Negative Equity

NEGATIVE EQUITY ISSUE NOT RULED UPON IN 1327 CASE
In re Kuhasz, Case No. 07-20282
November 2008, Judge Somers

Court noted split within the district. Judge Karlin excluded negative equity from PMSI claim in In re Padgett, 389 BR 203, while Judge Nugent included it. In re Ford 387 BR 14827 but declined to rule on the issue because the plan had been confirmed and the elements of 1329 had not been met.

NEGATIVE EQUITY ROLLED INTO LOAN IS NOT PMSI
In re Padgett, Case No. 07-41284
May, 2008 Judge Karlin

Car creditor objected to debtor’s attempt to avoid paying the negative equity in a 910 case. After analyzing the UCC as it exists in Kansas, the Court confirmed its opinion in Vega, but disagreed with Judge Nugent’s decision in Ford.

NEGATIVE EQUITY IS PMSI FOR PURPOSES OF 910 CAR LOANS
In re Ford, Case No. 07-11561
May 2008, Judge Nugent

Court held that negative equity in a trade in vehicle, financed by lender, is a part of the price of the collateral and constitutes value given to enable debtors to acquire collateral. The entire balance was found to be a “910” obligation under the hanging paragraph of 1325.

NEGATIVE EQUITY IS NOT PMSI
In re Kellerman, Case No. 06-22028
August 2007, Judge Berger

Pre petition payments are to allocated between refinanced negative equity and the PMSI portion of a 910 vehicle claim under 1325(a)’s hanging paragraph by reference to KSA 84-9-103(c). Under Kansas law, PMSI is the purchase price, not negative equity. Start with the vehicle’s cash purchase price and the apply pre petition payments in accordance with the parties written agreement. If no agreement or other manifested intent, the prepetition payments are applied first to unsecured negative equity and then to PMSI.

How Much Is My Attorney Paid to Defend Dismissal?

WICHITA NO LOOK FEE FOR DEFENDING MOTIONS TO DISMISS MAY BE $350.00
In re Kiser, Case No. 06-11453
January 2009, Judge Nugent

Debtor filed a motion to modify plan to increase monthly payment and to pay attorney fees of $500.00. Court allowed $400.00. Judge Nugent quoted Judge Karlin in Beck in supporting its conclusion that a presumptive fee of this nature may be appropriate.

How Much Are Chapter 13 Bankruptcy Fees in Wichita?

13 ATTORNEY FEES IN WICHITA
In re Mayer, Case No. 06-10013
October 2006, Judge Nugent

This is Judge Nugent’s fee decision. The “presumptive” fee in Wichita is $2500, without prejudice to fee applications, based upon the language of 330, testimony and the various factors recited.

Digest by:  Jan Hamilton, Trustee

Reconversion Fails, No Discharge Bankruptcy Dismissed

CONVERSION CONFUSION
In re Fry, Case No. 04-16887
October 2008 Judge Nugent

Debtor converted from 13 to 7 and then learned she was not eligible for a 7 and attempted to converted back to 13. Case dismissed as an “end run” around 7 discharge.

Digest by:  Jan Hamilton, Trustee

Foreclosure No Excuse for No Credit Counseling Before Bankruptcy

FAILURE TO OBTAIN CREDIT COUNSELING—EXIGENT
CIRCUMSTANCES
In re Thomas, Case No. 06-10242
March 2006, Judge Nugent
Pro se case dismissed for failure to obtain credit counseling. Certificate of exigent circumstances which recites pending foreclosure insufficient, case dismissed. 109(h)(1).

Deviation from Bankruptcy Means Test for Expenses, Too

LANNING EXTENDED TO EXPENSE SIDE
In re Melvin, Case No. 07-22352
December 2008 Judge Somers

Court extended the Lanning analysis and found there was no binding precedent on the issue of whether actual of 22C expenses were mandated and found that 22C expenses may be deviated from also. This is consistent with dicta in Lanning, and Judge Nugent in In Re Hoss, 08-10365, and In re Arroyo, No. 07-12779. It may also be inconsistent with Judge Karlin in the bankruptcy court decision in Lanning.

Lanning has been appealed by the bankruptcy trustee and is currently pending in the U.S. Supreme Court.  Oral argument is expected in March 2010.

Digest by:  Jan Hamilton, Trustee

Cram Down Value Used for Means Test in Wichita Bankruptcies

A DEBTOR MUST USE THE STRIPPED/CRAMMED DOWN AMOUNT FOR
PURPOSES OF CURRENT MONTHLY INCOME (CMI) ON LINE 47 OF B22C
In re Hoss, Case No. 08-10365
In re Arroyo, Case No. 07-12779
August 2008, Judge Nugent
In above median income (AMI) cases, debtors sought to deduct contract payments, rather than the stripped off/crammed down amounts. The Court sustained the Chapter 13 Trustee’s objection to confirmation. This is a good analysis of the status of the law, as of the date of the issuance of the opinion. Judge Nugent applied the reasoning of Lanning, but on the expense side, rather than the income side, of the equation. He also disagreed with Judge Karlin’s decision in Allen, which would have reached an opposite result.

401(k) Withdrawal Is Income for Means Test

401(K) DISBURSEMENT PRE PETITION IS CURRENT MONTHLY INCOME BUT NOT PROJECTED DISPOSBLE INCOME
In re DeThample, Case No 07-11829
July 5, 2008, Judge Nugent

Under 1325(b)(1)(B), a singular, one time disbursement is “income” for purposes of
determining Current Monthly Income (CMI), but followed Judge Karlin’s Lanning decision in determining what constituted Projected Disposable Income (PDI). This is a good read of the status of the law in
this area of its date of issuance, according to a digest of the case by Jan Hamilton, Trustee.

Deduct Full Secured Debt on Bankruptcy Means Test

OK FOR CHAPTER 13 DEBTORS TO TAKE B22C DEDUCTION FOR FULL PAYMENT
RATHER THAN CRAM DOWN AMOUNT
In re Allen, Case No. 07-41327
February 2008, Judge Karlin

Objected to confirmation on the basis that Debtor’s means test calculations erroneously included the full amount of the pre-petition car payments rather than the reduced or  crammed-down amounts. In analyzing 1325(b)(1), the Court found that 707(b)(2)(A)(iii) applies and that Debtors need not only list the amounts they will actually pay through the plan. There is a split of authority on this important issue. This case was not appealed so no appellate decision is in the immediate future for the 10th Circuit.  See the Hoss and Arroyo decision by Judge Nugent for the opposite result.

Digest by:  Jan Hamilton, Trustee

Car Deduction Allowed on Means Test, Reversed by District Court

CAR DEDUCTIONS ALLOWED EVEN THOUGH NO LIEN
In re Thomas, Case No 06-21108
In re Camacho, Case No. 06-20729
October 2007,  Judge Berger

UST Motion To Dismiss under 707(b) for presumed abuse based upon totality of circumstances was denied. The Court concluded that the debtors are entitled to claim vehicle ownership for expenses, even though debtors did not have liens or leases on the vehicles. (See In Re Howell, 06-11652 for opposing view from Judge Nugent.). Judge Lungstrum subsequently reversed and remanded Thomas, 382 B.R. 793 (D. Kan. 2008).

Digest by:  Jan Hamilton, Trustee

My Wife Didn't File Bankruptcy, Can I Deduct Her Car Payment on My Means Test?

NON DEBTOR EXPENSES NOT ALLOWED ON B22C
In re Shahan, Case No. 06-11638
April 2007, Judge Nugent

Above median debtor filed 13; wife did not. Trustee objected to confirmation on basis of various B22C deductions. Debtor was allowed to take a marital deduction on Line 19 from his paycheck, which represented mandatory withholdings from her paycheck and, as such, was not dedicated to household expenses. Debtor sought to deduct future payments on secured debts for wife’s debts on Line 47. Since these were not debtor’s expenses, they were not allowed. Additionally, debtor sought to deduct $415.00 on line 59. This includes wife’s monthly recreational expenses, loan repayment to family, tax prep fees and $200.00 per month to help an adult daughter. These are to be actual expenses. None of these qualified, except for the tax preparation expenses as analyzed by the Court.

Digest By:  Jan Hamilton, Trustee

My Car Is Paid For, Can I Deduct Ownership Expense on Means Test?

OWNERSHIP EXPENSE NOT ALLOWED IF VEHICLE PAID FOR
In re Howell, Case No. 06-11652
April 2007, Judge Nugent

Trustee objected to 13 confirmation under 1325(b)(1)(B) on basis that debtors projected disposable income was too low because they were deducted an ownership expense on Line 28 of B22C even though vehicle was fully paid for and even though they had claimed a standard vehicle operating allowance on Line 27. Objection Sustained, even though 707(b) (2) (A) (ii) (I) and B22C do not offer specific guidance.  Judge Nugent rejected the other view on the basis that an expense is not “applicable” if it is not actually incurred.

Digest by:  Jan Hamilton, Trustee

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