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On December 20, 2011, the United States Bankruptcy Court for the Western District of Pennsylvania held its Investiture Ceremony for the newly appointed Honorable Carlota M. Bohm.
Judge Bohm started her career as a law clerk to two Bankruptcy Judges and has concentrated her practice primarily in bankruptcy since 1981. Prior to being appointed and sworn in, Judge Bohm was a Bankruptcy Trustee on the U.S. Trustee’s Panel for the Western District of Pennsylvania and an attorney with the firm of Houston Harbaugh in Pittsburgh.
The United States Bankruptcy Court for the Western District of Pennsylvania sought a new judicial appointment after the untimely passing of the Honorable M. Bruce McCullough in November 2010.
On November 1, 2011 Bankruptcy Court Costs will be increasing. The Judicial Conference has approved changes to the miscellaneous fee schedule for the Bankruptcy Courts. Motions for Relief from Stay will now carry a court cost of $176.00, which is up from $150.00. Complaints to Determine Dischargeability and other Adversary Proceedings will now carry a court cost of $293.00, which is up from $250.00. These fees become effective November 1st for any pleadings filed in any case. It does not just apply to cases filed after November 1st.
Weltman, Weinberg & Reis Co., LPA. will keep you advised as to any other changes from the Bankruptcy Courts.
If you have any questions on this matter, please contact Alan C. Hochheiser, Managing Partner of the Bankruptcy Group at Weltman, Weinberg & Reis Co., LPA. Al can be reached at 216.739.5649 and .
While still in its early stages, the City of Harrisburg, PA’s recent Chapter 9 Bankruptcy filing represents a rare move by a municipality to seek the protection of the Bankruptcy Code. The City Council authorized the filing of the Chapter 9 case, while the mayor and other city officials opposed, and continue to oppose, the move. Chapter 9 is designed to provide a municipality with “breathing room” from its creditors’ collection efforts, which will then enable the municipality to formulate a plan of debt adjustment acceptable to a majority of its creditors. A municipality in Chapter 9 has the ability to adjust debts and other obligations, with a plan of debt adjustment ultimately resulting in the unpaid claims of creditors being reduced and/or extended or restructured, including those unpaid pre-petition claims of a utility or other creditor.
Utilities do not have the same rights to adequate assurance of payment in Chapter 9 as they do in Chapter 11. In Chapter 11, a debtor must provide a form of adequate assurance of payment that is satisfactory to the utility and is limited to a very small list of options (cash deposit, letter of credit, surety bond, certificate of deposit, prepayment or any other form that is mutually agreed upon by the parties). However, in Chapter 9, the form of adequate assurance is not limited and may include granting of an administrative priority claim. Further, the requirement that the offer of adequate assurance be “satisfactory to the utility” is not included in Chapter 9. In addition, Chapter 9 gives the municipality the option of assuming or rejecting executory contracts. Such contracts could include a whole range of potential obligations, from ongoing service contracts to vendor agreements and, possibly, collective bargaining agreements with its public employee unions.
If you have any questions on this matter, please contact Mr. Scott D. Fink, Esq. Scott is an associate in Bankruptcy focused on the Consumer Bankruptcy and Commercial Bankruptcy Groups with Weltman, Weinberg & Reis Co., LPA. He is located in the Brooklyn Heights, OH office. Scott can be reached at 216.739.5644 and .
On Thursday July 21, 2011 the Bureau opened its doors. The Consumer Financial Protection Bureau (CFPB) was created last summer through the Dodd-Frank Act. The purpose of the CFPB is to protect consumers from deceptive lending practices. The CFPB has faced several challenges from political leaders as the Bureaus power has yet to be defined. The CFPB currently operates without congressional oversight of its rulemaking power. Currently the CFPB does not have a leader after Republicans challenged Elizabeth Warren’s role in leading the agency. To appease Republicans President Obama chose former Ohio Attorney General to lead the agency but his role has also been challenged by leading Republicans.
Congress has already begun to shorten the leash of the agency. On the same day of the CFPB’s opening, legislation passed the house which would replace the agency direct with a five-person commission and make it easer to override rules created by the agency. For now the agency will only have the power to enforce existing consumer protection laws.
David H. Yunghans practices in Bankruptcy with a focus on the Consumer Bankruptcy Group, and he is based in the Cincinnati office of Weltman, Weinberg & Reis Co., LPA. David can be reached at 513.723.2211 or .
Hope was extinguished for creditors who would seek to overturn illegal provisions in confirmed Chapter 13 plans by the Supreme Court’s recent decision in Espinosa.[1] There, the Court upheld an order confirming a plan that stated all student loans would be discharged upon the debtor’s Chapter 13 discharge even though the provision was illegal – student loans are nondischargeable under bankruptcy law.
The best defense to illegal provisions is to timely review and object to Chapter 13 plans so that creditors do not lose rights upon confirmation that they would otherwise enjoy under the Bankruptcy Code. Confirmation orders may still be revoked for fraud under the Bankruptcy Code.[2] However, such cases are extremely rare. It is important to know that inserting illegal provisions in plans is not considered fraud under the law, so creditors cannot rely on this Code section as grounds to undo confirmation orders.
But if a plan is confirmed with an illegal provision, Espinosa does not entirely shut the door on challenging the confirmation order. That case honored the importance of the finality of orders more than the undoing of illegal provisions in Chapter 13 plans. However, a fundamental underpinning of the decision was the fact that the creditor did have notice of the bankruptcy and plan in time to object, but failed to do so.
If a creditor’s due process rights are violated, the confirmation order is void, at least as to that creditor’s treatment.[3] Due process requires that the creditor get notice in time to object. If a creditor is omitted from the service list, or an obsolete or incorrect address is scheduled so that the creditor does not receive actual notice of the bankruptcy in time to object to confirmation, then it has a due process argument to challenge the confirmation order.
Many districts now have model plans that debtors are required to use, but allow special provisions or additional treatment than what the model plan provides. Often, these model plans incorporate the Bankruptcy Code’s requirements for confirmation. An example is the lien retention provision – a creditor has the right to retain its lien until the earlier of a Chapter 13 discharge or payment in full under non-bankruptcy law.[4] The Erdmann court found that when a debtor tried to override this provision in a model plan, by inserting a special provision that a creditor’s lien was void upon confirmation, the attempt failed, and the model plan language and the Bankruptcy Code prevailed.[5] Accordingly, the lien was not avoided at confirmation as the plan had provided. While it is important to note that in the Erdmann case, the creditor did not receive notice of the plan in time to object, rendering the confirmation order void as to that creditor’s treatment, this argument may be successful on its own. If a special plan provision conflicts with model plan language that echoes the Bankruptcy Code, the model plan language should prevail.
Prompt and diligent review of Chapter 13 plans is the best and most dependable protection against any negative plan treatment. However, if a plan is confirmed with an illegal provision, your bankruptcy attorney may be able to mount a challenge to the order if the facts are favorable, even after the Espinosa decision.
If you have any questions on this matter, please contact Monette W. Cope, Esq. Monette is a junior partner in the bankruptcy department of Weltman, Weinberg & Reis Co., LPA located in the Chicago office. She can be reached directly at 312.253.9614 or via email at .
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[1] United Student Aid Funds, Inc. v. Espinosa, 130 S. Ct. 1367(U.S. 2010)
[2] 11 U.S.C. § 1330(a)
[3] Erdmann v. Charter One Bank (In re Erdmann), 2011 Bankr. LEXIS 845 (Bankr. N.D. Ill. Mar. 10, 2011)
[4] 11 U.S.C. § 1325(a)(5)(B)(i)(I)
[5] Erdmann v. Charter One Bank (In re Erdmann), infra.
