Justia Bankruptcy Opinion Summaries

The debtor did not pay his $2,902 bill for treatment of an infection, which was turned over to a collections agency. He made payments for several years. When the balance was at $536.35 the agency sued in Michigan court for $678.27, attaching to the complaint a document titled "Combined Affidavit of Open Account and Motion for Default Judgment." An agency employee then incorrectly told the debtor that he owned $1,016. The district court rejected the debtor's suit under the Fair Debt Collection Practices Act 15 U.S.C. § 1692e. The Sixth Circuit reversed in part, holding that the title to the document attached to the complaint could be misleading. The mistaken balance was not given as part of a collection effort and was not a violation of the Act.

The Chapter 7 trustee sought to avoid a mortgage with respect to wife's interest in the property because the mortgage did not name or identify her in the body of the mortgage. The wife had signed the mortgage, and a rider that contained a provision for joint and several liability, but not the note. The bankruptcy court ruled in favor of the trustee. The Sixth Circuit reversed. Relying on 11 U.S.C. 544(a) and Kentucky property law, the court concluded that the identities of both borrowers was readily ascertainable from examination of the entire mortgage, which includes the rider.

The trustee in Chapter 7 proceedings sought to avoid the mortgage, recorded in 2006, asserting that the words "see EXHIBIT A," in the spot for the legal description on the signature page did not satisfy the statutory requirement found in Ky. Rev. Stat. 440.060(1). The Bankruptcy Court rejected the argument and the Sixth Circuit affirmed, holding that the practice of incorporating an exhibit containing the legal description is common and satisfies the statute.

The Chapter 7 debtors' federal tax return listed: withholding of $6,777; total tax liability of $2,934, a non-refundable child tax credit of $2,903, an additional child tax credit of $1,097, and a total federal tax refund of $8,542. The credit allows some taxpayers to claim a tax credit of $1,000 for each qualifying child. If the taxpayers have tax liability, the non-refundable portion is applied to satisfy the tax liability. If the taxpayer qualifies, a portion of the refundable amount of the credit, not used to offset tax liability, is sent as an income tax refund. The refundable portion, unlike the non-refundable portion, is treated as an overpayment. The bankruptcy court sustained the trustee's objection that the $2,903 credit was not exempt. The Sixth Circuit affirmed. Under 26 U.S.C. 24(a) and (d), the non-refundable portion of the credit is not property of the estate cannot be exempted as a payment under Ohio Rev. Code 2329.66(A)(9)(g). The entire tax refund of $8,542 is property of the estate from which the debtors may exempt $1,097 as the refundable portion of the credit.

When the debtors filed for Chapter 7 relief they listed the residence in which they had lived since 1995 as having fair market value of $205,000.00 with secured debt of $164,978.92. Pursuant to Ohio Revised Code 2329.66(A)(1), they claimed a homestead exemption of $40,400.00. They did not disclose a pending contract to sell the house for $205,000. After the sale closed, the debtors moved to an apartment and told creditors that they were using the proceeds for living expenses. The bankruptcy court sustained the trustee's objection to the homestead exemption and ordered turn over of the proceeds. The Sixth Circuit reversed and remanded. Exemptions are determined on the date a bankruptcy petition is filed. The debtors were using the property as their principal residence on the date they filed their petition; their intention to leave was irrelevant and does not defeat their claim to the homestead exemption.

Plaintiff, an attorney who handled Chapter 11 proceedings for a client, submitted a petition for fees after the case was converted to a Chapter 7 proceeding. The bankruptcy court denied the petition because of the attorney's failure to comply with disclosure rules, abusive conduct toward others involved in the case, excessive or incomplete billing, and disruptive behavior. The Sixth Circuit affirmed, noting the attorney's "flagrant" disregard of deadlines and the rules for appeal.

During 10 years in a 12-year period the defendant, an Ohio physician, filed federal income tax returns that showed she owed taxes â but she failed to pay them. The United States brought an action for judgment and to foreclose on its tax liens on defendant's real property. Defendant argued that her Chapter 7 bankruptcy petition discharged her tax liabilities for some of the years preceding the filing. The district court disagreed and entered a $319,698 judgment in favor of the United States, finding that she had willfully attempted to evade paying taxes for those years, preventing discharge of the obligations through her bankruptcy filing. The Sixth Circuit reversed, holding that the government did not establish willfulness as required by 11 U.S.C. 523(a). There was no evidence that the defendant lived lavishly; the district court incorrectly applied the test applicable only to student loans and made assumptions about her ability to earn more money and her husband's failure to contribute.