Sunday, October 16, 2011

BANKRUPTCY FLINT MICHIGAN




I. History of Bankruptcy Law

Need a Flint Bankruptcy Contact Terry Bankert 1000 Beach ST., Flint MI 48503 810-235-1970

§1.1 Laws that provide for the distribution of a debtor’s property among creditors have been a part of civil jurisprudence since ancient times. Under the Code of Hammurabi, an insolvent debtor was often sold into slavery. In Celtic Ireland, a creditor would often “fast on” a debtor by placing himself or herself before the debtor’s doorway until the debt was paid. See generally Louis Edward Levinthal, The Early History of Bankruptcy Law, 66 U Pa L Rev 223 (1918).

In English and American legal history, bankruptcy laws have moved from facilitating the seizure and prompt distribution of debtors’ property to rehabilitating the insolvent debtor. Although the U.S. Constitution empowered Congress to enact “uniform Laws on the subject of Bankruptcies,” US Const art I, §8, cl 4, Congress did not pass such a law until 1800. Before the federal C

On November 6, 1978, President Jimmy Carter signed into law the Bankruptcy Reform Act of 1978I. History of Bankruptcy Law





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This complete revision of the federal bankruptcy laws, which became effective on October 1, 1979, was the apogee of decades of reform efforts. Congress amended the Code in 1984 primarily to resolve the constitutional infirmities engendered by the broad grant of jurisdiction to the bankruptcy courts in the 1978 Code. 1986 amendments to the Code established the U.S. Trustee System nationally and created a new chapter providing special bankruptcy relief for family farmers. In 1990, Congress amended the Code to address, among other things, certain issues relating to discharge and the dischargeability of debts. In 1993, Congress made limited changes to the provisions of Chapter 12 of the Code and in 1994, enacted amendments to change certain provisions in all chapters and established a Bankruptcy Review Commission. Chapter 12 of the Bankruptcy Code was extended by Congress retroactively from January 1, 2004, to July 1, 2005. Pub L No 108-369, 118 Stat 1749 (2004). In October 2005, Congress made sweeping changes to the Bankruptcy Code through the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). The most recent legislation affecting the Code is the Bankruptcy Technical Corrections Act of 2010 ( Pub L No 111-327, 124 Stat 3557 (2010).



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The 2005 amendments changed over 100 years of bankruptcy law. Some of the important changes made by BAPCPA include the following:

requiring consumer debtors to undergo financial counseling before filing for bankruptcy, 11 USC 109(h), 521(b), and before discharge, 11 USC 727(a)(11), 1328(g)(1)

means testing for consumer debtors seeking to discharge debts under Chapter 7, 11 USC 707(b)

bars against repetitive filing through limitation of the automatic stay, 11 USC 362(c)(3)

elimination of the debtor’s ability to retain secured collateral without redemption or reaffirmation, 11 USC 521(a)(6)





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In addition, BAPCPA made substantial changes in the provisions relating to business cases that had been recommended by the Bankruptcy Review Commission. BAPCPA’s prefiling requirement of credit counseling and debtor education and the enactment of the means test will be discussed in depth in the chapters addressing representation of the consumer debtor (see chapters 2 and 3). The 2005 amendments affecting business cases, such as expanded reclamation rights, award of administrative expenses for goods shipped just before filing, designation, and processes for small business cases and changes affecting exclusivity, will be addressed in the chapters discussing business bankruptcy issues (see chapters 6 and 7).

As a result of the changes effected by both electronic case filing and the 2005 amendments, the U.S. District Court for the Western District of Michigan adopted new local rules effective February 1, 2007, and the U.S. District Court for the Eastern District of Michigan adopted modified local rules on May 5, 2008.

Effective December 1, 2009, a number of amendments to the Code (under Pub L No 111-16, 123 Stat 1607 (2009)) and Bankruptcy Rules revised procedural deadlines to harmonize them with other federal rules governing time computation. The Eastern District has adopted amendments to conform with the Bankruptcy Rule amendments (http://www.mieb.uscourts.gov/notices/Notice_regarding_local_rules_120109.pdf), while the Western District made conforming changes to its rules by an administrative order (http://www.miwb.uscourts.gov/cms/assets/Rules-and-Forms/AdminOrders/adminOrder2009-4.pdf). The Eastern District has also posted a chart online (http://www.mieb.uscourts.gov/rulesAndForms/Table%20-%20Federal%20and%20Local%20Rules.pdf) that shows the various changes to the deadlines and time periods. Minor bankruptcy court rule changes also took effect December 1, 2010 (see http://www.uscourts.gov/RulesAndPolicies/FederalRulemaking/PendingRules/ProposedSupCt1210.aspx), with others scheduled to take effect December 1, 2011 (see http://www.miwb.uscourts.gov/cms/assets/Home/Court-News/amendments2011.pdf).





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II. Sources of Bankruptcy Law: The Bankruptcy Code and Rules

A. Structure of the Bankruptcy Code

§1.2 Most of the operative provisions of the Bankruptcy Code are located in Title 11 of the United States Code. This title is divided into nine chapters—1, 3, 5, 7, 9, 11, 12, 13, and 15. Some of them offer separate forms of relief to financially distressed debtors. Chapter 7 provides for the automatic appointment of a trustee who will liquidate all of the debtor’s nonexempt property and distribute the proceeds to creditors. Chapter 9 permits troubled municipalities to reorganize their affairs under the protection of the bankruptcy court. Chapter 11 allows for the reorganization of distressed debtors; this form of relief is often selected by troubled businesses that need some time to restructure their financial affairs. Chapter 12 permits family farmers to reorganize their farming operations under the protection of the bankruptcy court. Chapter 13 provides for the adjustment of debts of persons with “regular income.” This chapter expands the scope of the old wage-earner provisions contained in Chapter XIII of the Bankruptcy Act of 1898. Finally, Chapter 15 deals with ancillary and cross-border cases.

The remaining chapters of the Code generally apply to all forms of bankruptcy relief unless otherwise specified in the Code. Chapters 1, 3, and 5 contain these general provisions. In 1986, Congress enacted the Bankruptcy Judges, United States Trustees and Family Farmer Bankruptcy Act of 1986, which, among other things, repealed old Chapter 15 of the Bankruptcy Code and established the U.S. Trustee System throughout the country. HR 5316, 99th Cong, 2d Sess (1986).

A U.S. trustee was appointed for the region that comprises the Eastern and Western Districts of Michigan in 1988. In 2008, Daniel M. McDermott was appointed the U.S. Trustee for the region that includes Michigan and Ohio (Region 9). His office is located in Cleveland, Ohio. Assistant U.S. trustees have been appointed in the Eastern and Western Districts of Michigan to help the U.S. trustee perform his statutory duties. The assistant U.S. trustee for the Western District of Michigan is Matthew Cronin. In the Eastern District of Michigan, Marion Joseph Mack, Jr., is the Assistant U.S. Trustee. See §1.34 for a discussion of the U.S. Trustee System.

B. Rules Governing Bankruptcy Procedure: National and Local





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§1.3 In 1983, the U.S. Supreme Court, acting pursuant to 28 USC 2075, adopted the Federal Rules of Bankruptcy Procedure (Bankruptcy Rules). These rules were drafted to conform with the provisions of the Code and govern procedure in all federal bankruptcy courts; they may not abridge, enlarge, or modify the substantive rights granted under the Code. 28 USC 2075. Recent revisions to the Bankruptcy Rules were made in 2003, 2008, 2009, 2010, and 2011 (effective December 1).

In addition to the Bankruptcy Rules, the bankruptcy courts for both the Eastern and Western Districts of Michigan have adopted local rules. The local bankruptcy rules supplement the Bankruptcy Rules and may not be inconsistent with them. Bankruptcy Rule 9029. These rules are cited in this book as LBR [number] (ED Mich) or LBR [number] (WD Mich). The bankruptcy courts for the Eastern and Western District of Michigan have also adopted several general orders to supplement the local rules. The local rules and general orders may be accessed at the Web sites for the Eastern (http://www.mieb.uscourts.gov) and Western (http://www.miwb.uscourts.gov) districts.



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The U.S. District Court for the Western District of Michigan has enacted WD Mich LCivR 83.2 et seq., which address certain aspects of bankruptcy procedure. Finally, the U.S. District Court for the Eastern District of Michigan has adopted ED Mich LR 83.50, which also contains various provisions governing procedure in the bankruptcy courts.

On February 5, 1996, the U.S. Bankruptcy Court for the Eastern District of Michigan adopted a list of civility principles governing the conduct of bankruptcy judges and the attorneys who practice before them (available online at http://www.mieb.uscourts.gov/rulesAndForms//CVprinciples.pdf). Similar principles have been adopted by the Bankruptcy Court for the Western District of Michigan (available online at http://www.miwb.uscourts.gov/cms/assets/Rules-and-Forms/Rules/Professional-Conduct.pdf).







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III. Bankruptcy Courts

A. Structure

1. Federal District Courts

§1.4 The jurisdictional provisions in the Bankruptcy Amendments and Federal Judgeship Act of 1984 (the 1984 amendments) resolved a constitutional problem (see Northern Pipeline Constr Co v Marathon Pipe Line Co, 458 US 50 (1982)) with the status of bankruptcy judges. These provisions, which are contained in 28 USC 1334, grant to federal district judges the power to administer bankruptcy cases and all civil proceedings connected to them. Thus, the district court is granted original and exclusive jurisdiction over all bankruptcy cases. 28 USC 1334(a). The district court is also granted original, but not exclusive, jurisdiction over all civil proceedings “arising under,” “arising in,” or “related to” bankruptcy cases. 28 USC 1334(b). However, the district court may abstain from deciding these civil proceedings “in the interest of justice, or in the interest of comity with State courts or respect for State law.” 28 USC 1334(c)(1). Finally, the district court is granted exclusive jurisdiction over all property of the debtor and property of the estate, wherever that property is located. 28 USC 1334(e).

2. Bankruptcy Judges





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2. Bankruptcy Judges

§1.5 Even though Congress allocated to the federal district courts the power to administer bankruptcy cases and to adjudicate controversies connected to those cases, they generally do not exercise these powers. Rather, these matters are automatically referred to the bankruptcy judges appointed in each district court. 28 USC 151. Bankruptcy judges may exercise the powers delegated to the district court “with respect to any action, suit, or proceeding,” except as otherwise provided by law or district court order. Id. In the Eastern District of Michigan, which encompasses approximately the eastern half of the Lower Peninsula, ED Mich LR 83.50(a)(1) refers all bankruptcy cases and proceedings to the bankruptcy judges of that district. WD Mich LCivR 83.2(a) does the same with respect to bankruptcy cases and proceedings filed in the Western District of Michigan. Although the issue has not yet been finally resolved, the U.S. District Court for the Western District of Michigan has held that a bankruptcy judge lacks the power to conduct criminal contempt proceedings and to impose criminal contempt sanctions. In re Lawrence, 164 BR 73 (WD Mich 1993); see also In re Hake, No 06-8014, 2006 Bankr LEXIS 2428 (6th Cir BAP Oct 3, 2006) (stating that there is serious question whether bankruptcy court has power to impose criminal contempt sanctions). Note that it has been held that a bankruptcy judge may impose civil contempt sanctions. In re Burkman Supply, 217 BR 223 (WD Mich 1998). Under certain circumstances, the reference may be withdrawn. See §§1.11–1.14.

The Bankruptcy Reform Act of 1994, Pub L No 103-394, amended section 105 of the Bankruptcy Code by specifically authorizing bankruptcy judges to conduct status conferences in cases and proceedings on the court’s own motion or on the request of a party in interest. 11 USC 105(d)(1). At this conference, the bankruptcy judge may issue orders to ensure that the bankruptcy case “is handled expeditiously and economically.” 11 USC 105(d)(2). For example, in a Chapter 11 case, the bankruptcy judge may fix a date by which a debtor must file a disclosure statement and plan. 11 USC 105(d)(2)(B)(i).





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In the Eastern District in Michigan, Phillip J. Shefferly is the Chief Judge. Marci B. McIvor, Steven W. Rhodes, Walter Shapero, and Thomas J. Tucker are judges in the Southern Division, while Daniel J. Opperman sits in Bay City and Flint to administer cases filed in the Flint and Bay City administrative units.

In the Western District of Michigan, three bankruptcy judges sit in Grand Rapids and administer all the cases filed in that district. They ride the circuit and administer cases from the cities of Grand Rapids, Kalamazoo, Lansing, Traverse City, and Marquette. James D. Gregg, Jeffrey R. Hughes, and Scott W. Dales fill these positions.







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B. Core and Related Proceedings

1. The Significant Distinction

§1.6 When litigating in the bankruptcy court, the practitioner must be keenly aware of the distinction made in the jurisdictional provisions of the Bankruptcy Code between core and noncore (or related) proceedings. This distinction is important primarily because in related proceedings, bankruptcy judges may not enter final orders and judgments without the consent of the litigants.





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Saturday, October 15, 2011

Occupy Flint 10/14-15 update 1

IMG_20111012_112534DSCN2993DSCN3089DSCN3091DSCN3090IMG_20111014_184320
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This is a running photo/video shorts of the "Occuoy Flint" Movement. Prodeuced by Terry Bankert, terry@attorneybankert.com

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Sunday, October 9, 2011

CHAPTER 7 BANKRUPTCY AND SPOUSAL SUPPORT


FLINT BANKRUPTCY LAWYER TERRY BANKERT (810) 235-1970



III. COURTS OPINION



[HERE WE FIND] The facts of this case indicate that (1) Debtor enjoys a stable source of future income, (2) HE is eligible for Chapter 13 relief, and (3) he is capable of significantly reducing his expenses withhout depriving himself and his dependents of food, clothing, shelter, or other necessities.

While[ BANKRUPTCY] Debtor’s apparent desire to continue to support current or prior family members beyond his legal obligation to do so is commendable, it should not be at his creditors’ expense. For the foregoing reasons, the UST’s Motion to Dismiss is granted unless, within 20 days from the entry of the order effectuating this Opinion, the Debtor converts to a Chapter 13 proceeding.

The UST shall present an appropriate order.


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COURTS OPINION GRANTING UNITED STATES TRUSTEE’S MOTION

TO DISMISS CASE PURSUANT TO 11 U.S.C. § 707(b)(3)


The matter before the Court is the United States Trustee’s Motion to Dismiss Chapter 7

Case Under 11 U.S.C. § 707(b)(3) (Docket No. 13). The Court held a hearing on the matter and

requested post-hearing briefs. The Court also requested additional information from the Debtor

regarding the end date of certain liabilities. Those materials have been submitted and reviewed

by the Court, and this is the Court’s opinion.

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I. BACKGROUND

David Difazio (“Debtor”) filed his Chapter 7 bankruptcy petition on November 12, 2010.

He is 50 years old and works as a pharmacist at Walgreens. He has held that position for

approximately eleven years and earns approximately $128,205 annually. He is divorced and has

three sons, ages 21, 23, and 24. Debtor’s ex-wife and two of his sons live with him in a home

owned by his former mother-in-law. His 23 year old son lives in Chicago and is recently

employed. His 24 year old son, who lives with him, recently returned to work in June, after

being laid off at the end of last year. His 21 year old son, who lives with him, is a student and is

unemployed. Debtor and his ex-wife divorced in February 2009. Pursuant to the Judgment of

Divorce, Debtor is required to pay alimony in the amount of $1,200 per month for 48 months.

That 48-month obligation began in September 2009 (the selling of their marital home was a

condition precedent to the start of the alimony obligation), and that obligation has approximately

28 months remaining. Debtor testified that, in lieu of paying his ex-wife $1,200 per month, he

and his ex-wife came to an agreement whereby they would live in the same residence and he

would pay certain monthly household expenses on her behalf, as well as payments for certain

expenses for their sons. At this time, Debtor pays the following expenses for the benefit of

himself, his ex-wife, and his children, to wit: mortgage ($1,149); utilities ($313); water and

sewer ($55); telephone ($275); cable/internet ($230); a car payments for two vehicles, both of

which are owned by Debtor’s mother and which Debtor and his son are given permission to drive

($250 and $320); a payment for a Harley Davidson motorcycle ($326); insurance for the

vehicles owned by Debtor’s mother, Debtor’s ex-wife’s vehicle, and the motorcycle ($181, $213,

and $56.16); student loan payment for his son ($150); and a “payment for dependent,” which is

money given to his son currently living in Chicago ($110).1 Debtor’s ongoing debts include:


(1) tax debt owed to the Internal Revenue Service in the amount of approximately

$160,000; Debtor currently pays $1,424 per month (that payment increased from

$856 in September 2011) and he will likely be required to pay that obligation for

the remainder of his working career; Debtor’s ex-wife does not contribute to the

repayment of this debt;



(2) income tax debt owed to the State of Michigan in the amount of $3,042, with

estimated interest and penalties of 31-35%; Debtor currently pays $190 per month

and that obligation is estimated to be paid off between 1.9 – 2.4 years; Debtor’s

ex-wife does not contribute to the repayment of this debt; and



(3) stock loan plan debt in the amount of $3,381.51; Debtor currently pays

$247.78 per month and that obligation is estimated to be paid off in October 2012.

In addition to those continuing debt payments, Debtor contributes $213.67 per month to his

401K, which has a balance of approximately $29,000.





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II. [THE COURTS] DISCUSSION



Section 707(b)(1) provides, in part,

After notice and a hearing, the court, on its own motion or on a motion by the

United States trustee, trustee (or bankruptcy administrator, if any), or any party in

interest, may dismiss a case filed by an individual debtor under this chapter whose

debts are primarily consumer debts, or, with the debtor’s consent, convert such a

case to a case under chapter 11 or 13 of this title, if it finds that the granting of

relief would be an abuse of the provisions of this chapter.



1 These enumerated payments consist of all of the regular household expenses for himself and his ex-wife and his two adult children who are living with him. It is clear, however, that Debtor would be required to pay most of those expenses, such as mortgage/rent, utilities, and food if he were living on his own. Accordingly, the Court will only attribute a portion of those total expenses as being payments made for his wife’s benefit in exchange for the alimony payments.



In determining whether this case constitutes an “abuse” under § 707(b)(3), the Court must

examine the totality of the circumstances and determine whether the Debtor is “honest” and

“needy”. In re Krohn, 886 F.2d 123, 126 (6th Cir. 1989); In re Behlke, 358 F.3d 429, 434 (6th

Cir. 2004). “’[H]onest,’ in the sense that [Debtor’s] relationship with his [or her] creditors has

been marked by essentially honorable and undeceptive dealings, and […] ‘needy’ in the sense

that his [or her] financial predicament warrants the discharge of his [or her] debts in exchange for

liquidation of his [or her] assets.” Krohn, 886 F.2d at 126.



There is no allegation or indication that the Debtor has been anything other than honest in

his relationship with his creditors, and therefore the inquiry is limited solely to whether the

Debtor is “needy” of a chapter 7 discharge. In making determinations as to neediness, courts

have looked to the following non-exclusive factors:



(a) whether the Debtor has the ability to repay his debts out of future earnings;



(b)whether the Debtor enjoys a stable source of future income;

(c) whether the Debtor is eligible for chapter 13 relief;

 (d) whether there are state remedies with the potential to ease the Debtor’s financial predicament;

(e) whether relief may be obtained through private negotiations with creditors; and

 (f) whether expenses can be reduced significantly without depriving the Debtor of adequate food, clothing, shelter and other necessities.

In re Beckerman, 381 B.R. at 845 (citing In re Krohn, 886 F. 2d at 126-27).

In this case, Debtor enjoys a stable source of future income and is eligible for Chapter 13

relief. The factor most applicable to the Court’s analysis in this particular case is (f), i.e.:

whether the Debtor’s expenses can be significantly reduced without depriving him or his

dependents with adequate food, clothing, shelter, and other necessities.

The UST argues that Debtor can easily reduce his monthly expenses without depriving

himself or his dependents of adequate shelter, food, or clothing and that he has the ability to pay

his debts out of future earnings in a Chapter 13 case. Specifically, the UST argues that Debtor

could immediately trim his budget by $1,467.34 by: discontinuing his 401K contribution for the

period of a Chapter 13 plan ($213.67), eliminating the payments for his sons’ cell phones and

eliminating premium television channels ($150), eliminating the payments for his son’s vehicle

and insurance ($411.50), eliminating the motorcycle payment and insurance ($382.16), and

eliminating the payments for his son’s student loan and the “payment to dependent” ($260). The

UST further argues that when some of the above listed ongoing debts are paid off, Debtor will

have additional income he can contribute to a Chapter 13 plan to pay unsecured creditors.

Debtor argues that, given his ongoing support obligations for his ex-wife and his significant tax

debt, even if he could reduce his monthly expenses, he would not have sufficient income to

contribute toward a Chapter 13 plan.



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B. Payments in Lieu of Alimony Obligation



As noted, Debtor has a monthly alimony obligation to his ex-wife. As noted, he and his

ex-wife came to an agreement whereby Debtor would pay the ex-wife’s portion of the mortgage

payment, her car insurance, household utilities, and certain expenses for their sons instead of

paying the monthly alimony obligation to her. Debtor argues that he is currently paying the

following expenses in lieu of that alimony obligation: (1) his ex-wife’s share of the mortgage

payment ($575), automobile insurance for his wife’s vehicle ($106), a car payment for his son’s

vehicle ($306), student loan payment for the eldest son ($150), and a “payment for dependent”

($110). Those expenses add up to $1,247. However, Debtor is clearly paying expenses above

and beyond those amounts on his ex-wife’s behalf. Specifically, he is also paying $313 for

utilities; $55 for water and sewer; $230 for cable/internet; and $298.76 for his ex-wife’s

insurance expenses. Taking into consideration the portion of those expenses attributable to

Debtor’s ex-wife, it appears that he is paying at least an additional $598 per month for his exwife’s expenses. It is also unclear whether the $1,100 monthly food expense listed on Debtor’s

Schedule J includes food expenses for his ex-wife. It is clear in this case that Debtor is paying

much more than $1,200 on his ex-wife’s behalf on a monthly basis. For that reason, the Court

will consider the car payment for his son’s vehicle, student loan payment for his other son, and

the “payment for dependent” as being separate from the alimony obligation.



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C. Reduction of Expenses

A review of Debtor’s schedules show that his expenses are somewhat excessive and

additional belt tightening is not out of question. To be sure, some expenses are what they are in

no small part because he is financially supporting his ex-wife and three adult children. Two of

his adult children are working and are able to either support themselves or to contribute to the

household expenses or to their own expenses. See In re Beckerman, 381 B.R. at 852 (citing In re Siemen, 294 B.R. 276, 279 (Bankr. E.D. Mich. 2003). Further, Debtor’s payment of expenses for his ex-wife is clearly in significant excess of his $1,200 monthly alimony obligation and that

excess is not likely legally required. Debtor’s expenses can clearly be reduced by a minimum of:

$150 for cable/internet/phones, $411.50 for the payments for his son’s vehicle and insurance,

$382.16 for the motorcycle payment and insurance, and $260 for the payments for his son’s

student loan and the “payment to dependent.” Eliminating or reducing those expenses alone

adds up to $1,203.66. Adding in Debtor’s monthly net income of $159.80, Debtor could pay a

total of $1,363.46 per month to his unsecured creditors in a Chapter 13 plan. Even taking into

consideration the recent increase in Debtor’s tax obligation, from $856 to $1,424, Debtor could

make a significant monthly payment toward a Chapter 13 plan. Further, the amount Debtor can

contribute to a Chapter 13 plan would at some point increase as the Michigan tax debt, alimony

obligation (which will end in September 2013), and stock loan plan debt are paid off during the

period of a five year plan.



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UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION – DETROIT

In re:

Case No. 10-74441

David M. Difazio, Chapter 7

Hon. Walter Shapero

Debtor.

___________________________________/

OPINION GRANTING UNITED STATES TRUSTEE’S MOTION

TO DISMISS CASE PURSUANT TO 11 U.S.C. § 707(b)(3)



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Saturday, October 8, 2011

Bankruptcy in Flint Michigan

Your History of Bankruptcy Law


Did you kn ow.§1.1 Laws that provide for the distribution of a debtor’s property among creditors have been a part of civil jurisprudence since ancient times. Under the Code of Hammurabi, an insolvent debtor was often sold into slavery. In Celtic Ireland, a creditor would often “fast on” a debtor by placing himself or herself before the debtor’s doorway until the debt was paid. See generally Louis Edward Levinthal, The Early History of Bankruptcy Law, 66 U Pa L Rev 223 (1918).




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The 2005 amendments changed over 100 years of bankruptcy law. Some of the important changes made by BAPCPA include the following:

requiring consumer debtors to undergo financial counseling before filing for bankruptcy, 11 USC 109(h), 521(b), and before discharge, 11 USC 727(a)(11), 1328(g)(1)

means testing for consumer debtors seeking to discharge debts under Chapter 7, 11 USC 707(b)

bars against repetitive filing through limitation of the automatic stay, 11 USC 362(c)(3)

elimination of the debtor’s ability to retain secured collateral without redemption or reaffirmation, 11 USC 521(a)(6)







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II. Sources of Bankruptcy Law: The Bankruptcy Code and Rules

A. Structure of the Bankruptcy Code

§1.2 Most of the operative provisions of the Bankruptcy Code are located in Title 11 of the United States Code. This title is divided into nine chapters—1, 3, 5, 7, 9, 11, 12, 13, and 15. Some of them offer separate forms of relief to financially distressed debtors. Chapter 7 provides for the automatic appointment of a trustee who will liquidate all of the debtor’s nonexempt property and distribute the proceeds to creditors. Chapter 9 permits troubled municipalities to reorganize their affairs under the protection of the bankruptcy court. Chapter 11 allows for the reorganization of distressed debtors; this form of relief is often selected by troubled businesses that need some time to restructure their financial affairs. Chapter 12 permits family farmers to reorganize their farming operations under the protection of the bankruptcy court. Chapter 13 provides for the adjustment of debts of persons with “regular income.” This chapter expands the scope of the old wage-earner provisions contained in Chapter XIII of the Bankruptcy Act of 1898. Finally, Chapter 15 deals with ancillary and cross-border cases.





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B. Rules Governing Bankruptcy Procedure: National and Local

§1.3 In 1983, the U.S. Supreme Court, acting pursuant to 28 USC 2075, adopted the Federal Rules of Bankruptcy Procedure (Bankruptcy Rules). These rules were drafted to conform with the provisions of the Code and govern procedure in all federal bankruptcy courts; they may not abridge, enlarge, or modify the substantive rights granted under the Code. 28 USC 2075. Recent revisions to the Bankruptcy Rules were made in 2003, 2008, 2009, and 2010 (effective December 1).







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B. Core and Related Proceedings

1. The Significant Distinction

§1.6 When litigating in the bankruptcy court, the practitioner must be keenly aware of the distinction made in the jurisdictional provisions of the Bankruptcy Code between core and noncore (or related) proceedings. This distinction is important primarily because in related proceedings, bankruptcy judges may not enter final orders and judgments without the consent of the litigants.

2. Core Proceedings

§1.7 What's New in this Section Bankruptcy judges may hear and decide all core proceedings and may enter orders and judgments in those proceedings subject to appellate review. 28 USC 157(b)(1). Examples of core proceedings are listed in 28 USC 157(b)(2) and include (1) motions to lift the automatic stay, (2) actions to recover fraudulent conveyances and preferences, and (3) determinations whether certain debts are dischargeable. Also included on the list are “other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship.” 28 USC 157(b)(2)(O). For decisions construing the scope of core proceedings, see In re Pioneer Inv Servs Co, 946 F2d 445 (6th Cir 1991); Bliss Techs, Inc v HMI Indus (In re Bliss Techs, Inc), 307 BR 598 (ED Mich 2004); and In re Marshall, 118 BR 954 (WD Mich 1990).








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E. Venue of Bankruptcy Cases and Proceedings

§1.17 In general, a debtor who seeks bankruptcy relief may file a bankruptcy petition in the court for the district in which the debtor’s domicile, residence, principal place of business, or principal assets have been located for 180 days before the date of filing. 28 USC 1408. In the Eastern District of Michigan, LBR 1071-1(a) (ED Mich) establishes three administrative units (Detroit, Flint, and Bay City) for cases filed in that district. If a case is filed in the wrong administrative unit—for example, if a corporation headquartered in Bay City files its petition in Detroit—the bankruptcy judge may transfer that case to the proper administrative unit. LBR 1071-1(c)(1) (ED Mich); see, e.g., In re Romzek, 50 BR 720 (Bankr ED Mich 1985). The Bankruptcy Court for the Western District of Michigan has adopted a similar local rule. See LBR 1014 (WD Mich).





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H. Electronic Filing of Cases and Pleadings

§1.20 On February 3, 2004, the U.S. Bankruptcy Court for the Western District of Michigan adopted Administrative Order No 2004-02, which provides for the electronic filing, signing, verification, and service of documents. This order provides that the electronic filing of a document in accordance with the Administrative Procedures “constitutes the filing of the document for all purposes.” On July 14, 2004, this court followed with Administrative Order No 2004-06, which requires “all petitions, pleadings and other papers filed in all cases and proceedings, whether pending or new,” to be filed electronically beginning on January 1, 2005. The Administrative Order was incorporated into and was superseded by the February 1, 2007, comprehensive revisions to the Western District Local Rules. Similarly, the Eastern District implemented electronic filing on a mandatory basis on January 1, 2006, and electronic filing is covered in the Eastern District’s local rules.







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IV. Parties in Interest in Bankruptcy Cases

A. In General

§1.21 In every bankruptcy case, there are certain persons, called parties in interest, who perform their statutory duties and attempt to enforce their rights and privileges. They are the debtor, the trustee, the U.S. trustee, secured creditors, unsecured creditors, and, in certain cases, creditors’ committees and equity security holders.





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B. Debtors

1. Chapter 7 Cases

§1.22 In Chapter 7 cases, a debtor may be an individual, a partnership, a corporation, or some other artificial person. However, only an individual may receive a discharge of debts in Chapter 7 cases; other entities may not. The 2005 amendments require that a debtor receive an individual or group briefing that outlines the opportunities available for credit counseling. The briefing must have been received within the 180-day period preceding the filing of the bankruptcy case. 11 USC 109(h)(1). This requirement is commonly referred to as the requirement for prefiling credit counseling.

Chapter 7 debtors must file certain documents with the bankruptcy court; must appear for questioning by creditors, the bankruptcy administrator, and the trustee at the meeting of creditors; and must perform other duties specified in the Code and the Bankruptcy Rules. If the individual debtor performs these duties and is not guilty of any bad acts as defined in the Code, the debtor will be granted a general discharge of prepetition debts and will retain exempt property to be able to make a fresh start in life.

After the debtor meets the duties specifically required under the Code, the debtor is required to complete an instructional course concerning personal financial management to obtain a discharge. 11 USC 727(a)(1). This is another requirement added by BAPCPA.





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2. Chapter 11 Cases

§1.23 Individuals, partnerships, and corporations all qualify for relief under Chapter 11 of the Code. A Chapter 11 debtor is normally retained as debtor-in-possession at the outset of the case and, as such, continues to operate its business as a fiduciary for all creditors within the guidelines prescribed by the bankruptcy court. The debtor, if not displaced by a trustee, then negotiates with its secured and unsecured creditors the terms of a plan calling for either the reorganization or the liquidation of the debtor’s assets and the adjustment of the rights of creditors and stockholders. This plan is sent to all creditors for a vote, and, after the votes are tallied, the plan may be confirmed and given effect by the bankruptcy court. Special rules apply for small businesses. See chapter 6.

In 2005, BAPCPA enacted comprehensive revisions to 11 USC 1112 and 1104, addressing conversion or dismissal and appointment of trustees. As amended, 11 USC 1112 provides that the courts “shall” rather than “may” convert or dismiss a case if it is in the best interests of creditors and if the movant establishes cause. Comprehensive examples of cause are set forth in the provision, and, in the event that the court decides that there is a basis or cause to dismiss or convert, the court has the alternative of appointing a Chapter 11 trustee or examiner.



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3. Chapter 12 Cases

§1.24 Only “a family farmer or family fisherman with regular annual income” may be the subject of a Chapter 12 case. 11 USC 109(f). The term family farmer includes individuals, partnerships, and corporations but does not encompass all entities that are engaged in farming operations. 11 USC 101(18). Family farmers who seek relief under Chapter 12 normally file their reorganization plans soon after their case has been commenced. Chapter 12 plans provide for payments to be made on secured and unsecured debt over a period that may last as long as five years. Confirmation of the plan does not result in the family farmer’s discharge; this is granted only when the debtor completes making payments under the plan or qualifies for a hardship discharge.

Although Congress retroactively extended Chapter 12 in 2004 ( Pub L No 108-369, 118 Stat 1749 (2004)), BAPCPA made Chapter 12 a permanent provision of the Code.



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4. Chapter 13 Cases

§1.25 Only “individuals with regular income” may file Chapter 13 petitions and propose plans providing for the composition and extension of debts. Relief under this chapter is not available to artificial persons, nor is it available to individuals who do not receive regular income or are carrying heavy debt loads. 11 USC 109. A Chapter 13 debtor normally files, along with a voluntary petition, a proposed Chapter 13 plan, in which the debtor proposes to pay all or a portion of the debts over time with regular income. Unlike the Chapter 7 debtor, the Chapter 13 debtor is not required to surrender nonexempt property to the trustee for liquidation; the plan may propose that the debtor keep this property while he or she pays the debts. Unlike the Chapter 11 debtor, the Chapter 13 debtor does not receive a discharge once the plan is confirmed; discharge is granted only when the debtor performs all the obligations under the plan or otherwise qualifies for a hardship discharge.

As of April 1, 2007, the eligibility requirements for Chapter 13 debtors have been increased. Only individuals with regular income who have, on the date of filing a Chapter 13 petition, noncontingent and liquidated secured debts in an amount less than $1,010,650 and noncontingent and liquidated unsecured debts in an amount less than $336,900 are eligible for Chapter 13 relief. 11 USC 109(e). The debt limits are adjusted every three years, 11 USC 104(a), and increased to $1,081,400 and $360,475 effective April 1, 2010. See generally In re Pisczek, 269 BR 641 (Bankr ED Mich 2001); In re Faulhaber, 269 BR 348 (Bankr WD Mich 2001).



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C. Trustees

1. Chapter 7 Cases

§1.26 In Chapter 7 cases, the U.S. trustee appoints an interim trustee on the entry of an order for relief, which generally occurs when the bankruptcy petition is filed. The trustee is selected from the panel of trustees for the judicial district in which the Chapter 7 petition has been filed by or against the debtor. The U.S. trustee may serve as trustee in a Chapter 7 case if none of the panel trustees are able or willing to serve. At the meeting of creditors, the creditors may vote either to allow the interim trustee to continue as the permanent trustee or to replace that person with another from the panel. See generally In re Lindell Drop Forge Co, 111 BR 137 (Bankr WD Mich 1990). If no voting takes place, the interim trustee becomes the permanent trustee.

The trustee is a representative of the debtor’s estate and as such is required to investigate the debtor’s affairs and liquidate his or her nonexempt property for the benefit of creditors. The trustee may also seek to augment property of the estate by filing actions to recover preferences, fraudulent conveyances, and other voidable transfers made by the debtor to third parties. Once this property is collected and reduced to cash, the Chapter 7 trustee files a final report and account with the bankruptcy court in which the trustee proposes how these cash proceeds should be distributed. When the court approves this final report and account, the trustee distributes the cash to creditors and closes the Chapter 7 case. See chapter 5 for further discussion of the trustee’s role in Chapter 7 cases.





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SOURCE

Handling Consumer and Small Business Bankruptcies in Michigan ch 1 (Richardo I. Kilpatrick et al eds, ICLE 2009), at
 http://www.icle.org/modules/books/chapter.aspx/?lib=bankruptcy&book=2009550820&chapter=01




(last updated 09/30/2011

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Tuesday, October 4, 2011

Flint bankruptcy and public benefits

PUBLIC BENEFITS IN FLINT BANKRUPTCY.
Posted by Flint Bankruptcy Attorney Terry Bankert, 235-1970.

Flint Area Public agencies that are seeking to collect overpayments from Flint Bankruptcy debtors such as SSI,Medicaid, or other welfare benefits [good luck with that one under Snyder] cannot do so by lowering or ending you benefits while your Bankruptcy is pending. Becomeing ineligible for other reasons  a Flint Bankruptcy does not  prevent this type of denial.

When you are in a Flint Bankruptcy Government  may not , deny,revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant on the basis of your Fliny Bankruptcy. Specifically they cannot.
-denyu or terminate public benefits
-deny or evict you from public housing
-deny or refuse to reinstate your state liquor license
-deny you a drivers license
any many other rights. Contact Flint Bankruptcy Lawyer Terry Bankert 235-1970 if you have questions.

Live Broadcast  on this topic 10/04/2011 8:45 - 9:00 a.m. on WFLT 1420 AM radio. Show "Its no joke being broke"
http://www.attorneybankert.com


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