Now comes the Connecticut case of In re Caraballo, Case No. 07-32469 (D. Conn. 2008) which faced head on the question of whether, after the enactment of BAPCPA, Capital Communications Federal Credit Union v. Boodrow (In re Boodrow), 126 F.3d 43 (2d Cir. 1997), cert. denied, 522 U.S. 1117 (1998) and BankBoston, N.A. v. Sokolowski (In re Sokolowski), 205 F.3d 532 (2d Cir. 2000), remain binding authority that (1) a debtor has an option (the “ride through option”) to retain real property collateral and maintain current performance under the subject loan documents and (2) the secured creditor may not foreclose based solely on the debtor’s filing of the bankruptcy petition and failure to reaffirm.

Caraballo involved a debtor who sought to reaffirm a mortgage owed to HSBC Mortgage Services.  Though the court found no reason to deny the reaffirmation, it raised the issue sua sponte of whether such a move was necessary at all.

The court used Northwest Airlines Corp. v. Association of Flight Attendants-CWA (In re Northwest Airlines Corp)., 483 F.3d 160, 169 (2d Cir. 2007) and Garcia v. Teitler, 443 F.3d 202, 207 (2d Cir. 2006) to determine that Congress would have been aware of the pre-BAPCPA “existing landscape” of Boodrow and Sokolowski allowing ride-through for real property and personal property.  Noting that Congress eliminated the ride through option for personal property in BAPCPA, the court assumed that by failing to specifically do so as to real property in BAPCPA the intention was to leave it intact post-BAPCPA.

The question, then, is how the court could have affirmed the so-called fourth option for real property but not for personal property?  True, BAPCPA eliminated the automatic stay for unreaffirmed personal personal but did it provide a secured lender with the ability to repossess based solely on the bankruptcy trigger?

Here’s the thing - Boodrow and Sokoloski both accepted that it was a stream of payment, not a “technical default” such as bankruptcy, that prohibited a secured creditor from repossessing property.  There is nothing in BAPCPA that changed those rules; in fact, BAPCPA merely addressed the automatic stay.  It gave a creditor the ability to seek non-bankruptcy recourse to the extent permitted by law.  In the Second Circuit, such non-bankruptcy law is a non-starter.  So in my mind, the secured creditor is left with nothing but an empty bag; no automatic stay, but no ability to repossess in the face of current payments.

In re Caraballo is attached for your review.

This Research Guide tackles the following:

• attempts to collect all the cases discussing the calculation of projected disposable income insofar as the discussion is specific to Chapter 13
• review how a court applies § 1325(b) to the numbers generated by the debtor under § 101(10A) and § 707(b)(2)
• collects the cases discussing the treatment of a Chapter 13 debtor’s retirement plan contributions and loan repayments, and those cases determining the classes of unsecured creditors comprehended by Code § 1325(b)(1)(B), requiring a debtor to pay all of his or her projected disposable income to “unsecured creditors” if those creditors are not paid in full.

Robin has graciously allowed me to make this guide available to my readers and visitors. I think you’ll find it a useful tool in your Chapter 13 practice.

Download the guide by clicking here.

This flies in the face of the bankruptcy discharge injunction, and the prohibitions of the US Bankruptcy Code. What the court in Eady failed to realize was the the Code prohibits collection activities against a debtor once a discharge has been issued. It is incumbent upon a creditor to ensure that it refrains from such prohibited activities, and the argument put forth here amount to what I like to call the, “Stupidity Rule.”

If you’re too stupid to read the law, dear creditor, that’s alright - we forgive you.

The defendant in this case, however, is not stupid. In fact, the website maintained by the creditor clearly states that its entire business model centers around bankruptcy.

How can such a defendant be deemed too stupid to know the law, and the consequences of its actions?

That’s why each year only 400 of the 3,000 NACBA members vote in the elections.

The result never represents the needs of the members.

This year needs to be different.

Why? Because the future of consumer bankruptcy practice is in your hands. You pay dues to an organization, and it’s important to have that organization reflect your needs.

Without your input, NACBA is nothing more than a waste of space and time.

You need to vote. And to know who gets your vote, you need to be informed.

What do you care about? Lobbying? Technology? Managing your office? Getting NACBA to help you in day-to-day issues with your local judges and trustees? Education?

I have issued a challenge to the candidates.

It’s called “30 Questions.”

Each candidate will choose 10 questions for the other candidate to answer. The members of NACBA will submit an additional 10 questions.

No holds barred, folks. Any serious question is fair game.

I will call each candidate separately and ask the questions. The entire conversation will be recorded and disseminated to the members online via mp3 audio.

To wrap it up, I will ask 10 questions. They will be the following:

1. What is your educational background?

2. How large is your firm or organization?

3. How long have you been a consumer bankruptcy attorney?

4. How many cases do you file on an average month (or year)?

5. Where do you practice law?

6. How long have you been a member of NACBA?

7. What has been your greatest professional achievement thus far in your career?

8. If you were the “King of NACBA” for one day and one day only, answering to no other individual or group for your actions, what is the single thing that you would do to better the organization?

9. Do you believe that the current vetting process for new members is sufficient to protect the interests of the membership?

10. What is the single most important issue confronting the members of NACBA at this time?

Questions submitted by the members will be selected at random, but both candidates will answer the same questions.

Candidates will not be given the questions (except for the above) until they are asked.

The election is important.

Questions should be posed to me by email (bankruptcy [at] gmail.com) Friday, April 11, 2008 at 5:00pm Eastern time.

I will be doing Q&A sessions with each candidate next week, and will post the audio of our conversations shortly thereafter.

What happens when your case is assigned to one of these trustees? Simple - the case is reassigned.

My colleague, Kansas City bankruptcy attorney Rachel Foley, mentions this phenomenon in a recent post on her blog as well - which goes to show that the problem is not limited to New York cases.