Supreme Court Update

NACBA has filed an amicus brief in United Student Aid Funds v. Espinosa, No. 08-1134,  where the Supreme Court will consider whether a student loan creditor  can attack a debtor's chapter 13 plan 10 years after it was confirmed  and five years after the debtor completed his payments. The case was  brought by the creditor who filed a "Rule 60 motion" arguing that the  plan's term permitting discharge of interest on his student loan was  "void" because the discharge was not sought by an adversary proceeding.  NACBA's brief argues that allowing such a challenge would eviscerate  the finality that all parties in every chapter of the Code rely upon  when a plan is confirmed, and that Rule 9024 (incorporating Rule 60 for  most purposes) does not permit a creditor to seek plan revocation  except as permitted in Code section 1330. It also addresses the  argument made by the creditor and numerous student loan creditor amici  that they are too inundated by mail to be bothered by reading every  notice they get from bankruptcy courts. NACBA's brief points out that  they are being paid by the taxpayers to do exactly that, and in fact  the governing regulations require them to review chapter 13 plans and  object when appropriate. The brief was written by Geoff Walsh of the  National Consumer Law Center.

Negative Equity

Debtors have taken another hit on the Negative Equity front.  In In re Peaslee, No. 07-3962 (2d Cir.), the court, after having received from the State  Court the answer to the certified question that negative equity  constitutes a “purchase money security interest” under state law, found  that the creditor is entitled to the protection of the hanging  paragraph in bankruptcy.

In re Penrod, No. 08-60037 (9th Cir.) has been scheduled for oral argument on November 5.  NACBA assisted with Debtor’s brief in that case. The creditor filed as supplemental authority the case of In re Whipple in which the court held that the issue should be a matter of uniform federal law rather than vary from state to state.  The court in Whipple also  found that where some of the debt is secured and some is not (negative  equity) the entire debt is covered by the terms of the hanging  paragraph.

The negative equity issue is set for oral argument in the Sixth Circuit on December 3, in the case of In re Shockley, No. 08-3954.

Vehicle Ownership Deduction

Tara Twomey, NACBA’s Amicus Project Director, has assisted the Debtor in filing for reconsideration in the case of In re Ransom,  No. 08-15066 (9th Cir.) which addresses the issue of whether a Debtor  may take a vehicle ownership deduction on a wholly owned vehicle

Unemployment Compensation

The  issue of whether unemployment compensation is a “benefit received under  the Social Security Act” for purposes of calculating current monthly  income is being increasingly argued around the country.  NACBA is preparing to file an Amicus Brief on that issue in the case of Washington v. Reding, No. 09-579 (M.D.Ala).  NACBA’s Memorandum of Law on that issue is available on the NACBA website.

Other News:

The issue of whether the Ford buy-out plan is exempt under §522(d)(11)(E) has been briefed in the Sixth Circuit case of Gold v. Lewis, No. 09-1777.  Tara Twomey tendered an amicus brief in support of Debtor’s position.

NACBA has assisted Debtor in the case of Home Funds Direct v. Monroy,  No. 0-1175 (BAP 9th Cir.), which addresses the issue of whether an  addendum altering what must be included in monthly statements from the  creditor violates the separation of powers clause and §362 and/or  §1322(B)(2) of the Code.