Other Nationally Significant Cases

In In re Ruehle, 412 F.3d 679 (6th Cir. 2005), the Court of Appeals for the Sixth Circuit joined a growing number of courts in rejecting the practice of “discharge by declaration.” The debtor in Ruehle had included provisions in her Chapter 13 plan purporting to discharge her student loan debt without an adversary proceeding and stating that excluding the loan from discharge would impose an undue hardship on her, a process known as “discharge by declaration.” On appeal, the debtor argued that the need for finality trumps the creditor’s due process rights, citing as support two cases from the Ninth and Tenth Circuits.
Continue Reading “In re Ruehle”: Majority Rule Rejecting “Discharge by Declaration” Continues to Evolve

In August 2005, the Advisory Committee on Bankruptcy Rules approved Interim Bankruptcy Rules and Official Forms designed to implement and reflect the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. These Interim Bankruptcy Rules were amended on October 13, 2005. The interim rules are designed to implement the substantive and procedural changes mandated by BAPCPA and are intended to bridge the gap between the effective date of BAPCPA and the promulgation of rules by the Supreme Court. As of December 1, 2005, certain of these rules and forms officially took effect. The full text of the new rules and forms is available at http://www.uscourts.gov/rules/archive.htm#bk2005, under “Bankruptcy.” Some of the additional proposed rules and forms remained subject to public comment until February 15, 2006, and therefore, have not yet become effective. The text of these rules can be accessed at http://www.uscourts.gov/rules/newrules6.html#bk0804. Additional information on all the Interim Rules and Official Forms, as well as related legislative developments, can be found at www.uscourts.gov/rules. All of the revised forms are available at http://www.uscourts.gov/rules/new_and_revised_official_forms.html.
Continue Reading INTERIM RULES ADOPTED BY ADVISORY COMMITTEE ON BANKRUTPCY RULES

The Internal Revenue Service has released a fact sheet regarding responsibilities under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which requires debtors to comply with certain tax-filing responsibilities. In general, the new law requires that debtors comply with their tax-filing responsibilities, make available previously-filed tax returns, in many cases, and seek credit counseling services. The Fact Sheet (FS-2005-18) is available on the IRS’s website.
Continue Reading IRS Fact Sheet Issued Regarding Responsibilities under BAPCPA

In April 2002, Robert Clauss, Esq., agreed to represent Randall Church in connection with a divorce decree. Clauss ultimately withdrew as Church’s attorney, turning over all of his files to Church and releasing his attorney’s lien. In September 2003, Church filed for bankruptcy relief, scheduling an outstanding debt to Clauss of approximately $32,000. Clauss asserted that this debt was nondischargeable under Bankruptcy Code section 523(a)(2)(A), contending that Church had obtained the benefit of his legal services by falsely representing that�regardless of whether he filed a bankruptcy case�he would not discharge the debt to Clauss but would pay it in full.
Continue Reading “In re Church”: Unfulfilled Promises to Pay and Misrepresentations Distinguished

Late-filed claims are not automatically disallowed under the Bankruptcy Code, and under Section 502(b)(9), such late-filed, general unsecured claims are not invalidated to the extent excess funds remain after payment of timely filed claims. As stated by the Bankruptcy Appellate Court for the Eighth Circuit Court of Appeals: “The net effect of the foregoing is to subordinate the payment of late unsecured nonpriority claims to the payment of nonpriority unsecured claims for which proofs were timely filed.” “In re Hollingsworth,” 331 B.R. 399 (8th Cir. BAP 2005).
Continue Reading “In re Hollingsworth”: Even Late-Filed Claims May Be Entitled to Distributions

According to a press release by the Administrative Office of the U.S. Courts, the total number of bankruptcy filings for the three-month period from June 30, 2005 to September 30, 2005 represented the greatest number of filings recorded for any quarter in the history of the bankruptcy law. During the 12-month period ending Sept. 30, 2005, 1,782,643 bankruptcies were filed, up from the 1,618,987 bankruptcy cases filed in fiscal year 2004.
Continue Reading AOUSC Reports Record Number of Bankruptcy Filings

In the Owens Corning case, the Third Circuit Court of Appeals reversed an Order of the Delaware District Court substantively consolidating Owens Corning, certain of its subsidiaries that had received a $2 billion unsecured loan, and other subsidiaries that had guaranteed repayment of the loan. In Re Owens Corning, No, 04-4080, 2005 WL 1939796 (3d. Cir. Aug. 15, 2005).
Continue Reading Third Circuit Adopts Stringent Test for Substantive Consolidation

On August 12, 2005, the United Bankruptcy Court for the District of Delaware held in Cooper v. Tech Data, (In re Bridgeport Holdings, Inc.) that clear and unambiguous provisions in a disclosure statement and reorganization plan, which specify the category of causes of actions to be preserved and the effect of any recovery, are sufficient to preserve those causes of action for post-confirmation adjudication. Bankruptcy Code Section 1123(b)(3) does not require “specific and unequivocal” identification of all preference claimants.
Continue Reading Delaware Bankruptcy Court Rules Category-Specific Retention Clause in Disclosure Statement and Plan is Sufficient to Preserve Preference Causes of Action for Post-Confirmation Adjudication

The “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005” (as the “Act”) becomes effective Monday, October 17, 2005, and represents the biggest overhaul of bankruptcy law in more than 25 years. The major thrust of the Act is to limit an individual debtor’s access to relief under chapter 7 of the bankruptcy code. Chapter 7 gives a debtor the right legally to discharge most debts after the debtor’s non-exempt property is turned over to an appointed trustee for liquidation.
Continue Reading New Bankruptcy Laws Effective October 17, 2005