Judge Duncan Keir of the U.S. Bankruptcy Court for the District of Maryland has taken a differing approach to the issue of how the automatic stay affects the ability of a creditor to foreclose when a debtor is ineligible to file for bankruptcy.

We have previously discussed an opinion from the Bankruptcy Court for the Southern District of Texas in which 5 debtors had their petitions stricken because they did not satisfy the eligibility requirements for bankruptcy http://www.texaslawyerblog.com/index.php?title=failure_to_comply_with_credit_counseling&more=1&c=1&tb=1&pb=1 We later followed up on this issue when Judge Isgur denied a motion to reconsider filed by Debtors Elias and Diane Salazar. http://www.texaslawyerblog.com/index.php?title=the_automatic_stay_does_not_exist_when_a&more=1&c=1&tb=1&pb=1

After the debtors filed their petition, their home was foreclosed on under state law. The resulting issue whether the filing of the petition invoked the automatic stay under Section 362 of the Bankruptcy Code, thus rendering the foreclosure voidable.

Judge Isgur decided that the legal question is this: "Did Congress intend to impose an eligibility requirement on putative debtors, but also intend for an ineligible person to receive the benefits of the automatic stay?" Judge Isgur answers the question by stating: "It is implausible to believe that Congress specifically identified people to exclude from the bankruptcy process, yet permitted those same people to benefit from bankruptcy's most powerful protection: the automatic stay."

In the original opinion, the Court stated that when the petition was stricken, it was made clear that no case existed, and therefore the stay was never in force. Judge Isgur acknowledged that declaring the automatic stay void ab initio would result in the Debtors losing their homestead, but held that the relevant statutory language leaves no room for discretion.

Judge Keir approached the problem differently and, in the process, wrote that Judge Isgur's opinion in Salazar was a minority position that could not be reconciled with a plain reading of the code provisions involved.

On February 2, 2006, Tracey Brown, the debtor, filed a voluntary petition along with a request for waiver of the credit counseling requirement. On February 9, the court entered an order finding that the request did not comply with 11 U.S.C. ? 109(h)(3)(A) and dismissed the case. On February 22, the debtor filed a motion to vacate the order and reinstate the bankruptcy on the basis that the debtor had received the required credit counseling on February 16. A creditor opposed the motion, and the court denied it.

The wrinkle in this case was that between the Petition Date and the date the court dismissed the case -- in other words, during the period when the request for a waiver of the counseling requirement was still pending -- the creditor had proceeded with a foreclosure sale of the debtor's home even though it had been advised of the bankruptcy filing. The court held a show cause hearing on whether the sale violated the automatic stay on April 4.

At the show cause hearing, the creditor argued that because the debtor hadn't received credit counseling, and because the waiver request did not appear to meet statutory requirements, it concluded that the debtor was ineligible to file and, therefore, the stay was not in force. Judge Keir determined that the foreclosure was void and that the debtor was entitled to consequential, but not punitive damages.

Judge Keir took aim at Judge Isgur's opinion in Salazar. Although the opinion embarks on an extended discussion of the interplay among various code provisions that seems geared mainly toward picking apart the Salazar opinion, the gist of Judge Keir's reasoning is that a creditor is not the court. Thus, a creditor cannot unilaterally decide whether a debtor is an eligible filer or not. Only the bankruptcy court can determine whether a debtor has met the statutory requirements for eligibility, and, in situations like the one presented in this case where eligibility might be questionable, the stay is in force until the court says otherwise.

Judge Keir's opinion is available at http://207.41.17.84/images/opinions/632827801897500000.pdf

Mac

At times most of us have spent money on things we do not need, and have been victims of impulse buying. Once the thrill is gone all that we are left with is our buyers remorse. Now the American Psychological Association is giving recognition to a disorder known as oniomania.

It is "a form of self medication against depression, shopping, etc. Unfortunately, it's usually followed by a strong sense of guilt or self directed anger...the signs of feeling or being out of control, which can cause a merry go round of shopping, depression, shopping, etc."

The full article will be available on the Web for a limited time:

http://frugalliving.about.com/cs/consumeraddiction/a/071800.htm

Pam