Central District Consumer Bankruptcy Attorney's Association

I think it will be very important for everyone who appears at these
status conferences to try to engage Judge Johnson in a conversation
regarding his views of chapter 13. I think we need to get more on the
record regarding his attitude toward chapter 13. We can then order
transcripts of those hearings. It may be possible to make the case that
based on his policies, orders, rulings and comments he is unable to
preside over chapter 13s because of his stated bias against them.
As I pointed out below, in his 42 page standing order he states that the
dismal rate of discharge in chapter 13 has lead Katy Porter to opine
that chapter 13 is a "failed social program." He has use her words and
not his own to express a conclusion that he seems to share. Based on
this and other comments and practices, it can be argued that he is
unable to make proper judgments based on the letter of the law and the
precedence that has gone before him, and that all of his orders and
rulings are colored by the conclusion that chapter 13 is a failed social
program. Again based on these comments, one may conclude that his goal
may be to persuade congress, attorneys and the public that chapter 13 is
a failed social program and that strict enforcement of this failed
program is required to weed out the viable from the nonviable cases.
Debtors must demonstrate to him that there has been a significant enough
change in circumstances to proceed in chapter 13. Even if they are able
to meet that burden, he may test the viability by continuing
confirmation hearings for months at a time to make sure the debtors are
able to make those payments. Furthermore, he will test viability by
setting up Status Conferences to monitor payments. If debtors make a
misstep such as making a mortgage payment a day late, he may dismiss the
chapter 13 case or order that the debtor must now make their mortgage
payments through the chapter 13 trustee who will be entitled to 5%. So,
it can be argued that based on his comments, rulings, policies and
orders his goal is to set an extremely high standard to confirm and/or
receive a discharge in chapter 13 than currently exists. This has the
effect of discouraging the practice of chapter 13 bankruptcy and it
further reduce the number of discharges for the time being so that,
eventually, practitioners may accept that only certain types of cases
will be viable case resulting in the debtor bar filing fewer chapter 13s
which should increase the number of filed cases that reach discharge. Is
anyone dizzy yet? This is the same kind of logic his former employer,
Judge Naugle, used to require 70-100% plans in Riverside. (The only
problem is that we have a means test to contend with now and chapter 20s
are less likely.)
By sua sponte ordering hearings that no party in interest has requested
and are not required under the Code, and by denying confirmation when no
one is objecting to confirmation, he is inserting himself where there is
no controversy. It appears that the reasoning for this is to "enforce or
implement court orders, or rules, or to prevent abuse of process." II
U.S.C. Sec. 105. In many of the case, there appears to be no reason to
believe that the orders or rules have been violated, or that debtors
have abused the process, yet he is still requiring that debtors prove
that they are complying with the letter of the orders or rules, and that
they have not in some way abused the process. It should be noted that he
does not seem to have these concerns in other chapters of bankruptcy but
that may be just because the discharge rates are much higher. There is
no mention in the Code of Status Conferences to monitor chapter 13
cases. There is nothing in the code that allows the court to order
status conferences so that he then may order modifications to confirmed
plans. It could be argument that those actions taken together may lead
to the argument that he is unable to fairly apply the law.
JUST TO BE CLEAR: These are just my conclusions and not those of
Borowitz & Clark, LLP. I make these comments based on my observations
alone and do not mean any disrespect to anyone.
Thank you,
Nancy B. Clark
100 N. Barranca Ave, Suite 250
West Covina, CA 91791
Tele: (626) 332-8600
Fax: (626) 332-8644
www.blclaw.com

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Thanks Jim. I will look for it. I was unable to attend the conference,
and I am at wits end with these Status Conferences. We received five all
at once. It is overwhelming.
I've been trying to research "abuse of discretion" and I come up with
nothing that would really help. I am attaching a copy of the Status
Conference Order if anyone wants to review it.
Thank you,
Nancy B. Clark
100 N. Barranca Ave, Suite 250
West Covina, CA 91791
Tele: (626) 332-8600
Fax: (626) 332-8644
www.blclaw.com

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Did you see Jenny Doling's objection in her materials from NACBA this last weekend? She does not cite any cases but does a good review of 105 arguing that 'the status conference is neither necessary nor a procedure that furthers the expeditious and economical resolution of the case.'

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As I have reported on occasion before, we are having "difficulty" with our chapter 13 cases assigned to Judge Johnson. It is apparent from his rulings and comments such as:
"As a statistical matter, chapter 13 cases fail considerably more often than they succeed. Only one in three debtors nationwide actually makes all the required plan payments which means two-thirds (67%) of chapter 13 cases fail nationwide. This rate of failure has "persisted for more than thirty years" and has led one professor to refer to chapter 13 as the "pretend solution...a social program that does not work as intended but is not critiqued or reformed because its flaws are hidden.'"
Then the Judge goes on to discuss the fact that in the Riverside Division the statistics are worst. His next observation is that,
"With 92% of chapter 13 failing in this division and two-thirds throughout the country, chapter 13 consumes considerable resources (in the form of attorney's fees, judicial resources and the finances and hopes of debtors) with limited results. One of the initial challenges for every bankruptcy court is to sort our the chapter 13 cases filed in bad faith from the cases filed in good faith."
Judge Johnson uses the reasons stated above to then spell out his rules regarding chapter 13 with a warning that if one does not strictly adherence to his rules the case will be dismissed. Some of his requirement are that debtors file a mortgage declaration documenting all payments made in the year before the filing. In addition, he has requirement regarding voluntary dismissals of chapter 13, prosecutions of motions to modify, etc.
His latest act to deal with the high failure of chapter 13 bankruptcy is to order Status Conferences (based on his powers under 11 U.S.C.Sec. 105(d)(1)):
"In the declaration, the debtors should state whether and when the debtors made all direct payments to creditors required under the terms of the plan. The declaration should state the total number of payments that have come due to each creditor and the total number of payments which the debtors have actually made. The body of the declaration should also include text stating the date of each post-petition payment, the amount of each payment and the party to whom each payment was made. Ideally, this data should be presented in a table in the body of the declaration. Appropriate backup documentation should be attached to the declaration which corroborates the payment information in the declaration and demonstrates the payments were made and/or that the obligations owed to the affected creditors have been satisfied (i.e. the debt has been fully paid) or are now current (i.e. because arrearage ever existed or all arrearages have been cured). Failure to timely provide the declaration and backup documentation may result in dismissal of the case at the status conference or conversion of the case to chapter 7."
He is issuing this Order Setting Status Conference for case that were filed as far back as 2009. The problem I have is that the debtors have no records to back up their claims that they are current with payments. We tried getting payment histories from the creditors and they are extremely hard to read and do not provide all the information the Court has requested. In one such case, the debtors have two mortgages and are 42 months into the plan. It will cost them $672 to order all the cancelled checks. Their plan payment is only $468. There is not enough time to file a Motion to Modify suspending at least one plan payment in order to comply with the Court's order. The debtors are angry because they were never told that they would have to produce all this documentation. I am also afraid he will dismiss case if he sees that mortgage payments were reduced and or cars were paid off and debtors never filed a Motion to Modify.
I have been tasked with filing an objection to the Order Setting Status Conference and from my reading of 11 U.S.C. Sec. 105, this falls within the Court's powers. In addition, the Court states that this type of requirement is contemplated in In re Lopez, 372 B.R. 40, 41 (9th Cir. BAP 2007), affirmed, 550 F.3d 1202 (9th Cir. 2008). Does anyone have any cases to recommend regarding this issue. I feel this order is onerous and is a trap for debtors to be dismissed before plan completion. I just cannot seem to formulate an objection that would get the attention of an appellate court.
Any help would be greatly appreciated.
Thank you,
Nancy B. Clark
Bprowitz & Clark, LLP
100 N. Barranca Ave, Suite 250
West Covina, CA 91791
Tele: (626) 332-8600
Fax: (626) 332-8644
www.blclaw.com

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