In re Seafort, Case No. 10-6248, Sixth Circuit Court of Appeals, February 15, 2012

On an issue of first impression before the Sixth Circuit, the Court held that post-petition income that becomes available after a debtor completes repayment of a 401(k) loan is projected disposable income that must be turned over to the Trustee for distribution to unsecured creditors pursuant to Section 1325(b)(1)(B) and may not be used to fund voluntary 401(k) plans.

In this case, both debtors (on consolidated appeal) were making payments to a 401(k) loan, which would be paid off during the life of the Chapter 13 plan.  Neither debtor was making contributions to their 401(k) retirement accounts at the time the petitions were filed.  The debtors proposed to use the income (available after full repayment of the 401(k) loan) to start making contributions to their 401(k) retirement accounts.  The Trustee objected on the issue of whether the debtors must include the income resulting from the payoff of the 401(k) loans to their respective plans considering neither debtor was making 401(k) contributions at the time the petitions were filed. Read More ›

Changes to the Proof of Claim Form as of December 1, 2011

Effective December 1, 2011, the Federal Rules of Bankruptcy Procedure (FRBP) that govern filing a proof of claim will change dramatically. 

FRBP 3001 will be amended to increase the types of information required to be attached to a proof of claim.  While Rule 3001 has always required a claimant to produce a writing to support its claim, now a claimant must also attach information relative to the principal, interest, fees, and any other expenses incurred pre-petition - including arrearages.  Read More ›

U.S. Supreme Court: Chapter 13 Debtor Who Does Not Make Loan or Lease Payments Cannot Deduct Vehicle Ownership Expenses

Ransom v FIA Card Services, NA, Supreme Court of the United States, Jan. 11, 2011 (Case No. 09-907).

In the first opinion authored by Justice Elena Kagan, the Supreme Court of the United States held that a Chapter 13 debtor who owns a vehicle outright and thus does not make loan or lease payments cannot include vehicle ownership costs in his or her monthly expenses for purpose of the means test.

Under BAPCPA, debtors in Chapter 13 cases must follow a formula to calculate their disposable income - that is, the amount that the debtor must use to pay creditors under a court-approved Chapter 13 plan. To determine disposable income, the debtor deducts certain "reasonably necessary" expenses from his or her monthly income. Those reasonably necessary expenses, which are outlined in the IRS's "National and Local Standards," include allowances for vehicle ownership and operating costs. Read More ›

New Amendments to Bankruptcy Rules Take Effect

Although less sweeping than the 2009 rule amendments, which changed the time periods for many actions, bankruptcy professionals should take note of the most recent changes to the Bankruptcy Rules. A list of the amendments, which took effect on December 1, 2010, is available here.

Notably, Amended Rule 1007(c) increases the time for an individual debtor in Chapter 7 to file the statement of completion of a course concerning personal financial management from 45 days to 60 days. Read More ›

Espinosa Does Not Excuse Compliance With Bankruptcy Rules When Defect is Detected Pre-Confirmation

In re Peckens-Schmitt, Bankr. W.D. Mich., July 16, 2010 (Case No. 10-04164, Hon. Scott W. Dales).

In a notable decision, the United States Supreme Court recently upheld a bankruptcy court's confirmation of a Chapter 13 plan that discharged part of a student loan debt without an adversary proceeding where the student loan creditor had notice of the plan but did not object. United Student Aid Funds, Inc. v. Espinosa, 130 S. Ct. 1367 (2010). Read More ›