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New Bankruptcy Filing Fees Effective June 1, 2014

4/17/2014

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The Judicial Conference of the United States recently approved amendments to the Bankruptcy Court Miscellaneous Fee Schedule. The amendments, which take effect on June 1, 2014, increase, among other things, the fee assessed for filing a bankruptcy petition under each chapter of the Bankruptcy Code.

The new filing fee schedule is as follows:
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  • ​Chapter 7: from $306 to $335
  • ​Chapter 9: from $1,213 to $1,717
  • Chapter 11: from $1,213 to $1,717
  • Chapter 12: from $246 to $275
  • Chapter 13: from $281 to $310
  • Chapter 15: from $1,213 to $1,717

Notably, the amendments also increase the fee to commence an adversary proceeding in a bankruptcy case from $293 to $350, making it equal to the fee to commence a civil case in the United States district courts.
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First Quarter Bankruptcy Filings down 12% from 2013

4/7/2014

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​As reported by the American Bankruptcy Institute, total bankruptcy filings nationwide declined 12% in the first quarter of 2014 (January 1 - March 31) as compared to the previous year. Specifically, consumer filings declined 12%, and commercial filings declined 22%.

Samuel J. Gerdano, Executive Director of the American Bankruptcy Institute, cited low interest rates, deleveraging by both businesses and individuals, and high filings costs as factors contributing to the decline. Additionally, Mr. Gerdano expects year-over-year filing rates to continue to fall in 2014 as companies and households persist in their efforts to cut costs and eliminate debt. 
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Supreme Court Declines Review of Chapter 7 "Strip Off" Case

4/2/2014

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On March 31, 2014, the Supreme Court denied a petition for writ of certiorari in Bank of America, N.A. v. Sinkfield, a case from the Eleventh Circuit. The case presented the still unsettled issue of whether section 506(d) of the Bankruptcy Code permits a chapter 7 debtor to eliminate a wholly unsecured junior lien.
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The source of this particular issue is the Supreme Court's 1992 decision in Dewsnup v. Timm, in which the Court held that section 506(d) of the Bankruptcy Code does not permit chapter 7 debtors to reduce the amount of a partially unsecured lien to the judicially determined value of the collateral. The Court's reasoning in Dewsnup focused on its determination that Congress, in enacting the Bankruptcy Code, did not intend to depart from the pre-Code rule that liens generally pass through bankruptcy unaffected. Additionally, the Court was hesitant to modify the prepetition contractual rights between secured lenders and debtors. Accordingly, Dewsnup made clear the chapter 7 debtors could not strip down partially unsecured liens using section 506(d). Dewsnup did not address, however, the related issue of whether section 506(d) permits chapter 7 debtors to void entirely those liens that are wholly unsupported by the value of the collateral. Lower courts nationwide have struggled with this issue ever since.

Although not every federal circuit court has addressed this issue, the majority of those that have ultimately determined that the reasoning in Dewsnup extends to the strip off issue, prohibiting debtors from using section 506(d) to eliminate wholly unsecured junior liens. Courts in the Eleventh Circuit, however, have continually relied on a pre-Dewsnup decision, In re Folendore, that permitted strip off in chapter 7.  The Eleventh Circuit reaffirmed this decision post-Dewsnup in In re McNeal. In essence, courts in the Eleventh Circuit permit chapter 7 debtors to strip off wholly unsecured junior liens because they interpret Dewsnup as not being clearly on point, leaving In re Folendore as controlling precedent. 

While the Second Circuit has not yet spoken on this issue, the United States District Court for Eastern District of New York has, and in Wachovia Mortgage v. Smoot held that section 506(d) of the Bankruptcy Code does not permit chapter 7 debtors to strip off wholly unsecured liens, relying on the reasoning of the Supreme Court's decision in Dewsnup.

The lasting effect of the Supreme Court's denial to hear Slinkfield is that this issue will remain open to interpretation until either Congress or the Court offers a definitive answer. 
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