the historically based "current monthly income." The court held that this approach is supported by the "ordinary meaning of the term 'projected.'" The Court noted that the term "projected" is not defined in the statute and that in "ordinary usage future occurrences are not 'projected' based on the assumption that the past will necessarily repeat itself.
The Court also noted the usage of the word "projected" in other federal statutes and stated that "Congress rarely used it [the phrase "projected"] to mean simple multiplication." In contrast, the Court referred to certain provisions in the Bankruptcy Code and noted that when Congress wished to mandate "simple multiplication, it does so unambiguously-most commonly by using the term 'multiplied'".
The Court remarked that pre-BAPCPA case law favors the "forward-looking" approach in that the general rule was that "courts would multiply a debtor's current monthly income by the number of months" of the plan as the first step in determining projected disposable income. But the Court also observed that the courts also "had discretion to account for known or virtually certain changes in the debtor's income." The Court noted that pre-BAPCPA practice is telling based on the principal that it "will not read the Bankruptcy Code to erode past bankruptcy practice absent a clear indication that Congress intended such a departure."
The Court also observed that the mechanical approach "clashed" with the terms of 11 U.S.C. section 1325 in that it would read out of the statute the phrase "to be received in the applicable commitment period" and the direction to determine projected disposable income "as of the effective date of the plan" (as opposed to the filing date).
But the Court noted that the statutory formula for determining "disposable income" still plays an important function under the forward-looking approach in that in "most cases, nothing further is required" and that only "in the most unusual cases" may a court "go further and take into account other known or virtually certain information about the debtor's future income or expenses." In short, the Court adopted the Tenth Circuit's analysis that "a person making a projection uses past occurrences as a starting point."
The Court further noted that the mechanical approach would "produce senseless results that we do not think Congress intended" where the debtor's income has changed since the historical six month period.
Justice Scalia dissented and held that the Court's conclusion is "contrary the Code's text" and "refus[es] to hold that Congress meant what it said."Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
Bringing you the most up-to-date news, tips and blogs throughout the web. Here’s your Bankruptcy Update for October 03, 2013 Failed Kickstarter Forces NYC Opera to File for Bankruptcy Caught in the Nation’s Largest Food Fraud, Groeb Farms Files for Bankruptcy Financial plan for historic church is flawed, bankruptcy court says
There are times filing bankruptcy is necessary in order to maintain a level head and to keep from drowning in debt. If you find yourself relating to any of the following reasons, you may want to discuss your situation further with an experienced bankruptcy attorney. Obtain a fresh start. You don’t have to keep struggling [...]
Here is an interesting article from NBC News about how the recent Government Shutdown could affect small business owners and lead to possible bankruptcy filings:
Will Government Shutdown Lead to Bankruptcies?
Adam Brown is a bankruptcy attorney for Dexter & Dexter, a debt relief agency helping people file for bankruptcy.
As many readers of our e-mails and blog are aware, if an individual resides in an apartment with a rent controlled or rent stabilized lease and files for personal bankruptcy under Chapter 7 of the Bankruptcy Code, the trustee assigned to the case can assume, assign and transfer the bankruptcy estate's rights and interests in the lease to the landlord, pursuant to § 365 of the Bankruptcy Code. In other words, if an individual resides in an apartment with a rent controlled or rent stabilized lease and the fair market rent of the apartment is significantly greater than the rent paid by the rent controlled or rent stabilized tenant/debtor, a Chapter 7 bankruptcy trustee can sell the bankruptcy estate's rights and interests in the lease to the landlord and remove the debtor/tenant from the apartment.
A more complicated scenario occurs where a married couple are both signatories on a rent controlled or rent stabilized lease, but only one spouse files for Chapter 7 bankruptcy. Can the Chapter 7 bankruptcy trustee sell the bankruptcy estate's rights and interests in the rent controlled or rent stabilized to the landlord free and clear of the non-filing spouse to the landlord and remove the non-filing spouse from the apartment?
While there are no reported decisions on point in the Southern or Eastern Districts of New York, § 363(h) of the Bankruptcy Codeallows a bankruptcy trustee to sell a bankruptcy estate's interest in property and the interest of a non-debtor co-owner in the property as a joint tenant, a tenant in common or a tenant by the entirety, but only if:
1. Partition in kind of the property among the bankruptcy estate and the co-owners is impracticable;
2. The sale of the bankruptcy estate's undivided interest in the property would realize significantly less for the bankruptcy estate than the sale of the property free of the interests of the co-owners;
3. The benefit to the bankruptcy estate of a sale of the property free of the interests of co-owners outweighs the detriment, if any, to the co-owners; and
4. The property is not used in the production, transmission, or distribution, for sale, of electric energy or of natural or synthetic gas for heat, light, or power.
If a Chapter 7 Trustee decided to analyze the assumption, assignment and sale of a rent controlled or rent stabilized lease to which a non-debtor spouse is a party using the §363(h) factors, the lease could be at risk. A better strategy for a couple in this situation, if they want to keep the apartment, is to do an out of court workout with creditorsor file for bankruptcy under Chapter 13 of the Bankruptcy Code.
Individuals or couples who are in debt and have a rent controlled or rent stabilized lease need to consult with an experienced personal bankruptcy attorney, such as Jim Shenwick.
Fitch Ratings, a major agency that gauges the health of financial instruments, sees a river of red in the private student loan market.
With anywhere from 22% of 55% of trusts issued by National Collegiate Student Loan Trust, Fitch Ratings on October 1, 2013 downgraded 42 classes of the portfolio.
That may not mean much to you, but consider the broader context.
More Private Student Loans In Default
According to Fitch, defaults on private loans held by National Collegiate Student Loan Trust range approximately from 22% to 55% depending on the trust.
Fitch’s outlook for the future performance is also considered negative because the trusts continue to experience high default levels in excess of Fitch’s initial expectations.
Overall, there’s about $8.1 billion in private student loans in default.
See also:
- Fitch Takes Rating Actions on National Collegiate Student Loans
- Here’s How Private Student Loan Debt Became A $150 Billion Burden
More Federal Student Loans In Default
The federal student loan default rate is at the highest rate in nearly 20 years, with 1 in 10 recent borrowers defaulting on federal student loans within the first two years. This, according to annual figures released on September 30, 2013 by the U.S. Department of Education.
The statistics don’t get much better with older loans, either. For loans that are 3 years into repayment, one in seven borrowers with federal student loans are in default.
All This As Student Loan Debt Grows To Epic Proportions
There’s $1.2 triilion in outstanding federal student loan debt.
That doesn’t count the private student loans.
12 million students – or 60% – borrow annually to help cover costs.
There are approximately 37 million student loan borrowers with outstanding student loans today.
If that doesn’t make your head spin, not much will.
See also:
- Student Debt Swells, Federal Loans Now Top a Trillion
- Chronicle of Higher Education
- Federal Reserve Board of New York
National Collegiate Student Loan Trust Leading The Next Perfect Storm?
The last time a field of securitized trusts went down we were talking about the foreclosure market. And though that debacle left us with a hangover that persists 5 years later, there was one major difference – the mortgage lenders had houses they could take back to minimize their losses.
What can a private student loan lender do if you fail to pay? They can sue you and, in some places, levy your bank account or slap a garnishment on your wages. Doing so will provide a payment stream, but only a small one at best over a course of years.
If you decide to fight the lawsuit, you have a chance of either winning or getting a settlement out of the lender because in some ways they’re at your mercy.
Though I’m no fortuneteller, I’m willing to bet Fitch’s actions in downgrading the creditworthiness of National Collegiate Student Loan Trust is just the beginning.
Stay tuned.
image: www.solvencyiiwire.com
Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
The Court in the case of James P. Driscoll, Inc., et al. v. Theodore B. Gould, 32 FLW D2467 (3rd DCA 2007) dealt with a judgment that was not listed in chapter 11 schedules. The Defendant claimed that the post-confirmation debtor did not have standing as the judgment was not listed in the bankruptcy schedules. Parker v. Wendy's Int'l, Inc. 365 F.3d 1268, (11th Cir. 2004). There is an independent avenue under which property may revest in the debtor at conclusion of a Chapter 11 proceeding, which is the express terms and conditions of the confirmed plan of reorganization. See In re Coastline Care, Inc., 299 B.R. 373, (Bankr. EDNC 2003). Here the plan released and revested the right to pursue the judgment to the debtor upon consummation and closure of the bankruptcy case. See In re Coastline Care, Inc. 299 B.R. at 377-78. Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
The Court in the case of James P. Driscoll, Inc., et al. v. Theodore B. Gould, 32 FLW D2467 (3rd DCA 2007) dealt with a judgment that was not listed in chapter 11 schedules. The Defendant claimed that the post-confirmation debtor did not have standing as the judgment was not listed in the bankruptcy schedules. Parker v. Wendy's Int'l, Inc. 365 F.3d 1268, (11th Cir. 2004). There is an independent avenue under which property may revest in the debtor at conclusion of a Chapter 11 proceeding, which is the express terms and conditions of the confirmed plan of reorganization. See In re Coastline Care, Inc., 299 B.R. 373, (Bankr. EDNC 2003). Here the plan released and revested the right to pursue the judgment to the debtor upon consummation and closure of the bankruptcy case. See In re Coastline Care, Inc. 299 B.R. at 377-78. Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
In the case of In re Parada, 2008 WL 126626 (Bkrtcy.S.D.Fla. January 10, 2008)(Isicoff, J.) the court was presented with the U.S. Trustee's motion to dismiss the chapter 7 debtors' case as an abuse pursuant to section 707(b)(1) by the application of the section 707(b)(2) means test presumption and pursuant to the 707(b)(3)(B) totality of the circumstances of the financial situation test. The court found that while the debtors passed the means test, they did not pass the totality of the circumstances of the debtors' financial situation test. The major factor in this determination was the court's ruling that the deduction of the secured debt on the debtors' residence and vehicle that they intended to and did indeed surrender were deductible for purposes of the 707(b)(2) means test, but were not deductible for the 707(b)(3)(B) totality of the circumstances of the debtors' financial situation test.
The debtors' Form B22A did not indicate that the presumption of abuse under section 707(b)(2) arose. However, the U.S. Trustee filed a motion to dismiss arguing that the section 707(b)(2) presumption of abuse did indeed arise based on their assertion that the debtors' deduction of their payments on the former residence and vehicle which they intended to surrender was improper. The court noted that the debtors' statement of intentions indicated an intention to surrender their former residence which was encumbered by a mortgage of almost $500,000.00 and to surrender their BMW for which they owed almost $20,000.00. The court noted that the debtors were no longer living at their former residence and had surrendered the vehicle post-petition. Furthermore, the debtors reported monthly gross income of almost $9,000.00 and deductions for voluntary 401(k) contributions of about $400.00.
The court noted that there are two opposite interpretation of section 707(b)(2)(A)(iii) as to the allowability of secured debt payments on account of assets surrendered post-petition. One line of cases adopts a "snapshot" (or "mechanical") approach as of the petition date and allows the payments to be deducted whether or not the debtor intends to make the payments. See In re Benedetti, 372 B.R. 90 (Bankr. S.D.Fla. 2007). The other line of cases holds that only those payments the debtor reasonably expects to be made during the next sixty months may be deducted. The court adopted the "snapshot" approach and allowed the deduction for purposes of the means test calculation of amounts that would be due but which the debtor may not pay to secured creditors on account of property they intend to and in fact do surrender post-petition. The court therefore found that the section 707(b)(2) presumption of abuse did not arise.
The U.S. Trustee also sought a finding of abuse based on the totality of the circumstances of the debtors' financial situation. 11 U.S.C. section 707(b)(3)(B). The debtors argued that the totality of the circumstances, including their financial situation, did not merit dismissal. The court noted that section 707(b)(3) provides for two separate grounds for the dismissal of a debtor's case - (A) bad faith and (B) the totality of the circumstances of the debtor's financial situation. The court held that "the lack of indicia of bad faith and other factors unrelated to a debtor's financial situation are not relevant to consideration under the totality of the circumstances test of 11 U.S.C. section 707(b)(3)(B), rather, they are relevant to determining abuse under the bad faith standard of 11 U.S.C. section 707(b)(3)(A)."
The court agreed with the decision in In re Henebury, 361 B.R. 595 (Bankr.S.D.Fla.2007)(Hyman, C.J.), and held that the court should consider post-petition events in making its determination under section 707(b)(3)(B). The court further held that the cut-off date for the relevancy of post-petition circumstances is the date of the hearing on the motion to dismiss.
In determining whether the debtors' financial situation demonstrated abuse, the court applied a test of whether they had sufficient projected disposable income to fund a hypothetical chapter 13 case. In re Henebury, 361 B.R. at 611. The court noted that there were two methods used by the courts to determine a debtor's projected disposable income under the totality of the circumstances analysis - one based on the debtor's CMI and the other based on the debtor's net income based on actual anticipated income and expenses over the chapter 13 plan period which in this case would be sixty months as the debtors' CMI was above-median income. The court agreed with the U.S. Trustee and held that in calculating the debtors' ability to pay their unsecured debt under section 707(b)(3), that they may not take into account the payments with respect to the surrendered house and car. The court held that "[a]lthough these payments were properly deducted for purposes of the means test, when determining the Debtors' projected disposable income, it is appropriate to exclude these deductions as the payments clearly will not be made going forward, and therefore will not negatively impact the Debtors' disposable income." The court also agreed with the U.S. Trustee that, absent special circumstances, voluntary contributions to a 401(k) should not be considered reasonably necessary expenses under the totality of the circumstances analysis. The court did not find special circumstances in this case.
The court found that, with the exclusion of the nonallowed deductions, both methods of determining the debtors' projected disposable income (the CMI method or the net income method) indicated that the debtors' had the sufficient income to repay 100% of their unsecured debt in less than five year. The court refused to take into consideration in determining the totality of the circumstances financial situation factors that were not verifiable and too remote at the time of the hearing on the motion, such as the debtors' submission that their reconciliation had failed and that they intended to move into separate apartments.
The court found that based on the totality of the circumstances of the debtors' financial situation, that the debtors were abusing the bankruptcy code. 11 U.S.C. section 707(b)(3)(B). But the court did not find that the case was filed in bad faith under section 707(b)(3)(A) and therefore allowed the debtors ten days to convert their case to a case under chapter 13 or 11 before the court would dismiss their case. See, Marrama v. Citizens Bank of Mass., 127 S.Ct. 1105 (2007).Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
Miami Personal Bankruptcy Lawyer Jordan E. Bublick has over 25 years of experience in filing Chapter 13 and Chapter 7 bankruptcy cases. His office is centrally located in Miami at 1221 Brickell Avenue, 9th Fl., Miami and may be reached at (305) 891-4055. www.bublicklaw.com
In the case of In re Parada, 2008 WL 126626 (Bkrtcy.S.D.Fla. January 10, 2008)(Isicoff, J.) the court was presented with the U.S. Trustee's motion to dismiss the chapter 7 debtors' case as an abuse pursuant to section 707(b)(1) by the application of the section 707(b)(2) means test presumption and pursuant to the 707(b)(3)(B) totality of the circumstances of the financial situation test. The court found that while the debtors passed the means test, they did not pass the totality of the circumstances of the debtors' financial situation test. The major factor in this determination was the court's ruling that the deduction of the secured debt on the debtors' residence and vehicle that they intended to and did indeed surrender were deductible for purposes of the 707(b)(2) means test, but were not deductible for the 707(b)(3)(B) totality of the circumstances of the debtors' financial situation test.
The debtors' Form B22A did not indicate that the presumption of abuse under section 707(b)(2) arose. However, the U.S. Trustee filed a motion to dismiss arguing that the section 707(b)(2) presumption of abuse did indeed arise based on their assertion that the debtors' deduction of their payments on the former residence and vehicle which they intended to surrender was improper. The court noted that the debtors' statement of intentions indicated an intention to surrender their former residence which was encumbered by a mortgage of almost $500,000.00 and to surrender their BMW for which they owed almost $20,000.00. The court noted that the debtors were no longer living at their former residence and had surrendered the vehicle post-petition. Furthermore, the debtors reported monthly gross income of almost $9,000.00 and deductions for voluntary 401(k) contributions of about $400.00.
The court noted that there are two opposite interpretation of section 707(b)(2)(A)(iii) as to the allowability of secured debt payments on account of assets surrendered post-petition. One line of cases adopts a "snapshot" (or "mechanical") approach as of the petition date and allows the payments to be deducted whether or not the debtor intends to make the payments. See In re Benedetti, 372 B.R. 90 (Bankr. S.D.Fla. 2007). The other line of cases holds that only those payments the debtor reasonably expects to be made during the next sixty months may be deducted. The court adopted the "snapshot" approach and allowed the deduction for purposes of the means test calculation of amounts that would be due but which the debtor may not pay to secured creditors on account of property they intend to and in fact do surrender post-petition. The court therefore found that the section 707(b)(2) presumption of abuse did not arise.
The U.S. Trustee also sought a finding of abuse based on the totality of the circumstances of the debtors' financial situation. 11 U.S.C. section 707(b)(3)(B). The debtors argued that the totality of the circumstances, including their financial situation, did not merit dismissal. The court noted that section 707(b)(3) provides for two separate grounds for the dismissal of a debtor's case - (A) bad faith and (B) the totality of the circumstances of the debtor's financial situation. The court held that "the lack of indicia of bad faith and other factors unrelated to a debtor's financial situation are not relevant to consideration under the totality of the circumstances test of 11 U.S.C. section 707(b)(3)(B), rather, they are relevant to determining abuse under the bad faith standard of 11 U.S.C. section 707(b)(3)(A)."
The court agreed with the decision in In re Henebury, 361 B.R. 595 (Bankr.S.D.Fla.2007)(Hyman, C.J.), and held that the court should consider post-petition events in making its determination under section 707(b)(3)(B). The court further held that the cut-off date for the relevancy of post-petition circumstances is the date of the hearing on the motion to dismiss.
In determining whether the debtors' financial situation demonstrated abuse, the court applied a test of whether they had sufficient projected disposable income to fund a hypothetical chapter 13 case. In re Henebury, 361 B.R. at 611. The court noted that there were two methods used by the courts to determine a debtor's projected disposable income under the totality of the circumstances analysis - one based on the debtor's CMI and the other based on the debtor's net income based on actual anticipated income and expenses over the chapter 13 plan period which in this case would be sixty months as the debtors' CMI was above-median income. The court agreed with the U.S. Trustee and held that in calculating the debtors' ability to pay their unsecured debt under section 707(b)(3), that they may not take into account the payments with respect to the surrendered house and car. The court held that "[a]lthough these payments were properly deducted for purposes of the means test, when determining the Debtors' projected disposable income, it is appropriate to exclude these deductions as the payments clearly will not be made going forward, and therefore will not negatively impact the Debtors' disposable income." The court also agreed with the U.S. Trustee that, absent special circumstances, voluntary contributions to a 401(k) should not be considered reasonably necessary expenses under the totality of the circumstances analysis. The court did not find special circumstances in this case.
The court found that, with the exclusion of the nonallowed deductions, both methods of determining the debtors' projected disposable income (the CMI method or the net income method) indicated that the debtors' had the sufficient income to repay 100% of their unsecured debt in less than five year. The court refused to take into consideration in determining the totality of the circumstances financial situation factors that were not verifiable and too remote at the time of the hearing on the motion, such as the debtors' submission that their reconciliation had failed and that they intended to move into separate apartments.
The court found that based on the totality of the circumstances of the debtors' financial situation, that the debtors were abusing the bankruptcy code. 11 U.S.C. section 707(b)(3)(B). But the court did not find that the case was filed in bad faith under section 707(b)(3)(A) and therefore allowed the debtors ten days to convert their case to a case under chapter 13 or 11 before the court would dismiss their case. See, Marrama v. Citizens Bank of Mass., 127 S.Ct. 1105 (2007).Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.
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