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A panel of the United States Court of Appeals for the Sixth Circuit recently published an opinion reversing a bankruptcy court’s decision to refuse a Chapter 7 debtor’s request to reopen his bankruptcy case nearly four years after he was granted a discharge. The debtor had asked the court to reopen his bankruptcy so that he could address judgment liens against his home that were not properly avoided during the bankruptcy, possibly by mistake.

dollarsAlthough the debtor could easily have removed the liens during the bankruptcy, none of his creditors objected to reopening the bankruptcy, and the code specifically allows for the reopening of a case to address the issue, the bankruptcy judge refused the debtor’s request, suggesting instead that the debtor could possibly obtain relief by suing his attorney for malpractice. The appellate panel acted more humanely and sympathetically than the bankruptcy judge, whom they reversed.

Ultimately allowing the case to be reopened, the panel remembered that bankruptcy laws exist to help debtors address their financial issues and move forward in life, while allowing creditors a fair chance to stake their claims if they choose. Since no creditors objected to the debtor’s request, the bankruptcy judge could not justify refusing the debtor’s request.

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A federal bankruptcy appellate panel recently released an opinion addressing an appeal filed by a pro se debtor who challenged the dismissal of his case. The appellate court found that it did not have jurisdiction to hear the man’s claims on appeal, but it addressed them anyway, holding that a federal bankruptcy judge did not abuse his discretion by dismissing the man’s bankruptcy case after his failure to submit the required accompanying documentation and schedules to the court after filing for bankruptcy.

Law BookThe Debtor Attempted To File for Bankruptcy Without the Help of an Attorney

The appellant in the case of In re Dan Lee was a man who filed a chapter 7 bankruptcy earlier this year, and he did so without hiring an attorney to prepare his bankruptcy petition. As a result, he filed the petition without ensuring that the required accompanying documentation was submitted with his filings.

After the initial filing, the court notified the man that he needed to file certain schedules and declarations with the court within a specified amount of time. The man did not comply with the request, and his case was dismissed after the deadline set by the court had expired.

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A panel of the U.S. Sixth Circuit Court of Appeals recently affirmed a bankruptcy court’s ruling to deny the discharge of a couple’s debts that had been requested as part of a Chapter 7 bankruptcy petition they filed in 2008 with the help of their attorney. The appeals court ruled that the decision by the bankruptcy court to deny the debtor’s requested discharge because of their failure to disclose their interests in several trusts, corporations, annuities, and other pieces of property owned by others was a legitimate response to the debtors’ apparent attempt to deceive the court as to the nature of their assets and liabilities. The attorney who prepared the initial petition had also been implicated in the ruling of the bankruptcy court and sanctioned for his role in concealing the debtors’ assets, although the debtors were held to their sworn statements and unable to pass full responsibility for the inaccuracies onto their former attorney.

Legal BooksDebtors Fail to Reveal Several Pieces of Property in 2008 Bankruptcy Petition

The debtors in the case of In re Blasingame are a married couple who sought the assistance of a bankruptcy attorney to file a Chapter 7 bankruptcy petition to address their debts in 2008. The attorney prepared a petition, the related schedules, and a Statement of Financial Affairs for the debtors, which were accompanied by affidavits signed and endorsed by the debtors under oath that swore to their knowledge and understanding of the information contained in the schedules, as well as their truthfulness. Throughout the bankruptcy process, the creditors challenged the statements and claims of the debtors, eventually demonstrating to the bankruptcy court that the debtors had knowingly made false statements on their petition.

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In a revised opinion recently released by the First Circuit U.S. Court of Appeals, the court affirmed a bankruptcy court’s decision to dismiss a man’s personal bankruptcy because he “committed a false oath” by failing to disclose a retirement account in his bankruptcy filings. Although the man did include the value of the account in other filings, the First Circuit accepted the district court’s conclusion that the omission was knowing, fraudulent, and material to the case. With the dismissal of his bankruptcy petition confirmed, the debtor will be unable to discharge any of his debts through a bankruptcy proceeding anytime soon.

CourtroomThe Debtor Supplies His Attorney with Information for All Accounts

The debtor in the case of Premiere v. Crawford is a man who petitioned the bankruptcy court for relief from his excessive debt. His attorney prepared a bankruptcy petition and the required schedules, which were affirmed as true by the debtor and submitted to the court. Upon reviewing the Petition and schedules, the appellee, a creditor who holds a judgment against the debtor for over $800,000, noticed that the debtor had failed to list the existence of a “Cash Balance Plan” under his retirement accounts. Although the value of the account was included under the total for “Retirement Accounts” in the debtor’s disclosures, the creditor alleged that he had intentionally and fraudulently excluded the name of the plan from his disclosures and requested that his case be dismissed as a result of the false oath.

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The United States First Circuit Court of Appeals recently published an opinion affirming a lower court’s ruling to dismiss a Chapter 11 bankruptcy petition filed by a man and his wife after confirming that the debtor knowingly made false statements under oath when petitioning for the bankruptcy. Since the bankruptcy code strictly requires debtors to be forthcoming with their assertions to the court, the debtor will be denied any bankruptcy relief because of his false statements, including for debts that he reasonably could have expected to be discharged had he been honest in his prior statements. As a result of this final appellate ruling, the debtor will not be able to seek the discharge of the debts that the bankruptcy initially attempted to address.

CrossiesDebtor Seeks Bankruptcy Protection With $6 Million in Assets and $10 Million in Debts

The debtor at issue in the case of Hannon v. ABCD Holdings, Inc. was the owner of ABCD Holdings, who sought bankruptcy protection for his wife and him in 2012, alleging that he owed over $10 million in debts and had less than $7 million in assets on hand. According to the facts discussed in the appellate opinion, during the course of the proceedings, a minority shareholder in ABCD Holdings exercised an option to purchase a controlling stake in the company, since he suspected that Hannon was mismanaging the company’s assets. After controlling ownership of ABCD Holdings switched to the new owner, Hannon continued to run the day-to-day operations of the company for several months, until the new owner obtained an order forbidding him from doing so.

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The United States Bankruptcy Appellate Panel for the Eighth Circuit recently released a decision affirming a lower federal bankruptcy court’s decision permitting a bankruptcy debtor to discharge a debt he owed to a county jail for incarceration costs as part of his Chapter 7 bankruptcy. Representatives of the county to which the debt was owed appealed the bankruptcy court’s ruling, but the appellate panel’s decision favored the debtor, holding that federal bankruptcy law allows the discharge of the debts. Based on the recent appellate ruling, the debt owed by the man for his incarceration costs will remain discharged, and he has no obligation to repay it.

Jail FenceThe Debtor Attempts to Discharge a $3,500 Debt for Incarceration Expenses Through Bankruptcy

The debtor in the case of County of Dakota v. Milan was a man who sought debt relief through a Chapter 7 bankruptcy proceeding in 2014. Among other debts and obligations, the debtor requested the discharge of a $3,500 debt that he owed to the appellant, the Dakota County Sheriff’s Office, for the costs of his 179-day incarceration at the Dakota County Jail. Like many jails and prisons throughout the country, the appellant charges inmates daily fees to contribute toward the expenses of their incarceration. During the initial bankruptcy proceedings, the court ruled that the unsecured debt owed to the appellant should be discharged, leading the Sheriff’s Office to file an appeal.

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A popular online meme that came out earlier this year pointed out that over 500,000 Americans declare bankruptcy because of medical bills each year, and it was often used to criticize the medical and financial institutions of the United States. According to a recent fact check performed on the claims behind the meme, the numbers may not be exact but appear reasonably accurate. The larger issue surrounding the viral spread of the meme online is the misguided criticism of the United States bankruptcy code. In reality, many Americans are able to use U.S. bankruptcy protections to regain control of their finances after incurring excessive medical debt that was necessary to save their own life or the life of a loved one.

StethoscopeMore Personal Bankruptcies Are Filed Over Medical Debts Than Any Other Type of Debt

Putting the relatively insignificant dispute over the exact numbers aside, both the source of the popular meme and the fact checkers who wrote the article agree that more personal bankruptcies are filed to address medical debt in the U.S. each year than over any other source of debt. The reasons for this vary, but medical debts may result in so many bankruptcy filings because they are rarely secured by collateral, can increase very quickly to reach levels that are impossible for many debtors to pay off, and are often incurred while patients are suffering from medical problems that prevent them from working. According to a 2013 congressional report cited in the article, over 640,000 medical bankruptcies were filed in American courts in 2013. Many of these cases resulted in large amounts of medical debt being discharged.

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The United States Court of Appeals for the Seventh Circuit recently released a decision allowing creditors to make claims in a debtor’s bankruptcy case for the repayment of debts that would otherwise be time-barred and ineligible for collection through a standard debt collection lawsuit. The Seventh Circuit decision was in line with other federal appellate court rulings that declined to apply the protections of the federal Fair Debt Collection Practices Act (FDCPA) to creditors’ actions within a debtor’s bankruptcy. Although the recent ruling allows creditors to pursue stale claims without violating the FDCPA, it appears the creditors will still be unable to collect on the stale claims as long as the debtor or their legal representative objects to the validity of the debt properly in the bankruptcy proceeding.

GavelMost Federal Bankruptcy Courts Will Allow Creditors to Claim Stale Debts Without Violating Federal Law

The most important point of the ruling in the case of Owens v. LVNV Funding, LLC was the court’s finding that creditors are not in violation of the FDCPA by adding a claim for a stale debt to a debtor’s bankruptcy. The court focused on the specific protections of the FDCPA to find that a creditor would not be violating federal law by including a stale debt claim in a bankruptcy, since a bankruptcy is not a collection case per se, and the FDCPA was not enacted to prevent creditors from bringing claims to the attention of a bankruptcy court, even if those claims are ultimately not recoverable by the creditor.

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Across the United States, varying factors result in statewide and regional differences in the number of bankruptcies filed. A recently discussed statistical analysis of per capita personal bankruptcy filings has revealed that most of the states with the highest rates of personal filings are located in the South, the Midwest, and the Great Lakes regions. Although many factors contribute to each state’s per capita rate of personal bankruptcy filings, the existence of beneficial state debt protection laws appears from the data to correlate negatively with the per capita filing rate.

Which States Have the Highest Personal Bankruptcy Rates?Money

A recent report on the per capita filing rate for personal bankruptcies between April 2015 and March 2016 demonstrates that the states with the very highest personal bankruptcy rates are clustered in the South, with key Great Lakes states close behind. According to the report, Tennessee is the state with the highest rate of personal bankruptcies, with 553 filings for every 100,000 residents. Indiana and Kentucky are both in the top 10, with 387 and 345 filings for every 100,000 residents, respectively. The national median over that time period was 224 filings per 100,000 people.

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The United States Seventh Circuit Court of Appeals recently released a decision in a bankruptcy appeal that affirmed a lower court’s ruling that voided a debtor’s pre-filing transfer of a farm to her father, allowing the trustee to take partial possession of the property. The debtor’s claim that the property was given to her father in exchange for his cessation of unrelated legal proceedings against her was rejected by the appellate court as unjustified and not reasonably related to the value of the asset that was transferred before the debtor filed for bankruptcy.

FarmFourteen Months Before Debtor’s Bankruptcy, She Transfers a Farm to Her Father Without Compensation

The appellant in the case of Griswold v. Zeddun was a Chapter 7 bankruptcy debtor who appealed the bankruptcy court’s decision to avoid the transfer of a farm to her father before she filed for bankruptcy. The lower courts agreed that the transfer of the property was a “fraudulent transfer” under the meaning of the bankruptcy code, since the debtor was not adequately compensated for the property, giving the appearance that the transfer was made to allow the debtor and her father to avoid the jurisdiction of the bankruptcy court. The debtor had claimed that the transfer was legitimate because her father assumed the debt on the property, and he agreed to stop pursuing an unrelated legal claim against her as compensation for the remaining equity in the property.

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