Creditor Trying To Collect After Bankuptcy Discharge: Taggart v. Lorenzen

A recent Supreme Court decision gives some further insight into what conduct constitutes a violation of a discharge order.  Normally, the discharge order from the Court prevents creditors from trying to collect discharged debts from the debtors.  Doing so can lead to civil contempt.  But what happens if a creditor does not believe its debt was discharged?  Does it matter if the creditor's belief is unreasonable?  Is the standard objective or subjective?

The Supreme Court of the United States recently addressed these issues in the case of Taggart v. Lorenzen.

Justice Breyer delivered the opinion of the Court.


At the conclusion of a bankruptcy proceeding, a bankruptcy court typically enters an order releasing the debtor from liability for most prebankruptcy debts.  This order, known as a discharge order, bars creditors from attempting to collect any debt covered by the order.  The question presented here concerns the criteria for determining when a court may hold a creditor in civil contempt for attempting to collect a debt that a discharge order has immunized from collection.  

The Bankruptcy Court, in holding the creditors here in civil contempt, applied a standard that it described as akin to “strict liability” based on the standard’s expansive scope.  It held that civil contempt sanctions are permissible, irrespective of the creditor’s beliefs, so long as the creditor was “aware of the discharge” order and “intended the actions which violate[d]” it.  The Court of Appeals for the Ninth Circuit, however, disagreed with that standard.  Applying a subjective standard instead, it concluded that a court cannot hold a creditor in civil con-tempt if the creditor has a “good faith belief ” that the discharge order “does not apply to the creditor’s claim.”  That is so, the Court of Appeals held, “even if the creditor’s belief is unreasonable.”   

We conclude that neither a standard akin to strict liability nor a purely subjective standard is appropriate.   Rather, in our view, a court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct. In other words, civil contempt may be appropriate if there is no objectively reasonable basis for concluding that the creditor’s conduct might be lawful. [Citations Omitted]
--- So, if you have been contacted by a creditor following the entry of a discharge order, you should contact a competent bankruptcy attorney to review your case, and determine whether or not civil contempt proceedings are warranted.

Bankruptcy and Tax Day, April 15

TAX RETURN TIME, Now What?
 
Chapter 13. 

I just received a notice from the Chapter 13 Trustee in the Jacksonville Division of the Middle District of Florida reminding me that taxes are due to be filed no later than April 15.  Of course, we all know taxes are due on the 15th.  So what's the big deal?

The Trustee was pointing out that a copy of the tax return, or a copy of the extension form, is due to the Trustee by the end of the day on the 15th.  The greatest impact this will have is on the debtor awaiting confirmation of their Chapter 13 Plan.  The Trustee will not agree to allow confirmation unless they have a copy of the tax return, or extension form, as filed with the Internal Revenue Service (IRS).

I suspect this will also effect confirmed cases, as each debtor is required to submit either a copy of the return, or a copy of the extension, as filed with the IRS, or a affidavit stating he or she was not required to file a tax return for the current year.

Chapter 7.

While I have not directly received a notice recently from the Chapter 7 Trustees reminding me to notify my clients, each of the Chapter 7 Trustees makes it well known at the Meeting of Creditors, and through written correspondence, that they need a copy of the tax return when filed, and not to spend any of funds from a tax refund until after notifying the Trustee, as some of the tax refund proceeds may me property of the bankruptcy estate.

Not In Middle District of Florida?

This is what happens in the Middle District of Florida.  If you have filed bankruptcy in another jurisdiction, or are considering filing bankruptcy, you should contact a local competent bankruptcy attorney practicing within your jurisdiction regarding your tax return and its effects on your bankruptcy.

Best States To Be Rich Or Poor

 I found the following information from Hubwallet interesting:
 

Best States to Be Poor from a Tax Perspective			Worst States to Be Poor from a Tax Perspective
1	Delaware		47	Indiana
2	Alaska		48	Pennsylvania
3	Montana		49	Hawaii
4	Utah		50	Illinois
5	South Carolina		51	Washington

For the full report and to see where your state ranks, please visit:
http://wallethub.com/edu/best-states-to-be-rich-poor-from-a-tax-perspective/11257/    

Key Stats:

• The overall tax burden for low-income earners is three times higher in Washington than in Delaware.
   
• The overall tax burden for middle-income earners is three times higher in New York than in Alaska.
   
• The overall tax burden for high-income earners is four times higher in New York than in Alaska.

Best States to Be Rich from a Tax Perspective			Worst States to Be Rich from a Tax Perspective
1	Alaska		47	Vermont
2	Nevada		48	Maryland
3	Wyoming		49	Illinois
4	Tennessee		50	Connecticut
5	Florida		51	New York

Court News On Government Shutdown as of January 8, 2019

News fron the Court's website.

During the partial shutdown of the federal government, which began Dec. 22, 2018, the Judiciary has continued to operate by using court fee balances and other “no-year” funds. The Administrative Office of the U.S. Courts has revised its original estimate and now is working toward the goal of sustaining paid operations through Jan. 18, 2019.

In an effort to achieve this goal, courts have been asked to delay or defer non-mission critical expenses, such as new hires, non-case related travel, and certain contracts. Judiciary employees are reporting to work and currently are in full-pay status.

If existing funds run out and new appropriated funds do not become available, the Judiciary will operate under the terms of the Anti-Deficiency Act, which allows “essential work” to continue during a lapse in appropriations

Government Shutdown: How is the Bankruptcy Court Effected by the Shutdown?

 

The most prominent item on the top of the news each night is the continued government shutdown. As of the writing of this post, it has been shut down for several hours short of 14 days. 

While this has directly effected many federally funded areas of our country, there are others that are not as immediately impacted, at least, from a public or user perspective.

The Federal Courthouses remain open and doing business, but probably with some impact on internal procedures that will cause some delays. Many, but not all, bankruptcy courthouse websites have a statement regarding the government shutdown. I practice in Florida. The Middle District of Florida and the Northern District of Florida state

“Despite the government shutdown, the federal judiciary will remain open and can continue operations for approximately three weeks, through January 11, 2019.”

However, the Southern District of Florida's website is silent regarding information related to the shutdown.

In the Middle District of Florida, there is also an administrative order (FLMB 2018-4) stating Federal agencies effected by the government shutdown will have have 7 days following the end of the shutdown “to take record action”.  So the court recognizes other Federal Agencies may not have the staff in place to properly give legal responses, or file necessary papers related to individual bankruptcy cases.

Should the government shutdown continue through January 11, 2019, you should look to your court's website to see what effects the shutdown will have on the Court in your district.

Of course, should you have any questions about this, or any other bankruptcy related questions, you should contact a local bankruptcy attorney for advice.

Amendments to Bankruptcy Laws Effective December 1, 2018

All In Favor?

It seems like the Federal Rules of Bankruptcy Procedure are amended every year at the recommendation of an advisory committee since 2006 after the last major change in bankruptcy laws in 2005.  For 2018, there were some meaningful amendments, however, unlike previous years, the changes will not effect my clients much, in that the amendments dealt with, for the most part, appeal and electronic filing laws. 

So, how does all this happen?  The amendments address issues identified by a committee, called an Advisory Committee.  The committee is made up of federal judges, bankruptcy attorneys, and others. The rule amendments are approved by the U.S. Supreme Court.

Key Rule Amendments Have A Certain Appeal. This year almost all of the rule amendments are fairly technical.  If you are a bankruptcy rules geek, like myself, then you will want to read the following:

• Rule 3002 has been amended to address procedures for handling payment changes in home equity lines of credit in consumer cases.
• Rule 5005 has been amended to require electronic filing absent good cause and to make that a national rule. As the Advisory Committee commented, “Electronic filing has matured” and “The time has come to seize the advantages of electronic filing by making it mandatory in all districts, except for filings made by an individual not represented by an attorney.” Almost all filings are electronic now anyway so this is more of the rule reflecting current practice than requiring actual changes.
• Rule 7004(a) has been tweaked to pick up the accurate cross-references to Federal Rule of Civil Procedure 4.
• Rule 7062 applies Federal Rule of Civil Procedure 62 to adversary proceedings but clarifies that the stay of proceedings to enforce a judgment is only for 14 days in an adversary proceeding and not the 30 days in a district court case.
• Rule 8002 has been amended to clarify, among other items, time requirements for filing a notice of appeal.
• Rule 8006 now allows the bankruptcy court to file a statement on the merits of direct certification to the court of appeals when the parties make a joint certification.
• Rules 8007 and 8010 discard the term “supersedeas bond” and instead use “security provided to obtain a stay of judgment” to account for changes to Federal Rule of Civil Procedure 62.
• Several rules, including Rules 8011, 8013, 8015, 8016, and 8022 have been amended to reflect electronic filing and to limit the size of briefs using word counts rather than page limits.
• Rule 8017 has been revised to address amicus briefs and their potential impact on the disqualification of a judge.
• Rule 8018.1 has been added to allow a district court to treat an appeal from a bankruptcy court judgment — if the district court concludes the bankruptcy court lacked constitutional authority to enter the judgment — as proposed findings of fact and conclusions of law.
• Rule 9025 has been revised to reflect the different types of security for appeals and their providers.

 I know, for most people this is not very exciting stuff.  If you would like to know more about the amendments or have any specific questions, I suggest you contact your local bankruptcy attorney.

Public Service Announcement from FBI: Foreign Cyber Actors Target Home and Office Routers and Networked Devices Worldwid

Summary

The FBI recommends any owner of small office and home office routers power cycle (reboot) the devices. Foreign cyber actors have compromised hundreds of thousands of home and office routers and other networked devices worldwide. The actors used VPNFilter malware to target small office and home office routers. The malware is able to perform multiple functions, including possible information collection, device exploitation, and blocking network traffic.

Please see https://www.ic3.gov/media/2018/180525.aspx for the complete bulletin.