Are Voluntary Retirement Contributions Deductible When Computing Net Disposable Income in Chapter 13?

Well that’s a good question.  But according to Peter Lively, the deductions are allowable in Judge Zuzolo’s courtroom from now on.  Below is the email I received today from Peter.

Judge Zurzolo announced at the confirmation hearing this morning regarding one of my clients that he will now allow voluntary retirement contributions for his cases.  He is no longer following the BAP’s In re Parks opinion.  In all fairness to Nancy Curry, she withdrew her objection prior to the ruling and the case was confirmed, but Judge Zurzolo recalled the case and said he has spent a lot of time reading the brief and considering the issue and wanted to announce his decision.

State Court Attorneys: Call Me Before Trial, Arbitration, or Default Prove Up

The state court attorney says to his client, “Good news!  The judge is going to enter judgment for breach of contract and fraud – $1 million bucks!!”  If that is what the judgment says, or the statement of decision, or the findings of fact, the arbitration award, the settlement, whatever you want to call it – your great victory is going to have to be re-litigated in bankruptcy court.   Why you say?  Because breach of contract is discharged in bankruptcy and fraud is not.  We can’t tell what part of the damages are for the breach of K and what part is for fraud.  The judgment is good enough, most likely, to establish fraud in bankruptcy court but that doesn’t do anyone much good by itself.

The reality today is actually much worse than the above.  Today’s state court litigator loves to allege 17 causes of action, the more the better.  Then litigate it until the cows come home.  Then, upon your great victory, set out a great proposed statement of decision.  Explain why the bad guy outrageously breached the contract, his fiduciary duties, violated ten different state code sections of some sort, three federal code sections, lots of stuff from your law school remedies class – conversion, accounting, resulting trust, aiding and abetting – throw in some unjust enrichment – he must have done that of course.  End it all with – “Judgment for good guy – $1 million bucks.”  In bankruptcy you have very little that is useful to establish that some part (or maybe all) of that is non-dischargeable.  It is going to have to be largely re-litigated.

I have seen several arbitration awards recently.  The arbitrator goes off for 57 pages on what scum this defendant is, how he should be shot, how he breached his contract, was negligent, reckless and indifferent, committed fraud and some indecency.  Yep, $1 million bucks, thank you.  Maybe even throw in some punitive damages.  I’m sorry to say you will be re-litigating a substantial portion, if not all, of the case in bankruptcy court.

What is non-dischargeable in bankruptcy court is set forth in section 523(a).  Everything else is discharged!!  I really have to say that again.  Unless you can point to the exact words in 523(a) that make this debt non-dischargeable, the debt is discharged.  The words “punitive,” “conversion,” “reckless and indifferent,” “outrageous,” are not in the bankruptcy code.  Most breach of fiduciary duties are discharged.  Negligence, even gross negligence and almost all non-intentional torts are discharged.

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Filings Data for Central District of California

Looks like we are on track for about 50,000 filings this year.  I will add some detail later as to how many of each chapter has been filed, at least recently.

Central District of California
2008 2009 2010 2011 2012 2013 2014 2015
Jan 3,694 6,004 9,013 10,868 8,835 6,552 -26% 4,917 -25% 3,514 -29%
Feb 3,787 6,971 9,659 10,631 9,307 6,614 -29% 4,779 -28% 3,961 -17%
March 4,381 8,529 12,840 13,543 10,108 7,684 -24% 5,611 -27% 4,633 -17%
April 5,023 8,512 12,114 12,087 9,034 7,515 -17% 5,526 -26% 4,618 -16%
May 5,177 8,967 11,906 11,669 9,620 7,170 -25% 5,659 -21% 4,124 -27%
June 5,351 9,595 12,190 11,718 8,165 6,202 -24% 4,535 -27%
July 5,983 9,894 12,737 10,418 8,201 6,404 -22% 4,871 -24%
Aug 6,195 9,748 12,720 11,496 8,779 6,235 -29% 4,703 -25%
Sept 6,290 9,214 12,412 10,006 7,222 5,407 -25% 4,440 -18%
Oct 6,364 10,322 11,753 9,887 8,438 6,169 -27% 4,684 -24%
Nov 6,029 9,462 10,900 9,099 7,192 4,829 -33% 3,770 -22%
Dec 6,615 9,864 10,925 9,089 6,187 4,516 -27% 3,868 -14%
64,889 107,082 139,169 130,511 101,088 75,297 -26% 57,363 -24%
% of total 0.059 0.075 0.089 0.095 0.852

 

Dear Congress: Chapter 13 Could Use a Little Help

The Central District Consumer Bankruptcy Attorneys Assn (cdcbaa) is going to hold its second annual Jim King Program on Saturday September 19, 2015 at 11:00 a.m. The two hour Program will be titled

Dear Congress: Chapter 13 Could Use A Little Help!

The panel is

Judge Keith Lundin, Nashville Tn.
Hank Hildebrand, Chapter 13 Trustee Nashville, Tn.
Judge Meredith Jury, Riverside Division, Central District of California
Prof. Katie Porter, University of California Irvine
I will be the moderator (and mostly stay out of the way).

The program will be held either at Southwestern Law School downtown or at Loyola Law School downtown. We will let you know when the venue is finalized.

Read more…

Former Corinthian Students Should File a Proof of Claim

The “bar date” to file a proof of claim in the Corinthian chapter 11 bankruptcy case is July 20, 2015.  If you think Corinthian owes you money for any reason, you should file a proof of claim in the case.  The proof of claim form is here.  On line one you put in the amount you think it owes you.  You should have some rational basis for the amount but it does not have to be precise at this time unless of course you can make it precise.  It should be the amount you think you would win if you sued the school outside of bankruptcy court.  You should attach documents if you have them.  If you screw something up on the form, the courts are pretty casual about letting you fix it later, i.e., file an amended proof of claim.  The big thing is don’t blow that date.

Very helpful instructions can be found on the Public Counsel website here.

Once it is done, mail it to

Corinthian Colleges, Inc., et al. Claims Processing, c/o Rust Omni, 5955 DeSoto Ave., Suite 100, Woodland Hills, CA 91367.

The big think is don’t be intimidated by the process.  You won’t be shot if you do it wrong.  If you file it late however, you are assured of getting nothing.

Jailed in Puerto Rico: Does Bankruptcy Court have Personal Jurisdiction Over You?

Don’t try to hide in a Puerto Rican jail.

Trustee filed an adversary seeking to recoup assets against a defendant who was incarcerated in Puerto Rico.   Defendant argued that since he was locked up in Puerto Rico, the bankruptcy court lacked personal jurisdiction over him because it is outside the boundaries of its district.

Ninth Circuit BAP Panel disagreed.   “Recognizing the reality that many interested parties may not be local, bankruptcy court’s jurisdiction extends nationwide.  Under FRBP 7004(d), the summons/complaint may be served anywhere in the United States.   Although “United States” is not defined in that section, the bankruptcy court is a unit of the district court under 28 U.S.C. §151, thus, “United States” would compromise every jurisdiction in which a district court is located, which includes Puerto Rico, Guam, and Virgin Islands.”

So, yes, bankruptcy court does have personal jurisdiction over you, even if you are in jail in Puerto Rico (or even more tropical locations like in Guam or the Virgin Islands).

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Is It Community Property Or Separate Property?

The 9th Circuit really confused a lot of people in 2003 when it incorrectly interpreted California community property laws. The confusion spread to California courts of appeal until finally corrected by the California Supreme Court in 2014!

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Dear Congress: Please Scrap that Stupid Means Test

I spent the morning at the Self-Help Desk at the bankruptcy court in Woodland Hills.  I had a group of ten people or so and I was helping them understand the forms that they must complete to file chapter 7.  None of these people owned a home; only one had a car payment; one said she was homeless, a few get social security.  None were anywhere near the median income.  I suspect all will qualify for the filing fee waiver.

The whole presentation came to a screaming halt when we got to the means test forms.  First of all, it is a form I could not fill out myself without a computer program helping me.  But I assumed that because they were all bellow median, we could get through the form quickly.  I suddenly found myself facing spending half the afternoon helping each one individually fill out the form, partially because I had to sit there and read through it myself, then try to figure out what the household size was for each (and hear each of the explanations), what income or receipts to include into current monthly income.  The form wants to know the actual income for the past six months which none of them had at hand.

For what?  A two second glance at the I and J shows they are barely scrapping by and could not possibly fund a chapter 13 plan.  Before the means test, the US Trustee used to check the I and J to decide if there was abuse.  Lets go back to that.  The form today serves no purpose other than to scare away people trying to do the forms themselves.

Meet the New Face of the IRS in the Central District

Last Saturday I attended the CDCBAA CLE on “Handling Tax Debt Dischargeability and Bankruptcy Tax Disputes.”

The speakers were Judge Kwan, Arnold H. Wuhrman, Esq. of Serenity Legal Services, P.C., and assistant U.S. Attorneys Robert F. Conte, Esq. and Najah Shariff. Judge Saltzman and Judge Houle’s former law clerk, Jolene Tanner also made a special guest appearance. Najah and Jolene are the two new faces of the IRS. They will have the primary responsibility for all bankruptcy related litigation in the entire Central District of California.

Judge Kwan

(from far left to right: Jolene Tanner, Robert Conte, Najah Shariff, Judge Kwan, and Arnold H. Wuhrman)

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You’ve Made Your Bed, Now Go Lie in It: Court May Not Consider the Preclusive Effect Of Its Own Decision

If a Court were to also make a finding of fact in its Order sustaining a claim objection “...creditor has also manipulated the books and records,” can the creditor ask the Court to amend its order out of fear that such language in an Order would have a potential preclusive effect in another court?

Absolutely not!

As the Supreme Court has twice ruled within the last six years, “the first court does not get to dictate the preclusive consequences of its own judgment.”  Medellin v. Texas, 128 S. Ct. 1346, 1361 (2008).

As Judge Jaraslovsky told a party seeking to have the court’s order amended for fear of its preclusive effect, “I’ve rendered my decision.  I gave my reasons.  And if another court decides that they want to give preclusive effect, that’s for another court to decide.”