E.D.N.C.: Goddard v. Burnett- Lack of Good Faith in Chapter 13 Retention of Luxury Vehicles Ed Boltz Wed, 04/30/2025 - 16:22 The District Court affirmed the Bankruptcy Court’s denial of confirmation of Bobby Goddard’s Chapter 13 plan, holding that the plan was not proposed in good faith under 11 U.S.C. § 1325(a)(3), despite the debtor’s full compliance with the means test under § 1325(b). Goddard, an above-median income debtor and Army veteran suffering from PTSD, proposed a plan in which he would retain three secured vehicles—a Corvette, a GMC Sierra pickup truck, and a Genesis sedan—while making minimal distributions to unsecured creditors. The trustee objected to confirmation on the basis that retaining all three vehicles was not necessary and was inconsistent with the debtor’s obligation to propose the plan in good faith. The Bankruptcy Court agreed, finding that although BAPCPA  and Bledsoe v. Cook   70 F.4th 746 (4th Cir. 2023)  permits above-median debtors to deduct payments on secured debts when calculating disposable income under the means test, the retention of the vehicles in this case—especially when viewed alongside the debtor’s prepetition borrowing activity—reflected an abuse of the spirit and purpose of Chapter 13. The court emphasized that the debtor would emerge from bankruptcy with three unencumbered vehicles while discharging over $78,000 in unsecured debt. On appeal, Goddard argued that his full compliance with § 1325(b)’s means test should insulate the plan from any further scrutiny under the good faith standard of § 1325(a)(3). Relying on Bledsoe v. Cook, 70 F.4th 746 (4th Cir. 2023), he contended that the Bankruptcy Code leaves no room for judicial second-guessing where the debtor’s deductions are authorized under the means test. The District Court disagreed, holding that § 1325(a)(3)’s good faith requirement remains a separate, independent confirmation standard that survived BAPCPA. While Bledsoe confirmed a debtor’s right to claim allowed expenses under the means test, it did not displace § 1325(a)(3), nor did it address whether a debtor’s use of allowable deductions could, under the totality of circumstances, still reflect bad faith. The District Court found the Bankruptcy Court’s factual findings not clearly erroneous and concluded that the plan’s structure—prioritizing retention of luxury vehicles while providing only token payments to unsecured creditors—violated the good faith requirement. Commentary: The bankruptcy adaga that a debtor "shouldn't drive a nicer car than the judge"  still  holds under this decision.  That notwithstanding,  hopefully bankruptcy judges and trustees also recognize current conditions where the average monthly car payment for  vehicles is,  according to Bankrate.,  around $742.  That amount is the average for all consumers, but  those  filing bankruptcy  overwhelmingly have subprime credit scores,  increasing their costs. The court’s ruling in Goddard risks reviving the pre-BAPCPA  “smell test” that Congress deliberately replaced with a more mechanical means test. While the court paid lip service to Bledsoe v. Cook, its approach invites subjective moralizing about what a debtor “deserves” to keep, which runs counter to the explicit Congressional purpose and structure of Chapter 13 that not only limited judicial activism but privileged secured claims over unsecured creditors. The potential for improper implicit biases,  found in  recent research to have a statistically significant effect on  dismissal  rates for bankruptcy judges and trustees,  to further affect  this already subjective standard is also a troubling consequence of this holding. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document goddard_v._burnett.pdf (353.76 KB) Category Eastern District

Bankr. W.D.N.C.: In re Popp- Dismissal pursuant to § 707(a) for Nondisclosure and Lack of Cooperation Ed Boltz Thu, 04/24/2025 - 15:53 Summary: Michael and Mary Popp filed a Chapter 7 petition in May 2024, but the case was dismissed under 11 U.S.C. § 707(a) after the debtors failed—despite months of requests and hearings—to adequately explain what happened to more than $123,000 in proceeds from the sale of their Florida home less than two years before filing. The initial Statement of Financial Affairs omitted the home sale entirely. When the Chapter 7 Trustee independently discovered the transaction, he requested documentation for the numerous five-figure transfers that occurred shortly thereafter. The Popps eventually amended their SOFA to include the sale but never properly disclosed the nature, purpose, or recipients of most of the transfers—relying instead on cryptic marginal notes like “mom pay bk” and “? Cash” scribbled next to the withdrawals. The Trustee made multiple follow-up requests and even met with counsel, who promised to improve the disclosures. Yet the supplemental productions were incomplete, inconsistent, or simply unresponsive. By the November 2024 hearing, the Trustee still had no clear understanding of how the funds were spent. Although the Debtors testified and offered some clarifications at the hearing—especially the Female Debtor—the testimony didn’t align with the documents, the amendments were never properly made, and the Trustee was still unable to administer the estate. The Court found that although the Popps did not act in bad faith, their failure to cooperate or to timely and accurately respond left the Trustee without a viable path forward. Dismissal, rather than denial of discharge or contempt proceedings, was deemed the most appropriate remedy. Commentary: This case reminds practitioners that incomplete cooperation can be just as fatal as outright fraud.    Judge Laura Beyer’s opinion doesn’t suggest that the Popps were hiding money or acting in bad faith—just that their inability (or unwillingness) to document where $123,000 went left the Trustee in the dark, and that darkness is incompatible with the “sunlight” required for Chapter 7 administration. Though the Debtors eventually amended their SOFA and produced some records, the Court made clear that half-answers and annotated bank statements—especially ones with vague notations like “paid Bank OZK” or “bought camper”—do not meet the standard of full, candid, and prompt disclosure that Chapter 7 demands. The fact that the Trustee had to repeatedly follow up, and that even the night before the hearing the Debtors were still scrambling to identify transactions, reflected more than just bad timing; it showed the systemic failure to take the bankruptcy process seriously. It is,  however,  difficult to square this decision,  which dispenses with the Popp's reliance of counsel defense ("The Debtor cannot rely on the advice of counsel defense regarding errors in the Schedules where the Debtor has declared under penalty of perjury that he has read the Schedules, and to the best of his knowledge they were true and correct.”)  without any reference to the recent Fourth Circuit Court of Appeals published decision in Sugar v. Burnett   where a dismissal  with a bar to refiling for five (5) years (which is if anything more punitive than a dismissal under § 707(a)) was vacated and remanded specifically   for a determination of whether that debtor had a valid  reliance on counsel defense. Complicating Popp (and Sugar as well)  is that once questions arise about the allocation of blame between  debtor and their attorney,  continued representation by that lawyer increasingly appears to present an unwaivable conflict of interest.  Whether debtors (by definition broke) can afford to hire new,  independent counsel  or whether the other  lawyers (and the judge)  in the case have obligations to report the matter to the state bar are further problems. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document in_re_popp.pdf (416.05 KB) Category Western District

Book Review: Berman, Jillian- Sunk Cost: Who's to Blame for the Nation's Broken Student Loan System and How to Fix It Ed Boltz Wed, 04/23/2025 - 20:50 Available at:  Your Local Bookstore  or https://press.uchicago.edu/ucp/books/book/chicago/S/bo244056598.html Summary: Exposes the forgotten origins of the student loan system, how politicians have attempted to fix it, and the life-altering damage borrowers face.   Student-loan horror stories are a dime a dozen. But students today are faced with a seemingly insurmountable paradox: Research consistently shows that the clearest viable option to financial stability is a college degree. But if and when Americans decide to pursue diplomas, student loan payments quickly follow, and even after securing full-time employment, many borrowers struggle to make ends meet for years. In Sunk Cost, journalist Jillian Berman explores how the nation’s student loan program went from a well-intentioned initiative aimed at helping low- and middle-income students afford college to one that traps borrowers in long-term debt.   Berman interviewed dozens of borrowers and policymakers and dug into the archives to unearth the true causes of the student loan problem. A couple of generations ago, policy makers generously subsidized Americans’ college educations because they knew it would be advantageous for the entire country: a more educated population meant better quality of life for all. But today, higher education is viewed as an individual goal, so students and their families are expected to be on the hook for it themselves. Berman explains how this enormous shift happened, which industries benefit from it, and what it means for college-going Americans today. She shares real-life stories of college graduates who are being crushed under some of the harshest consequences of the student loan system. These borrowers pursued higher education in hopes of a better life and yet some have been trapped in debt for decades, making it difficult to put food on the table, much less imagine a life beyond debt.   By connecting personal accounts to the policy history of student loans, Berman makes clear that if American society continues to push students toward higher education, but fails to truly subsidize it, the financial strain will become unbearable for all but the most privileged. The current system is broken, but Berman proposes that significant changes are possible, and will require political will from state lawmakers and Congress, along with a philosophical shift, to tackle one of the largest consumer finance challenges of our time. Commentary: Jillian Berman's Sunk Cost is,  along with  Ryann Liebenthal's Unburdened: Student Debt and the Making of an American Crisis,  an excellent history and review of how the student lending system began with the GI Bill (and the flaws  inherent even from the start)  through  the present.  The attention paid to more recent efforts,  both grassroots arising from the Occupy Wall Street movement and by various federal entities,  is particularly  excellent.   Despite including a few pages about changes over the last 50 years in how student loans are treated in bankruptcy,  I am still hoping and waiting for  an investigative journalist to eventually put similar time and effort into researching and writing more about this vital aspect of student loans.   As a bankruptcy geek,  I just really want to know what happened to Marie Brunner after she became the poster child for the draconian and cruel undue hardship test in bankruptcy. With proper attribution,  please share this post.  Blog comments Category Book Reviews

N.C. Ct. of App.: Paradigm Park Holdings v. Global Growth Holdings Ed Boltz Wed, 04/23/2025 - 16:08 Summary: The North Carolina Court of Appeals reversed summary judgment granted to the landlord, Paradigm Park, in a commercial lease dispute, finding that material questions of fact existed as to whether it had waived its right to collect rent by accepting mortgage and maintenance payments in lieu of rent for nearly four years. The Court also revived the tenant’s unjust enrichment counterclaim, reasoning that services provided outside the scope of the lease agreement might give rise to equitable compensation. Commentary: This case reinforces the viability of waiver by conduct as a defense in contract disputes, not just commercial leases. For debtors in consumer bankruptcy this ruling underscores that a creditor’s  acceptance of alternative performance (e.g., partial or substituted payments) can defeat later efforts to retroactively enforce the original payment terms.  This may also preclude lienholders from asserting that a default resulted merely due to the filing of a bankruptcy  would,  absent a reaffirmation and after accepting payments,  and allowed repossession. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document paradigm_park_v._global_growth.pdf (145.38 KB) Category NC Court of Appeals

 OFFER IN COMPROMISE (“OIC”) FOR  SBA EIDL LOANS UPDATE Is the SBA accepting OIC applications for SBA EIDL loans? If you search online, you'll find conflicting answers. Most results indicate noYesterday I (Jim Shenwick, Esq) called the SBA EIDL Customer Service and spoke with a representative who said the following:The SBA were doing offers in compromise on a case-by-case basis on a loan-by-loan basis”.  They would provide me with no further information and my take away from the telephone call was that under the right circumstances and the right fact pattern the SBA would consider an OIC, however the SBA is looking for full repayment of SBA EIDL loans and they would be reluctant to accept discounted or reduced payments. Clients or their advisors with questions about SBA EIDL loans are encouraged to contact Jim Shenwick, Esq.Jim Shenwick, Esq  917 363 3391  jshenwick@gmail.com Please click the link to schedule a telephone call with me.https://calendly.com/james-shenwick/15minWe help individuals & businesses with too much debt!

Law Review: LoPucki, Lynn M., False Venue Claims Signed Under Penalty of Perjury Ed Boltz Tue, 04/22/2025 - 16:42 Available at:  https://ssrn.com/abstract=5068891 Abstract: In a study of venue for the one hundred ninety-five large, public company bankruptcies filed from 2012 through 2021, I discovered nine cases (5%) in which the companies’ venue claims were in apparent conflict with what the debtors themselves stated on their petitions to be the locations of the companies’ principal places of business and principal assets. Eight of the nine proceeded to confirmation in an improper venue. Although it is routine for large, public companies and the courts in which they file to ignore the Bankruptcy Code and Rules, these cases take Chapter 11’s lawlessness to a new level. Top officers of large, public companies, with the advice of counsel, signed apparently false venue claims under penalty of perjury. This Article analyzes the nine cases and concludes that (1) no apparent basis for the venue claims in seven of the nine cases exists, and (2) the apparent basis for the venue claims in one of the other two cases is both legally implausible and in conflict with the relevant facts stated in the petitions. Because private companies were not included in this study, these nine cases are probably a minority of the big cases in which false venue claims were signed under penalty of perjury. The carelessness regarding venue in these cases shows the depth to which the competition for big cases has taken a few United States Bankruptcy Courts.  Commentary: While questions about venue in consumer cases are unaddressed in this article,  it is worth contrasting the venue selection questions in the bankruptcy petition form for individuals: 6. Why you are choosing this district to file for bankruptcy Check one:  Over the last 180 days before filing this petition, I have lived in this district longer than in any other district.  I have another reason. Explain. (See 28 U.S.C. § 1408.) with that for corporations: 11. Why is the case filed in this district?  Check all that apply:   Debtor has had its domicile, principal place of business, or principal assets in this district for 180 days immediately preceding the date of this petition or for a longer part of such 180 days than in any other district.   A bankruptcy case concerning debtor’s affiliate, general partner, or partnership is pending in this district.  That consumers are able to provide an explanation for the choice of venue other than just that it is their residence would seem on one hand to allow a response, in something in the the vein that "Venue is for the convenience of the debtor(s) & believing creditors will have no objection."  At the same time,  by ignoring that 11 U.S.C.  1408 can also provide proper venue for individuals based on the location of principal assets or related cases,  the form may be overly restrictive.  With sympathy for the corporate devil,  the absence of space to provide an alternate basis for venue may also be a deficiency. It is interesting to contemplate how  courts friendly to venue shopping in large corporate cases  would  respond to consumer bankruptcy filings with similarly "manufactured venue".    Could a consumer debtor follow the path of Chapter 11 debtors and first  create a business entity in a favorable jurisdiction (usually only requiring a modest fee for incorporation),  then assigning debts and/or assets to that corporation and finally filing successive bankruptcies for the corporation and then themselves?  While certainly overkill,  particularly as many jurisdictions take a more permissive view to venue and none seem to salivate over the prospect of an additional  consumer case,  it is another thought experiment that might further show the discrepancy between Fake and Real People in Bankruptcy.   To read a copy of the transcript, please see: Blog comments Attachment Document false_venue_claims_signed_under_penalty_of_perjury_compressed.pdf (505.02 KB) Category Law Reviews & Studies

Law Review: Hampson, Christopher- Defamation, Bankruptcy & the First Amendment Ed Boltz Mon, 04/21/2025 - 17:16 Available at:   https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5156187 Abstract: In recent years, a series of high-profile defamation cases has wound up in bankruptcy court, involving such colorful characters as Rudy Giuliani, Alex Jones, and Cardi B. As demands and verdicts swell with the rise of social media in a polarized age, defamation defendants are filing bankruptcy more frequently and at earlier stages of litigation. But that doesn't mean bankruptcy is a magic wand for waving away debt. To the contrary, much defamation debt may be nondischargeable as "willful and malicious" under section 523 of the Bankruptcy Code. Of course, consumer bankruptcy attorneys are all too familiar with bankruptcy's discharge exceptions, but some courts are now starting to apply the exceptions to small businesses attempting to reorganize under subchapter V of the Code — a category that includes Alex Jones's InfoWars. Defamation law is coming to bankruptcy court, and it’s bringing the First Amendment with it. Yet scholars and practitioners have not yet placed these three areas of law — defamation, bankruptcy, and the First Amendment — next to each other. This Article provides both theoretical and practical guidance to litigants and lawyers, showing how bankruptcy’s substantive and procedural rules will process defamation debt, including when the First Amendment protections of New York Times v. Sullivan and related cases are triggered. The ensuing mixture is a cocktail of torts, contracts, civil procedure, federal courts, and constitutional law. When speech injures others, compensation and punishment are in order. Yet forgiveness and a fresh start have their place as well. As to individuals, defamation debt should cause us to reflect on whether our “fresh start” policy in bankruptcy is too anemic. As to business entities, the defamation cases continue to raise the specter of whether chapter 11 makes it too easy for bad actors to shed debt without compensating victims, suffering consequences, or reforming behavior. Either way, attorneys must be prepared to provide forward-thinking legal advice about bankruptcy whenever insolvency is on the horizon.  Commentary: Christopher Hampson's article, Defamation, Bankruptcy & the First Amendment, offers a timely and insightful examination of the intersection between defamation claims, bankruptcy proceedings, and constitutional protections.   Hampson highlights that while bankruptcy is traditionally viewed as a means for debtors to achieve a "fresh start," defamation debts often fall under the "willful and malicious" exception to dischargeability outlined in Section 523 of the Bankruptcy Code. This means that individuals and entities cannot easily escape liability for defamatory actions through bankruptcy. Notably, the article discusses how courts are beginning to apply these discharge exceptions to small businesses reorganizing under Subchapter V, as seen in the case of Alex Jones's InfoWars. Furthermore, the article brings to light the complex interplay between bankruptcy law and First Amendment protections. It raises critical questions about how constitutional defenses, such as those established in New York Times v. Sullivan, are considered within bankruptcy proceedings. This intersection presents a multifaceted legal landscape involving torts, contracts, civil procedure, federal courts, and constitutional law. While  high  profile defamation cases,  including the examples of Rudy Guiliani,  Alex Jones and Cardi B,  often have damage awards  ($148 million,  $965 million and $4 million respectively) that vastly exceed Chapter 13 debt limits,  it is always important to remember that the discharge under §1328(a)(4) and §523(a)(6) are subtly different:   Comparison of Willful and/or Malice Nondischargeability in Chapter 7 and Chapter 13    §523(a)(6)  §1328(a)(4)  To:  An Entity  An individual or the Estate of an individual  For:  Injury to Person or Property  Personal Injury or Death  By:  The Debtor  The Debtor  Intent:  Willful AND Malicious  Willful OR Malicious  Adjudication:  No restriction  Prior Civil Award for restitution or damages   These could result in a defamation claim being dischargeable in Chapter 13,  for example if the award was to a corporate entity rather than an individual.  Contrariwise,  while   §523(a)(6)  requires both willful AND  malicious action,  in Chapter 13  a party need only show under §1328(a)(4)  that the action was either willful or malicious.  (As the article discusses,  the willful AND  malicious standard will nearly always be met in a defamation award.) With proper attribution,  please share this post.    To read a copy of the transcript, please see: Blog comments Attachment Document defamation_bankruptcy_the_first_amendment.pdf (648.34 KB) Category Law Reviews & Studies

4th Cir.: Sugar & Saser v. Burnett- Reliance on Legal Advice as Defense and Vesting of Assets in the Debtor does not preclude subsequent modification due to appreciation Ed Boltz Mon, 04/21/2025 - 17:07 Summary:  In  Sugar & Sasser v. Burnett, the Fourth Circuit upheld in part and vacated in part a district court’s affirmance of the bankruptcy court’s sanctions arising from a Chapter 13 debtor’s unauthorized sale of her residence. The debtor, Christine Sugar, sold her home during the pendency of her case without prior court approval as required by Eastern District of North Carolina Local Bankruptcy Rule 4002-1(g)(4) and her confirmed Chapter 13 plan, even though the property was partially exempt Despite having claimed  homestead exemption under N.C. Gen. Stat. § 1C-1601(a)(1) for a portion of the equity in her home,  the court of appeals held that such exempts only a dollar value interest in property, not the property itself.  Accordingly,  it  rejected arguments that vesting of the property upon plan confirmation removed it from the reach of the Local Rule or § 1329 modification. The bankruptcy court dismissed her case with a five-year refiling bar and required her attorney  to pay sanctions in the amount of $15,000. The Fourth Circuit affirmed the finding of a violation and the sanctions against counsel, but vacated the dismissal and refiling bar imposed on the debtor, remanding for the bankruptcy court to reconsider those sanctions  because the bankruptcy court failed to account for Sugar’s reliance on the erroneous legal advice of her attorney. Commentary: This decision underscores that confirmation does not confer carte blanche over exempt property. Even where equity is partially protected under a homestead exemption, any property—vested or not—that includes non-exempt value remains subject to procedural safeguards.   The Fourth Circuit's reaffirmation of the distinction between exempting an “interest” versus an “entire asset” is significant. To the extent that vesting of assets in the debtor at confirmation,  rather than retention by the bankruptcy estate,  is allowed (as it should be under Trantham)  that does not  grant unqualified control  to Chapter 13 debtors  to sell property post-confirmation. Here, the court made clear that the proceeds attributable to non-exempt value remain subject to modification under § 1329 and court oversight. For consumer debtors, especially those pro se or guided by overly zealous counsel, this decision highlights that even if local rules such as EDNC LBR 4002-1(g)(4) are improper,  the correct avenue for challenging those is the appellate process  not simply ignoring them. The existence of a potential defense of reliance on advice of counsel also raises thorny ethical issues  for debtors attorneys,  as that would seem to trigger a direct conflict of interest between the debtor and the lawyer,  who may or may not have provided improper or inaccurate advice. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document sugar_sasser_v._burnett.pdf (242.27 KB) Category 4th Circuit Court of Appeals

4th Cir.: Carroll Management v. Dun & Bradstreet- Defamation and Credit Reporting Ed Boltz Mon, 04/21/2025 - 15:46 Summary: In this defamation and unfair trade practices case, six related real estate companies sued Dun & Bradstreet (“D&B”), alleging that the business credit reporting giant published misleading and false credit assessments—labeling them high or moderate risk, including outdated or erroneous legal filings, and creating damaging implications regarding their creditworthiness. The District Court for the Middle District of North Carolina dismissed the complaint with prejudice under Rule 12(b)(6), finding the statements non-defamatory and the Plaintiffs unable to demonstrate injury under the North Carolina Unfair and Deceptive Trade Practices Act (“UDTPA”). The Fourth Circuit affirmed, holding that the proposed amended complaint failed to cure the deficiencies and was futile. Specifically, the Fourth Circuit found that: The statements in D&B’s reports, such as classifications of legal actions and business risk ratings, were accompanied by disclaimers and date stamps that would lead a reasonable reader to understand the possibility of outdated information. The Plaintiffs’ claims of implied defamatory meaning were not supported by factual allegations to plausibly establish falsity or harm. The UDTPA claims failed due to the absence of “actual injury,” as reputational harm alone—especially where defamation claims fail—cannot support UDTPA liability. Having failed to cure these issues through a proposed amended complaint, the Plaintiffs also lost their appeal of the district court’s refusal to permit amendment and the original dismissal with prejudice. Commentary: While Carroll did not involve the Fair Credit Reporting Act (FCRA), its reasoning maps closely onto FCRA jurisprudence—particularly in emphasizing: the importance of context and substantial accuracy; the legitimacy of relying on public records; the necessity of alleging and proving actual harm; and the sharp boundary between commercial and consumer reporting. In practice, Carroll serves as a reminder that pleading vague allegations about “false credit information” may  not survive in any forum—state or federal—unless grounded in specific, provable facts tied to a cognizable injury under the correct statute. See also the law review article by Christopher Hampson,  Defamation, Bankruptcy & the First Amendment,     With proper attribution,  please share this post.  Blog comments Category 4th Circuit Court of Appeals

Average Property Tax Amount on Single Family Homes Up 2.7 Percent Across U.S. in 2024 Ed Boltz Mon, 04/21/2025 - 15:40 Available WITH INTERACTIVE MAPS at:  https://www.attomdata.com/news/market-trends/home-sales-prices/2024-annual-tax-report Summary: ATTOM released its 2024 Property Tax Analysis for 85.7 million U.S. single-family homes which shows that $357.5 billion in property taxes were levied on single-family homes in 2024, down 1.6 percent from 2023. The average tax bill rose 3% to $4,172 in 2024 despite a slight dip in effective tax rates.  Home values rebounded 4.8% to an average of $486,456 after a decline in 2023.  Effective tax rates decreased slightly to 0.86%, down from 0.87% in 2023.  Commentary: Interestingly,  at +21/1%,  the Raleigh-Durham metro area  had the largest increase in average tax bills,  while Charlotte, NC  had the largest decrease at -7.3 %. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document attoms_2024_u.s._property_tax_analysis_for_single-family_homes_compressed.pdf (406.22 KB) Category Law Reviews & Studies