Sadly, there are occasions where a debtor passes away before a discharge enters, or a Chapter 7 case is concluded. Rule 1016, of the Federal Rules of Bankruptcy Procedure, expressly provides, however, that the case does not “abate,” or terminate: “death or incompetency of the debtor shall not abate a liquidation case under chapter 7 of the Code. In such event the estate shall be administered, and the case concluded in the same manner, so far as possible, as though the death or incompetency had not occurred.” If a discharge has not yet entered, the family of the deceased might well want to continue with the case to insure that a discharge is granted. It is important, however, for a suggestion of death to be filed with the court, and served upon the trustee, with a copy of the death certificate attached. The form of the suggestion is not particularly critical, as long as needed information is supplied. I have on this website a form entitled “Notice of Death or Incompetency of a Debtor”. Most attorneys filing bankruptcy cases will also have a suitable form. Just contact the attorney who filed the case, or, get it touch with the trustee and he or she will be able to assist.
Dischargeability of Student Loans
Boy, it has been awhile since I posted ANYTHING. It is way past time.
I often get questions regarding the dischargeability of student loan debt. Putting aside the political component, what follows is a brief discussion of the legal analysis that will apply to any attempt to discharge student loan debt. Let’s start with the Bankruptcy Code, and specifically, with Section 523, entitled “Exceptions to Discharge.” This is the Code section that delineates those obligations to which a discharge will not apply. Section 523(a)(8) excepts from discharge any student loan debt for which repayment “would impose an undue hardship on the debtor and the debtor’s dependents . . .” The term “undue hardship” is not specifically defined, however, so the courts get to define it.
The leading case on this issue is Brunner v. New York State Higher Education Services Corporation, 831 F.2d 395 (2nd Cir. 1987), in which the court created a three-part test for determining when undue hardship rises to the level required to allow discharge of the debt:
(1) If forced to repay the loan, the debtor would be unable to maintain, based on current income and expenses, a “minimal” standard of living for the debtor and their dependents.
(2) Additional circumstances existed which indicated that that state of affairs would be likely to persist for a significant portion of the repayment period of the student loan.
(3) The debtor had made good faith efforts to repay the loan.
These elements must be established by a preponderance of the evidence.
In the subsequent 35 years, Brunner, and what is commonly known as “the Brunner test,” has become the prevailing test for determining undue hardship in bankruptcy courts nationwide. The Bruner test has specifically been adopted by the Eleventh Circuit. In re Cox, 338 F.3d 1238 (11th Cir. 2003). Within the Middle District of Alabama, this issue was addressed at length by Judge William Sawyer in In re Monique Denise Wheat, Adv. Pro. Number 18-03041. I might also mention in passing that the Department of Justice, working with the Department of Education, has promulgated new guidance which is, I believe, intended to streamline this process. I would encourage anyone seeking to discharge a student loan debt to communicate with DOJ counsel regarding the specifics of the new guidance.
COVID 19 UPDATE
It’s been a good while since anything was added to this site, and I thought a COVID update might be timely. It looks like the court will want Section 341 meetings to continue via ZOOM video until at least the March-April time frame. The court watches COVID developments very carefully, however, and if the next few months are bad (as the experts are predicting), then we could continue video meetings well beyond Spring of 2021. It is useless to speculate, so we’ll just wait until we receive further direction from the court.
In the meantime, here are a few thoughts gleaned from the last few months of ZOOMING . . .
If you know your wi-fi is weak, go somewhere that provides a stronger signal; perhaps a friend or relative has good wi-fi, or use one of the free hotspots available at the library
If you are in a vehicle, PARK IT
If you are at home, find a spot and sit down; when you are walking around your home with your phone in your hand, I see things I don’t want to see; it is also distracting to have an image on the screen (among 12 others) that is moving around
If at work, find a quiet place
Don’t try to connect outside; I won’t be able to hear over the wind noise; you have to be indoors
Have your photo ID on your person
I will mute your device; please leave it muted until we call your case so I don’t have to deal with background noise
Dress appropriately; I am not going to conduct your meeting with you sitting there in your pajamas
Make sure both your video and your microphone are working
Thanks for your cooperation and patience. It is difficult for us all, and hopefully we will soon be able to return to in person meetings. In the meantime, BE SAFE AND WELL!
Oath v. Affirmation
When I administer the oath, I will say “ . . . [d]o you swear or affirm that the testimony you are about to give in these proceedings will be the truth.” I recently had a debtor ask me to explain the difference. In short, swearing an oath implicates a “higher power”, or “supreme being,” e.g. God, while an affirmation implicates one’s conscience and honor. One is a promise, before God and to God, to tell the truth, and the other is a promise, on your honor, to tell the truth, without resort to a higher power. Usually, individuals who choose to affirm rather than swear do so because of some conviction that it is inappropriate to swear oaths, or, because they do not believe in any “higher power.”
Rule 603 of the Federal Rules of Evidence, which are applicable in Bankruptcy Court., deals with the issue simply and directly:
Rule 603. Oath or Affirmation to Testify Truthfully
Before testifying, a witness must give an oath or affirmation to testify truthfully. It must be in a form designed to impress that duty on the witness’s conscience.
The intention here is not to proscribe a particular form of oath or affirmation, but to impress upon a witness the importance of testifying truthfully. At your meeting of creditors, you may either give oath, or affirm. The choice is yours. It is important to remember, however, that whether testimony is offered under oath or by affirmation, the penalties for giving false testimony are equally applicable.
Debts Incurred After Filing Chapter 13 and Before Converting to Chapter 7
I was recently asked whether a discharge in a case converted from Chapter 13 to Chapter 7 would cover debts incurred after filing but before conversion. Generally speaking , the answer is yes; those “gap” claims are subject to the automatic stay and the discharge.
The operative Bankruptcy Code language is found in 11 U.S.C. Section 348(d), entitled “Effect of Conversion,” which provides that a claim or debt arising after the Chapter 13 is filed “shall be treated for all purposes as if such claim had arisen immediately before the date of the filing of the petition..” In conjunction with the conversion of the case from Chapter 13 to Chapter 7, the debtor(s) filings is supposed to include a “Schedule of Post-Petition Debt.” which includes the name and address of each holder of a claim. This schedule is intended to give creditors notice that their debt is included in the Chapter 7 case.
EVICTION MORATORIUM LIFTED
You will recall that on April 3, 2020, Alabama Governor Kay Ivey issued a temporary moratorium on residential evictions and foreclosures. It was not a moratorium on the accrual of rent or mortgage payments, nor did it restrict or limit obligations existing under leases or mortgages. The proclamation did, however, instruct state, county and local law enforcement to temporarily suspend enforcement proceedings intended to evict or foreclose on residential property.
Since that time, however, states have begun to move forward with the implementation of plans to open their respective economies. On May 21, 2020, Governor Ivey issued a proclamation further loosening COVID 19 restrictions in Alabama, and specifically providing that the moratorium on residential evictions and foreclosures terminates effective at 12:00 a.m. on June 1, 2020.
COVID 19 PROCEDURES UPDATE-Telephone Hearings Through July 2020
I understand that the judges have decided that we will continue to conduct hearings telephonically at least through the end of July, 2020. Beyond that date, we just don’t know yet. What we can know with certainty is that when we do return to in person hearings, things will be different. Right now the Court, the Bankruptcy Administrator, and the Chapter 13 trustee are working diligently to develop procedures designed to maximize the safety of everyone participating. At this point, it is still a work in progress but the Bar will be notified as soon as procedures are announced.
COVID 19 AND CHAPTER 7
The CARES Act recently enacted by Congress to provide relief to individuals and business from the financial impacts of COVID 19 contain a number of provisions relating to bankruptcy. Most of the changes impact cases under Chapter 13, and some are pretty significant. For further information on how Chapter 13 cases are impacted visit the website maintained by trustee Sabrina McKinney: https://www.ch13mdal.com.
The only change directly impacting a Chapter 7 bankruptcy relates to eligibility. For purposes of calculating a debtor’s income to determine his or her eligibility for Chapter 7 relief, COVID-19 related payments from the federal government are excluded from the analysis. This simply means that when the means test analysis is applied to determine whether you qualify for Chapter 7, no payments coming to you as a result of the CARES Act will be counted.