.jpg)
non-consumer debt & (no) means test
In a message dated 5/6/2010 9:23:59 AM Pacific Daylight Time,
jim@wsrlaw.net writes:
Jeff's e-mail makes lots of excellent points. Remember that mortgages onrental or investment property are "non-consumer debt". I have filed two
cases in the last month for above-median income debtors where we rushed toget the case filed before a rental property was foreclosed to ensure that the
non-consumer debt exceeded the consumer debt (which included the debtors'residence). If we had waited until the rental property was foreclosed, the
debtors would have been ineligible to file.
Also, the point raised by Jim King leads back to the oft-asked question asto whether the UST can (and will) file a Motion to Dismiss "for cause"
under 707(a) if a non-consumer debtor has a large surplus of income over
expenses. I remember Peter Anderson at a CDCBAA seminar several years agosaying that his office would consider filing such a Motion in an appropriate
(i.e. egregious?) case. My review of the limited 707(a) cases says he'd lose,
and I've yet to hear of any such Motion filed in this District.
Jim
James R. Selth
Weintraub & Selth, APC
12121 Wilshire Boulevard, Suite 1300
Los Angeles, California 90025
Telephone: (310) 207-1494
Facsimile: (310) 442-0660
E-Mail: _jim@wsrlaw.net_ (mailto:%20vinnet@wsrlaw.net)
NOTICE TO RECIPIENT: THIS E-MAIL IS MEANT FOR ONLY THE INTENDED RECIPIENTOF THE TRANSMISSION AND THIS COMMUNICATION IS INTENDED TO BE PRIVILEGED BYLAW. IF YOU RECEIVED THIS E-MAIL IN ERROR, ANY REVIEW, USE,
DISSEMINATION, DISTRIBUTION, OR COPYING OF THIS E-MAIL IS STRICTLY PROHIBITED. PLEASE
NOTIFY US IMMEDIATELY OF THE ERROR BY RETURN-E-MAIL AND PLEASE DELETE THIS MESSAGE FROM YOUR SYSTEM. THANK YOU IN ADVANCE FOR YOUR COOPERATION.
Of James T. King
Sent: Thursday, May 06, 2010 9:13 AM
To: cdcbaa@yahoogroups.
Subject: RE: [cdcbaa] Re: non-consumer debt & (no) means test
Your last point is well taken and I certainly dont disagree. I too, have
filed numerous non-consumer cases and I also agree you must make it very
clear in the schedules and not just on the B22 that it is a non-consumer
case. I have seen cases where there is surplus income that would tank a
consumer case and there is nothing available to the OUST in 707(b) to challenge
the filing.
Of jbsesq1965
Sent: Thursday, May 06, 2010 9:08 AM
To: cdcbaa@yahoogroups.
Subject: [cdcbaa] Re: non-consumer debt & (no) means test
Jovan:
Yes, and I agree with Ken that it happens all the time. I think that manypractitioners overlook this important method of avoiding the means test
altogether. I have had several clients come to me after being told that they
did not qualify for a CH7 who clearly were non-consumer debtors.
Ken Lau of the OUST spoke at last year's means test CDCBAA event and
pointed out that when you claim a debtor is non-consumer, you need to make it
easy for the OUST to look at the case and see how you come to that
conclusion. It is a "red flag" for the OUST analyst if you say a case os non-consumer
but there is no mention of business activity in the petition + schedules
and particularly questions 18+++ in the SFA.
My practice, when filing a non-consumer case is to make the initial filingOOZE "business". Be verbose in your explinations of how and when debt wasincurred on schedule F. "Credit card used primarily for purchases relatedto debtors XYZ business from June 2002 to September 2009 when business
failed", for instance. Of course, it has to be true, to withstand a challenge,
but ask the right questions and really have clients dig into their recordsand you might be surprised what debts are justifiable as not incurred
"primarily for a personal family or household purpose".
Finally, as Ken mentioned, don't forget that taxes have been determined,
by judicial opinions, to be non-consumer, and POSSIBLY some or all studentloans. The student loan case, whose name I cannot recall, said that to theextent a st loan was used to pay for room and board, its a consumer debt. By
implication, as read that case, to the extent the loan was used to pay for tuition and books it is not consumer. The key is vigorously quiz the
clients on what they used the money for and make them do the best to break it
out, then explain your facts clearly on the schedules.
I have filed dozens of non-consumer cases using these strategies, and haveyet to have an OUST challenge, or even a follow up inquiry, and a couple
of those cases would have been VERY close calls if challenged.
Last note on this subject, as I read 707(b) if you prove you have a non
consumer debtor, I don't know that the OUST can challenge your CH7 based on
traditional (non BAPCEPA) substantial abuse grounds. I could be wrong on
this but the code, 707(b) seems to say just that. Does anyone disagree with me
on this last point?
Hope this helps.
-Jeffrey B. Smith**
CURD, GALINDO & SMITH, L.L.P.
301 East Ocean Blvd. #1700
Long Beach, CA 90802
(562) 624-1177
(562) 624-1178 fax
(310) 993-6560 cellular
_jsmith@cgsattys.jsm_ (mailto:jsmith@cgsattys.com)
www.expertbk.www
**Certified By The State Bar
Of California As A Specialist
In Bankruptcy Law
Albeit pre-BAPCPA, the 9th Cir decision in Padilla says that bad faith isnot cause to dismiss under Section 707(a).
Law Office of Eric Alan Mitnick
21515 Hawthorne Boulevard, Suite 1080
Torrance, CA 90503
(310) 792-5864; 792-5866 (fax)
MitnickLaw@aol.com
Although this email and any attachments are believed to be free of any
virus or other defect that might affect any computer system into which it is
received and opened, it is the responsibility of the recipient to ensure
that it is virus free and no responsibility is accepted by the sender for any
loss or damage arising in any way from its use.
The information contained in this email message and any attached files maybe privileged, confidential and protected from disclosure. If you are notthe intended recipient, any dissemination, distribution or copying is
strictly prohibited. If you think that you have received this email message in
error, please notify the sender by reply email, and delete the email message
you received and all of the attached files.
In a message dated 5/6/2010 9:23:59 AM Pacific Daylight Time,
jim@wsrlaw.net writes:
Jeff's e-mail
makes lots of excellent points. Remember that mortgages on rental or
investment property are "non-consumer debt". I have filed two cases in
the last month for above-median income debtors where we rushed to get the case
filed before a rental property was foreclosed to ensure that the non-consumer
debt exceeded the consumer debt (which included the debtors' residence).
If we had waited until the rental property was foreclosed, the debtors would
have been ineligible to file.
Also, the
point raised by Jim King leads back to the oft-asked question as to whether
the UST can (and will) file a Motion to Dismiss "for cause" under 707(a) if a
non-consumer debtor has a large surplus of income over expenses. I remember Peter Anderson at a CDCBAA seminar several years ago saying that his
office would consider filing such a Motion in an appropriate (i.e. egregious?)
case. My review of the limited 707(a) cases says he'd lose, and I've yet
to hear of any such Motion filed in this District.
Jim
James R.
Selth
Weintraub
& Selth, APC
12121
Wilshire Boulevard, Suite 1300
Los Angeles,
California 90025
Telephone: (310)
207-1494
Facsimile:
(310) 442-0660
The post was migrated from Yahoo.