New Cases For the Week of March 19, 2001 - March 23, 2001

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March 22, 2001

Case

Court

Holding

In re Vitanovich
(DBN Subscription Required)
6th Cir. BAP Debts falling within the scope of 11 USC 523(a)(2)(A) are not limited to debts incurred through the use of fraudulent misrepresentations.  The statute encompasses all debts incurred through "actual fraud," which is broader than fraud debts arising from the use of factual misrepresentations. "Actual fraud" encompasses any deceit, artifice, trick, or design involving direct and active operation of the mind, used to circumvent and cheat another.
Cummings v. Cummings
(DBN Subscription Required)
11th Cir. Although federal law controls, state law does provide guidance in determining whether the obligation should be considered `support' under § 523(a)(5)." Id. To make this determination a bankruptcy court should undertake "a simple inquiry as to whether the obligation can legitimately be characterized as support, that is, whether it is in the nature of support. However, a court cannot rely solely on the label used by the parties, since it is likely that neither the parties nor the divorce court contemplated the effect of a subsequent bankruptcy when the obligation arose.  Although the various factual factors considered by bankruptcy courts are relevant to the inquiry, the touchstone for dischargeability under § 523(a)(5) is the subjective intent of the parties.

Since the divorce court in the debtor's prepetition divorce had indicated several times on the record that permanent alimony was denied on the basis that the debtor's wife could rely for support on a lump sum equitable distribution ordered by the divorce court, the bankruptcy court may have erred in finding that the equitable distribution obligation ($6.3 million dollars, payable in three installments) was not support, and thus was dischargeable. 

March 21, 2001

Case

Court

Holding

In re Taylor
(DBN Subscription Required)
2d Cir. The bankruptcy court may have erred in holding that a Chapter 13 debtor's pension plan contributions was not a reasonably necessary expense. A Chapter 13 debtor's monthly contribution to a pension plan may be a reasonably necessary expense (and thus excluded from disposable income) under certain circumstances.  The Court must evaluate such contributions on a case-by-case basis considering all factors, including : the age of the debtor and the amount of time until expected retirement; the amount of the monthly contributions and the total amount of pension contributions debtor will have to buy back if the payments are discontinued; the likelihood that buy-back payments will jeopardize the debtor's fresh start; the number and nature of the debtor's dependants; evidence that the debtor will suffer adverse employment conditions if the contributions are ceased; the debtor's yearly income; the debtor's overall budget; who moved for an order to discontinue payments; and any other constraints on the debtor that make it likely that the pension contributions are reasonably necessary expenses for that debtor.  
In re Burks
(DBN Subscription Required)
11th Cir. A debtor/graduate student, who received a $10,000/year stipend conditioned on his agreement to teach after graduation at an "other-race university," was precluded from discharging his obligation to repay the stipend if he failed to fulfill his teaching responsibility.  The debtor contended unsuccessfully that the stipend was not an "educational benefit" within the meaning of 11 USC 523(a)(8), but was instead an effort to address racial inequity.  

March 20, 2001

Case

Court

Holding

In re Popkin & Stern
(DBN Subscription Required)
8th Cir. BAP A co-owner's claim for allocation of the proceeds of an asset garnished by the bankruptcy trustee of the debtor in connection with judgments issued by the bankruptcy court was not barred by the Rooker Feldman doctrine, since the relief sought by the co-owner would not have collaterally attacked the relief the trustee sought in the garnishment proceeding.
In re Gaston & Snow
(DBN Subscription Required)
2d Cir. Because federal choice of law rules are a type of federal common law, which federal courts have only a narrow power to create, bankruptcy courts confronting state law claims that do not implicate federal policy concerns should apply the choice of law rules of the forum state.

March 19, 2001

Case

Court

Holding

In re Booth
(DBN Subscription Required)
6th Cir. BAP A debtor's right to a profit-sharing payment from his employer was sufficiently rooted in the debtor's prepetition past as to become property of his bankruptcy estate even though the right was contingent and unenforceable on the petition date, since the employer had not yet calculated profits.
 
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