April 2007

Debtor/Creditor NewsMag
A publication of the Debtor/Creditor Rights Committee of the Business Law Section of the State Bar of Michigan

Articles of Interest for the
Practitioner of Debtor/Creditor Law

- - - a Quick Read for the Lawyer on the Run


By: Laura J. Eisele

In In re Zaporski, Case no. 06-51617, Bankr. E.D. March 29, 2007, Judge Shefferly resolved some hotly disputed issues arising from BAPCPA, including the proper calculation of the means test under amended form B22A, and whether a chapter 7 case can be dismissed under section 707(b) absent a statutory presumption of abuse under the means test.  In Zaporski, the United States Trustee (the “UST”) moved to dismiss the debtor’s chapter 7 case under both sections 707(a) and (b).  The UST alleged that the debtor improperly calculated the means test under amended form B22A, and if properly calculated, a presumption of abuse would exist.  Alternatively, the UST argued that based on the totality of circumstances, the case should be dismissed for abuse.  The UST did not argue, and the Court did not find, that the debtor acted in bad faith or was dishonest. 

The first argument made by the UST was that in calculating its expenses under amended form B22A, the debtor should not have included ownership and operational costs for two vehicles since the vehicles were owned free and clear of liens and the debtor only used one car.  The UST instead argued that only the debtor’s actual expenses should be included in calculating the means test.  Judge Shefferly disagreed, holding that “the IRS Local Standards are fixed allowances, and not caps on a debtor’s actual expenses, and therefore permit a debtor to take a reduction for an ownership expense of a vehicle even if the debtor owns the vehicle free and clear and has no actual payments for the vehicle.”  Judge Shefferly reached the same conclusion for operating expenses, and thus denied the motion to dismiss based on a presumption of abuse under the means test. 

The second argument made by the UST was that even if the debtor is within the means test, the court could dismiss based on a totality of circumstances.  Judge Shefferly rejected the argument made by the debtor that the totality of circumstances test is inapplicable where there is no presumption of abuse.  “Just because there is no statutory presumption of abuse does not somehow create a safe harbor for a debtor.”  Judge Shefferly considered whether the debtor had the ability to pay his creditors and determined that in a chapter 13 case, with no belt tightening or life style changes, the debtor could make a substantial distribution to unsecured creditors.  Judge Shefferly also considered that debtor was in a stable job, had a substantial retirement nest egg, had the ability to make continued contributions to his retirement account and had above median income.  As such, Judge Shefferly granted the UST’s motion to dismiss under section 707(b)(3)(B), based on the totality of circumstances. 


By: Charles J. Schneider with contributions by Jeffrey Sieving

Amongst the many infirmities of BAPCPA, the “hanging paragraph” of 11 USC 1325(a)(9) has ripened into divergent interpretations from the local bench leaving chapter 13 creditor attorneys rejoicing and debtor attorneys scratching their heads. The “hanging paragraph” presents the question: can a chapter 13 debtor surrender collateral consisting of a vehicle in full satisfaction of a creditor’s secured claim or does the secured motor vehicle lender have a right to file an unsecured claim if the surrender results in a deficiency.

The “hanging paragraph” provides that “...section 506 shall not apply to a claim described in that paragraph if the creditor has a purchase money security interest securing the debt that is the subject of the claim, the debt was incurred within the 910 day preceding the date of the filing of the petition, and the collateral for that debt consists of a motor vehicle...”

The majority of courts across the nation have interpreted the “hanging paragraph” as allowing the debtor to surrender the vehicle in full satisfaction of the debt. Judge Rhodes has held, with the majority, that a debtor could surrender a vehicle in full satisfaction of a creditor’s claim. In re Evans, 349 BR 498 (Bankr.E.D.Mich. 2006). He states that the “hanging paragraph” is clearly unambiguous in its application to 910 creditors. The plain language of 1325(a)(9) makes it clear that section 11 USC 506 does not apply to 910 creditor claims. A 910 creditor is deemed fully secured regardless of whether a debtor decides to retain the vehicle and make payments over time in accordance with 11 USC 1325(a)(5)(B) or if the debtor decides to surrender the vehicle complying with 11 USC 1325(a)(5).

Michigan is unique in that there are two recent opinions upholding the minority’s position. See In re Particka, 2006 WL 3350198 (Bankr.E.D.Mich.) and In re Hoffman, 2006 WL 3813775 (Bankr.E.D.Mich.). In these subsequent cases, Judge Shefferly and Judge Tucker, in their respective opinions, conclude that a 910 creditor can have a deficiency claim after surrender of a vehicle. The cases distinguish their position based on an analysis of 506's applicability to 1325(a)(5). Accordingly, 506 only applies to claims relating to 1325(a)(5)(B) and not 1325(a)(5)(C). When a debtor decides to retain the vehicle, 506 is used to determine the value of the secured claim. The effect of the “hanging paragraph” bars the debtor only from paying the “cram down” value. The court states that 506 had never applied to 1325(a)(5)(C) because the “estate does not have an interest in the property securing the claim”. Inasmuch as the estate no longer retains an interest in the vehicle, the creditor is allowed to pursue a deficiency claim under state law.

The inability of the local bench to rule uniformly on this issue is a testament to BAPCPA and the continuing difficulty judges and attorneys will have interpreting it. What should a chapter 13 debtor’s attorney do? Debtor’s attorneys should be composing an unsecured base plan (sometimes called a pot plan) rather than a percentage plan. By composing an unsecured base plan, a potential deficiency claimant has potentially no impact upon a chapter 13 plan. The deficiency claimant would just take a pro rata share imposing smaller shares on other unsecured claimants. This was a better practice prior to BAPCPA and remains the same today as it minimizes the impact that any claim can have upon the plan when the scheduled claim is understated.



By: Richard Fellrath

We all know that the credit card industry has a very powerful lobby.  How else could they get around the 25% State criminal usury laws? So when they engineered changes in the Bankruptcy Code, naturally they attacked their perceived nemeses, the bankruptcy attorney.  They did this by passing three sections of the Bankruptcy Code aimed at attorneys (or so they thought). The sections involved, 526, 7, & 8, generally require written contracts place duties on the debtor’s attorney to investigate the debtor’s finances, restrict advertising, and prohibit advice given to clients regarding incurring debt. There are civil and criminal penalties for violations of the sections by debt relief agencies.

So what is a debt relief agency (DRA)? For the purpose of this discussion, a DRA is one who gives assistance to an assisted person, 11 USC Sec 101(12)(a).  An assisted person is defined as a person whose debts consist primarily of consumer debts and whose nonexempt property is less than $150,000.

The first and thus far the most expansive response to this law was a decision from the Chief Judge for the Southern District of Georgia. On the date the law came into effect, he ruled that the attorneys practicing in his court are not DRAs as long as they act as attorneys and do not have separate commercial enterprises in the bankruptcy field. In In re Attorneys at law and Debt Relief Agencies, 332 BR 66 (Bankr, SD, GA, 2005), the Judge reasoned that DRAs are persons who provide bankruptcy assistance.  Attorneys are not mentioned but provide legal representation is. This term specifically excludes attorneys. He gets around that part of the definition which includes legal representation by determining that this refers to non attorney representation. He also notes a provision that advice that a party can represent himself does not apply to an attorney. Finally, he notes that the statute recognizes that states regulate attorneys within their borders (Sec 526(d)(2)) and if there is to be a preemption by the federal government it must be clearly set out.  The U.S. Trustee appealed this decision to the District Court, (In re Attorneys at Law, 353 BR 318 (SD, GA, 2006) which followed a trend in appeals and found that there was no case or controversy and declined to get into the controversy which it described as a rats nest.

Attorneys in the Middle District of Georgia then attempted to get a ruling that the statute did not apply to lawyers in In re McCartney, 336 BR 588 (Bankr MD, GA, 2006). The Georgia District Court said that there was no threat of enforcement of the law and thus no case or controversy. A similar result occurred in the Eastern District of Pennsylvania where the case was dismissed for want of a case and controversy since there was no actual injury and the District Court stated it would not give advisory opinions (Geisenberger v Gonzales, 346 BR 678 (ED PA, 2006).

In Susan B. Hersh v. U.S., 347 BR 19 (ND TX, 2006), the Court again dismissed for no controversy but made some findings of fact. First, the Court held that Attorneys are debt relief agencies and that the requirement for written notice was valid. The attorney had no standing to raise the 5th Amendment on behalf of her clients. However, the Court found that Section 526(a)(4)’s restrictions on legal advice (could not counsel obtaining further debt) were in violation of the first amendment. Olson v. Gonzales, 30 BR 906 (D OR, 2006) followed Hersh The District Court found that attorneys are DRAs; the advertising restrictions were approved, and found that no definition of exempt property did not require a finding of vagueness. The failure to allege that advice was given to those with incomes under $150,000 required dismissal since there was no threat of enforcement. However, like the Court in Hersh, found that Section 526(a)(4) violated the first amendment as it restricted advice which an attorney could fairly be expected to give clients concerning obtaining a car or refinancing which debts would be reaffirmed. In Zelotes v. Martini, 352 BR 17 (D CN, 2006) the District Court denied a motion to dismiss by the U. S. Trustee finding that the attorney had standing because he was a DRA.

The Minnesota District Court again followed Hersh in finding that section 526(a)(4) was in violation of the First Amendment but also found that the advertising sections of the Act were also in violation of that amendment (Sections 526(a)(4) and (b)(2)) and that the term Debt Relief Agency itself was misleading. Finally the Court found that the debt relief agency provisions did not apply to attorneys and denied the government’s motion to dismiss Milavetz,Gallop, & Milavetz P.A.v. U. S. , (2006 U.S. Dist LEXIS 88785) (D MN. Dec 7, 2006)

Locally Judge Rhodes in an unwritten bench opinion in In re Szekeres, (case No 06-41315) (Oct 13, 2006) ruled that a person with an un-exempted  residence  worth $150,000 or more (without deduction for mortgages) is not an assisted person and therefore the attorney representing him or her is not a DRA.

There are no Court of Appeals decisions on attorney DRAs but, unless one is practicing in the Southern District of Georgia or the District of Minnesota, it appears that the attorneys representing parties with under $150,000 in assets may be DRAs. On the other hand Section 526(a)(4) is probably constitutionally invalid - this seems to be the state of the law at least until the next Court decision.



By: Deborah Kovsky-Apap

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) created a new category of administrative expense claim for creditors who sell goods to debtors within 20 days before the bankruptcy petition. Specifically, 11 U.S.C. 503(b)(9) provides administrative expense status for “the value of any goods received by the debtor within 20 days before the date of commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such debtor’s business.”

Much of the wrangling in the courts over the new 20-day administrative claims has been about the timing of the payments.  Must the debtor pay the claims immediately?  In the ordinary course of business, according to applicable credit terms?  May payment be delayed until the effective date of a confirmed plan?  Two recent decisions by courts in the Third Circuit appear to be among the first opinions issued on these questions.

In In re Global Home Products LLC, No. 06-10340, 2006 WL 3791955 (Bankr. D. Del. Dec. 21, 2006), a creditor moved for allowance and immediate payment of its 503(b)(9) claim.  The court, noting that the timing of payment of administrative expense claims is left to the discretion of the courts, analyzed the creditor’s request under a three-prong test:  “(1) the prejudice to the debtors, (2) hardship to claimant, and (3) potential detriment to other creditors.”  Id. at *4.  At an evidentiary hearing, the debtor presented uncontroverted evidence that it would be prejudiced by immediate payment for a variety of reasons, including the lack of sufficient funds, the fact that the DIP financing agreement prohibited the debtor from paying any debts not in the post-petition budget and the concern that immediate payment of one 20-day administrative claim would trigger an avalanche of similar demands.  The creditor, on the other hand, presented no evidence of hardship.  Id. at *4-5.  The court, finding that the prejudice to the debtor clearly outweighed the hardship to the claimant, denied the creditor’s motion to the extent that it sought immediate payment.  Id. at *5.

In In re Bookbinders’ Restaurant Inc., No. 06-12302, 2006 WL 3858020 (Bankr. E.D. Pa. Dec. 28, 2006), the 20-day administrative expense claimant claimed that it was entitled to immediate payment as a matter of law.  The creditor argued that 503(b)(9) requires a chapter 11 debtor to treat 20-day administrative expenses in the same manner as administrative expenses arising from the post-petition delivery of goods and services; since the debtor in that case had been paying its post-petition trade debt in the ordinary course, it was likewise required to pay the 20-day administrative expenses.  The court flatly rejected this argument.  Id. at *1, *5.  Instead, the court adopted the same three-factor test used in Global Home Products, and found that an evidentiary hearing would be required to determine whether to compel immediate payment of the allowed 503(b)(9) claim or defer payment to a later stage in the case.  Id. at *1.

These decisions suggest that while it may be possible to obtain immediate payment of a 20-day administrative expense claim, the creditor will be required to jump through additional hoops and incur greater expenses than those involved in simply filing a motion.  At a minimum, a 20-day administrative claimant must be prepared to demonstrate, at an evidentiary hearing, that it will suffer unusual hardship in the absence of immediate payment.  Moreover, a savvy administrative expense claimant will seek a carve-out for 503(b)(9) claims in the DIP facility, so that if the court, in its discretion, compels immediate payment, the debtor will be able to do so.



– Don’t Ignore This One!

By: Brandan Best

The Federal Rules of Civil Procedure, generally incorporated by the Federal Rules of Bankruptcy Procedure, were recently amended, effective December 1, 2006, in part to specifically address the rights and duties of litigants with respect to “electronically stored information” (otherwise known as “ESI”) (described in Rule 34(a) in part as “data or data compilations stored in any medium from which information can be obtained”).  These amendments will have the effect of forcing many bankruptcy attorneys to re-examine how they approach, and respond to, document requests, interrogatories, and other areas of discovery.  Attorneys should re-read the discovery rules as they come up in their practice and note any new requirements or issues created by references to ESI.  Although the amendments are only three months old, there has been a substantial amount of written analysis regarding them, which attorneys will no doubt resort to as questions regarding the application of the amendments to specific cases begin to arise.  However, here are a few of the changes that all attorneys may need to confront at the outset of any litigation:

FRBP 7026(f) Conference and Report.  While the model form on the bankruptcy court’s website for the Eastern District of Michigan has not yet been updated to reflect the changes, parties must now include in their Rule 26(f) report, generated after the Rule 26(f) conference, “any issues relating to discovery of [ESI] including the form or forms in which it should be produced.”  This will require attorneys to think through, and discuss with the client (and/or the client’s IT department) how their ESI is maintained, what ESI might be relevant to the matter at hand, and any other ESI-related issues that may arise during the litigation.

FRBP 7026(a) Disclosures.  Rule 26(a) requires parties to voluntarily provide initial disclosures within 14 days after the Rule 26(f) conference.  Parties typically either agree to provide all the 26(a) disclosures by a date certain in their Rule 26(f) report, or modify the requirements of Rule 26(a), identifying which of the requirements the parties deem necessary in that particular litigation.  Unless otherwise agreed to by the parties or directed by the court, parties must now provide (along with the usual list of individuals, location of documents and “tangible things,” computation of damages, and any insurance contracts) either a copy of, or a description by category and location of, all ESI that the party may use to support its claims or defenses.  Again, these changes require attorneys to thoroughly explore with the client all ESI-related issues relevant in the case, keeping in mind that Rule 37(c)(1) provides that a party that fails to identify information in its initial disclosure “without substantial justification” will not be permitted to use that evidence at trial unless the “failure is harmless.”

FRBP 7026(b)(2) Limitations.  Rule 26(b)(2)(B) states that a “party need not provide discovery of [ESI] from sources that the party identifies as not reasonably accessible because of undue burden or cost.”  Attorneys will likely have to become familiar with what is “not reasonably accessible,” from both practical knowledge and experience and available case law (see, e.g., Zubulake v. UBS Warburg LLC, 217 F.R.D. 309 (S.D.N.Y. 2003) (holding that question of “inaccessibility” is tied to the cost of production of the information at issue); Manual for Complex Litigation (4th Ed., Federal Judicial Center 2004)).

There are many other issues raised by the amendments to the rules that are important for bankruptcy attorneys to understand, including provisions relating to document requests under Rule 34, document retention issues, and attorney client privilege issues.  Suffice it to say that, as with BAPCPA and the Bankruptcy Code, attorneys are advised to re-examine everything they previously took for granted in the FRBP relating to document discovery.


By: Stuart Gold

After the Michigan Supreme Court declined to accept the Bankruptcy Court’s request for an advisory opinion on the question: When, if ever, a mortgage in Michigan is recorded when the Registers of Deeds fail to keep “entry books,” as required by Michigan statute? - the Judges of the Eastern District of Michigan Bankruptcy Court decided to consider this question, en banc.  They received briefs from trustees and various mortgage companies--the parties in five pending cases, and amicus briefs from the Michigan Land Title Association, the Michigan Association of Registers of Deeds, the State Bar Real Property Law Section, and the Registers of Deeds from Wayne and Oakland County.  They heard oral argument on December 11, 2006.

On February 27, 2007, the first decisions to come out of that en banc hearing were rendered in the pending adversary proceedings.  The first was Judge Phillip J. Shefferly’s 34-page opinion In re Schmiel (Stuart A. Gold v. Interstate Financial Corporation) AP# 04-0423.  In summary, Judge Shefferly agreed with the trustee that despite the lack of the statutorily required entry books, a mortgage is recorded at the time that the mortgage is received by the county register of deeds for recording provided, that it is in recordable form when received and the statutorily required fee is paid when the mortgage is delivered for record.  Judge Shefferly specifically rejected any notion that a later payment of the recording fee could relate back to the date that a mortgage was left with the Register of Deeds, for recording purposes.  However, he did express concern, in a lengthy footnote, about reports that some register of deeds offices have refused to accept recording fees when a document is left for record.  In those cases, it appears that the fee is paid after the register of deeds has received the document and deemed it to be in recordable form and has otherwise met the statutory requirements for recordation.  In those limited cases, Judge Shefferly opined that the mortgagee should not be penalized, if true.  The court thereafter concluded that summary judgment could not be granted for either party in the Schmiel case because there remained an issue of fact concerning when the recording fee was in fact paid.

Later the same day, Judge Thomas J. Tucker issued his Opinion Regarding the Question Certified to the Michigan Supreme Court In re Earlie L. Nelson (Gold v Nations Finance Corporation), AP # 05-05311, indicating in that he “fully agree[s] with the reasoning and holdings in that [Judge Shefferly’s] opinion, and therefore adopt them in this case.”


By: Charles J. Schneider with contributions by Jeffery Sieving

The United States Supreme Court held in a 5-4 decision that a Chapter 7 debtor who acted in bad faith by making a number of misleading or inaccurate statements and concealed a principal asset in his bankruptcy schedules forfeited his right to proceed under Chapter 13. This affirmed the decision of the First Circuit Court of Appeals in In re Marrama, 430 F.3d 474 (C.A.1 2005). Chapter 7 debtors do not have an absolute right to convert their cases to Chapter 13.The Court primarily considered two provisions of the Bankruptcy Code, subsections (a) and (d) of 11 U.S.C.A. 706 relevant in determining what Justice Stevens, writing for the court, termed a “procedural anomaly.”

Relying on a Senate Committee Report, the debtor had contended that 706(a) created an unqualified right of conversion as that report stated that ”… 706(a) "gives the debtor the one-time absolute right of conversion," It further noted that "[t]he policy of the provision is that the debtor should always be given the opportunity to repay his debts."

The Court, however, found the report's reference to an "absolute right" of conversion to be "more equivocal than petitioner suggests." The statement that a debtor should "always" have the right to proceed under Chapter 13 is inconsistent with the earlier recognition that it is only a one-time right that does not survive a previous conversion to, or filing under. "More importantly, the broad description of the right as 'absolute' fails to give full effect to the express limitation in subsection (d)," which expressly conditioned the debtor's right to convert on his ability to qualify as a "debtor" under Chapter 13. The court further relied on 1307(c), which states that a Chapter 13 proceeding may be either dismissed or converted to a Chapter 7 proceeding "for cause". Justice Stevens explains that although there is no specific mention of pre-petition bad-faith conduct as a cause of dismissal, bankruptcy courts routinely treat dismissal for such conduct as implicitly authorized by the "for cause" language.

Writing in dissent, Justice Alito opined that the majority's imposition of a condition on the debtor's conversion right – namely, a bankruptcy judge's finding of good faith – was inconsistent with the Bankruptcy Code. He states that there was nothing in the Code suggesting that a bankruptcy judge has the discretion to override a debtor's exercise of the 706(a) conversion right on a ground not set out in the Code.

It has been this author’s experience that some bankruptcy judges have granted ex-parte requests by Debtors for conversion. Once the court entered the order to convert would a chapter 7 Trustee file a motion for reconsideration to set aside the order based on the Debtor’s alleged “bad faith”. This appears to be a reasonable procedure giving a Debtor an opportunity to propose a plan of repayment that would purge his “bad faith” by offering creditors more than liquidation by the chapter 7 Trustee. This was a point recognized by the dissent. By virtue of the majority’s opinion bankruptcy judges may feel compelled to permit conversion only after notice and opportunity. Such a procedure would inhibit the Debtor from presenting such a plan and place too much emphasis on the “bad faith” and not on the totality of the circumstances.


By: Willard Hawley

On March 20, 2007, the United States Supreme Court issued its decision in Traveler’s Casualty Company of America v Pacific Gas & Electric Company, 2007 U.S. Lexis 3566; dealing with the allowance of contractual attorney’s fees in bankruptcy.

The case came before the court upon a writ of certiorari from the Ninth Circuit to resolve a split among circuits as to the so-called “Fobian Rule.”  The underlying case involved Traveler’s request for allowance of an unsecured claim for its attorney’s fees which were claimed pursuant to a contractual right of indemnity.  The Bankruptcy Court rejected Traveler’s claim for attorney fees, relying on In re Fobian, 951 F.2d 1149 (CA9 1991), which held that, “where the litigated issues involve not basic, contract enforcement questions, but issues peculiar to federal bankruptcy law, attorney’s fees will not be awarded absent bad faith or harassment id. at 1153.  Following affirmation of the decision by both the District Court and the United States Court of Appeals for the Ninth Circuit, the Supreme Court granted a writ of certiorari to resolve the conflict between the Fourth and Ninth Circuits.

The Supreme Court held that there is simply no support for the Fobian rule in federal bankruptcy law.  Absent an exception in 502(b) the claim would be allowed.  The court further found that given the broad permissive scope of 502(b)(1), as well as the Courts prior recognition that, “the character of [a contractual] obligation to pay attorney’s fees presents no obstacle to enforcing it in bankruptcy” the Fobian rule could not stand. The Court held that the Bankruptcy Code does not disallow contract-based claims for attorney’s solely because they were incurred litigating issues of bankruptcy law.   The judgment was vacated and the case remanded.


By: Anonymous Blogger

A "Guest Attorney" sent the following article to The Bankruptcy Blog sponsored byTotal Bankruptcy.
Click this line to check it out.

    Is this for real ?????
    Who knows.

After spending $21 million in the past two years, rumors are flying that pop idol Britney Spears is facing bankruptcy. She is currently in a California substance abuse treatment facility. Apparently, she has already spent two-thirds of her $32 million fortune and is “scared to death” of the financial situation that faces her when she leaves treatment. A family friend is quoted as saying, “She has to concentrate on staying sober, but she can't do that if she has to worry about going broke - which is exactly what she thinks will happen.” I know what you’re thinking. I too, wish could worry about going broke with $12 million instead of the $8.32 I have in my pocket.


By: Martin L. Fried

The Supreme Court Explains Disallowance of Unenforceable Claims.

The recent Supreme Court decision of Travelers Casualty & Surety Co. of America v Pacific Gas & Electric Co, 549 US --- (2007) will probably be cited most often because of the allowance of bankruptcy related attorney fees BUT the Court also sheds some needed light on disallowance of unenforceable claims per 502(b)(1) - "any defense to a claim that is available outside of the bankruptcy context is also available in bankruptcy." That should be enough to keep an aggressive creditor from making up causes of action to assert in dischargeability proceedings. Query: Does the res judicata effect of a state court judgment based on contract preclude the same creditor from objecting to discharge by now claiming he also had a fraud claim?

Legal - Is It?
Debtor Claims Eastern District Bankruptcy Case Management Order Exceeds Authority by Dismissal for Failure to File Completed Chapter 13 Confirmation Hearing Statement.

In the Eastern District case of In re Delmar Sharp, 06-13151, an aggressive debtor sought on appeal to strike paragraph 3 of the Case Management Order from "this and all other cases". That paragraph provides for dismissal without a hearing for failure to file the Chapter 13 Confirmation Hearing Statement. The debtor argued that dismissal without a hearing violates the bankruptcy code. Unfortunately, we don't learn the answer since the District Court dismissed the appeal as moot, but is the debtor on to something?

Legal - it's not!
FTC Busts "Reduce Debt Now" Scheme

If you listen to the radio, you heard it.  If you're a bankruptcy practitioner, you wonder.   Every 15 minutes, an assuring but enthusiastic voice announces that he has a "secret method the credit card companies don't want you to know about" which allows him to settle your debts for 50% on the dollar. Problem is, it's a scam, at least according to the FTC. Click here to read more from ConsumerAffairs.Com

Everything You Ever Wanted to Know about the Federal "right to receive" exemption

In an exhaustive 18-page analysis, Western District Judge Jeffrey Hughes explains the differences between the "right to receive" exemption paragraphs. In re Sanchez, --- BR --, 2007 WL 445959.

Everything You Ever Wanted to Know About Dividing Up a Tax Refund

A Connecticut bankruptcy judge has tackled the thorny issue of dividing up a post-petition tax refund between the Estate and the non-filing spouse where both spouses had income and withholding, and the Petition was filed during the tax year in question. It's worth saving because sooner or later, you're going to need it.  In re Edwards, --- BR ---, 2007 WL 419650.

Hanging Paragraph Dilemma

Did you know there are 108 published decisions interpreting the Hanging Paragraph section? What does that tell you about clarity in drafting?