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Fourth Circuit Adopts Economic Unit Approach to Household Size

Family law matters can complicate a Chapter 13 bankruptcy proceeding when determining the debtor's household size.

So how should a debtor determine her household size when she shares custody of her children? In the Fourth Circuit Court of Appeals, she should use a fractional, "economic unit" approach.

Fourth Circuit: Absolute Priority Rule Lives

The Fourth Circuit Court of Appeals ruled on Thursday that the absolute priority rule still applies to individual debtors in possession filing for bankruptcy under Chapter 11.

This is a significant decision, because the Fourth Circuit is the first appellate court to consider the issue since the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).

Defendant's Sentence for Perjury in a Bankruptcy Case Upheld

In US v. Boulware, No. 09-5125, the Fourth Circuit faced a challenge to the district court's imposition of a 15-month sentence upon a defendant convicted of fraudulently making a declaration under penalty of perjury in a bankruptcy case

As the court wrote: "The indictment did not characterize Boulware's failure to disclose the prior bankruptcies as being part of a plan to avoid making payment to specific creditors.  Rather, the indictment focused on the fact that her nondisclosure constituted a false declaration made to the bankruptcy court under penalty of perjury."

Thus, defendant's sentence is affirmed as, the district court did not err by using U.S.S.G. section 2J1.3 rather than section 2B1.1 to set her offense level, as the gravamen of the charge was that defendant interfered with the bankruptcy court's administration of justice, not that she defrauded any creditors.  Furthermore, even assuming that the district court committed procedural error in failing to sufficiently explain the sentence imposed in light of the section 3553(a) factors, any error was harmless.     

Related Resource:

In In Re: Kirkland, No. 09-1379, the court addressed the issue of whether a bankruptcy court had jurisdiction to determine post-petition interest and collection costs to which the creditor was entitled as the result of a default on a student loan that occurred after Chapter 13 estate was closed and the debtor discharged.

As stated in the decision: "ECMC's claim to post-petition interest and collection costs is not a matter "under Title 11" nor is it a civil proceeding "arising in" or "related to" Kirkland's bankruptcy petition."  Also stated in the decision: "A claim to post-petition interest and collection costs is also not a matter "arising in" or "related to" a bankruptcy proceeding."

Thus, in reversing the district court's decision, the court held that the bankruptcy court lacked subject matter jurisdiction in the matter.

Related Resource:

United Rentals, Inc. v. Angell, No. 09-1209

District court's order affirming a bankruptcy court judgment allowing the bankruptcy trustee to avoid and recover certain payments made to plaintiff during the 90 days prior to the bankruptcy petition is affirmed as, regardless of whether the transfers set in motion a chain of events that resulted in the debtor's recoupment of the amounts paid, plaintiff did not show that such new value was given to the debtor as part of a contemporaneous exchange.     

Read United Rentals, Inc. v. Angell, No. 09-1209

Appellate Information

Argued: December 2, 2009

Decided: January 22, 2010

Judges

Opinion by Chief Judge Traxler

Counsel

For Appellant:  James Durling Fullerton, Fullerton & Knowles, PC

For Appellee:  James Bigelow Angell, Howard Stallings From & Hutson, PA

In Re: Jones, No. 08-2177

In defendants' Chapter 7 proceedings, district court's judgment that plaintiff-creditor had the right to repossess their vehicle is affirmed where: 1) district court did not err in holding that the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) eliminated the ride-through option; 2) plaintiff had authority to repossess the vehicle pursuant to the contract's ipso facto clause without giving the defendants prior notice of a right to cure the default under state law; and 3) plaintiff was not required to give defendants notice of default and right to cure before repossessing the vehicle as both parties agree that the event that triggered default, the filing of a bankruptcy petition, cannot be cured.      

Read In Re: Jones, No. 08-2177

Appellate Information

Argued: September 23, 2009

Decided: January 11, 2010

Judges

Opinion by Circuit Judge Shedd

Counsel

For Appellant:    Andrew Steven Nason, Pepper & Nason

For Appellee:  Stephen P. Hale, Hale Dewey & Knight, PLLC

In re: Crescent City Estates, LLC, No. 08-2367

28 U.S.C. section 1447(c) does not permit the imposition of legal fees on an attorney who erroneously removes a case from state to federal court. 

Read In re: Crescent City Estates, LLC, No. 08-2367

Appellate Information

Argued: October 29, 2009

Decided: December 7, 2009

Judges

Opinion by Circuit Judge  Wilkinson

Counsel

For Appellant:  Mark Jerome Friedman, DLA Piper US LLP

For Appellee:   W. Neil Eggleston, Debevoise & Plimpton, LLP