2008 – February

In re Bensinger; Case No. 07-12984-RGM; February 6th, 2008

Reaffirmation Agreement Requirements

Debtor was represented by counsel who did not completely fill out the reaffirmation agreement.  Also, the monthly income and expenses on the reaffirmation agreement did not match Schedules I & J in the case and the court decided that, pursuant to FRBP 4008, a hearing was required.

In re Gonzalez; Case No. 07-11165-RGM; February 11th, 2008

Attorney Opinion in Reaffirmation Agreements

If the agreement shows there to be an undue hardship, and the attorney does not check the box that certifies that despite the undue hardship “the debtor(s) is/are able to make the required payment.”  Because of this, §524(c) was not satisfied and the agreement was not effective.

In re Senseng; Case No. 07-11165-RGM; February 19th, 2008

Reaffirmation Requirements

No Debtor signature and income and expenses on reaffirmation differed from Schedules I & J without explanation required by Rule 4008.  Reaffirmation agreement not approved.

In re Golman; Case No. 07-12496-RGM; February 20th, 2008

Income and expenses on reaffirmation differed from Schedules I & J without explanation required by Rule 4008.  Debtors had the opportunity to be heard, but were not able to explain the difference.  Therefore, the court did not approve the reaffirmation agreement.

In re Exum; Case No. 08-10079-RGM; February 21st, 2008

Proceeding with Divorce When One Spouse in Bankruptcy

Debtor’s spouse filed a Motion for Relief from the Automatic Stay to Proceed with divorce proceedings.  Court noted that the automatic stay, does not operate as a stay of the commencement or continuation of a civil action “(ii) for the establishment or modification of an order for domestic support or obligations” or “(iv) for the dissolution of a marriage, except to the extent that such proceeding seeks to determine the division of property of the estate.” Bankruptcy Code §362(b)(2)(A).

The court does have a problem, however, with allowing the equitable distribution hearing to go forward.  The court notes that because the Trustee and the creditors are not proper parties before the circuit court in the divorce proceeding and they may be adversely affected by any division of property.

Ms Exum argued, that she will be adversely prejudiced because it is the local rules of the court not to grant a divorce without adjudicating the property rights of the parties.  The court answers this by pointing out that is really the circuit courts issue and that, though the bankruptcy court may consider the impact of the automatic stay over other litigation, in this case, the benefit to the creditors of the estate outweighs the detriment to Mrs. Exum.

Mrs. Exum then proffered the argument that there is a benefit to the creditors is the divorce is granted because TxE property would turn into property held by Tenants in Common.  The court decided that this required it to analyze the relative benefits and burdens on various classes of creditors, an exercise it was not willing to undertake.

In re Gebermariam; Case No. 07-11355-RGM; February 26th, 2008

Credit Card Company Submitted Incorrect Amount Owed

Judge Mayer, sua sponte, issued this memorandum opinion decreasing the amount owed because the credit card company submitted an affidavit with numbers adding up to a different amount than that claimed.

In re Shea; Case No. 08-10350-RGM; February 27th, 2008

Motion to Extend Stay and Third Party Injunction

The debtor in this case previously had a case dismissed within the last year.  Because of this, according to Bankruptcy Code §362(c)(3)(B), a hearing to extend the automatic stay beyond this 30 day period must be “completed before the expiration of the 30-day period.”  That court rules that because the motion for an expedited hearing to extend the stay was not filed until one day after the 30-day period, it is futile to set the hearing and therefore the motion was denied.

Interestingly, the court also commented on the purported reason the debtor was seeking the stay (to prevent foreclosure of home she didn’t own, but lived in).  The court noted that the automatic stay does not extend to the lender of the debtor’s landlord.  Judge Mayer noted that, “at best, the debtor could seek an injunction premised on Bankruptcy Code § 105.” citing A.H. Robbins Co. Inc v. Piccinin, 788 F.2d 994 (4th Cir. 1986).  In any event, an action for an injunction must be in the form of an adversary proceeding, and not by the filing of a motion.

In re Aime; Case No. 07-12388-SSM; February 28th, 2008

Right Prevent Modification of Stay Limited.

This matter was before the court on the motion of the creditor to enforce a security interest in a motor vehicle and the debtor’s motion to amend the previously entered order conditioning the automatic stay.  The Debtor was in default of her payments on the vehicle by 10 months, but needed the vehicle to get to work and wanted to enter into an agreement for additional time to make payments and otherwise catch up on her payments.

The court discusses the automatic stay and points out that “if the debtor is granted a discharge, the discharge acts as a permanent injunction against many kinds of creditor actions but does not prevent enforcement of a valid lien against property of the debtor, since liens, unless specifically avoided in the course of a bankruptcy, pass through and may be enforced against the collateral following discharge.  Bankruptcy Code § 524(a)(2).  The court holds that because it found that the substantial payment default, coupled with the trustee’s decision not to administer the property, the debtor’s financial inability to bring the payments current prior to the date she would receive the discharge, and the creditor’s unwillingness to agree to a reaffirmation except upon the original terms constitute cause for termination of the stay.  The court noted that the debtor’s need for the vehicle, however great, cannot trump the secured creditor’s right to adequate protection of its security interest in the motor vehicle.  “The longer an automobile lender goes without payments, the greater the risk that its collateral, if repossessed and sold, will not bring enough to satisfy the debt.

The court has no power in a chapter 7 case to require a creditor to agree to a loan modification or to a cure that would extend beyond the date a discharge is grated and the automatic stay terminates as a matter of law.

Court modifies the automatic stay to allow the lender to repossess its collateral as permitted by non-bankruptcy law, but may not pursue the debtor for any deficiency.