Pappas

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In re DeVries

Decision: In re Relna James DeVries and Kathryn Lee DeVries, Case No. 13-41591-JDP (Bankr. D. Idaho, 28 Apr. 2015)
Judge: Honorable Jim D. Pappas, United States Bankruptcy Judge
Counsel for Debtors: Paul Ross, Idaho Bankruptcy Law, Paul, Idaho
Chapter 13 Trustee: Kathleen A. McCallister, Meridian, Idaho
Trustee’s Counsel: Holly Roark, Office of Kathleen A. McCallister, Meridian, Idaho

Background

Relna and Kathryn DeVries filed a Chapter 13 petition on 27 December 2013. Their amended plan, confirmed on 19 May 2014, provided that all allowed tax claims would be paid in full. The IRS timely filed a proof of claim for taxes owed for the 2011 and 2012 tax years. The deadline for governmental units to file proofs of claim was 25 June 2014.

The Debtors filed their 2013 federal income tax returns in April 2014, which showed they owed $1,021 to the IRS for the 2013 tax year. The Idaho Tax Commission filed its own proof of claim for the $84 in state taxes owed for 2013 the day after plan confirmation. The IRS, however, did not file a claim for the 2013 federal taxes, nor did it amend its existing claim to include them. Within 30 days of the 25 June 2014 governmental bar date — as permitted by Federal Rule of Bankruptcy Procedure 3004 — the Debtors filed a proof of claim on behalf of the IRS for the $1,021 in 2013 taxes.

The Trustee’s Objection

The Trustee objected to the Debtors’ proof of claim. The Trustee represented that it was allegedly filed at the IRS’s own request, and that the IRS did not wish to have the 2013 tax debt paid through the plan as a § 1305 claim.

The Trustee’s objection rested on 11 U.S.C. § 1305(a)(1), which governs postpetition claims in Chapter 13 cases. That provision permits a proof of claim to be filed by “any entity that holds a claim against the debtor … for taxes that become payable to a governmental unit while the case is pending.” The Trustee argued that the Debtors’ 2013 federal income taxes became payable during the pendency of the bankruptcy case, making them a § 1305 postpetition claim, and that under the plain language of § 1305 only the creditor holding the claim — the IRS — was authorized to file a proof of claim for it. The Debtors’ attempt to file on the IRS’s behalf was therefore improper and the claim should be disallowed in its entirety.

The Debtors’ Response

Debtors filed a response through their counsel arguing that the 2013 tax debt was properly treated as a prepetition claim and that they were authorized to file the proof of claim under § 501(c) and Federal Rule of Bankruptcy Procedure 3004.

Debtors did not rely on § 1305 as their filing authority. Instead, they argued that the 2013 tax obligation was a prepetition claim — or should be treated as one — and that the ordinary debtor claim-filing mechanism of § 501(c) and Federal Rule of Bankruptcy Procedure 3004 therefore applied. On the question of when the claim arose, Debtors urged the Court to apply the “fair contemplation” or “prepetition relationship” test articulated in In re Dixon, 295 B.R. 226 (Bankr. E.D. Mich. 2003). Under that approach, a claim arises prepetition if there was a prepetition relationship between the debtor and the creditor such that a possible claim was within the creditor’s fair contemplation at the time of filing. The IRS and the Debtors had precisely such a relationship: the Debtors were taxpayers, the IRS was their taxing authority, and 361 of the 365 days of the 2013 tax year had elapsed before the petition was filed. The IRS’s claim for 2013 taxes was fully within its fair contemplation at the time of filing, Debtors argued, making it a prepetition claim subject to the ordinary rules permitting debtors to file on a creditor’s behalf.

Debtors also invoked 11 U.S.C. § 502(i), which provides that a postpetition claim for taxes entitled to priority under § 507(a)(8) shall be treated as if it had arisen before the petition date. On that theory, even if the 2013 taxes technically arose postpetition, § 502(i) mandated that they be treated as prepetition claims, restoring the Debtors’ authority to file under § 501(c) and Federal Rule of Bankruptcy Procedure 3004.

The Trustee’s Reply

The Trustee replied that Ninth Circuit authority resolved the question directly and foreclosed the Michigan court’s “fair contemplation” test. Relying on Joye v. Franchise Tax Bd. (In re Joye), 578 F.3d 1070 (9th Cir. 2009), the Trustee argued that taxes owed for a given tax year do not “become payable” — and therefore do not arise as a § 1305 postpetition claim — until the close of that tax year. Because the DeVries filed their petition before the close of 2013, the 2013 taxes became payable only after the petition date and were a postpetition claim that only the IRS could properly file. The Trustee further noted that allowing the improperly filed claim would prejudice general unsecured creditors, whose pro-rata distributions would be reduced by the addition of a priority tax claim.

The Court’s Ruling

Judge Pappas sustained the Trustee’s objection and disallowed the Debtors’ proof of claim in its entirety.

The Court addressed § 502(i) first and found it dispositive against the Debtors. Section 502(i) applies only to postpetition tax claims entitled to priority under § 507(a)(8)(A)(i), which affords priority to income taxes for which the applicable return was due within three years before the petition date. The DeVries’ 2013 federal income tax return was not due until 15 April 2014 — after their 27 December 2013 petition date. Because the return due date fell outside the three-year lookback period, the 2013 taxes were not entitled to priority under § 507(a)(8)(A)(i), and § 502(i) therefore had no application. The Court drew support from the Ninth Circuit BAP’s analysis in In re Jones, 420 B.R. 506 (9th Cir. BAP 2009), aff’d on other grounds, 657 F.3d 921 (9th Cir. 2011), which explained that a postpetition income tax obligation whose return is due postpetition cannot invoke priority status under § 507(a)(8)(A)(i) and thus falls outside § 502(i)’s reach entirely.

The Court then turned to § 1305(a)(1) and rejected the Debtors’ “fair contemplation” argument. Binding Ninth Circuit precedent, not the Michigan court’s test, controlled the analysis. Under In re Joye, taxes become “payable” for purposes of § 1305(a)(1) when they are “capable of being paid.” The Ninth Circuit further established in In re Pacific-Atlantic Trading Co., 64 F.3d 1292 (9th Cir. 1995), that a tax on income is “incurred” on the last day of the income period. Because federal income taxes are assessed by the calendar year, the DeVries’ 2013 taxes were incurred at midnight on 31 December 2013 — after the petition was filed. Both the incurrence and the payability of the 2013 taxes therefore occurred postpetition, placing them squarely within § 1305(a)(1).

The Court also examined the interplay between § 502(i) and § 1305(a)(1) as analyzed in In re Joye, which drew on Collier on Bankruptcy for the proposition that § 502(i) applies to taxes incurred prepetition that do not come due until after the petition is filed, while taxes incurred postpetition can be treated only as postpetition claims under § 1305. Because the 2013 taxes were incurred postpetition under the Pacific-Atlantic rule, § 502(i) offered the Debtors no relief in any event.

Having concluded that the 2013 taxes were a § 1305(a)(1) postpetition claim, the Court applied the well-established rule that postpetition claims under § 1305 may be offered for inclusion in a Chapter 13 plan only by the creditor that holds the claim. A debtor has no authority to force a postpetition creditor into the plan by filing a proof of claim on its behalf. The Trustee’s objection was sustained and the Debtors’ proof of claim disallowed.

Why This Matters

  1. Section 502(i) does not reach postpetition taxes whose returns are due postpetition. The provision applies only to taxes entitled to priority under § 507(a)(8)(A)(i) — which requires the return to have been due within three years before the petition date. An income tax return due after the petition date falls outside that window entirely. Practitioners should not assume § 502(i) will bridge the gap between a postpetition tax liability and prepetition claim treatment.

  2. The Ninth Circuit’s “capable of being paid” standard governs when taxes become payable in the Ninth Circuit. Under In re Joye, the relevant inquiry for § 1305(a)(1) purposes is when the tax was capable of being paid — and under In re Pacific-Atlantic Trading Co., income taxes are incurred on the last day of the tax year. A tax year that closes after the petition date produces a postpetition claim regardless of how many days of that year preceded the filing.

  3. Only the creditor may file a § 1305 postpetition claim. Section 1305(a) grants the right to file a proof of claim for postpetition taxes exclusively to the entity that holds the claim. A debtor cannot invoke § 501(c) or Federal Rule of Bankruptcy Procedure 3004 to file on a creditor’s behalf where the underlying obligation is a § 1305 postpetition claim rather than a prepetition one. The creditor’s silence is the creditor’s choice to make.

  4. The IRS may decline plan treatment of a postpetition tax debt. This case illustrates that § 1305 is entirely creditor-driven. The Trustee’s objection represented that the IRS allegedly sought disallowance of the Debtors’ filing rather than simply declining to participate. A Chapter 13 debtor who owes postpetition taxes has no mechanism to compel inclusion of that debt in the plan over the IRS’s objection.

  5. Debtors who owe taxes for a year that closes after their petition date should address the liability outside the plan. Where postpetition income taxes cannot be included in a confirmed Chapter 13 plan, the debt remains the debtor’s obligation to manage directly with the taxing authority. Counsel should advise clients of this reality at the outset and account for ongoing tax obligations in assessing the feasibility of the plan.


Full Decision: Available on PACER, Case No. 13-41591-JDP, Doc. 57 (Bankr. D. Idaho 28 Apr. 2015)

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In re Sprague

Decision: In re Jarred A. Sprague and Elizabeth J. Sprague, Case No. 12-41099-JDP (Bankr. D. Idaho, 18 December 2013)
Judge: Honorable Jim D. Pappas, United States Bankruptcy Judge
Counsel for Debtors: Paul Ross, Idaho Bankruptcy Law, Paul, Idaho
Chapter 13 Trustee: Kathleen A. McCallister, Meridian, Idaho
Trustee’s Counsel: Alexandra O. Caval, Meridian, Idaho

Background

Jarred and Elizabeth Sprague filed a Chapter 13 petition on 2 August 2012. Their plan was confirmed on 12 October 2012, and the bar date for non-governmental creditors to file proofs of claim passed on 3 December 2012. Under Federal Rule of Bankruptcy Procedure (“FRBP”) 3004, the Debtors or Trustee had an additional 30 days — until 2 January 2013 — to file a proof of claim on behalf of any creditor that failed to do so.

The debt at issue arose in May 2009, when U.S. Bank closed Ms. Sprague’s bank account after a scam check deposited into the account bounced. Neither U.S. Bank nor its collection assignee, National Law Group (“NLG”), reported the resulting deficiency to any credit reporting agency, and neither contacted Ms. Sprague after the account was closed. When the Debtors compiled their bankruptcy schedules, they relied heavily on their credit reports — which showed no debt to U.S. Bank — and the obligation was omitted entirely from their filings.

In August 2013 — more than a year after the bar date — NLG contacted Ms. Sprague’s employer seeking to collect. Upon learning of the omitted debt, the Debtors promptly amended Schedule F to list U.S. Bank and NLG as creditors, served them with notice of the bankruptcy, and filed a motion to enlarge the time to file a proof of claim on their behalf under FRBP 3004 and FRBP 9006(b)(1).

The Trustee’s Objection

Trustee objected on several grounds. First, she argued the Debtors had not met the “excusable neglect” standard required under FRBP 9006(b)(1) to justify enlarging the FRBP 3004 deadline after its expiration. Relying on In re Schuster, 428 B.R. 833 (Bankr. E.D. Wis. 2010) — the only reported decision she could locate addressing this precise issue — the Trustee argued that the Debtors’ reason for delay was insufficient, as the account closure in 2009 should have put Ms. Sprague on notice that a claim might exist.

Second, the Trustee argued that granting the motion would prejudice the existing pool of unsecured creditors, who held approximately $37,894 in claims and whose pro-rata distributions would be reduced by the addition of a new creditor more than a year into the plan. She further contended that the omitted creditor itself would be prejudiced because its debt would be discharged upon plan completion — a result she argued was impermissible under 11 U.S.C. §§ 1328(a)(2) and 523(a)(3), which exclude from Chapter 13 discharge debts that are neither listed nor scheduled in time to permit a timely proof of claim.

The Debtors’ Brief

Debtors filed a detailed brief through their counsel addressing each of the Trustee’s arguments.

On the procedural question, Debtors’ counsel confirmed that FRBP 3004’s deadline, unlike FRBP 3002(c)’s creditor bar date, is not enumerated in FRBP 9006(b)(3)’s list of deadlines that can only be extended under their own specific conditions. FRBP 9006(b)(1) therefore applies, and the Court may enlarge the FRBP 3004 deadline upon a showing of excusable neglect.

On excusable neglect, Debtors distinguished Schuster on its facts. In Schuster, the debtor had purchased appliances on credit — physical items that provided tangible, ongoing reminders of an unpaid debt — yet still claimed to have forgotten the obligation. Here, by contrast, the Debtors had no collateral, no invoices, no collection contacts, and no credit report entry to put them on notice. Ms. Sprague did not merely forget a debt she knew existed — she was genuinely unaware that any debt was owed. Upon learning of it, she and her husband acted immediately. Debtors’ counsel also identified three unreported decisions from the District of Utah in which courts had granted similar enlargements under comparable circumstances.

On the Trustee’s standing to seek a non-dischargeability determination, Debtors argued that the Trustee lacked both constitutional and prudential standing to raise a dischargeability objection on behalf of a specific creditor. Dischargeability is a particularized right belonging to the individual creditor, not a general estate matter the Trustee may assert.

On dischargeability itself, Debtors argued that § 523(a)(3) would not apply if the Court granted the enlargement. If the time to file a proof of claim on behalf of NLG were enlarged under FRBP 9006(b)(1), the claim would be deemed timely filed under FRBP 3004, included in the plan’s pro-rata distribution to general unsecured creditors, and “provided for” under the plan within the meaning of § 1328(a). The harm § 523(a)(3) is designed to prevent — a creditor being denied both payment and discharge — would not exist.

The Court’s Ruling

Judge Pappas granted the Debtors’ motion in its entirety. Applying the four-factor equitable test from Pioneer Investment Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380 (1993), the Court found that each factor weighed in the Debtors’ favor.

On prejudice, the Court found the impact on other unsecured creditors to be minimal. The omitted claim was approximately $1,500 in a pool of roughly $37,894 in unsecured debt — a modest reduction in pro-rata distributions that no creditor had objected to. As for the omitted creditor itself, the Court found it would actually benefit from having its claim filed and paid, rather than being left entirely outside the plan.

On the length and reason for delay, the Court found the delay understandable and outside the Debtors’ reasonable control. The creditor had made no contact for over four years, reported nothing to credit agencies, and provided no basis for the Debtors to know the debt existed. Upon learning of it, the Debtors acted promptly.

On good faith, the Court found no basis to question it — a conclusion the Trustee herself did not dispute.

The Court also expressly disagreed with the Trustee’s dischargeability argument, declining to follow Schuster on that point. Because the Court was enlarging the time to file a proof of claim under 11 U.S.C. § 501(c) and FRBP 3004 and 9006(b)(1), the creditor’s claim would be treated as timely filed. The Court doubted that §§ 1328(a)(2) and 523(a)(3)(A) compelled a contrary result under those circumstances, though it declined to rule definitively on the discharge issue as it was not formally before it.

The Order gave the Debtors fourteen days from 18 December 2013 to file the proof of claim for U.S. Bank.

Why This Matters

1. FRBP 9006(b)(1) can enlarge the FRBP 3004 deadline. Unlike the creditor bar date under FRBP 3002(c) — which is expressly restricted from enlargement except under its own terms by FRBP 9006(b)(3) — FRBP 3004’s debtor/trustee claim-filing window is not enumerated in FRBP 9006(b)(3). Courts therefore retain discretion to enlarge it upon a showing of excusable neglect. This is a critical distinction practitioners must understand when an omitted creditor surfaces mid-case.

2. Excusable neglect is highly fact-specific. The contrast between this case and Schuster illustrates how much the reason for delay matters in the excusable neglect analysis under Pioneer. A debtor who genuinely lacked knowledge of a debt — with no collateral, no billing, and no credit report entry — is in a materially different position than one who simply forgot about a known obligation.

3. Acting promptly upon discovery is essential. The Debtors’ immediate response — amending their schedules, serving the creditor, and filing the motion — was central to the Court’s good faith finding. Delay after discovery would have significantly weakened the equitable case for enlargement.

4. The Trustee lacks standing to raise dischargeability on behalf of a single creditor. A Chapter 13 trustee does not have constitutional or prudential standing to seek a dischargeability determination on behalf of a specific creditor. That creditor’s own silence — it filed no objection — reinforced the point.

5. Timely filing cures the § 523(a)(3) problem. Where a court enlarges the FRBP 3004 deadline and the debtor files a proof of claim on the omitted creditor’s behalf, that claim becomes timely for plan purposes. The debt is then “provided for” under § 1328(a), resolving the non-dischargeability concern under § 523(a)(3). Inclusion in the plan is the better outcome for all parties.

Full Decision: Available on PACER, Case No. 12-41099-JDP, Doc. 54 (Bankr. D. Idaho 18 December 2013)
Order Granting Motion: Doc. 55 (Bankr. D. Idaho 18 December 2013)

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In re Cantu

Decision: In re Rebecca Cherie Cantu and Alejandro Cantu, Case No. 14-40254-JDP (Bankr. D. Idaho, 26 Aug. 2014)
Judge: Honorable Jim D. Pappas, United States Bankruptcy Judge
Counsel for Debtors: Paul Ross, Idaho Bankruptcy Law, Paul, Idaho
Chapter 7 Trustee: Gary L. Rainsdon, Twin Falls, Idaho
Trustee’s Counsel: Brett R. Cahoon and Daniel C. Green, Racine, Olsen, Nye, Budge & Bailey, Chtd., Pocatello, Idaho

Background

Rebecca and Alejandro Cantu filed a Chapter 7 bankruptcy petition on 20 March 2014. In the months leading up to their filing, two creditors — NCO Financial and Bonneville Billing and Collections — had been garnishing their wages pursuant to state court judgments. NCO, collecting on student loans, garnished 15% of Ms. Cantu’s wages each pay period under federal law. Bonneville garnished an additional 10% under state law. Idaho only allows a maximum of 25% to be garnished from an individual’s wages. Over the 90-day preference period preceding the petition date, the two creditors combined had garnished a total of $1,536.93 from the Debtors’ paychecks.

On their amended Schedule B, Debtors listed the garnished funds as personal property and claimed $1,500 of that amount exempt under Idaho Code § 11-605(12) — a wage exemption statute enacted by the Idaho Legislature in 2010, and one that, as Judge Pappas noted, had never been interpreted by any court.

The Trustee’s Objections

The Chapter 7 Trustee filed two objections in sequence. The first, argued simply that the garnished funds were not “disposable earnings receivable” because they had already been paid to the creditors prior to the bankruptcy filing. When the Debtors amended their Schedule C to increase the claimed exemption from $1,086.53 to the statutory maximum of $1,500, the Trustee withdrew the first objection and filed a more detailed second objection through retained counsel.

The second objection raised two grounds. First, the Trustee argued the garnished funds were avoidable preferences under 11 U.S.C. § 547(b) — transfers made within 90 days of filing to specific creditors on account of antecedent debt — and that the Debtors were therefore barred from exempting them under § 522(g), which limits a debtor’s ability to exempt property recovered by the trustee to situations where the debtor could have exempted the property absent the transfer. Second, the Trustee contended that because the Debtors had received a benefit from the garnishments — reduction of their judgment debts — the funds had effectively been “paid” to them, and thus did not qualify as unpaid wages under Idaho Code § 11-605(12).

The Debtors’ Responses

This firm filed two responses on behalf of the Debtors, tracking the Trustee’s evolving objections.

On the statutory interpretation question, Debtors argued that Idaho Code § 11-605(12) means exactly what it says: the exemption applies to earnings that “have been earned but have not been paid to the individual.” The garnished funds were unquestionably earned by Ms. Cantu through her personal services, and they were never paid to her — they were diverted directly to her creditors via the sheriff. The statute does not require that funds be “receivable,” nor does it specify where the funds must be held. The Trustee’s position that the funds were “effectively paid” to the Debtors because they reduced outstanding debts stretched the statutory language beyond its plain meaning.

On the § 522(g) issue, Debtors argued that the garnishments were not voluntary transfers — they were compelled by court order — and that the funds had not been concealed, as they were fully disclosed on Schedule B and the Statement of Financial Affairs. Because the property could have been exempted under Idaho Code § 11-605(12) had it remained with the employer and not yet been paid, the Debtors were entitled to claim the exemption on any funds recovered by the Trustee under § 522(h).

The Court’s Ruling

Judge Pappas ruled in favor of the Trustee and sustained the objection, disallowing the exemption. The Court’s analysis turned entirely on the meaning of the phrase “have not been paid to the individual” in Idaho Code § 11-605(12).

The Court acknowledged that the statute had never been interpreted by any court since its enactment in 2010, and that the phrase “paid to the individual” was arguably ambiguous. However, the Court concluded that reading the statute in context — as required under Idaho rules of statutory construction — compelled the conclusion that the garnished wages had been paid.

The Court’s reasoning proceeded on several fronts:

From the employer’s perspective, the wages were indisputably paid. The employer transferred the full amount owed to Debtors — some directly to them, and the garnished portion to the sheriff on their account — satisfying its payroll obligation in full.

From the Debtors’ own perspective, the Court found the wages had likewise been paid. The garnished sums reduced the Debtors’ outstanding judgment debts, conferring a direct financial benefit. To hold otherwise, the Court noted, would potentially require employers to pay the garnished amounts twice — once to the sheriff, and again to the debtor following a successful exemption claim — a result the Idaho Legislature could not have intended.

The Court also rejected the Debtors’ reading as internally inconsistent with Idaho’s garnishment statutes. Idaho Code § 8-509(b) expressly directs an employer-garnishee to “pay” the earned wages to the sheriff for the creditor’s benefit. Treating those same wages as simultaneously “paid” for garnishment purposes and “unpaid” for exemption purposes would create an irreconcilable conflict between the two statutes. As the Court observed, while exemption statutes are to be construed liberally in favor of debtors, statutory language should not be “tortured” in the name of liberal construction.

Because it resolved the case on the § 11-605(12) issue, the Court declined to reach the Trustee’s alternative argument under § 522(g).

Why This Matters

1. A case of first impression on Idaho Code § 11-605(12). The Court explicitly noted that no prior case had interpreted this 2010 wage exemption statute. This decision remains the leading — and only — authority on its meaning and scope. Idaho practitioners advising debtors on wage garnishment situations should be aware of its limitations.

2. “Paid to the individual” means paid on the individual’s account, not just into their hands. The Court’s construction of the statute is broad: wages diverted to a creditor through garnishment are treated as paid for exemption purposes, even though the debtor never personally received them. Debtors who suffer pre-petition garnishments cannot use § 11-605(12) to recapture those funds in bankruptcy.

3. The interplay between § 547 preferences and § 522(g) exemptions is complex. Where a trustee seeks to avoid a pre-petition garnishment as a preference, the debtor’s ability to claim an exemption in the recovered funds depends on whether the property could have been exempted in the first instance. This case illustrates how critical it is to identify viable exemption authority before asserting the right to avoid a transfer under § 522(h).

4. Debtors should assert wage exemptions in state court before filing. The Court noted, in a footnote, that Idaho Code § 8-519 permitted the Debtors to have raised an exemption claim in state court at the time of the garnishment. No such claim was made. Practitioners should advise clients facing wage garnishment to promptly evaluate available exemptions under state law — before funds leave the employer’s hands.

5. Liberal construction has limits. Idaho courts construe exemption statutes in favor of debtors, but that principle does not authorize courts to rewrite statutory language. Where plain meaning and statutory context point clearly in one direction, liberal construction will not overcome them.

Full Decision: Available on PACER, Case No. 14-40254-JDP, Doc. 51 (Bankr. D. Idaho 26 Aug. 2014)

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In re Champ

Decision: In re Richard M. Champ and Helen B. Champ, Case No. 08-40272-JDP (Bankr. D. Idaho, 19 Aug. 2013)
Judge: Honorable Jim D. Pappas, United States Bankruptcy Judge
Counsel for Debtors: Paul Ross, Idaho Bankruptcy Law, Paul, Idaho
Chapter 13 Trustee: Kathleen A. McCallister, Meridian, Idaho

Background

Richard and Helen Champ filed a Chapter 13 petition on 8 April 2008, represented by attorney Emil F. Pike, Jr. Their plan was confirmed in October 2008, requiring monthly payments of $910 over sixty months toward $53,019.09 in unsecured debt. The confirmation order included a specific provision reflecting that Mrs. Champ had a pending Social Security disability claim: if she were awarded benefits, the Debtors were required to file an amended Schedule I to disclose that income.

The Debtors faithfully made plan payments for nearly five years — even through a period in which Mr. Champ suffered a heart attack and the Trustee extended the payment period to allow them to catch up. By the time this dispute arose, only approximately $1,130 remained unpaid under the Plan.

The Trustee’s Motion

In March 2013 — nearly two years after learning of the Social Security award from the Debtors’ 2011 tax return — McCallister filed a motion to dismiss, alleging that the Debtors had failed to comply with the confirmation order by not amending their schedules to disclose Mrs. Champ’s Social Security lump sum award of $37,914.40 and her ongoing monthly benefit of $1,038.90. The Trustee argued the award remained property of the estate and demanded either dismissal or a turnover of approximately $25,600 to pay creditors in full.

The Objection

The Debtors engaged new counsel — Paul Ross with Idaho Bankruptcy Law — and filed a substantive objection raising several important points.

First, the Debtors’ original attorney, Emil Pike, had passed away in April 2010, leaving them without legal guidance at the precise moment they needed it most. When Mrs. Champ received the Social Security award in mid-2011, the Debtors did what they understood to be appropriate — they called the Trustee’s office. A factual dispute arose over what was communicated: the Trustee believed the Debtors were asking about a payoff and were told to contact an attorney; the Debtors believed they were simply told to keep making plan payments. Either way, their outreach demonstrated good faith, not an intent to conceal.

Second, new counsel promptly filed amended Schedules B, C, and I to address all disclosure deficiencies, including the Social Security lump sum, the ongoing monthly benefit, and a previously undisclosed $92 monthly Lamb Weston pension payment to Mrs. Champ.

Third, and critically as a legal matter, Social Security benefits are excluded from the calculation of a debtor’s current monthly income under 11 U.S.C. § 101(10A)(B) following BAPCPA. As such, the Social Security award would not have increased the Debtors’ required plan payments regardless of when it was disclosed. The Trustee’s demand for a $25,600 turnover had no statutory basis.

The objection also raised alternative relief: modification of the plan under § 1329 to reduce any remaining payment obligation to zero given the Debtors’ reduced income and medical hardships, or alternatively, a hardship discharge under § 1328(b) given that the plan shortfall was attributable to circumstances beyond the Debtors’ control — specifically, the death of their attorney and Mr. Champ’s serious medical issues.

The Court’s Ruling

Judge Pappas denied the Trustee’s motion to dismiss in its entirety. While acknowledging that the Debtors technically failed to comply with the confirmation order, the Court exercised its discretion under 11 U.S.C. § 1307(c) — which uses the permissive “may” rather than the mandatory “shall” — and weighed the totality of the circumstances carefully.

The Court’s analysis turned on several key findings:

  • The death of the Debtors’ attorney left them without guidance at a pivotal moment, and their confusion about compliance was understandable given that circumstance
  • The Debtors’ phone call to the Trustee’s office and their voluntary provision of their 2011 tax return — which disclosed the Social Security income — demonstrated that they were not attempting to conceal anything
  • The Debtors had substantially completed five years of plan payments; denying them a discharge at that stage would be a disproportionately harsh sanction
  • Under post-BAPCPA law, Social Security income is excluded from current monthly income under § 101(10A)(B), meaning the award would not have changed the Debtors’ payment obligations in any event — a point recently confirmed by the Ninth Circuit in Drummond v. Welsh (In re Welsh), 711 F.3d 1120 (9th Cir. 2013)
  • The undisclosed Lamb Weston pension of $92 per month, while a concern, was too minor an omission to override five years of consistent plan compliance

The Court declined to consider the alternative requests for plan modification or hardship discharge raised in the objection, noting those would need to be raised by proper motion with appropriate notice — but the dismissal motion itself was denied, clearing the path for the Debtors to receive their discharge.

Why This Matters

1. Disclosure obligations are ongoing and binding. Confirmed plans create court orders, and debtors must comply with them throughout the life of the case — not just at the point of confirmation. A change in financial circumstances mid-case requires prompt attention.

2. Attorney death mid-case creates real risk for clients. When counsel passes away during a long Chapter 13 plan, clients are left without guidance precisely when they may need it most. Practitioners and courts alike should be attentive to these situations, and successor counsel should audit compliance with the confirmation order from the outset.

3. Social Security income is excluded from disposable income calculations post-BAPCPA. While SS income must be disclosed on Schedule I, it does not factor into a debtor’s projected disposable income under § 1325(b), and — as confirmed in In re Welsh — it cannot be considered in a good faith analysis under § 1325(a). The Trustee’s demand for a $25,600 turnover in this case was legally untenable.

4. Dismissal under § 1307(c) is discretionary. Courts are not required to dismiss even upon a finding of material default. Where debtors have acted in good faith, made substantial plan payments, and the equities weigh against dismissal, courts retain and will exercise broad discretion to deny the motion.

5. Good faith communication matters. The Debtors’ efforts — calling the Trustee’s office, providing tax returns, engaging new counsel promptly — were central to the Court’s finding that no intent to evade existed. Documented communication with the Trustee’s office, even if informal, can be meaningful evidence in contested dismissal proceedings.

Full Decision: Case No. 08-40272-JDP, Doc. 72 (Bankr. D. Idaho 19 Aug. 2013)

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Christiansen Family Photos

I just uploaded all the pictures I have of the Christiansen family relatives.  Here is my tie to the Christiansen family.
There is me.
Sandy is my mother.
Norwood is her father.
Lillian is his mother.
Martha Christiansen was her mother.  The same one I referred to in the past that Lillian gives no emotional record in her journal concerning her death.  She was born in 1879 in Fredrickstad, Norway.  She and her parents immigrated to the United States arriving in New York on the 2 Oct 1889.  It was a long route getting here as in the early 1880’s they moved to Melbourne, Australia.  After about 5 years there, they moved back to Norway.  It was then that they joined The Church of Jesus Christ of Latter-day Saints and then moved to the United States.  They found their way across the United States by rail and were sent from Salt Lake to Cache Valley.  They settled and homesteaded near Richmond, Utah.  Martha’s parents had 10 children.  Surprisingly, all of them lived through the move (the one’s who were born) to Australia, back to Norway, to the United States, and across the country.  They would only have one child die and that was the last child born near Richmond.  If anyone has more information on this family, I would certainly be interested.  I am especially interested since some of the children married husbands with common names which makes it hard to chase down, or they fall off the map and apparently out of the records of the church so they probably were not active.
Here is the family in full.
Olle Christiansen 1853 – 1900.  He was born in Trygstad, Norway, died in Richmond, Utah.
His wife from 1874 is Constance Josephine Eliza Jorgensen 1857 – 1932.  She was born in Drammen, Norway and died on a sightseeing tour in Portland, Oregon.  She is buried there.  Her parents Olavus Jorgensen and Hanna Mathea Christensen also came to Utah.  They died and are buried in Richmond, Utah.
Walborg Christiansen 1875 – 1951 Born in Fredrickstag, Norway; died in Salt Lake City, Utah.  She married to Charles Christian Anderson and lived in Salt Lake all her days.
Martha Christiansen 1879 – 1961 Born in Fredrickstag, Norway; died in Logan, Utah.  She married Herbert Coley.
Eivelda Christiansen 1881 – 1892 Born in Melbourne, Australia; died in Richmond, Utah.
Constance Christiansen 1883 -1953 Born in Melbourne, Australia; died in Pocatello, Idaho.  She was married to John Rocky Clawson and Charles Roy Huff.
Henry Owen Christiansen 1887 – 1932 Born in Fredrickstag, Norway; we don’t know where he died.  Church records have his exact death date but no location.  I believe he moved to Washington State and was married to Anna Wilder Hooser, but am not sure.
Rhoda Christiansen 1890 – 1965 Born in Richmond, Utah; death location is also unknown.  I believe she was living in either Vancouver, Washington or Nyssa, Oregon at the time of her death.  My Great Grandmother was writing to her in 1962 in Nyssa and in 1963 to Vancouver.  We have three marriages, none of which I am sure; George R Davenport, Edward Holman, and Peter Pappas.
Roy C Christiansen 1892 – 1892 Born and died in Richmond, Utah.
Jennie Christiansen 1894 – 1949 Born in Richmond, Utah; we don’t know where she died.  We assume her husbands were as follows; Peter Dee June, a Mr. Ewing, Orval Charles Sherwood, and Junior Albert Shirley.
Myra Christiansen 1896 – 1897 Born and died in Richmond, Utah.  There is another Myra Christiansen in church records born 2 years later, but I have no confirmation it is this girl.  Plus this girl is missing in the 1900 Census so she is either dead as the records and family tradition says, or who knows what.
Ole Loren Christiansen 1898 – 1977 Born in Richmond, Utah; died we assume in Oakland, California.  The dates and everything match, but I would like to have some contact with a family member or something to confirm it.  His spouses we believe are Sara May Strong and a Florence.
Anyhow, this line is a hard one to chase.  It is often misspelled as Christensen, Christinsen, Christianson, and so forth.  Plus there are so many of these other names it makes it tedious work to sort them out.  So I hope for some communication with a family member to open the door on these.  (If you are reading this and are related, please contact me!  Leave a comment with your e-mail or contact me directly, please)  This family has too many holes in it for how I like to do things.  But it seems to be so difficult to do.
by

Visit from Grands

This week brought some happy differences from the mundane run.  Not at all to give the impression that life is mundane though.  The longer I live, the more I realize it is just like beauty, all in the life of the beholder.  There are those people wandering their lives thinking they are a nobody and with nothing great in their character or soul.  Then there are those people who find fascination, excitement, and life in all there is about them.  They are a different breed.

Somehow, I feel like in Richmond, I walk through a load of people with no excitement in their lives.  Life is a labyrinth for them to wander and walk.  There are so few who are in it for the game, and the experience.

The great Samuel Clemens, a fascinating man.  One who watched the every move of those about him with great detail.  Their every movement captured their personality for him.  That is one of the things that made him such a great writer.  He was able to take those little details and wind them into a story and make the characters that much more real. 

Suppose it would be the experience of the riverboat pilot which would teach you even more closely to watch the details of the water.  The slightest quiver could mean life or death.  Just his assumed name of Mark Twain shows a certain yearning.

Earlier this week I was able to pick the brain of a man who I found to be very fascinating.  A silent man in the past, but who gave voice this week.  I wanted to hear his story.  So I started to inquire and found some wonderful stories.

Having William Borah fresh on my mind, I was thinking of the honour of the President of the United States coming to visit you in your home state.  Senator Borah toured with him and introduced him to all audiences that he was presented before.  For some reason this has really lingered with me the past weeks.  President Roosevelt paying one of the greatest honours to a man of the opposite party.  President Franklin Roosevelt went to Republican Idaho and toured with its Senator.  It also showed the distinction of Senator Borah.  This really has hit home with the latest election.

So it was with greatest delight that I wandered through the mind and history of Mel Thompson.  Learning he moved with his family to Nyssa, Oregon in the mid 30’s.  They moved up there and basically homesteaded a new territory.  Knowing many of my own family would move to that same area within the next 10 years I really sought to pick his brain. 

Family history and my delving into history met ironically in the mind of Mel.  He told of the experience when he was still in school that the President of the United States came to town.  Yes sir, little Nyssa, Oregon welcomed the President.  I knew who one of the men was who traveled with him, the same Senator Borah.

These stories come to life for me when I can go to the places these events happened.  But they come so much more alive when I know a person and can learn from firsthand experience.  Like sitting on the porch of the Price home in Malad, Idaho where Senator Borah visited with Helen Daniels Price’s father.

Having been to Nyssa several times in my life, the latest just in 2005 when I traveled out there with a visit to Parma.  The Amalgamated Sugar Factory, with which Dad was closely tied for a good 25 years.  Cannot forget the Sharp family members who moved, and some of which still live in Malheur County.  The Fort Boise replica is not far away either.  Oh, and the elusive Rhoda Christensen Davenport Pappas Halan who wrote letters from there, but that is the end of the story.  I have found no more.

All truth can be circumscribed into one great whole.  That truth certainly extends beyond the theoretical.  That truth engulfs us into it as well.  Funny thought, to consider ourselves the truth, but in essence all things are truth.  Whether we like or live it or not; even our lying is in truth and will be treated as such.  Our lives mingle, intertwine, and are very much related to each other.  How could one ever conceive that their actions don’t affect another?  President Roosevelt, Senator Borah, and in the school yard where the children were let out from class to go out to the street to see the President’s motorcade prove that point.  One of those children had a face, had a personality, and had the name of Melvin J Thompson.

Last weekend, we went to Washington to attend the temple, to see Amanda’s grandparents, and to witness of a baby blessing.  It was a great weekend, but turned even better when Amanda’s grandparents came to stay with us for an evening.  An honour I would be willing to give a lifetime to do with one of my sets of grandparents.  (I suppose I am giving a lifetime to do so!)  It will yet come to pass and I will cherish that day.

We attended the Washington Temple Saturday morning.  Amanda and I were asked to be the witness couple for the session.  That was our second time.  Shanna just thought that was something else.  I wish I could have done an endowment with any of my grandparents, living I mean.  It bothers me even still today my Grandfather, my only living grandparents, chose not to come to our sealing.  For what reason I do not know, and probably prefer not to know.  There again, how woven our lives are together.  That the mere presence, or absence thereof, would so affect me.  What if Mel Thompson had not been in the audience that day?  Who would ever have known?  Nobody would have known, but now I do.  Somehow it rings a siren to my soul and brings back me back to the reality of the past.  It seems so far distant sometimes.  But now that nameless face has altered my life some 70 years later.  Even further, all those who read this will be altered to one degree or another, by this events significance.  That says nothing of all the other individuals present that day.  How many of them told that experience later in life, how many wrote it down, how many family members recall that event today.  I would venture that at least one somewhere, somehow, even if from a recorded record.

Our families were tied a little more closely that day in Washington and the following convo.  The drive back to Richmond brought out the stories of childhood in Pingree, Idaho; Nyssa, Oregon; and Ogden, Utah.  The stories included excursions to the Pacific and World War II and running into Mel’s brother at Pearl Harbor from Air Craft Carrier #77 to his training at Farragut in northern Idaho.  His missing attendance at the Laie, Hawaii Temple by one day was told followed by his bouts in learning telegraphy for the railroad.  Even those appear to be the most ordinary have a life to tell.  Sadly, it is in the eye of the storyteller that plays just as much of a role as that of the listener.  The listener has to seek and find connections, living what is true empathy.  In return, the speaker has to give of himself in such a way for the other to experience it. 

Is it any wonder the gospel works the way it does?  Not only does one have to be prepared to receive, but the giver has to be prepared to give.  Otherwise neither will give nor receive and both will most certainly not be edified.  One side operating just doesn’t work.  It falls on deaf ears, or is droned out before even arriving at the other party.

Too often there are those who are giving for the wrong reasons make it strained.  Those who seek it for the wrong reasons ruin the experience.

Anyhow, it was a fascinating lesson, and I was able to come and grasp some more of the 60’s.  I have really struggled coming to understand the 70’s and 70’s.  I just cannot tell why.  Even though I was born in the late 70’s, there seems to have been some type of disconnect.I have been fully engulfed in Richmond, Utah in 1961 and 1962 through the eyes of Lillian Coley Jonas Bowcutt.  The lifestyle of a lady in her 60’s though just does not seem to portray the era.  Especially this is true in a community which was still very rural and in some ways behind the times.  I just cannot seem to get the culture of the time.  50’s, 40’s, 30’s, I feel like I have a very good grasp, like experiencing through proxy.  In stepping backwards farther, I struggle to back further and feel it is due to the 60’s and 70’s.  Honestly though, I have not much desire for that time.  I don’t know why.  So I push further back into the 20’s and 1800’s without it. 

Anyhow, I never really got to pick Shanna’s brain much.  I got Mel on such a roll that he was not about to give up his shine.  We both were so enjoying it while the others just slept, knitted, or did something else.  So I regret not picking apart Shanna’s past, which I am sure holds many interesting experiences and stories.  Perhaps another day, with the right experiences will open that book.

They spent the night, and we had breakfast together before Amanda went to school and I went to work.  Mel, Shanna, Dennis, and Gwen toured the Museum of the Confederacy and St. John’s Church.  We invited them for dinner, of which they accepted.  We made white chili for their dinner.  They loved it, we put it over rice with corn.  In the end, games and conversation were out as Dennis seemed not very desirous to stay.  So we bid them adieu and wished them well on their drive home.

It was an experience I will not soon forget.  It is a rare thing such experiences happen.  So much has to align for such events to occur.  A man I had viewed as so quiet proved to be very perceptive, keen, and wise.

I don’t like the tone of this little blog, so I think I will be leaving.  I feel like I am condescending or portraying some type of sage.  Which I am not attempting, but failing.  I am so weak at words it is frustration.  What I would not give to have the power and verse of Mark Twain or Hugh Nibley.