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Bankruptcy


Discharge Denied When Debtor’s Case Fails the Smell Test

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In re Wilson, 2016 Bankr. Lexis 995 (Bankr. D. Md. March 30, 2016) Robert Horace Wilson (“Debtor”), a practicing orthopedic surgeon, filed a Chapter 7 bankruptcy case to stay the collection efforts of his largest creditor (“Creditor”). Debtor’s nonfiling spouse (“Spouse”) also was a physician. In his original Schedules, Debtor disclosed monthly income of nearly $18,000 and ownership interests in a medical practice and an entity called Spike Club, LLC (“Spike”), which owned a gentlemen’s club. Those Schedules, which by Debtor’s admission were incomplete and inaccurate, also disclosed only minimal bona fide claims against him apart from Creditor’s claim and dramatically understated Spouse’s income. Shortly after the petition date, Creditor filed a motion to dismiss the case on bad faith grounds. Thereafter, Debtor, with the assistance of an accountant, prepared and filed Amended Schedules. According to the Amended Schedules, the combined monthly income of Debtor and Spouse exceeded $48,000, and…Read More

Post-Filing Modification Prevents Student Loans From Being Discharged in Bankruptcy

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Naffis v. Xerox Education Services, LLC AP No. 15-0078 February 6, 2019 Consumer sought to discharge student loans but after filing the bankruptcy, the consumer consolidated his loans, which made them a “post-petition” debt and therefore not dischargeable. The consumer then Amended his Complaint to add violations of the Fair Debt Collection Practices Act (“FDCPA”) and the Maryland Consumer Debt Collection Act (“MCDCA”) because the servicer persuaded him to consolidate his loans, causing him to lose the opportunity for discharge. The servicer, Xerox Education Services, LLC (“XES”) filed a motion for summary judgment. The Court held that because the student loans were not in default at the time XES became the servicer, the FDCPA does not apply to them in this case.  The FDCPA states that “the term debt collector does not include any person collecting or attempting to collect any debt owed or due or asserted to be owed…Read More

Lost in Bank’s Computer System: Violation of Discharge Injunction

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Zombro v. SunTrust; AP No. 06 – 1166; April 14, 2008 This case involved a credit card account and a deed of trust at SunTrust bank. The first legal issue the court addressed was whether or not the debtor would be allowed to amend their complaint against the bank. To this the court decided that “Under the notice pleading approach adopted in Federal Rule of Bankruptcy Procedure 7008, the bank had sufficient notice both of the claim (violation of the discharge injunction) and the remedy (attorney’s fees) sought by the debtors as well as supporting allegations of fact. See Fed.R.Civ.P. 8(a)(2), made applicable by Fed.R.Bankr.P. 7008(a); Erickson v. Pardus, 127 S.Ct. 2197, 2200 (2007) (“Specific facts are not necessary; the statement need only ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.’”) (internal quotation marks and citations omitted).” The…Read More

No excuse not to have credit counseling course

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In re Houston; Case No. 08-11848; April 11th, 2008 The debtor in this case filed a Chapter 13 without yet having the necessary credit counseling certificate. Instead of this certificate, she filed a certification of exigent circumstances stating that she will be evicted without the court’s protection. The court cites Bankruptcy Code §109(h)(3)(A) which allows the credit counseling requirement to be waived if the debtor submits to the court a certification that (1) “describes exigent circumstances that merit a waiver” of the credit counseling requirement; (2) “states that the debtor requested credit counseling services from an approved nonprofit budget and credit counseling agency, but was unable to obtain the services . . . during the 5-day period beginning on the date on which the debtor made that request,” and (3)”is satisfactory to the court.” Id. The court reasons that though an impending eviction would generally qualify as an exigent circumstance,…Read More

Bankruptcy and Virginia Corporate Law

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In re Cummings; Case No. 07-13758-SSM; April 10th, 2008 Lawsuit brought in bankruptcy case highlights core aspects of Virginia corporate law Individual debtor filed a Chapter 11 under the bankruptcy code to reorganize her debts. The debtor then brought an action for breach of contract arising from the sale of a business, a declaratory judgment that salary repayment and non-compete provisions in an employment agreement she signed are unenforceable, and damages for breach of fiduciary duty. The court restated the standard for summary judgment that it was going to use. Importantly, the court noted that “the Supreme Court has held that a plaintiff need not plead evidence sufficient to establish a prima facia case in order to survive a motion to dismiss, but under Rule 8(a), need only give the defendant fair notice of what the plaintiff’s claim is and the grounds upon which it rests.” Swierkiewicz v. Sorena NA,…Read More

Notice of Bankruptcy Case

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In re US Airways, Inc.; Case No. 04-13819-SSM; March 27th, 2008 In a chapter 11 case, a debtor that continues in business following confirmation of a plan or reorganization is discharged from all debts arising prior to confirmation. 11 U.S.C. § 1141(d). However, before such a claim can be discharged, creditors must be afforded adequate notice of the bankruptcy case, as well as of the deadline set for filing claims against the debtor. Zurich American Ins. Co. v. Tessler (In re J.A. Jones, Inc.), 492 F.3d 242, 249(4th Cir. 2007). They type of notice that is required depends on whether a creditor is “known” or “unknown.” Creditors whose identities are actually known to the debtor or are reasonably ascertainable by the debtor are deemed to be “known creditors” and are entitled to actual notice of the bankruptcy filing. An “unknown creditor,” by contrast, is one whose identity or claim is…Read More

Who Can File Pleadings for Debtor?

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In re Carr; Case No. 05-11697-RGM; March 19th, 2008 When a party to a case is represented by counsel, counsel and counsel alone should be filing the pleadings. In addition to this error, the motion alleged that Wachovia Bank, the trustee of a trust established under the will of Robert A. Geary. The question at issue was whether the trustee ought to be compelled to make a distribution. The court notes that the will is probated in the Circuit Court for the City of Chesapeake and that this is a matter of state law; therefore, the court declined to exercise jurisdiction over the matter.

Time For Filing Dischargeability Complaint

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In re Nwoke; Case No. 07-10324-SSM; March 18th, 2008 This case was before the court on the motion of Tenacity Settlements, LLC (“Tenacity”) for leave to file a complaint to determine the dischargeability of Tenacity’s claim against the debtor to recover a payment made by mistake. Tenacity was not listed as a creditor and not given notice of the bankruptcy case. This complaint to determine dischargeability was filed after the date to file complaints to determine dischargeability. However, “a complaint to determine dischargeability of an unlisted debt under § 523 (a)(3), Bankruptcy Code, may be filed ‘at any time.’” FRBP 4007(b). However, a complaint to determine the dischargeability of a debt for embezzlement or larceny under §523(a)(4) is governed by §523(c) and must be filed no later than 60 days after the first date set for the meeting of creditors. FRBP 4007(c). Although the court is empowered to extend the…Read More

Relationship Between Fiduciary Duty In and Out of Bankruptcy and Non-Dischargeability

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In re Stewart; Case No. 07-10860-RGM; March 7th, 2008 This case was before Judge Mayer on a motion for summary judgment filed by the debtor. The Plaintiff in this case filed an adversary proceeding asserting that a judgment it had obtained in District Court in Oregon was nondischargeable under §§523(a)(4) and (a)(6) of the Bankruptcy Code. Secton 523(a)(4) and its predecessors have long narrowly construed the scope of fiduciary relationships encompassed by them. There must be a technical or express trust which predates and exists apart from the act creating the liability. Agents, bailees, brokers, factors, partners and similarly situated persons are generally excluded. 4 Collier on Bankruptcy ¶523.10[1][d]. See KMK Factoring, LLC v. McKnew(In re McKnew), 270 B.R. 593, 624 (Bankr.E.D.Va. 2001). The court determined that the debtor’s duty in this case was akin to the fiduciary duty partners owe each other and does not fall within the parameters…Read More