Statements of Jurisdiction, Statutory Provisions, Summary of Arguments | THE 200, Exams of World Religions

Download Statements of Jurisdiction, Statutory Provisions, Summary of Arguments | THE 200 and more Exams World Religions in PDF only on Docsity! No. 06-628 IN THE Supreme Court of the United States OCTOBER TERM, 2006 IN RE MEGHAN CANNELLA, DEBTOR PAUL HAGE, ESQ., Petitioner. -versus- MEGHAN CANNELLA, Respondent, ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRTEENTH CIRCUIT BRIEF FOR RESPONDENT Team Number R22 Attorneys for the Respondent R22 i QUESTIONS PRESENTED FOR REVIEW I. Whether § 526(a)(4) of the Bankruptcy Code, which prohibits attorneys from advising their debtor clients to incur additional debt in contemplation of bankruptcy, violates the First Amendment of the Constitution. II. Whether the § 362 automatic stay bars a chapter 7 debtor’s attorney from collecting fees incurred pursuant to a pre-petition retention agreement post petition. R22 iv TABLE OF AUTHORITIES UNITED STATES SUPREME COURT CASES Adarand Constructors, Inc. v. Mineta, 534 U.S. 103 (2001) (per curiam) ................................... 28 Bd. of Trs. for the State Univ. of N.Y. v. Fox, 531 U.S. 533 (2001)............................................ 12 Broadrick v. Okla., 413 U.S. 601 (1990) .................................................................................. 8, 15 Cohen v. Hurley, 366 U.S. 117 (1961) ......................................................................................... 11 Cooper Indus., Inc. v. Ariall Servs., Inc., 543 U.S. 157 (2004).................................................... 28 Gentile v. State Bar of Nev., 501 U.S. 1030 (1991) .............................................................. passim Goldfarb v. Va. State Bar, 421 U.S. 773 (1975)............................................................................. 9 Lakewood v. Plain Dealer Publ’g Co., 48 U.S. 750 (1988)............................................................ 7 Landreth Timber Co. v. Landreth, 471 U.S. 681 (1985) .............................................................. 25 Legal Servs. Corp. v. Velazquez, 531 U.S. 533 (2001).......................................................... 12, 17 Nat’l Endowment for the Arts v. Finley, 524 U.S. 569 (1998)....................................................... 8 Ohralik v. Ohio State Bar Ass’n, 436 U.S. 447 (1978) ...................................................... 9, 11, 12 Osborne v. Ohio, 495 U.S. 103 (1990) ......................................................................................... 15 Pa. Dep’t of Pub. Welfare v. Davenport, 495 U.S. 552 (1990) .................................................... 25 Sable Commc’ns of Cal., Inc. v. FCC, 492 U.S. 115 (1989)........................................................ 13 Turner Broad. Sys. v. FCC, 512 U.S. 622 (1994)......................................................................... 10 United States v. Playboy Entm’t Group, Inc., 529 U.S. 803 (2000)............................................. 18 Wis. Right for Life, Inc. v. Fed. Election Comm’n, 126 S.Ct. 1016 (2006)................................... 7 UNITED STATES COURT OF APPEALS CASES Avellino & Bienes v. M. Frenville Co., Inc. (In re M. Freville Co., Inc.), 744 F.2d 332, 335 (3rd Cir. 1984) ...................................................................................................................... 19, 24, 25 R22 v Bethea v. Robert J. Adams & Assocs., 352 F.3d 1125 (7th Cir. 2004) ........................................ 23 Craig v. Finch, 425 F.2d 1005 (5th Cir. 1970) .............................................................................. 13 Epstein v. Official Comm. of Unsecured Creditors of Estate of Piper Aircraft Corp. (In re Piper Aircraft Corp.), 58 F.3d 1573 (11th Cir. 1995) .................................................................. 20, 21 Fickling v. Flower, Medalie & Markowitz (In re Fickling), 361 F.3d 172 (2nd Cir. 2004)......... 27 Gordon v. Hines (In re Hines), 147 F.3d 1185 (9th Cir. 1998) .............................................. 23, 25 Grady v. A.H. Robins Co., 839 F.2d 198 (4th Cir. 1988)............................................................. 20 In re Dill, 30 B.R. 546 (B.A.P. 9th Cir. 1983).............................................................................. 24 In re Manville Forest Prods., 209 F.3d 125 (2nd Cir. 2000)......................................................... 22 In re THC Fin. Corp., 686 F.2d 799 (9th Cir. 1982)..................................................................... 25 Iowa Network Servs., Inc. v. Qwest Corp., 466 F.3d 1091 (8th Cir. 2006) ................................... 1 Johnson v. AT&T Corp., 422 F.3d 756 (8th Cir. 2005) ................................................................. 1 Olin Corp. v. Riverwood Int’l Corp. (In re Manville Forest Prods. Corp.), 209 F.3d 125 (2nd Cir. 2000) ................................................................................................................................... 19, 25 Rittenhouse v. Eisen, 404 F.3d 395 (6th Cir. 2005) ..................................................................... 27 Tripp v. Mitschrich, 211 F. 424 (8th Cir. 1914) ..................................................................... 15, 16 United States v. LTV Corp. (In re Chateaugay Corp.), 944 F.3d 997 (2nd Cir. 1991) ................ 25 United States v. Scarfo, 263 F.3d 80 (3rd Cir. 2001) .................................................................... 10 UNITED STATES DISTRICT COURT CASES Canatella v. Stovitz, 365 F.Supp. 2d 1064 (N.D. Cal. 2005)............................................ 10, 11, 12 UNITED STATES BANKRUPTCY COURT CASES In re All Media Props., Inc., 5 B.R. 126 (S.D. Tex. 1980) ........................................................... 25 In re Amfesco Indus., Inc., 81 B.R. 777 (Bankr. E.D.N.Y. 1988)................................................ 26 In re Caldor, Inc., 240 B.R. 180 (Bankr. S.D.N.Y. 1999) ............................................................ 22 R22 vi In re Griffin, 313 B.R. 757 (Bankr. E.D. Ill. 2004) ...................................................................... 22 In re Jastrem, 224 B.R. 125 (Bankr. E.D. Cal. 1998) ................................................................... 28 In re Nat'l Gypsum Co., 139 B.R. 397 (Bankr. N.D. Tex. 1992) ................................................. 22 In re Piper Aircraft Corp., 162 B.R. 619 (Bankr. S.D. Fla. 1994) ................................................ 21 In re Piper Aircraft Corp., 169 B.R. 766 (Bankr. S.D. Fla. 1994) ................................................ 21 FEDERAL STATUTES 11 U.S.C. § 101 (2005) ............................................................................................... 19, 24, 25, 26 11 U.S.C. § 109 (2005) ................................................................................................................. 14 11 U.S.C. § 329 (2005) ........................................................................................................... 26, 27 11 U.S.C. § 362 (2005) .......................................................................................................... passim 11 U.S.C. § 526 (2005) .......................................................................................................... passim 11 U.S.C. § 707 (2005) ............................................................................................................. 7, 14 11 U.S.C. § 723 (2005) ................................................................................................................. 13 11 U.S.C. § 727 (2005) ................................................................................................................. 13 STATE COURT CASES Fite v. Lee, 11 Wash. App. 21 (Div. 2 1974)................................................................................ 11 LEGISLATIVE HISTORY Bankruptcy Reform Act of 1998: Part I, Hearing on H.R. 3150 before House Judiciary Comm., 105th Cong., 2d Sess., at 25 (1998) ........................................................................................... 14 H.R. Rep. No. 109-31, at 5 (2005), reprinted in 2005 U.S.C.C.A.N. 88 ............................... passim H.R. Rep. No. 595, 95th Cong., 2d Sess. 209 (1978) .................................................................... 19 R22 2 STATEMENT OF THE CASE This appeal involves a dispute between a debtor in bankruptcy, Meghan Cannella (hereinafter “Respondent”) and her former attorney Paul Hage (hereinafter “Petitioner”). In October of 2005, Respondent consulted Petitioner regarding the possibility of filing for bankruptcy. (R. 3) Having just been laid off from her job as a ticket agent with Northwest Airlines in the state of Bliss, Respondent was in a precarious financial situation and needed sound legal advice. (R. 3) Petitioner advised Respondent that she would be better off filing for Chapter 7 rather than Chapter 13 relief. (R. 3) However, under the “means test,” newly imposed by the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (hereinafter “BAPCPA”), which screens debtors for Chapter 7 eligibility, the amount of Respondent’s monthly disposable income raised a presumption of bankruptcy abuse which would likely have lead to the dismissal of her petition. (R. 3) Since monthly payments on secured debt reduce a debtor’s disposable income under the means test, Petitioner advised Respondent to trade in the car she owned outright and purchase a new car on credit. (R. 3-4) Doing so, Petitioner advised, would help her pass the means test and become eligible for Chapter 7 relief. (R. 4) Pursuant to her attorney’s advice, Respondent traded in her old car and bought a new 2005 Nissan Sentra on credit. (R. 5) Having thus subverted the means test, the Chapter 7 petition was then filed by Petitioner in the United States Bankruptcy Court for the Northern District of Bliss. (R. 5) Respondent agreed to pay Petitioner $1,000 for his services in her Chapter 7 bankruptcy. (R. 4) Respondent could not pay the whole fee upfront so she entered into an agreement with Petitioner whereby she would pay $600 of his fees upfront and pay the remaining $400 over time via four post-dated checks worth $100 each which Petitioner would cash as they came due. (R. 4- R22 3 5) In December 2005 and January 2006, Petitioner cashed the first two of the four post-dated checks for the remainder of his fee and both checks were paid. (R. 5) Shortly afterward, Respondent and Petitioner got into a divisive argument over a reaffirmation agreement. (R. 5) Respondent wanted to reaffirm a debt, but Petitioner refused to sign the § 524(c)(3) declaration. (R. 5) Upset and frustrated, Respondent terminated their relationship and found new legal counsel, Joe Finelli (“Finelli”). (R. 5, 6) Petitioner returned the two remaining post-dated checks he had not cashed. (R. 5-6) Finelli filed the instant action against Petitioner to recover all fees paid by Respondent to Petitioner positing two theories for recovery. (R. 6) First, the complaint averred that under § 526(c)(2) Respondent is entitled to recover all fees that were paid to Petitioner, plus reasonable attorneys fees and costs because Petitioner’s advice to her to incur additional debt in contemplation of bankruptcy violated § 526(a)(4). (R. 6) Petitioner testified that he would not have advised Respondent to incur more debt if she had not been planning on filing for bankruptcy. (R. 4) Furthermore, Respondent’s complaint alleged that by cashing the two post-dated checks, Petitioner attempted to collect on a pre-petition claim in willful violation of the automatic stay, and therefore, pursuant to 362(k)(1) Respondent is entitled to recover the $200 paid for fees as well as punitive damages, attorneys fees, and costs. (R. 6-7) Discovery ensued and Petitioner subsequently motioned for summary judgment. (R. 7) At the hearing, Petitioner conceded that § 526 applied to him because he was a “debt relief agency” and Respondent was an “assisted person.” (R. 7) Petitioner’s only defense to Respondent’s § 526 complaint was that the section is an unconstitutional restriction on the freedom of speech. (R. 7) In response to Respondent’s assertion that Petitioner violated the R22 4 automatic stay, Petitioner insisted that the § 362 stay did not apply to attorneys who sought to recover fees for post-petition services. (R. 7) Both parties stipulated that Petitioner’s overall fee was reasonable and that his post-petition services were worth $200. (R. 7) The United States Bankruptcy Court for the Northern District of Bliss granted Petitioner’s motion for summary judgment on June 12, 2006. (R. 7) The District Court affirmed the decision without opinion. (R. 7) Respondent appealed to the Thirteenth Circuit (R. 7), which reversed the District Court on both counts holding that (1) reasonable ethical restraints on lawyer speech are constitutional (R. 12), and (2) post-petition attorney fees incurred pre-petition are stayed. (R. 17) Petitioner appealed and this Court granted certiorari to consider the following questions: (1) whether the restrictions on attorney advice in § 526(a)(4) of the Bankruptcy Code violate the First Amendment of the Constitution; and (2) whether the § 362 automatic stay prevents a chapter 7 debtor’s attorney from collecting fees incurred for post-petition services provided pursuant to a pre-petition retention agreement. (R. 1) SUMMARY OF THE ARGUMENT In the court below, the Thirteenth Circuit correctly held that § 526(a)(4), which prohibits attorneys from advising their clients to incur additional debt in contemplation of filing a bankruptcy petition, is constitutional in that it does not impermissibly restrict freedom of speech in violation of the First Amendment. The court also correctly decided that Petitioner violated the § 362 automatic stay when he impermissibly cashed two post-dated checks post-petition pursuant to a pre-petition agreement with Respondent. This is a case of an attorney who willfully overstepped ethical bounds, breached duties owed to his client, and intentionally violated two provisions of the bankruptcy code. The first statute that Petitioner violated is one of the provisions implemented under BAPCPA which R22 7 opportunistic personal filings and abuse,” Id., and on occasion, attorneys played a role in exploiting these “opportunities.”1 To correct this abuse, Congress included in BAPCPA “provisions strengthening professionalism standards for attorneys and others who assist consumer debtors with their bankruptcy cases.” Id. at 103. 11 U.S.C. § 526(a)(4) is one such provision. It provides: “A debt relief agency shall not…advise an assisted person or prospective assisted person to incur more debt in contemplation of such person filing a case under this title .…” 11 U.S.C. § 526(a)(4) (2005) (emphasis added). Section 526(a)(4) holds attorneys accountable for advising a debtor to take on debt when he or she intends to file for bankruptcy, since such advice could be used to take unfair advantage of discharge or avoid the means test. 11 U.S.C. § 707(b)(2) (2005). Thus, § 526(a)(4) serves Congress’ objective “to improve bankruptcy law and practice by restoring personal responsibility and integrity in the bankruptcy system, …ensur[ing] that the system is fair for both debtors and creditors…and [ ] mitigat[ing] the financial toll bankruptcy filings were taking on creditors and the economy as a whole.” 2005 U.S.C.C.A.N. 88, 89, 91. A. Neither a ‘Facial’ Nor an ‘As Applied’ Challenge Can Prevail Against § 526(a)(4) A “facial challenge” to a statute considers only the text of the statute itself, not its application to an individual’s particular circumstances, see Lakewood v. Plain Dealer Publ’g Co., 48 U.S. 750 (1988), whereas an “as applied challenge” requires a case-by-case analysis of whether the application of a statute, even if facially constitutional, deprived the individual to whom it was applied of a protected right. See, e.g., Wis. Right for Life, Inc. v. Fed. Election Comm’n, 126 S.Ct. 1016 (2006). The Supreme Court has indicated a general preference for as 1 A civil enforcement initiative, undertaken by the U.S. Trustee Program, found similar problems of attorney and professional misconduct along with debtor misconduct and abuse. 2005 U.S.C.C.A.N. at 92 (quoting Antonia G. Darling and Mark A. Redmiles, Protecting the Integrity of the System: the Civil Enforcement Initiative, AM. BANKR. INSTITUTE L. REV. 12 (Sept. 2002) R22 8 applied challenges, noting that “facial invalidation is “manifestly ‘strong medicine’ [that] has been employed by the Court sparingly and only as a last resort.” Nat’l Endowment for the Arts v. Finley, 524 U.S. 569 (1998) (quoting Broadrick v. Okla., 413 U.S. 601, 613 (1990)). In addition, this Court has said that a facial challenge requires demonstrating that all applications of the law would be unconstitutional. Constitutional Issues Posed in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 79 AM. BANKR. L.J. 571, 580 (2005), See Unites States v. Salerno, 481 U.S. 739 (1987). Since § 526(a)(4) is not unconstitutional in every conceivable application, it is not facially invalid. An “as applied” challenge also fails to invalidate § 526(a)(4). By advising the Respondent to incur additional debt in contemplation of bankruptcy, Petitioner placed the Respondent at risk of being denied relief on the ground of bankruptcy abuse. Petitioner’s advice to Respondent, which sought to undermine the bankruptcy code, is the very type of advice Congress sought to restrict when it adopted § 526(a)(4). Section 526(a)(4) is constitutional because, as applied in this case, it did not deprive the Petitioner of a protected right. B. Ethical Restrictions on Attorney Speech are Subject to the Gentile Balancing Test The Supreme Court has recognized that the government may properly regulate some aspects of attorney speech, particularly when that speech breaches professional duties of competency or loyalty to a client, or otherwise abuses the special trust that attorneys hold as agents of the justice system. Gentile v. State Bar of Nev., 501 U.S. 1030, 1073 (1991). In Gentile, an attorney was disciplined for making extrajudicial statements to the press after his client was indicted. Id. In the litigation that followed, Mr. Gentile argued that the state’s interpretation of the ethical rule under which he was disciplined violated the First Amendment. This Court found that lawyers are “subject to ethical restrictions on speech to which an ordinary R22 9 citizen would not be.” Id. at 1071. This Court did not apply strict scrutiny, but rather held that the speech of attorneys “may be regulated under a less demanding standard than established for regulation of the press.” Id. Under this more lenient test, this Court held that an ethical restriction of attorney speech was permissible and did not violate an attorney’s First Amendment right. This Court found that the regulation achieved a “constitutionally permissible balance” because (i) it served “the State’s legitimate interest in regulating the activity in question” – to ensure fair trials and to prevent officers of the court from imposing costs on the judicial system and the litigant – and (ii) it “impose[d] only narrow and necessary limitations on lawyers’ speech.” Id. at 1075. In Ohralik v. Ohio State Bar Ass’n,2 the Supreme Court applied a balancing test to laws regulating attorney ethics. In that case, the state bar association had brought a disciplinary action against an attorney for soliciting accident victims in person for the purposes of representing them on a contingent fee basis. Id. at 447. Balancing the attorney’s First Amendment rights against the state’s interest, this Court found that the disciplinary action taken against the attorney did not violate his First Amendment rights because the government has a “special responsibility for maintaining standards among the members of the licensed professions.” Id. at 460. The Court held that this interest “in regulating lawyers is especially great since lawyers are essential to the primary governmental function of administering justice, and have historically been ‘officers of the court.’” Id. (quoting Goldfarb v. Va. State Bar, 421 U.S. 773, 792 (1975)). Although Gentile and Ohralik are factually distinguishable, they demonstrate that the balancing test in not limited to public statements and commercial speech alone, but applies to attorney speech in a variety of contexts. In fact, nothing in Gentile remotely suggests that the standard is limited to commercial or public speech by an attorney; however, the Court did note 2 436 U.S. 447 (1978). R22 12 sought to protect the integrity of the legal system by: limiting partiality, id., maintaining professional responsibility and standards (Ohralik, 436 U.S. at 460), and preventing fraud (Canatella, 365 F.Supp. 2d. at 1072), the ethical restraints on speech in § 526(a)(4) seek to protect the integrity of the bankruptcy system by (i) limiting injury to debtors and creditors and (ii) preventing fraud and abuse. The Petitioner may argue that Legal Services. Corp. v. Velazquez8 and Board of Trustees for the State University of New York v. Fox9 should control this issue. However, neither Legal Services Corp. nor Fox dealt with ethical restrictions. Fox involved a challenge to a regulation prohibiting commercial entities from selling certain goods or services on state university campuses. 492 U.S. 469 (1989). Nothing in the decision stated or suggested that restrictions on “legal advice” or other non-commercial speech by attorneys are always subject to the strict scrutiny test. In Legal Services Corp., this Court found that the restriction imposed by Legal Services Corp. on legal services attorneys harmed clients and the judicial system by preventing the attorney from bringing legitimate suits on behalf of clients. 531 U.S. at 545. Here, the restriction protects, not harms, clients and the integrity of the judicial system. Section 526(a)(4) does so by prohibiting attorney advice that could result in the denial of relief to the debtor. It preserves the integrity of the bankruptcy system by preventing attorneys from advising their clients to circumvent the means test by incurring additional debt. Congress itself described the “debt relief agency” provisions, including § 526(a)(4), as establishing ethical standards, 2005 U.S.C.C.A.N. at 92, which were meant “to improve bankruptcy law and practice by restoring professional responsibility and integrity in the bankruptcy system.” 2005 U.S.C.C.A.N. 88, 89. Section 526(a)(4) holds attorneys liable for advising a debtor to take on 8 531 U.S. 533 (2001). 9 531 U.S. 533 (2001). R22 13 debt when he or she intends to file for bankruptcy because such advice could be used by the debtor to take advantage of discharge or to “game” the means test. These opportunistic uses of bankruptcy are antithetical to the notions of “personal responsibility” and “integrity” and motivated Congress to pass the BAPCPA. Thus, the restriction serves the purpose that ethical rules must serve, protection of the integrity of the legal system. Accordingly, there is no basis for subjecting § 526(a)(4), an ethical rule10, to strict scrutiny review, see Sable Commc’ns of Cal., Inc. v. FCC, 492 U.S. 115, 126 (1989), and therefore, it should be upheld under the balancing test set forth in Gentile. ii. The Government has a Legitimate Interest in Restricting Advice to Incur Debt In Contemplation of Bankruptcy The government has a compelling interest in curtailing bankruptcy abuse and fraud within the bankruptcy system. First, the government has an interest in protecting debtors. Under the revised Code, accruing greater debt in contemplation of bankruptcy, either to take advantage of the discharge or to avoid the means test, is likely to lead to a dismissal of the petition. Section 526(a)(4) seeks to protect debtors from attorneys who would lead them to undertake abusive practices which could result in the bankruptcy court ordering (i) conversion to Chapter 13, (ii) a particular debt non-dischargeable under § 723 or (iii) denial of discharge entirely under § 727. Such remedies penalize a client who relied on his attorney’s advice and incurred such debt. Although a malpractice suit may be a suitable means of seeking reparation from such harmful actions, § 526(a)(4) seeks to curtail harm altogether by allowing debtor’s to seek compensation from their attorneys when they are injured by such advice. 11 U.S.C. 526(c)(2).11 10 While § 526(a)(4) is not labeled an “ethical rule”, but rather “Restrictions on Debt Relief Agencies” does not mean ex silentio it is not an ethical rule. The guiding principle of statutory construction is legislative intent and not the title of the statute. Craig v. Finch, 425 F.2d 1005 (5th Cir. 1970). 11 Section 526(a)(4) is not a duplicate of pre-existing law. Although Rule 9011 of the Federal Rules of Bankruptcy Procedure provides debtor remedies, § 526(a)(4) expands available remedies. Section 526 allows (i) a debtor to seek R22 14 Second, § 526(a)(4) protects creditors from debtor abuse and fraud. Improperly enlarging the pool of pre-existing debt subverts the principle of ratable distribution, because it dilutes the dividend that would otherwise be payable to prior creditors; therefore, incurring such abusive debts would decrease the amount of money that each creditor would receive, or, in some cases, result in no recovery at all for creditors. Section 526 (a)(4) protects creditors from such a reduction by deterring advice that would encourage debtors to accumulate debt simply to take advantage of the discharge or to game the means test. Furthermore, encouraging a client to take advantage of an unsuspecting creditor by incurring such debt clearly presents legitimate legal and ethical concerns. See 11 U.S.C. § 523(a)(2). Third, § 526(a)(4) protects the integrity of the judicial system. Accruing greater debt in contemplation of bankruptcy could be used to circumvent the means test. See Bankruptcy Reform Act of 1998: Part I, Hearing on H.R. 3150 before House Judiciary Comm., 105th Cong., 2d Sess. 25 (1998) (testimony of The Honorable Randall Newsome, United States Bankruptcy Judge for Northern District of California, that the more debt that is incurred prior to filing, the more likely the debtor will qualify for Chapter 7: “I can envision debtor’s counsel advising their clients to buy the most expensive car that someone will sell them, and sign on to the biggest payment they can afford as a way of increasing their deductions under § 109(h).”) Under the means test, abuse of the bankruptcy system is presumed where the amount of the debtor’s income, after deduction of certain expenses and other specified amounts, exceeds specified thresholds. See 11 U.S.C. § 707(b)(2)(A). Because the amount of secured and priority debt is one of the amounts deducted from income, increasing the amount of debt could reduce the amount of the debtor’s disposable income under the means test, and thus allow an individual who would compensation; (ii) the State to bring an enforcement action against the attorney; and (ii) the Court to impose civil penalties. Furthermore, Rule 9011 is limited to filings, whereas § 526 is not. R22 17 The fact that there may be circumstances where § 526(a)(4) prohibits valid legal advice does not render the section unconstitutional. This Court stated in Rust v. Sullivan, which also involved a comprehensive federal program, “the fact that [a] regulation might operate unconstitutionally under some conceivable set of circumstances is insufficient to render [it] wholly invalid.” 500 U.S. 173, 183 (1991) (citing United States v. Salerno, 481 U.S. 739, 745 (1987). Furthermore, unlike the restriction on advice in Legal Services Corp., § 526(a)(4) does not prohibit an attorney from advising an assisted person about what the bankruptcy law states or limit a lawyer’s ability to advise the court, i.e., to make “all reasonable and well-grounded arguments necessary for proper resolution of the case.” Legal Servs. Corp., 531 U.S. at 545. Neither does § 526(a)(4) interfere with the court’s core function of interpreting the law and the Constitution, and therefore, it does not threaten the independence of the judiciary.15 Section 526(a)(4) is not a blanket prohibition on attorneys advising clients to incur additional debt prior to bankruptcy and it does not interfere with the court’s core function of interpreting the law and the Constitution. As such, it is a narrowly tailored restriction on attorney speech. D. Congress Has Plenary Authority Over Bankruptcy In the U.S. Constitution, article I, section 8, clause 4, the Bankruptcy Clause provides that Congress shall have the power “to establish...uniform Laws on the subject of Bankruptcies throughout the United States.” The Constitution also gives Congress the power "[t]o make all Laws which shall be necessary and proper for carrying into Execution" its bankruptcy power. U.S. CONST. art. 1, § 8, cl. 18. Thus, the Constitution grants Congress plenary authority over 15 In Legal Servs. Corp v. Velazquez, the court concluded that the law restricting legal advice impaired the judicial function because it limited LSC attorneys’ abilities to “advise the courts of serious questions of statutory validity,” thereby infringing on the court’s primary mission of interpreting the law and the Constitution. 531 U.S. at 537, 545. R22 18 bankruptcy, including power to legislate whatever is deemed useful to an effective bankruptcy system." In re Lasky, 38 F.Supp. 24, 26 (1941).16 Congress exercised this right in adopting § 526(a)(4) because of the pervasive fraud and abuse found within the bankruptcy system. 2005 U.S.C.C.A.N. at 92-96. Therefore, § 526(a)(4) is constitutional because it is legislation deemed by Congress to be useful for the effective functioning of the bankruptcy system. In short, § 526(a)(4) is an ethical rule, which requires the application of the Gentile balancing test.17 Since (i) the government has a compelling and legitimate interest in preventing fraud and abuse within the bankruptcy system and (ii) § 526(a)(4) is narrowly tailored to serve the government’s purpose, § 526(a)(4) satisfies the Gentile standard and is therefore constitutional. Furthermore, since Congress has plenary power to establish laws governing insolvency and to enact laws that are necessary and proper to execute the bankruptcy system this Court should find that § 526 (a)(4) is constitutional. II. SECTION 362 BARRED PETITIONER FROM COLLECTING FEES The Petitioner violated the § 362 automatic stay by cashing post-dated checks for legal services he performed for Respondent. Section 362(a)(6) provides: Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title. 16 In addition, lower courts, in using this Court’s jurisprudence, see Perez v. United States, 402 U.S. 146 (1971), have further concluded that the Commerce Clause, which authorizes Congress to adopt legislation regulating activities that have a substantial effect on interstate commerce, and the Bankruptcy Clause may be considered in tandem to authorize consumer protection laws that affect bankruptcy law and procedure. See United States v. Fiore, 434 F.2d 966 (1st Cir. 1970). Section 526(a)(4) is a consumer protection law meant to protect debtors and the functioning of the bankruptcy system. 17 Section 526(a)(4) should still be upheld even if the strict scrutiny standard is applied. Strict Scrutiny requires (i) a compelling state interest and (ii) the restriction must be narrowly tailored. See United States v. Playboy Entm’t Group, Inc., 529 U.S. 803, 813, 120 S.Ct. 1878, 146 L.Ed.2d 865 (2000). Section 526(a)(4) meets the strict scrutiny requirements: (i) prevention of abuse of the bankruptcy proceeding is a compelling government interest and (ii) in placing a restriction on advice to incur further debt, Congress chose the least restrictive means. R22 19 11 U.S.C. § 362. The purpose of this section is to keep any party with a claim against a debtor from attempting to collect debts after the debtor has filed bankruptcy. § 362. In order to determine whether a party has violated § 362(a)(6), it must first be determined whether a party has a claim. A. Petitioner Has a Pre-petition Claim Claim is currently defined in § 101(5) as a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured.” 11 U.S.C. § 101(5) (2005). Congress enacted this definition in 1978 to replace the concept of “claim allowance,” which was existed after the Bankruptcy Act of 1898. Olin Corp. v. Riverwood Int’l Corp. (In re Manville Forest Prods. Corp.), 209 F.3d 125, 128 (2nd Cir. 2000). This concept “only allowed for participation by claimants with a provable claim.” Id. “Congress realized the provability requirement ill- served the policies underlying bankruptcy and broadened the definition of “claim” in the Bankruptcy Refiorm Act of 1978.” Id. Congress intended the current definition of claim is to be interpreted very broadly in order to allow “all legal obligations of the debtor, no matter how remote or contingent, [to] be able to be dealt with in the bankruptcy case.” H.R. Rep. 95-595, at 209 (1978). The Petitioner holds a claim against the Respondent because he had a right to payment for legal services rendered for the Respondent. This meets the definition of claim and the Congressional intent that claim be interpreted broadly. However, the § 362 automatic stay is only applicable to claims that arise pre-petition, therefore the Court must determine not only whether the Petitioner holds a claim, but whether the Petitioner holds a pre-petition claim. Avellino & Bienes v. M. Frenville Co., Inc. (In re M. Freville Co., Inc.), 744 F.2d 332, 335 (3rd Cir. 1984). The Petitioner holds a pre-petition claim R22 22 bankruptcy petition, then the creditor holds a pre-petition claim. In this case, the Petitioner holds a pre-petition claim because his right to payment arose at the time the retention agreement was formed between the Petitioner and the Respondent. On November 10, 2005, the Respondent signed a retention agreement. (R. 4.) In this retention agreement the Petitioner agreed to represent the Respondent “in all aspects of her chapter 7 case” and Respondent agreed to pay Petitioner $1,000. (R. 4.) The Chapter 7 bankruptcy petition was not filed until after the retention agreement had been signed, therefore, the Petitioner’s right to payment arose pre- petition. In In re Griffin, 313 B.R. 757, 762 (Bankr. E.D. Ill. 2004), the debtors hired an attorney to file a Chapter 7 bankruptcy. The parties agreed that the debtors would pay a $100 retainer fee and pay the balance in four payments. Id. The court found that this pre-petition contract became a pre-petition claim once the bankruptcy petition was filed. Id. The court reasoned that “[u]nder the Bankruptcy Code, contract-based claims arise at the time the contract is entered into rather than upon subsequent events such as termination or performance.” Griffin, 313 B.R. at 762 (citing In re Caldor, Inc., 240 B.R. 180 (Bankr. S.D.N.Y. 1999)). The retention agreement was formed prior to the filing of the bankruptcy petition, so it is irrelevant that some of the work intended to be performed was post-petition. “[A] contract-based claim is a pre-petition claim if prior to filing the relationship between the debtors and the creditor contained all the elements necessary to create a right to payment under the relevant contract law.” Id. at 762-63, citing In re Manville Forest Prods., 209 F.3d 125, 129 (2nd Cir. 2000); In re Nat’l Gypsum Co., 139 B.R. 397, 405 (Bankr. N.D. Tex. 1992). To form a valid contract there must have been an offer, acceptance, and consideration. See Gentile v. Youngstown Steel Door Co., 802 F.2d 457 (table) (6th Cir. 1986) (unpublished opinion). R22 23 In this case, Respondent sought Petitioner’s services and help in filing a bankruptcy petition, which constitutes an offer. Petitioner and Respondent signed a retention agreement, which constitutes an acceptance. Petitioner agreed to perform legal services for a fee, which constitutes the consideration. All of the elements necessary to create a right to payment under contract law existed at the time the retention agreement was formed pre-petition, therefore the Petitioner’s right to payment arose pre-petition. Since Petitioner’s right to payment arose pre- petition he had a pre-petition claim. The Petitioner violated the automatic stay by attempting to collect on his claim. ii. The Retention Agreement Between the Petitioner and the Respondent is One Contract, One Claim, and One Right to Payment In Gordon v. Hines (In re Hines),18 the court held that a right to payment will only arise for post-petition legal fees if the attorney first performs the legal services. Essentially, the court divided the work performed by the attorney into pre-petition and post-petition services and disregarded the fact that the attorney promised to perform all of the services in one pre-petition agreement. This radical holding completely disregarded the language and purpose of the Bankruptcy Code. The Hines court acknowledged as much when it stated, in reference to a perceived congressional oversight in the language of § 101(5), that “because Congress has failed to correct that oversight in express terms, we are compelled to consider an appropriate judicial response….” Hines, 147 F.3d at 1190-91. In Bethea v. Robert J. Adams & Assocs.,19 the Court of Appeals for the Seventh Circuit rejected the holding in Hines. In that case, three different debtors hired different attorneys to file bankruptcy petitions. Id. at 1126. The debtors signed retainers which stated the debtors were to 18 147 F.3d 1185 (9th Cir. 1998). 19 352 F.3d 1125 (7th Cir. 2004). R22 24 make installment payments both prior to and after the filing of the bankruptcy petition. Id. After the debtors obtained their discharges, the attorneys continued to seek payment from the debtors. Id. The debtors proceeded to file against the attorneys for violating the discharge injunction. Id. The court stated that “[d]ividing a retention agreement “into multiple claims by holding that a ‘claim’ does not accrue until the legal services are performed … contradicts both the Code and the [retention] agreement….” Id. at 1129. This Court should hold that the retention agreement between the Petitioner and the Respondent is one contract, one claim, and one right to payment, all of which arose pre-petition, and that Petitioner’s attempt to collect on his pre-petition claim violated the automatic stay. iii. Petitioner’s Pre-petition Claim is a Contingent Claim It could be argued that the automatic stay is not violated when a pre-petition agreement is subject to a condition precedent instead of a contingency on the basis that a right to payment subject to a condition precedent is not a claim as contemplated by § 101(5). However, courts have considered a condition precedent and a contingency as synonymous. In re Symes,20 involved an attorney who attempted to argue that the pre-petition agreement between him and the debtors was subject to a condition precedent (the filing of the petition), not a contingency. The court dismissed this argument stating, “[c]alling this contingency a ‘condition precedent’ is semantics.” Id. A contingent claim has been defined as “a claim which becomes due only on the occurrence of a future event.” Avellino, 744 F.2d at 337 (citing In re Dill, 30 B.R. 546, 549 (B.A.P. 9th Cir. 1983)). More specifically, “in the context of a contract claim … contingent claims refer ‘to obligations that will become due upon the happening of a future event that was 20 174 B.R. 114 (Bankr. D. Ariz. 1994). R22 27 11 U.S.C. § 329 (2005). In Fickling v. Flower, Medalie & Markowitz (In re Fickling),21 the Appellant attorney argued that Congress intended pre-petition attorney’s fees to be exempted from discharge “…because review by the court of the attorneys’ fees ‘agreed to be paid…for services…to be rendered’…simply is inconsistent with the prospect of discharge. If pre-petition claims for attorneys’ fees and expenses in a Chapter 7 case have been or will soon be discharged…the review contemplated by § 329 would be pointless.” Id. at 176. The Second Circuit found this argument without merit because the language in § 329 permits the court to review any attorney fees for post-petition services, not just fees for post- petition services under a pre-petition agreement. Id. “Canons of statutory interpretation may require us to disfavor a reading of a statute that would render a particular clause entirely superfluous (citation omitted), but they do not require us to read every clause of a general statutory provision to apply to every conceivable situation covered by its language. Id. The Sixth Circuit in Rittenhouse v. Eisen22 likewise reasoned that § 329 plays many roles in a Chapter 7 case including (1) “recouping prepaid fees which exceed the reasonable value of the legal services” and (2) determining “the reasonableness of reaffirmed debts for attorney fees.” Id. at 397. Congress did not intend to protect attorneys seeking post-petition payment for services agreed to be performed in a pre-petition agreement from violating the automatic stay. There is no indication in the plain language of § 329 or its legislative history that Congress intended this section to shield attorneys from violating the automatic stay. 21 361 F.3d 172 (2nd Cir. 2004). 22 404 F.3d 395 (6th Cir. 2005). R22 28 C. Applying the Automatic Stay Exception for Presentment of Negotiable Instruments to the Facts of This Case Stretches the Exception Beyond its Intended Purpose As a preliminary matter, this argument has been waived because the Petitioner failed to raise it in the courts below and should be barred. Cooper Indus., Inc. v. Ariall Servs., Inc., 543 U.S. 157, 168-69 (2004) (citing Adarand Constructors, Inc. v. Mineta, 534 U.S. 103, 109 (2001) (per curiam)). Even assuming for the sake of argument that the argument may be made, it is without merit because it ignores the purpose of the negotiable instrument exception to the automatic stay. Section 362(b)(11) reads in relevant part, “[t]he filing of a petition under § 301, 302, or 303 of this title…does not operate as a stay…under subsection (a) of this section, of presentment of a negotiable instrument and the giving of notice of and protesting dishonor of such an instrument.” 11 U.S.C. § 362(b)(11) (2005). The purpose of this particular exception is to allow holders of negotiable instruments to present negotiable instruments in order that they may be able to enforce the instrument against other obligors, such as an indorser. In re Jastrem, 224 B.R. 125, 127 (Bankr. E.D. Ca. 1998), citing 3 COLLIER ON BANKRUPTCY, at 362-69 (15th Rev. Ed. 1997). Its purpose is not to allow holders to enforce the instrument against the debtor after the filing of a bankruptcy petition. Id. Presenting a negotiable instrument for payment from a debtor is certainly a violation of the automatic stay. CONCLUSION WHEREFORE, the Respondent respectfully requests this Court to affirm the decision of the United States Court of Appeals for the Thirteenth Circuit with respect to (1) the constitutionality of § 526(a)(4), and (2) the violation of the automatic stay provided by § R22 29 362(a)(6). The Respondent further respectfully requests that this Court grant any additional relief deemed just and proper. Respectfully Submitted, Counsel for Respondent R22 Appendices-3 (d) Only a railroad, a person that may be a debtor under chapter 7 of this title [11 USCS §§ 701 et seq.] (except a stockbroker or a commodity broker), and an uninsured State member bank, or a corporation organized under section 25A of the Federal Reserve Act [12 USCS §§ 611 et seq.], which operates, or operates as, a multilateral clearing organization pursuant to section 409 of the Federal Deposit Insurance Corporation Improvement Act of 1991 [12 USCS § 4422] may be a debtor under chapter 11 of this title [11 USCS §§ 1101 et seq.]. (e) Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $ 307,675 and noncontingent, liquidated, secured debts of less than $ 922,975 or an individual with regular income and such individual's spouse, except a stockbroker or a commodity broker, that owe, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts that aggregate less than $ 307,675 and noncontingent, liquidated, secured debts of less than $ 922,975 may be a debtor under chapter 13 of this title [11 USCS §§ 1301 et seq.]. (f) Only a family farmer or family fisherman with regular annual income may be a debtor under chapter 12 of this title [11 USCS §§ 1201 et seq.]. (g) Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under this title who has been a debtor in a case pending under this title at any time in the preceding 180 days if-- (1) the case was dismissed by the court for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case; or (2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by section 362 of this title [11 USCS § 362]. (h) (1) Subject to paragraphs (2) and (3), and notwithstanding any other provision of this section, an individual may not be a debtor under this title unless such individual has, during the 180-day period preceding the date of filing of the petition by such individual, received from an approved nonprofit budget and credit counseling agency described in section 111(a) [11 USCS § 111(a)] an individual or group briefing (including a briefing conducted by telephone or on the Internet) that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis. (2) (A) Paragraph (1) shall not apply with respect to a debtor who resides in a district for which the United States trustee (or the bankruptcy administrator, if any) determines that the approved nonprofit budget and credit counseling agencies for such district are not reasonably able to provide adequate services to the additional individuals who would otherwise seek credit counseling from such agencies by reason of the requirements of paragraph (1). (B) The United States trustee (or the bankruptcy administrator, if any) who makes a determination described in subparagraph (A) shall review such determination not later than 1 year after the date of such determination, and not less frequently than annually thereafter. Notwithstanding the preceding sentence, a nonprofit budget and credit counseling agency may be disapproved by the United States trustee (or the bankruptcy administrator, if any) at any time. (3) (A) Subject to subparagraph (B), the requirements of paragraph (1) shall not apply with respect to a debtor who submits to the court a certification that-- R22 Appendices-4 (i) describes exigent circumstances that merit a waiver of the requirements of paragraph (1); (ii) states that the debtor requested credit counseling services from an approved nonprofit budget and credit counseling agency, but was unable to obtain the services referred to in paragraph (1) during the 5-day period beginning on the date on which the debtor made that request; and (iii) is satisfactory to the court. (B) With respect to a debtor, an exemption under subparagraph (A) shall cease to apply to that debtor on the date on which the debtor meets the requirements of paragraph (1), but in no case may the exemption apply to that debtor after the date that is 30 days after the debtor files a petition, except that the court, for cause, may order an additional 15 days. (4) The requirements of paragraph (1) shall not apply with respect to a debtor whom the court determines, after notice and hearing, is unable to complete those requirements because of incapacity, disability, or active military duty in a military combat zone. For the purposes of this paragraph, incapacity means that the debtor is impaired by reason of mental illness or mental deficiency so that he is incapable of realizing and making rational decisions with respect to his financial responsibilities; and 'disability' means that the debtor is so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone, or Internet briefing required under paragraph ( 1). R22 Appendices-5 APPENDIX C 11 U.S.C. § 329 (2005) (a) Any attorney representing a debtor in a case under this title, or in connection with such a case, whether or not such attorney applies for compensation under this title, shall file with the court a statement of the compensation paid or agreed to be paid, if such payment or agreement was made after one year before the date of the filing of the petition, for services rendered or to be rendered in contemplation of or in connection with the case by such attorney, and the source of such compensation. (b) If such compensation exceeds the reasonable value of any such services, the court may cancel any such agreement, or order the return of any such payment, to the extent excessive, to-- (1) the estate, if the property transferred-- (A) would have been property of the estate; or (B) was to be paid by or on behalf of the debtor under a plan under chapter 11, 12, or 13 of this title; or (2) the entity that made such payment. R22 Appendices-8 (C) a demand for tax returns; or (D) the making of an assessment for any tax and issuance of a notice and demand for payment of such an assessment (but any tax lien that would otherwise attach to property of the estate by reason of such an assessment shall not take effect unless such tax is a debt of the debtor that will not be discharged in the case and such property or its proceeds are transferred out of the estate to, or otherwise revested in, the debtor). (10) under subsection (a) of this section, of any act by a lessor to the debtor under a lease of nonresidential real property that has terminated by the expiration of the stated term of the lease before the commencement of or during a case under this title to obtain possession of such property; (11) under subsection (a) of this section, of the presentment of a negotiable instrument and the giving of notice of and protesting dishonor of such an instrument; (12) under subsection (a) of this section, after the date which is 90 days after the filing of such petition, of the commencement or continuation, and conclusion to the entry of final judgment, of an action which involves a debtor subject to reorganization pursuant to chapter 11 of this title and which was brought by the Secretary of Transportation under section 31325 of title 46 (including distribution of any proceeds of sale) to foreclose a preferred ship or fleet mortgage, or a security interest in or relating to a vessel or vessel under construction, held by the Secretary of Transportation under chapter 537 of title 46 [46 USCS §§ 53701 et seq.] or section 109(h) of title 49 [49 USCS § 109(h)], or under applicable State law; (13) under subsection (a) of this section, after the date which is 90 days after the filing of such petition, of the commencement or continuation, and conclusion to the entry of final judgment, of an action which involves a debtor subject to reorganization pursuant to chapter 11 of this title and which was brought by the Secretary of Commerce under section 31325 of title 46 (including distribution of any proceeds of sale) to foreclose a preferred ship or fleet mortgage in a vessel or a mortgage, deed of trust, or other security interest in a fishing facility held by the Secretary of Commerce under chapter 537 of title 46 [46 USCS§§ 53701 et seq.]; (14) under subsection (a) of this section, of any action by an accrediting agency regarding the accreditation status of the debtor as an educational institution; (15) under subsection (a) of this section, of any action by a State licensing body regarding the licensure of the debtor as an educational institution; (16) under subsection (a) of this section, of any action by a guaranty agency, as defined in section 435(j) of the Higher Education Act of 1965 [20 USCS § 1085(j)] or the Secretary of Education regarding the eligibility of the debtor to participate in programs authorized under such Act; (17) under subsection (a) of this section, of the exercise by a swap participant or financial participant of any contractual right (as defined in section 560 [11 USCS § 560]) under any security agreement or arrangement or other credit enhancement forming a part of or related to any swap agreement, or of any contractual right (as defined in section 560 [11 USCS § 560]) to offset or net out any termination value, payment amount, or other transfer obligation arising under or in connection with 1 or more such agreements, including any master agreement for such agreements; (18) under subsection (a) of the creation or perfection of a statutory lien for an ad valorem property tax, or a special tax or special assessment on real property whether or not ad valorem, imposed by a governmental unit, if such tax or assessment comes due after the date of the filing of the petition; R22 Appendices-9 (19) under subsection (a), of withholding of income from a debtor's wages and collection of amounts withheld, under the debtor's agreement authorizing that withholding and collection for the benefit of a pension, profit-sharing, stock bonus, or other plan established under section 401, 403, 408, 408A, 414, 457, or 501(c) of the Internal Revenue Code of 1986 [26 USCS § 401, 403, 408, 408A, 414, 457, or 501(c)], that is sponsored by the employer of the debtor, or an affiliate, successor, or predecessor of such employer-- (A) to the extent that the amounts withheld and collected are used solely for payments relating to a loan from a plan under section 408(b)(1) of the Employee Retirement Income Security Act of 1974 [29 USCS § 1108(b)(1)] or is subject to section 72(p) of the Internal Revenue Code of 1986 [26 USCS § 72(p)]; or (B) a loan from a thrift savings plan permitted under subchapter III of chapter 84 of title 5 [5 USCS §§ 8431 et seq,], that satisfies the requirements of section 8433(g) of such title [26 USCS § 8433(g)]; but nothing in this paragraph may be construed to provide that any loan made under a governmental plan under section 414(d) [26 USCS § 414(d)], or a contract or account under section 403(b) [26 USCS § 403(b)], of the Internal Revenue Code of 1986 constitutes a claim or a debt under this title; (20) under subsection (a), of any act to enforce any lien against or security interest in real property following entry of the order under subsection (d)(4) as to such real property in any prior case under this title, for a period of 2 years after the date of the entry of such an order, except that the debtor, in a subsequent case under this title, may move for relief from such order based upon changed circumstances or for other good cause shown, after notice and a hearing; (21) under subsection (a), of any act to enforce any lien against or security interest in real property-- (A) if the debtor is ineligible under section 109(g) to be a debtor in a case under this title; or (B) if the case under this title was filed in violation of a bankruptcy court order in a prior case under this title prohibiting the debtor from being a debtor in another case under this title; (22) subject to subsection (l), under subsection (a)(3), of the continuation of any eviction, unlawful detainer action, or similar proceeding by a lessor against a debtor involving residential property in which the debtor resides as a tenant under a lease or rental agreement and with respect to which the lessor has obtained before the date of the filing of the bankruptcy petition, a judgment for possession of such property against the debtor; (23) subject to subsection (m), under subsection (a)(3), of an eviction action that seeks possession of the residential property in which the debtor resides as a tenant under a lease or rental agreement based on endangerment of such property or the illegal use of controlled substances on such property, but only if the lessor files with the court, and serves upon the debtor, a certification under penalty of perjury that such an eviction action has been filed, or that the debtor, during the 30-day period preceding the date of the filing of the certification, has endangered property or illegally used or allowed to be used a controlled substance on the property; (24) under subsection (a), of any transfer that is not avoidable under section 544 [11 USCS § 544] and that is not avoidable under section 549 [11 USCS § 549]; (25) under subsection (a), of-- (A) the commencement or continuation of an investigation or action by a securities self regulatory organization to enforce such organization's regulatory power; (B) the enforcement of an order or decision, other than for monetary sanctions, obtained in an R22 Appendices-10 action by such securities self regulatory organization to enforce such organization's regulatory power; or (C) any act taken by such securities self regulatory organization to delist, delete, or refuse to permit quotation of any stock that does not meet applicable regulatory requirements; (26) under subsection (a), of the setoff under applicable nonbankruptcy law of an income tax refund, by a governmental unit, with respect to a taxable period that ended before the date of the order for relief against an income tax liability for a taxable period that also ended before the date of the order for relief, except that in any case in which the setoff of an income tax refund is not permitted under applicable nonbankruptcy law because of a pending action to determine the amount or legality of a tax liability, the governmental unit may hold the refund pending the resolution of the action, unless the court, on the motion of the trustee and after notice and a hearing, grants the taxing authority adequate protection (within the meaning of section 361 [11 USCS § 361]) for the secured claim of such authority in the setoff under section 506(a) [11 USCS § 506(a)]; (27) under subsection (a) of this section, of the exercise by a master netting agreement participant of any contractual right (as defined in section 555, 556, 559, or 560 [11 USCS § 555, 556, 559, or 560]) under any security agreement or arrangement or other credit enhancement forming a part of or related to any master netting agreement, or of any contractual right (as defined in section 555, 556, 559, or 560 [11 USCS § 555, 556, 559, or 560]) to offset or net out any termination value, payment amount, or other transfer obligation arising under or in connection with 1 or more such master netting agreements to the extent that such participant is eligible to exercise such rights under paragraph (6), (7), or (17) for each individual contract covered by the master netting agreement in issue; and (28) under subsection (a), of the exclusion by the Secretary of Health and Human Services of the debtor from participation in the medicare program or any other Federal health care program (as defined in section 1128B(f) of the Social Security Act [42 USCS § 1320a-7b(f)] pursuant to title XI or XVIII of such Act [42 USCS §§ 1301 et seq. or 1395 et seq.]). The provisions of paragraphs (12) and (13) of this subsection shall apply with respect to any such petition filed on or before December 31, 1989. (c) Except as provided in subsections (d), (e), (f), and (h) of this section-- (1) the stay of an act against property of the estate under subsection (a) of this section continues until such property is no longer property of the estate; (2) the stay of any other act under subsection (a) of this section continues until the earliest of-- (A) the time the case is closed; (B) the time the case is dismissed; or (C) if the case is a case under chapter 7 of this title [11 USCS §§ 701 et seq.] concerning an individual or a case under chapter 9, 11, 12, or 13 of this title [11 USCS §§ 901 et seq., 1101 et seq., 1201 et seq., or 1301 et seq.], the time a discharge is granted or denied; (3) if a single or joint case is filed by or against debtor who is an individual in a case under chapter 7, 11, or 13 [11 USCS §§ 701 et seq., 1101 et seq., or 1301 et seq.], and if a single or joint case of the debtor was pending within the preceding 1-year period but was dismissed, other than a case refiled under a chapter other than chapter 7 after dismissal under section 707(b) [11 USCS § 707(b)]-- (A) the stay under subsection (a) with respect to any action taken with respect to a debt or R22 Appendices-13 (A) transfer of all or part ownership of, or other interest in, such real property without the consent of the secured creditor or court approval; or (B) multiple bankruptcy filings affecting such real property. If recorded in compliance with applicable State laws governing notices of interests or liens in real property, an order entered under paragraph (4) shall be binding in any other case under this title purporting to affect such real property filed not later than 2 years after the date of the entry of such order by the court, except that a debtor in a subsequent case under this title may move for relief from such order based upon changed circumstances or for good cause shown, after notice and a hearing. Any Federal, State, or local governmental unit that accepts notices of interests or liens in real property shall accept any certified copy of an order described in this subsection for indexing and recording. (e) (1) Thirty days after a request under subsection (d) of this section for relief from the stay of any act against property of the estate under subsection (a) of this section, such stay is terminated with respect to the party in interest making such request, unless the court, after notice and a hearing, orders such stay continued in effect pending the conclusion of, or as a result of, a final hearing and determination under subsection (d) of this section. A hearing under this subsection may be a preliminary hearing, or may be consolidated with the final hearing under subsection (d) of this section. The court shall order such stay continued in effect pending the conclusion of the final hearing under subsection (d) of this section if there is a reasonable likelihood that the party opposing relief from such stay will prevail at the conclusion of such final hearing. If the hearing under this subsection is a preliminary hearing, then such final hearing shall be concluded not later than thirty days after the conclusion of such preliminary hearing, unless the 30-day period is extended with the consent of the parties in interest or for a specific time which the court finds is required by compelling circumstances. (2) Notwithstanding paragraph (1), in a case under chapter 7, 11, or 13 [11 USCS §§ 701 et seq., 1101 et seq., or 1301 et seq.] in which the debtor is an individual, the stay under subsection (a) shall terminate on the date that is 60 days after a request is made by a party in interest under subsection (d), unless-- (A) a final decision is rendered by the court during the 60-day period beginning on the date of the request; or (B) such 60-day period is extended-- (i) by agreement of all parties in interest; or (ii) by the court for such specific period of time as the court finds is required for good cause, as described in findings made by the court. (f) Upon request of a party in interest, the court, with or without a hearing, shall grant such relief from the stay provided under subsection (a) of this section as is necessary to prevent irreparable damage to the interest of an entity in property, if such interest will suffer such damage before there is an opportunity for notice and a hearing under subsection (d) or (e) of this section. (g) In any hearing under subsection (d) or (e) of this section concerning relief from the stay of any act under subsection (a) of this section-- (1) the party requesting such relief has the burden of proof on the issue of the debtor's equity in property; and (2) the party opposing such relief has the burden of proof on all other issues. R22 Appendices-14 (h) (1) In a case in which the debtor is an individual, the stay provided by subsection (a) is terminated with respect to personal property of the estate or of the debtor securing in whole or in part a claim, or subject to an unexpired lease, and such personal property shall no longer be property of the estate if the debtor fails within the applicable time set by section 521(a)(2) [11 USCS § 521(a)(2)]-- (A) to file timely any statement of intention required under section 521(a)(2) [11 USCS § 521(a)(2)] with respect to such personal property or to indicate in such statement that the debtor will either surrender such personal property or retain it and, if retaining such personal property, either redeem such personal property pursuant to section 722 [11 USCS § 722], enter into an agreement of the kind specified in section 524(c) [11 USCS § 524(c)] applicable to the debt secured by such personal property, or assume such unexpired lease pursuant to section 365(p) [11 USCS § 365(p)] if the trustee does not do so, as applicable; and (B) to take timely the action specified in such statement, as it may be amended before expiration of the period for taking action, unless such statement specifies the debtor's intention to reaffirm such debt on the original contract terms and the creditor refuses to agree to the reaffirmation on such terms. (2) Paragraph (1) does not apply if the court determines, on the motion of the trustee filed before the expiration of the applicable time set by section 521(a)(2) [11 USCS § 521(a)(2)], after notice and a hearing, that such personal property is of consequential value or benefit to the estate, and orders appropriate adequate protection of the creditor's interest, and orders the debtor to deliver any collateral in the debtor's possession to the trustee. If the court does not so determine, the stay provided by subsection (a) shall terminate upon the conclusion of the hearing on the motion. (i) If a case commenced under chapter 7, 11, or 13 [11 USCS §§ 701 et seq., 1101 et seq., or 1301 et seq.] is dismissed due to the creation of a debt repayment plan, for purposes of subsection (c)(3), any subsequent case commenced by the debtor under any such chapter shall not be presumed to be filed not in good faith. (j) On request of a party in interest, the court shall issue an order under subsection (c) confirming that the automatic stay has been terminated. (k) (1) Except as provided in paragraph (2), an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages. (2) If such violation is based on an action taken by an entity in the good faith belief that subsection (h) applies to the debtor, the recovery under paragraph (1) of this subsection against such entity shall be limited to actual damages. (l) (1) Except as otherwise provided in this subsection, subsection (b)(22) shall apply on the date that is 30 days after the date on which the bankruptcy petition is filed, if the debtor files with the petition and serves upon the lessor a certification under penalty of perjury that-- (A) under nonbankruptcy law applicable in the jurisdiction, there are circumstances under which the debtor would be permitted to cure the entire monetary default that gave rise to the judgment for possession, after that judgment for possession was entered; and R22 Appendices-15 (B) the debtor (or an adult dependent of the debtor) has deposited with the clerk of the court, any rent that would become due during the 30-day period after the filing of the bankruptcy petition. (2) If, within the 30-day period after the filing of the bankruptcy petition, the debtor (or an adult dependent of the debtor) complies with paragraph (1) and files with the court and serves upon the lessor a further certification under penalty of perjury that the debtor (or an adult dependent of the debtor) has cured, under nonbankrupcty law applicable in the jurisdiction, the entire monetary default that gave rise to the judgment under which possession is sought by the lessor, subsection (b)(22) shall not apply, unless ordered to apply by the court under paragraph (3). (3) (A) If the lessor files an objection to any certification filed by the debtor under paragraph (1) or (2), and serves such objection upon the debtor, the court shall hold a hearing within 10 days after the filing and service of such objection to determine if the certification filed by the debtor under paragraph (1) or (2) is true. (B) If the court upholds the objection of the lessor filed under subparagraph (A)-- (i) subsection (b)(22) shall apply immediately and relief from the stay provided under subsection (a)(3) shall not be required to enable the lessor to complete the process to recover full possession of the property; and (ii) the clerk of the court shall immediately serve upon the lessor and the debtor a certified copy of the court's order upholding the lessor's objection. (4) If a debtor, in accordance with paragraph (5), indicates on the petition that there was a judgment for possession of the residential rental property in which the debtor resides and does not file a certification under paragraph (1) or (2)-- (A) subsection (b)(22) shall apply immediately upon failure to file such certification, and relief from the stay provided under subsection (a)(3) shall not be required to enable the lessor to complete the process to recover full possession of the property; and (B) the clerk of the court shall immediately serve upon the lessor and the debtor a certified copy of the docket indicating the absence of a filed certification and the applicability of the exception to the stay under subsection (b)(22). (5) (A) Where a judgment for possession of residential property in which the debtor resides as a tenant under a lease or rental agreement has been obtained by the lessor, the debtor shall so indicate on the bankruptcy petition and shall provide the name and address of the lessor that obtained that pre-petition judgment on the petition and on any certification filed under this subsection. (B) The form of certification filed with the petition, as specified in this subsection, shall provide for the debtor to certify, and the debtor shall certify-- (i) whether a judgment for possession of residential rental housing in which the debtor resides has been obtained against the debtor before the date of the filing of the petition; and (ii) whether the debtor is claiming under paragraph (1) that under nonbankruptcy law applicable in the jurisdiction, there are circumstances under which the debtor would be permitted to cure the entire monetary default that gave rise to the judgment for possession, after that judgment of possession was entered, and has made the appropriate deposit with the court. (C) The standard forms (electronic and otherwise) used in a bankruptcy proceeding shall be amended to reflect the requirements of this subsection. (D) The clerk of the court shall arrange for the prompt transmittal of the rent deposited in accordance with paragraph (1)(B) to the lessor. R22 Appendices-18 APPENDIX E 11 U.S.C. § 523 (2005) (a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title [11 USCS § 727, 1141, 1228(a), 1228(b), or 1328(b)] does not discharge an individual debtor from any debt-- (1) for a tax or a customs duty-- (A) of the kind and for the periods specified in section 507(a)(3) or 507(a)(8) of this title [11 USCS § 507(a)(2) or 507(a)(8)], whether or not a claim for such tax was filed or allowed; (B) with respect to which a return, or equivalent report or notice, if required-- (i) was not filed or given; or (ii) was filed or given after the date on which such return, report, or notice was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or (C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax; (2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained, by-- (A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition; (B) use of a statement in writing-- (i) that is materially false; (ii) respecting the debtor's or an insider's financial condition; (iii) on which the creditor to whom the debtor is liable for such money, property, services, or credit reasonably relied; and (iv) that the debtor caused to be made or published with intent to deceive; or (C) (i) for purposes of subparagraph (A)-- (I) consumer debts owed to a single creditor and aggregating more than $ 500 for luxury goods or services incurred by an individual debtor on or within 90 days before the order for relief under this title are presumed to be nondischargeable; and (II) cash advances aggregating more than $ 750 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 70 days before the order for relief under this title, are presumed to be nondischargeable; and (ii) for purposes of this subparagraph-- (I) the terms "consumer", "credit", and "open end credit plan" have the same meanings as in section 103 of the Truth in Lending Act [15 USCS § 1602]; and (II) the term "luxury goods or services" does not include goods or services reasonably necessary for the support or maintenance of the debtor or a dependent of the debtor. (3) neither listed nor scheduled under section 521(1) of this title [11 USCS § 521(1)], with the name, if known to the debtor, of the creditor to whom such debt is owed, in time to permit-- (A) if such debt is not of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing; or (B) if such debt is of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim and timely request for a determination of dischargeability of such debt under one of such paragraphs, unless such creditor had notice or actual knowledge of the case in R22 Appendices-19 time for such timely filing and request; (4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny; (5) for a domestic support obligation; (6) for willful and malicious injury by the debtor to another entity or to the property of another entity; (7) to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than a tax penalty-- (A) relating to a tax of a kind not specified in paragraph (1) of this subsection; or (B) imposed with respect to a transaction or event that occurred before three years before the date of the filing of the petition; (8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor's dependents, for-- (A) (i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or (ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or (B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986 [26 USCS § 221(d)(1)], incurred by a debtor who is an individual; (9) for death or personal injury caused by the debtor's operation of a motor vehicle, vessel, or aircraft if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance; (10) that was or could have been listed or scheduled by the debtor in a prior case concerning the debtor under this title or under the Bankruptcy Act in which the debtor waived discharge, or was denied a discharge under section 727(a)(2), (3), (4), (5), (6), or (7) of this title [11 USCS § 727(a)(2), (3), (4), (5), (6), or (7)], or under section 14c(1), (2), (3), (4), (6), or (7) of such Act; (11) provided in any final judgment, unreviewable order, or consent order or decree entered in any court of the United States or of any State, issued by a Federal depository institutions regulatory agency, or contained in any settlement agreement entered into by the debtor, arising from any act of fraud or defalcation while acting in a fiduciary capacity committed with respect to any depository institution or insured credit union; (12) for malicious or reckless failure to fulfill any commitment by the debtor to a Federal depository institutions regulatory agency to maintain the capital of an insured depository institution, except that this paragraph shall not extend any such commitment which would otherwise be terminated due to any act of such agency; or (13) for any payment of an order of restitution issued under title 18, United States Code; (14) incurred to pay a tax to the United States that would be nondischargeable pursuant to paragraph (1); (14A) incurred to pay a tax to a governmental unit, other than the United States, that would be nondischargeable under paragraph (1); (14B) incurred to pay fines or penalties imposed under Federal election law; (15) to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit; R22 Appendices-20 (16) for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor's interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case; (17) for a fee imposed on a prisoner by any court for the filing of a case, motion, complaint, or appeal, or for other costs and expenses assessed with respect to such filing, regardless of an assertion of poverty by the debtor under subsection (b) or (f)(2) of section 1915 of title 28 [28 USCS § 1915] (or a similar non-Federal law), or the debtor's status as a prisoner, as defined in section 1915(h) of title 28 [28 USCS § 1915(h)] (or a similar non-Federal law); (18) owed to a pension, profit-sharing, stock bonus, or other plan established under section 401, 403, 408, 408A, 414, 457, or 501(c) of the Internal Revenue Code of 1986 [26 USCS § 401, 403, 408, 408A, 414, 457, or 501(c)], under-- (A) a loan permitted under section 408(b)(1) of the Employee Retirement Income Security Act of 1974 [29 USCS § 1108(b)(1)], or subject to section 72(p) of the Internal Revenue Code of 1986 [26 USCS § 72(p)]; or (B) a loan from a thrift savings plan permitted under subchapter III of chapter 84 of title 5 [5 USCS §§ 8431 et seq.], that satisfies the requirements of section 8433(g) of such title [5 USCS § 8433(g)]; but nothing in this paragraph may be construed to provide that any loan made under a governmental plan under section 414(d) [26 USCS § 414(d)], or a contract or account under section 403(b) [26 USCS § 403(b)], of the Internal Revenue Code of 1986 constitutes a claim or a debt under this title; or (19) that-- (A) is for-- (i) the violation of any of the Federal securities laws (as that term is defined in section 3(a)(47) of the Securities Exchange Act of 1934 [15 USCS § 78c(a)(47)]), any of the State securities laws, or any regulation or order issued under such Federal or State securities laws; or (ii) common law fraud, deceit, or manipulation in connection with the purchase or sale of any security; and (B) results, before, on, or after the date on which the petition was filed, from-- (i) any judgment, order, consent order, or decree entered in any Federal or State judicial or administrative proceeding; (ii) any settlement agreement entered into by the debtor; or (iii) any court or administrative order for any damages, fine, penalty, citation, restitutionary payment, disgorgement payment, attorney fee, cost, or other payment owed by the debtor. For purposes of this subsection, the term "return" means a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements). Such term includes a return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986 [26 USCS § 6020(a)], or similar State or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal, but does not include a return made pursuant to section 6020(b) of the Internal Revenue Code of 1986 [26 USCS § 6020(b)], or a similar State or local law. R22 Appendices-23 persons arising from such violation, including any liability under paragraph (2); and (C) in the case of any successful action under subparagraph (A) or (B), shall be awarded the costs of the action and reasonable attorneys' fees as determined by the court. (4) The district courts of the United States for districts located in the State shall have concurrent jurisdiction of any action under subparagraph (A) or (B) of paragraph (3). (5) Notwithstanding any other provision of Federal law and in addition to any other remedy provided under Federal or State law, if the court, on its own motion or on the motion of the United States trustee or the debtor, finds that a person intentionally violated this section, or engaged in a clear and consistent pattern or practice of violating this section, the court may-- (A) enjoin the violation of such section; or (B) impose an appropriate civil penalty against such person. (d) No provision of this section, section 527 [11 USCS § 527], or section 528 [11 USCS § 528] shall-- (1) annul, alter, affect, or exempt any person subject to such sections from complying with any law of any State except to the extent that such law is inconsistent with those sections, and then only to the extent of the inconsistency; or (2) be deemed to limit or curtail the authority or ability-- (A) of a State or subdivision or instrumentality thereof, to determine and enforce qualifications for the practice of law under the laws of that State; or (B) of a Federal court to determine and enforce the qualifications for the practice of law before that court. R22 Appendices-24 APPENDIX G 11 U.S.C. § 707 (2005) (a) The court may dismiss a case under this chapter [11 USCS §§ 701 et seq.] only after notice and a hearing and only for cause, including-- (1) unreasonable delay by the debtor that is prejudicial to creditors; (2) nonpayment of any fees [or] and charges required under chapter 123 of title 28; and (3) failure of the debtor in a voluntary case to file, within fifteen days or such additional time as the court may allow after the filing of the petition commencing such case, the information required by paragraph (1) of section 521 [11 USCS § 521], but only on a motion by the United States trustee. (b) (1) After notice and a hearing, the court, on its own motion or on a motion by the United States trustee, trustee (or bankruptcy administrator, if any), or any party in interest, may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts, or, with the debtor's consent, convert such a case to a case under chapter 11 or 13 of this title [11 USCS §§ 1101 et seq. or 1301 et seq.], if it finds that the granting of relief would be an abuse of the provisions of this chapter [11 USCS §§ 701 et seq.]. In making a determination whether to dismiss a case under this section, the court may not take into consideration whether a debtor has made, or continues to make, charitable contributions (that meet the definition of "charitable contribution" under section 548(d)(3) [11 USCS § 548(d)(3)]) to any qualified religious or charitable entity or organization (as that term is defined in section 548(d)(4) [11 USCS § 548(d)(4)]). (2) (A) (i) In considering under paragraph (1) whether the granting of relief would be an abuse of the provisions of this chapter [11 USCS §§ 701 et seq.], the court shall presume abuse exists if the debtor's current monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv), and multiplied by 60 is not less than the lesser of-- (I) 25 percent of the debtor's nonpriority unsecured claims in the case, or $ 6,000, whichever is greater; or (II) $ 10,000. (ii) (I) The debtor's monthly expenses shall be the debtor's applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor's actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides, as in effect on the date of the order for relief, for the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case, if the spouse is not otherwise a dependent. Such expenses shall include reasonably necessary health insurance, disability insurance, and health savings account expenses for the debtor, the spouse of the debtor, or the dependents of the debtor. Notwithstanding any other provision of this clause, the monthly expenses of the debtor shall not include any payments for debts. In addition, the debtor's monthly expenses shall include the debtor's reasonably necessary expenses incurred to maintain the safety of the debtor and the family of the debtor from family violence as identified under section 309 [320] of the Family Violence Prevention and Services Act [42 USCS § 10421], or other applicable Federal law. The expenses included in the debtor's monthly expenses described in the preceding sentence shall be kept confidential by the court. In addition, if it is demonstrated that it is reasonable and necessary, the debtor's monthly expenses R22 Appendices-25 may also include an additional allowance for food and clothing of up to 5 percent of the food and clothing categories as specified by the National Standards issued by the Internal Revenue Service. (II) In addition, the debtor's monthly expenses may include, if applicable, the continuation of actual expenses paid by the debtor that are reasonable and necessary for care and support of an elderly, chronically ill, or disabled household member or member of the debtor's immediate family (including parents, grandparents, siblings, children, and grandchildren of the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case who is not a dependent) and who is unable to pay for such reasonable and necessary expenses. (III) In addition, for a debtor eligible for chapter 13 [11 USCS §§ 1301 et seq.], the debtor's monthly expenses may include the actual administrative expenses of administering a chapter 13 [11 USCS §§ 1301 et seq.] plan for the district in which the debtor resides, up to an amount of 10 percent of the projected plan payments, as determined under schedules issued by the Executive Office for United States Trustees. (IV) In addition, the debtor's monthly expenses may include the actual expenses for each dependent child less than 18 years of age, not to exceed $ 1,500 per year per child, to attend a private or public elementary or secondary school if the debtor provides documentation of such expenses and a detailed explanation of why such expenses are reasonable and necessary, and why such expenses are not already accounted for in the National Standards, Local Standards, or Other Necessary Expenses referred to in subclause (I). (V) In addition, the debtor's monthly expenses may include an allowance for housing and utilities, in excess of the allowance specified by the Local Standards for housing and utilities issued by the Internal Revenue Service, based on the actual expenses for home energy costs if the debtor provides documentation of such actual expenses and demonstrates that such actual expenses are reasonable and necessary. (iii) The debtor's average monthly payments on account of secured debts shall be calculated as the sum of-- (I) the total of all amounts scheduled as contractually due to secured creditors in each month of the 60 months following the date of the petition; and (II) any additional payments to secured creditors necessary for the debtor, in filing a plan under chapter 13 of this title [11 USCS §§ 1301 et seq.], to maintain possession of the debtor's primary residence, motor vehicle, or other property necessary for the support of the debtor and the debtor's dependents, that serves as collateral for secured debts; divided by 60. (iv) The debtor's expenses for payment of all priority claims (including priority child support and alimony claims) shall be calculated as the total amount of debts entitled to priority, divided by 60. (B) (i) In any proceeding brought under this subsection, the presumption of abuse may only be rebutted by demonstrating special circumstances, such as a serious medical condition or a call or order to active duty in the Armed Forces, to the extent such special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative. (ii) In order to establish special circumstances, the debtor shall be required to itemize each additional expense or adjustment of income and to provide-- (I) documentation for such expense or adjustment to income; and (II) a detailed explanation of the special circumstances that make such expenses or R22 Appendices-28 debtor, including a veteran (as that term is defined in section 101 of title 38 [38 USCS § 101]), and the debtor's spouse combined, as of the date of the order for relief when multiplied by 12, is equal to or less than-- (i) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner; (ii) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals; or (iii) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals, plus $ 525 per month for each individual in excess of 4. (B) In a case that is not a joint case, current monthly income of the debtor's spouse shall not be considered for purposes of subparagraph (A) if-- (i) (I) the debtor and the debtor's spouse are separated under applicable nonbankruptcy law; or (II) the debtor and the debtor's spouse are living separate and apart, other than for the purpose of evading subparagraph (A); and (ii) the debtor files a statement under penalty of perjury-- (I) specifying that the debtor meets the requirement of subclause (I) or (II) of clause (i); and (II) disclosing the aggregate, or best estimate of the aggregate, amount of any cash or money payments received from the debtor's spouse attributed to the debtor's current monthly income. (c) (1) In this subsection-- (A) the term "crime of violence" has the meaning given such term in section 16 of title 18 [18 USCS § 16]; and (B) the term "drug trafficking crime" has the meaning given such term in section 924(c)(2) of title 18 [18 USCS § 924(c)(2)]. (2) Except as provided in paragraph (3), after notice and a hearing, the court, on a motion by the victim of a crime of violence or a drug trafficking crime, may when it is in the best interest of the victim dismiss a voluntary case filed under this chapter [11 USCS §§ 701 et seq.] by a debtor who is an individual if such individual was convicted of such crime. (3) The court may not dismiss a case under paragraph (2) if the debtor establishes by a preponderance of the evidence that the filing of a case under this chapter [11 USCS §§ 701 et seq.] is necessary to satisfy a claim for a domestic support obligation. R22 Appendices-29 APPENDIX H 11 U.S.C. § 723 (2005) (a) If there is a deficiency of property of the estate to pay in full all claims which are allowed in a case under this chapter [11 USCS §§ 701 et seq.] concerning a partnership and with respect to which a general partner of the partnership is personally liable, the trustee shall have a claim against such general partner to the extent that under applicable nonbankruptcy law such general partner is personally liable for such deficiency; (b) To the extent practicable, the trustee shall first seek recovery of such deficiency from any general partner in such partnership that is not a debtor in a case under this title. Pending determination of such deficiency, the court may order any such partner to provide the estate with indemnity for, or assurance of payment of, any deficiency recoverable from such partner, or not to dispose of property. (c) Notwithstanding section 728(c) of this title [11 USCS § 728(c)], the trustee has a claim against the estate of each general partner in such partnership that is a debtor in a case under this title for the full amount of all claims of creditors allowed in the case concerning such partnership. Notwithstanding section 502 of this title [11 USCS § 502], there shall not be allowed in such partner's case a claim against such partner on which both such partner and such partnership are liable, except to any extent that such claim is secured only by property of such partner and not by property of such partnership. The claim of the trustee under this subsection is entitled to distribution in such partner's case under section 726(a) of this title [11 USCS § 726(a)] the same as any other claim of a kind specified in such section. (d) If the aggregate that the trustee recovers from the estates of general partners under subsection (c) of this section is greater than any deficiency not recovered under subsection (b) of this section, the court, after notice and a hearing, shall determine an equitable distribution of the surplus so recovered, and the trustee shall distribute such surplus to the estates of the general partners in such partnership according to such determination. R22 Appendices-30 APPENDIX I 11 U.S.C. § 727 (2005) (a) The court shall grant the debtor a discharge, unless-- (1) the debtor is not an individual; (2) the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed-- (A) property of the debtor, within one year before the date of the filing of the petition; or (B) property of the estate, after the date of the filing of the petition; (3) the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case; (4) the debtor knowingly and fraudulently, in or in connection with the case-- (A) made a false oath or account; (B) presented or used a false claim; (C) gave, offered, received, or attempted to obtain money, property, or advantage, or a promise of money, property, or advantage, for acting or forbearing to act; or (D) withheld from an officer of the estate entitled to possession under this title, any recorded information, including books, documents, records, and papers, relating to the debtor's property or financial affairs; (5) the debtor has failed to explain satisfactorily, before determination of denial of discharge under this paragraph, any loss of assets or deficiency of assets to meet the debtor's liabilities; (6) the debtor has refused, in the case-- (A) to obey any lawful order of the court, other than an order to respond to a material question or to testify; (B) on the ground of privilege against self-incrimination, to respond to a material question approved by the court or to testify, after the debtor has been granted immunity with respect to the matter concerning which such privilege was invoked; or (C) on a ground other than the properly invoked privilege against self-incrimination, to respond to a material question approved by the court or to testify; (7) the debtor has committed any act specified in paragraph (2), (3), (4), (5), or (6) of this subsection, on or within one year before the date of the filing of the petition, or during the case, in connection with another case, under this title or under the Bankruptcy Act, concerning an insider; (8) the debtor has been granted a discharge under this section, under section 1141 of this title [11 USCS § 1141], or under section 14, 371, or 476 of the Bankruptcy Act, in a case commenced within 8 years before the date of the filing of the petition; (9) the debtor has been granted a discharge under section 1228 or 1328 of this title [11 USCS § 1228 or 1328], or under section 660 or 661 of the Bankruptcy Act [former 11 USCS §§ 1060, 1061], in a case commenced within six years before the date of the filing of the petition, unless payments under the plan in such case totaled at least-- (A) 100 percent of the allowed unsecured claims in such case; or (B) R22 Appendices-33 APPENDIX J Federal Bankruptcy Rules of Procedure, Rule 9011 Rule 9011. Signing of Papers; Representations to the Court; Sanctions; Verification and Copies of Papers (a) Signature. Every petition, pleading, written motion, and other paper, except a list, schedule, or statement, or amendments thereto, shall be signed by at least one attorney of record in the attorney's individual name. A party who is not represented by an attorney shall sign all papers. Each paper shall state the signer's address and telephone number, if any. An unsigned paper shall be stricken unless omission of the signature is corrected promptly after being called to the attention of the attorney or party. (b) Representations to the court. By presenting to the court (whether by signing, filing, submitting, or later advocating) a petition, pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,-- (1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; (2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law; (3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief. (c) Sanctions. If, after notice and a reasonable opportunity to respond, the court determines that subdivision (b) has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) or are responsible for the violation. (1) How initiated. (A) By motion. A motion for sanctions under this rule shall be made separately from other motions or requests and shall describe the specific conduct alleged to violate subdivision (b). It shall be served as provided in Rule 7004. The motion for sanctions may not be filed with or presented to the court unless, within 21 days after service of the motion (or such other period as the court may prescribe), the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected, except that this limitation shall not apply if the conduct alleged is the filing of a petition in violation of subdivision (b). If warranted, the court may award to the party prevailing on the motion the reasonable expenses and attorney's fees incurred in presenting or opposing the motion. Absent exceptional circumstances, a law firm shall be held jointly responsible for violations committed by its partners, associates, and employees. (B) On court's initiative. On its own initiative, the court may enter an order describing the R22 Appendices-34 specific conduct that appears to violate subdivision (b) and directing an attorney, law firm, or party to show cause why it has not violated subdivision (b) with respect thereto. (2) Nature of sanction; limitations. A sanction imposed for violation of this rule shall be limited to what is sufficient to deter repetition of such conduct or comparable conduct by others similarly situated. Subject to the limitations in subparagraphs (A) and (B), the sanction may consist of, or include, directives of a nonmonetary nature, an order to pay a penalty into court, or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of some or all of the reasonable attorneys' fees and other expenses incurred as a direct result of the violation. (A) Monetary sanctions may not be awarded against a represented party for a violation of subdivision (b)(2). (B) Monetary sanctions may not be awarded on the court's initiative unless the court issues its order to show cause before a voluntary dismissal or settlement of the claims made by or against the party which is, or whose attorneys are, to be sanctioned. (3) Order. When imposing sanctions, the court shall describe the conduct determined to constitute a violation of this rule and explain the basis for the sanction imposed. (d) Inapplicability to discovery. Subdivisions (a) through (c) of this rule do not apply to disclosures and discovery requests, responses, objections, and motions that are subject to the provisions of Rules 7026 through 7037. (e) Verification. Except as otherwise specifically provided by these rules, papers filed in a case under the Code need not be verified. Whenever verification is required by these rules, an unsworn declaration as provided in 28 U.S.C.§ 1746 satisfies the requirement of verification. (f) Copies of signed or verified papers. When these rules require copies of a signed or verified paper, it shall suffice if the original is signed or verified and the copies are conformed to the original.