Recent Entries

Telephone Scam Affects Chapter 13 Bankruptcy Cases Filed in Michigan

Published on April 21, 2011 in Chapter 13. 0 Comments

Recently debtors in chapter 13 cases in the Western District of Michigan have reported receiving phone calls from a person claiming to represent the trustee.  The person then instructs the debtor to make trustee payments to a different P.O. Box which is not the correct payment address.  The person also requests personal information from the debtors such as social security numbers.  The court has requested that all debtors’ counsel notify their clients that the trustee has not changed payment procedures. The United States Trustee has also advised that if a debtor receives such a call to notify the office of the United States Trustee at (616) 456-2002.

This raises several potential problems in chapter 13 cases.  If the debtor makes a payment to the false address these payments will not be applied to the debtor’s chapter 13 plan.  This may create a delinquency with the trustee and stop disbursements to creditors receiving payments from the 13 trustee.  In turn, the delinquency may cause creditors to file for relief from stay due to the lack of payments.  The trustee may also even file to dismiss the chapter 13 case.  Typically, trustees are slow to file motions to dismiss cases when payments are not made.  The scam may lend trustees in Michigan to become more cautious which would create undue delay for creditors waiting for a case to dismiss for lack of payments.

If you have any questions, please contact Mr. David Yunghans, Esq. David is an associate in the bankruptcy group located in the Cincinnati office of Weltman, Weinberg & Reis Co., LPA. You can reach him at 513.723-2211 or .

Supreme Court Adopts “Forward-Looking” Approach to Define Projected Disposable Income When Calculating Chapter 13 Repayment Plans

Published on July 1, 2010 in 2005 BAPCPA and Chapter 13. 0 Comments

When Congress amended the Bankruptcy Code in 2005, they implemented the means test.  The purpose of the means test was to provide a higher return of funds to unsecured creditors.  The test requires debtors filing chapter 13 bankruptcy to pay all “projected disposable income” into the plan.  Projected disposable income is a calculation of all income received by the debtor preceding the six months prior to filing minus allowed expenses.  After calculating the means test, a debtor in chapter 13 is required to pay a fixed amount to unsecured creditors.  The calculation is defined as the “mechanical-approach”.  Eventually problems arose with using the mechanical approach because it failed to deal with situations where debtor’s income actually decreased or increased during the life of the plan.  As a result, bankruptcy trustees and courts began to use a “forward-looking” test to calculate the debtor’s plan payments. 

Under the “forward-looking” approach, the debtor’s chapter 13 payment amount is based on the income they received during the life of the chapter 13 plan.  So if income increased over the life of the plan the debtor would be required to pay more of their income just as they would pay less to creditors if their income decreased.

In the case of Hamilton v. Lanning, the Supreme Court decided which approach was correct.  The court adopted the “forward -looking” approach.  The court reasoned that the ordinary meaning of the word “projected” supports looking to debtor’s current income.  The court also realized that following the “mechanical-approach” could lead to absurd results as debtor’s income could increase or decrease over the life of the plan, and thus some debtors would actually pay less than they were required under the Bankruptcy Code.

The ruling has both positive and negative affects for creditors.  A positive is that if a debtor’s income increases during the life of the plan, the debtor will be required to pay more into the plan, which could lead to increased distribution to unsecured creditors. The negative result occurs along the same line, as a debtor’s income may decrease during the length of the plan, and thus distribution to unsecured creditors may decrease.  Creditors will also need to keep on their toes as to monitor for possible increases in debtors’ incomes, as debtors are not likely to volunteer this information.  Some chapter 13 trustees require debtors to submit yearly tax returns so that creditors can check with the court for filed returns, indicating any change in income.

If you have any questions, please contact David Yunghans directly at 513.723.2211 or via email at .

Bankruptcy Filings Up in 2010 When Compared to 2009

Published on June 23, 2010 in Bankruptcy Filings. 0 Comments

Bankruptcy filings for the year through May 2010 are up over 9% nationwide as compared to filings through the same time last year.  From January 2010 to May 2010 there were 136,142 consumer bankruptcy filings nationwide as compared to 124,838 at the same time last year.  The increase is likely attributed to the high unemployment rate and tight credit restrictions of banks.  Although filings have increased when compared to last year’s numbers, there was an overall decline nationwide in filings from April 2010 to May 2010.  Filings in April were approximately 145,000 as compared to 137,000 in May 2010.  The two states with the highest filings are Nevada and Georgia.  Some states have experienced a decrease in filings when compared to last year.  States such as Tennessee, South Carolina, Alabama, and West Virginia have all seen the number of filings drop.  However, states such as Arizona and California have seen an increase in filings this year by 43% and 36% respectively.  Filings for the year are projected to reach the records set in 2005 when over 2 million households filed for bankruptcy.

If you have any questions, please contact David Yunghans directly at 513.723.2211 or via email at .

Sixth Circuit Rules That Negative Equity Is Purchase Money

Published on March 26, 2010 in Chapter 13 and Motor Vehicle. 0 Comments

On March 24, 2010 the Sixth Circuit Court of appeals which covers Ohio, Michigan, Kentucky, and Tennessee, in line with a recent decision in the Seventh and past decisions of the Second, Fourth, Fifth, Tenth, and Eleventh Circuit Courts of Appeal, ruled that negative equity is purchase money and cannot be crammed down through bankruptcy proceedings. 

Under bankruptcy law, a debtor cannot cram down a secured claim when the creditor has a purchase money security interest in a motor vehicle acquired for the debtor’s personal use within 910 days of the debtor’s bankruptcy filing.  In some vehicle purchase transactions, debtors trade in a vehicle in order to purchase a new vehicle.  If there is a difference between the value of the vehicle that the buyer trades in and the amount of the buyer’s preexisting debt, this shortfall is financed into the purchase of the new vehicle.  This is referred to as negative equity.  Debtor attorneys have argued that the negative equity is not considered purchase money, therefore a debtor can cram down the difference of the value of the negative equity financed into the new car purchase.

The decision, which affects the Sixth Circuit Court, ensures that debtors must pay the negative equity amount as fully secured in their Chapter 13 bankruptcy.  The favorable ruling for creditors now encompasses 26 states.

If you have any question, please contact David Yunghans directly at 513-723-2211 or via email at .

Bankruptcy Filings Continue to Increase

Published on February 24, 2010 in Bankruptcy Filings. 0 Comments

Bankruptcy filings for January 2010 are up 15% from January 2009.  There were a total of 102,600 bankruptcy filings in January 2010 as compared to 89,000 in January 2009.  Overall in 2009 there were a total of 1,434,600 bankruptcy cases filed.  These figures are approaching the record set in 2005 when over 1,600,000 cases were filed.  Bankruptcy filings in 2010 are expected to increase throughout the year and eclipse last year’s total filings.  Total filing numbers are taken from, “The Bankruptcy Database Project at Harvard (http://bdp.law.harvard.edu) in cooperation with Automated Access to Court Electronic Records (AACER).