In the past, Bankruptcy courts have allowed real estate sales certain state stamp or transfer taxes exemptions even if the sale took place prior to confirmation of a reorganization plan. This is based on a broad interpretation of 11 U.S.C. §1146(a) of the Bankruptcy Code, and is usually done to expedite bankruptcy cases. This practice will no longer be acceptable due to a recent case.

On June 16, 2008, in Florida Department of Revenue v. Piccadilly Cafeterias Inc., the Supreme Court ruled that §1146(a) does not allow for real estate transactions that take place prior to confirmation of a reorganization plan to be exempt from state stamp taxes.

Justice Thomas wrote the opinion for the Court. He based his decision upon on two attributes of §1146(a), its ambiguous language, and the subchapter heading (“Postconfirmation Matters”) under which §1146(a) appears.

Justice Thomas noted that §1146(a) provides that the exemption applied to “the issuance, transfer, or exchange of a security, or the making or delivery of an instrument of transfer under a plan confirmed under section 1129…”

Starting with the issue of ambiguity, both sides disagreed upon the meaning of the phrase “under a plan confirmed under”. The Court agreed, that “under a plan confirmed” should be read to mean “with the authorization of.” In following with this, the Court said that a transfer, which takes place before confirmation plan, cannot be said to have the “authority” of the plan.

Piccadilly had argued that the language actually meant “in accordance with.” But Justice Thomas added that “if the Court were to rule in favor of Piccadilly that it would result in an unfair burden on the states and courts because by obligating states to exempt such sales from taxation, the states and the courts would be saddled with the unnecessary burden of ensuring that a plan of reorganization is confirmed at some point.”

Florida also argued that the timing of the exemption was governed by the title of the subchapter “Postconfirmation Matters” under which §1146(a) appears.

Justice Thomas wrote that based on the placement of the statute within the Bankruptcy Code, “the most natural reading of §1146(a)’s text…affords a stamp-tax exemption only to a Chapter 11 plan that has been confirmed.” The Court concluded that because it is found under the subchapter “Postconfirmation Matters,” §1146(a) should be applicable after plan confirmation, and there should be no pre-confirmation exemption from tax.

Here is a link to the article:
http://www.abiworld.org/e-news/PiccadillyOpinions.pdf

Yameena

Barack Obama proposes changing bankruptcy laws to help military families, seniors, and people recovering from natural disasters.
According to the Associated Press, “Obama said he also would help service members and military families struggling financially after multiple moves, lengthy deployments and, in some cases, predatory lenders.”

Also, Obama wants to allow a faster bankruptcy process for all service members regardless of what state they live in. This is a departure from current law that says people can use federal bankruptcy exemption laws if their state of residence allows. According to a campaign-issued fact sheet, almost 35 states bar families from federal exemptions.

As for seniors, Obama said “people in that age bracket would get a minimum federal homestead exemption equal to the median cost of a home in their state, giving them a better chance to keep their homes and helping them maintain both their independence and their financial security."

Obama said he would help families recovering from a natural disaster by “streamlining the bankruptcy process for those in certified natural disaster areas by eliminating unnecessary paperwork and waiving unneeded credit counseling requirements.”

Here is a link to the article:
http://ap.google.com/article/ALeqM5hiBZp5QJXYZRlj_zYa0ebd-0RsfwD91POFAG0

Here is an additional link to an article on the same subject:
http://www.washingtonpost.com/wp-dyn/content/article/2008/07/08/AR2008070800861.html

Yameena

Although Judge Jeffrey Hoskins was acquitted of all 15 criminal charges (eight in December 2006 and the remaining seven in August 2007), he incurred numerous attorney fees. On March 26, 2008 Judge Hoskins and his wife filed for Chapter 13 bankruptcy protection in Ohio. In a civil suit, Hoskins was ordered to pay $354,465 to the bank that refinanced his 60 acres of farmland. He testified in his trials and an ethics hearing last year he had more than $800,000 in personal debt. Hoskins was quoted in January as saying, "It was a choice, do I pay for my defense or do I make this mortgage payment? I chose to pay toward the defense."

You can view the entire article at: http://www.dispatch.com/live/content/local_news/stories/2008/04/01/judge.html?print=yes&sid=101

Chandra

On August 29, 2007 Public Defender Service attorney Liyah Brown had a criminal hearing before D.C. Superior Court Judge John Bayly, Jr. During the hearing the two entered into an argument about whether or not the Defendant was in deed "a homeless man". Bayly told Brown to "be quiet" and he would "call the case later" and if she continued she was "going to be in contempt in a minute." When Brown didn't comply with the Court's order, however, Bayly asked a U.S. marshal to "[s]tep her back, please. Step her back." Brown ended up handcuffed, searched, and held for 45 minutes with misdemeanor defendants.

On March 11, 2008 Bayly signed the D.C. Commission on Judicial Disabilities and Tenure's determination stating Bayly had violated the code of conduct and his actions were "grossly disproportionate". Because of Bayly's 18-year tenure on the bench the commission felt no further sanctions were necessary.

You can read the entire article at: http://www.law.com/jsp/article.jsp?id=1206040363513

Chandra

James Krider was a responsible individual who paid his bills, but when life happened he was forced into filing bankruptcy. Willing to live with the bankruptcy notation on his credit report for 10 years, he was not aware that one credit card company was still reporting his discharged credit accounts as delinquent.

Mr. Krider had three credit card accounts with Capital One Bank. When he notified Capital One of what he thought was an oversight, he was informed by not only Capital One but from the three reporting agencies that "it has a perfect right to credit report these accounts as delinquent even though each has been discharged in bankruptcy".

Capital One is not the only company "pushing the envelope" on reporting discharged debts to credit agencies. The hope is that consumers who have been through bankruptcy will pay these debts either because they are not aware of the effect of the bankruptcy discharge or they are simply under a lot of pressure to rebuild their credit.

The lawsuit, Krider vs. Capital One Bank, et al was filed late 2007 in California, with a jury trial set in February 2009.

You can read the entire article at: http://news.yahoo.com/s/prweb/20080326/bs_prweb/prweb797564_1.

Chandra