5 Things Dept. of Education Can Do If You Don’t Pay Student Loan

There are $1.2 trillion (that’s with a ‘t’) of student loans out there and growing at $3,000 per second!  Read this in a reputable book, don’t ask me for pin cite.

A student borrower is in default if you fail to make a payment for 9 months.

So, what can are 5 main things the Dept. of Education can do?

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Renewal of Judgment versus Revival of Judgment

In California, ten years is pretty common for the validity and duration of a judgment lien.  You can thereafter renew.   Some states have renewal of judgment and revival of judgments.  What’s the difference?

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Recording Federal Court Judgment against Property of Defendant in State

Plaintiff obtains a Nevada state court judgment against defendant who owns land in California (different state).   What authorizes plaintiff to be able to record that Nevada judgment against D’s property in California?  Yes — the Full Faith & Credit Clause in Article VI of the Constitution which says states must give full faith and credit to judgments from other states.

Curve ball — what authorizes a Nevada plaintiff to obtain and record a Nevada Federal Court judgment against D’s property in same state Nevada?

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Central District Bankruptcy filings in October, 2018

Total bankruptcy filings for October 2018 creeped past filings a year ago.

2018 2017 2016 2015 2014
Jan 2,741 2,839 2,872 3,364 4,704
Feb 2,708 2,795 3,299 3,829 4,574
March 3,363 3,782 3,923 4,496 5,430
April 3,277 3,209 3,584 4,486 5,364
May 3,226 3,384 3,484 3,971 5,500
June 2,981 3,252 3,545 3,966 4,386
July 3,057 2,953 3,239 3,731 4,701
Aug 3,337 3,387 3,543 3,544 4,540
Sept 2,772 3,071 3,168 3,493 4,317
Oct 3,258 3,170 3,235 3,751 4,554
Nov 3,004 3,025 3,531 3,642
Dec 2,416 2,902 2,718 3,733
Total 30,720 37,262 39,819 44,880 55,445

Filings by chapter year to date.

Non-Commercial Commercial Chapter 7 Chapter 13 Chapter 11
28,210 2,517 23,612 6,745 367
92% 8% 77% 22% 1%

Fun Facts:  Total filings so far in 2018, South Dakota, 941; North Dakota 660; Wyoming, 849; Montana, 1046.

Can the Court Avoid a Judgment Lien under 522(f) When the Debtor Owns no Real Property?

I have seen this issue come up on numerous listserves.  Judge Mund explains why the answer is no.

In re Kenney,  1:10-bk-11635-GM (Bkrtcy, C. D. Cal. Nov, 2018)

Issue:   Is a 522(f) appropriate to avoid a prepetition judgment lien when the debtor owned no real property on the petition date?

Holding:   No.  There is no lien to avoid.

Judge Mund

The debtors filed chapter 7 and got their discharge in 2010.  At the time a creditor had a judgment against them and had recorded an abstract of judgment.  They had no real property at the time.  In 2018, they are trying to buy a house.  They reopened their case and filed a Motion to Avoid Judgment Lien under 522(f).

Judge Mund denied the motion on the basis that there is/was no lien to avoid.

Because there is no valid lien to be avoided, Debtor is not entitled to the protections of 522(f).  The Court recognizes that Debtor is trying to ensure that no encumbrance results from a pre-petition recorded abstract of judgment; such a result would have the absurd consequence of creating an unenforceable lien on property acquired post-petition, but only in the specific counties which the creditor recorded the abstract of judgment.

Bankruptcy Litigation Clinic – Woodland Hills

 Announcement

A bankruptcy litigation clinic will be held at the San Fernando Valley division on Friday, December 14, 2018 and on Friday, January 11, 2019.  The two hour programs will begin at 10:00 a.m.

Designed for people who have already filed a bankruptcy petition to address the following issues:

  • After filing for bankruptcy, have you been served with a lawsuit?
  • Are you trying to collect, but the debtor filed bankruptcy?
  • Were you served with a Motion, such as Relief From Stay?
  • Are your creditors ignoring your discharge?
  • Do you have overwhelming medical debt?
Reservations are not required, however, the program may be limited to the first 6-8 people attending.
Sponsored by:
Neighborhood Legal Services of Los Angeles County and the University of West Los Angeles – School of Law, 9201 Oakdale Avenue, Chatsworth, CA 91311

Suing Debtor for Specific Performance – Discharge Violation? Maybe not…

A discharge under 727 discharges a debtor from all prepetition debts (liability on a claim) and any liability on a claim (right to payment).   But what if the debtor is sued for something other than a “right to payment”.   Is that a discharge violation?  Hmmm….let’s take a look at an example.

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Subtle Difference Between “Deemed Exempt” versus “Claimed Exempt” — Just Because Schedule C Lists the $100 in Bank Account Does Not Mean Debtor Can Immediately Use It

I tried to make the title as concise as possible — Ockham’s Razor failed.

Client comes to see you and they have $5,000 in their checking account.  You list it on Schedule B then exempt it on Schedule C and file the case.  The 341(a) is in 30 days.  Client goes to the bank the next day and withdraws all of the funds to pay rent and spend it on gambling.  You don’t think it is a problem because the funds have been fully exempt.

But is it?

In Section 70a of the former Bankruptcy Act, there was an automatic exclusion of exempt property such that by simply listing the asset on Schedule C — then that asset was automatically and immediately exempt.  That is not how it works under the current Code — it is not automatic.  I was reading the Mwangi case from the Ninth Circuit that clarifies a subtle distinction between an asset that has been “claimed exempt” versus one that is actually “deemed exempt.“   In the hypo above, it is a “no harm, no foul” situation but it’s still worth thinking about.

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Receivership and Bankruptcy

Imagine this, prepetition, Debtor owns and operates 50-unit Apartment upon which Wells Fargo holds a note and deed of trust.  Debtor defaults on the note and WF commences foreclosure.  The state court appoints you Receiver to take possession of and operate the Apartments.  The Apartment is mismanaged and you begin improving the Apartments and collect $100,000 in new rent and the bank, WF, gives you additional funds also in your capacity as Receiver.   As you are running the Apartments and holding onto a substantial amount of funds — debtor files Chapter 11 bankruptcy and orders you, as the Receiver, to turnover the funds to him since it is property of the estate now.

Will the court grant Debtor’s Motion for Turnover such that the funds you hold as Receiver have to be turned over to the scumbag Debtor who will likely dissipate the funds?  

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Annual Holiday Party Hosted by the Los Angeles Bankruptcy Forum — December 3, 2018

Annual Holiday Party Hosted by the Los Angeles Bankruptcy Forum — December 3, 2018 6:00 to 9:00 p.m. – Angel City Brewery | 216 Alameda Street, Los Angeles, CA 90012

Cost: Members of Sponsoring Group: $100 (cdcbaa!) | Non-Members: $135 | Government Employees/Students: $45 | At door: Add’l $10

Register here. 

Don’t miss LABF’s holiday party at the Angel City Brewery in the Los Angeles Arts District. Support a worthy cause and join us for outstanding craft beers and food trucks for a great evening with colleagues and bankruptcy judges.  A portion of the net proceeds generated by the Holiday Party will be used to support the “Self-Help Desks” which are operating at the various divisions of the Bankruptcy Court. The Co-Sponsors are proud to support the very valuable and important contributions the Self-Help Desks make to the operation of our Bankruptcy Court.

The following organizations are proud to
co-sponsor this year’s Holiday Party:
Los Angeles Bankruptcy Forum
Beverly Hills Bar Association – Bankruptcy Section
Central District Consumer Bankruptcy Attorney Association
Financial Lawyers Conference
International Women’s Insolvency & Restructuring Confederation
Turnaround Management Association SoCal

Flyer attached.