Law on Rice

I am by no means finished reading St. Paul Fire & Marine Ins. Co. v. Labuzan, but it seems very interesting. It was published yesterday and is a matter of first impression for the Fifth Circuit.

A creditor of a business entity, St. Paul Fire and Marine, undertook some efforts to collect on its claims in violation of 362′s automatic stay but also sued the owners of the entity, the Labuzans. The Labuzans counterclaimed for damages under 362(k) because they claim that the creditor’s acts forced their entity, CTL, out of chapter 11 and into a chapter 7 liquidation.

The Fifth Circuit, in summary, concluded that even though the Labuzans were not the debtors in the case (their entity was), section 362(k)’s broad wording still gave them standing to pursue a private cause of action. Still more reading to do on my part, but at least there’s the headline.

By the way, I made a brief annotation in 11 USC 362 to reflect the case.

We’ve been working on it for a little over a week. It was a lot more exciting than it sounds! I even got to do the electronic filing through ECF. I just wanted to get it in my blog stream for my own posterity.

I feel like I just gave birth–to the Bankruptcy Code! I finally wrapped up chapters 5 and 7 (less, of course, the specialized chapter 7 cases). You can see them here: Bankruptcy Code. I’m hoping to finish chapter 13 tomorrow night.

Tonight I resolved to get chapter 5 loaded into Bankruptcy Law Reports. I failed, but I did get through subchapters I and II.

By the way, while I was getting the statutes formatted I was listening to a Diane Rhem show episode from a few weeks ago about the state of the U.S. economy with Mark Zandi, Dean Baker, and Douglas Holtz-Eakin (you can listen to it here). Generally, they thought Obama’s stimulus plan was generally working except for the attempts to curb the wave of foreclosures. Based on my own experiences with our clients, I would heartily agree with that last point!

One of the really good ideas I heard, however, was a “right to rent” proposal. The idea is that the current homeowners would lose their “ownership” of the property, but would be allowed to remain in possession of the property so long as they paid market rents. Indeed, they would be allowed to for the next few (or five) years.

I think this would dramatically stem the rate of foreclosures and might contribute mightily to improvements of the housing market. Of course, the banks aren’t used to be landlords, but this seems like a relatively simple problem to solve.

By the way, the statutes I did get loaded were the following:

• § 501. Filing of proofs of claims or interests
• § 502. Allowance of claims or interests
• § 503. Allowance of administrative expenses
• § 504. Sharing of compensation
• § 505. Determination of tax liability
• § 506. Determination of secured status
• § 507. Priorities
• § 508. Effect of distribution other than under this title
• § 509. Claims of codebtors
• § 510. Subordination
• § 511. Rate of interest on tax claims

• § 521. Debtor’s duties
• § 522. Exemptions
• § 523. Exceptions to discharge
• § 524. Effect of discharge
• § 525. Protection against discriminatory treatment
• § 526. Restrictions on debt relief agencies
• § 527. Disclosures
• § 528. Requirements for debt relief agencies

I just gave the recently published Ransom v. MBNA America (In re Ransom) a quick read (available here until I get it published on BLR). In short, Ransom continues a circuit split by holding that in the Ninth Circuit a debtor can only deduct “ownership costs” from a chapter 13 plan for a car if he or she is making payments (i.e., lease or purchase money payments) on the car. Consistently, when a debtor owns the car free and clear the debtor cannot deduct the payments.The Court said that maintenance fees or high mileage old cars can be accounted for in other ways.

The Court engaged in the statutory interpretation gymnastics that I see in many bankruptcy cases. It concludes with this passage:

The “correct” answer to the question before us, which the courts have been struggling with for years—at the unnecessary cost of thousands of hours of valuable judicial time—depends ultimately not upon our interpretation of the statute, but upon what Congress wants the answer to be. We would hope, in this regard, that we the judiciary would be relieved of this Sisyphean adventure by legislation clearly answering a straightforward policy question: shall an above-median income debtor in chapter 13 be allowed to shelter from unsecured creditors a standardized vehicle ownership cost for a vehicle owned free and clear, or not? Because resolution of this issue rests with Congress, we have taken the unusual step of directing the Clerk of the Court to forward a copy of this opinion to the Senate and House Judiciary Committees.

Take that, Congress!

UPDATE: I noticed that Prof. Shaun Martin the University of San Diego School of Law picked up on this paragaph as well. He has some interesting thoughts on Judge Trott’s complaint. Read it here.

Not the most exciting subject in the world, but still important. The United States Trustee has updated its approved debtor education provider list and its list of approved credit counseling pursuant to 11 USC 111. There are available at the following URLs:

http://www.usdoj.gov/ust/eo/bapcpa/ccde/de_approved.htm

http://www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm

A few days ago I had a genius idea to add “topics” as an organizing theme for BLR. Now I’m thinking that may have been a bit too cerebral. It’s not that law, or even bankruptcy law for that matter, isn’t a cerebral undertaking. It’s just that most people don’t have the time to devote to it. So, I want to make it a little more “nuts and bolts.”

Here are a few examples: how to strip a lien, how to get a redemption loan, how to deal with a rogue trustee, etc.

I just thought I would pass this along because I thought the situation was kind of ironic (in an almost true sense of the word ironic). There was a person looking for a redemption loan for a car manufactured by Chryself corporation about a month ago. The redemption loan company said their loan underwriter wouldn’t touch it because (drum roll please), Chrysler was in bankruptcy at the time.

Get the irony? Someone in bankruptcy can’t get a car loan from a company that specializes in giving car loans to people in bankruptcy not because the client is bankrupt but because the car company was.

Just a bit of law geek humor for the afternoon.

The U.S. Courts are reporting that 1.3 million bankruptcy cases were filed in the last 12 months–a 35% increase over the year prior. There were over 55,000 business filings. Read the rest here.

I did a back of the envelope calculation. If each case averages about $1,000 in attorneys fees (say, from chapters 7, 13, 11, etc.) then the last 12 months also created $1.3 billion in attorneys fees. Wow.

For some reason, I always had trouble finding the numbered page templates from Microsoft Word that you need when preparing pleadings. I finally found them in  a consolidated, useful place. I thought I should share:

http://office.microsoft.com/en-us/templates/CT102566891033.aspx?av=ZWD