Written by Craig D. Robins
These Supreme Court decisions will govern how consumer bankruptcy attorneys represent their clients and what we can expect with some important consumer bankruptcy issues
The United States Supreme Court has granted certiorari to review decisions in three bankruptcy matters and is considering whether to review others.
Constitutionality of New Bankruptcy Laws
I wrote about one of these cases previously when the Court of Appeals had issued a decision concerning the constitutionality of the 2005 Bankruptcy Amendment Act. See Portion of New Bankruptcy Laws Declared Unconstitutional. Court of Appeals Strikes Down Provision which Prevented Attorneys from Advising Clients . Milavetz, Gallop & Milavetz, P.A. v. U.S., 541 F.3d 785 (8th Cir., Sept. 4, 2008).
In that case the Supreme Court will be addressing whether consumer bankruptcy attorneys have the First Amendment right to advise bankruptcy clients that theymay incur new debt prior to filing.
Exemptions and Valuing Assets
The Supreme Court will also be reviewing the case of In re Reilly, 534 F.3d 173 (3rd Cir., July 21, 2008), which held that, by claiming an exemption in an amount identical to the stated value of the asset, the debtor put the trustee on notice of the debtor’s intention to exempt the full value of the asset, regardless of what that value might turn out to be or whether there was a limitation on the amount of the available exemption.
Discharging Student Loans Through Chapter 13 Plans
In addition, the Court announced this week that it will review the case of in Espinosa v. United Student Aid Funds, Inc., 553 F.3d 1193 (9th Cir., Dec. 10, 2008). In that case, the Ninth Circuit Court of Appeals ruled that the treatment of a student loan debt in a confirmed Chapter 13 plan of which the student loan creditor has actual, timely notice binds the creditor if the creditor fails to object to confirmation of the plan, even if the debtor has not established “undue hardship” as called for in Code § 523(a)(8).
The downside of the Supreme Court review is that the lower court decisions by the Court of Appeals are rather debtor-friendly. Since the current makeup of the Supreme Court often results in conservative decisions, there is a possibility that these cases could be overturned, which would not be good for consumer debtors or their attorneys.
The Issue of Calculating Income on the Means Test
In addition, there is another very important case which the Court is considering whether to review. That case is In re Lanning, 545 F.3d 1269 (10th Cir., Nov. 13, 2008), which holds that a Chapter 13 debtor’s projected disposable income is calculated in a forward-looking, rather than a mechanical, manner.
A forward-looking approach is what Judge Grossman, in our Long Island Bankruptcy Court in Central Islip, used to analyze the Chapter 13 case of Almonte, which I wrote about in a post discussing his decision: Cash Advances Are Not Pre-Petition Income .