We have had previous discussions that the jurisdictional limit in chapter 13 cases creates a major problem for many debtors to successfully confirm a chapter 13 plan. However, a recent case, In re Kevin Rosa, Case NO 6:10-bk-07799-ABB, recognized that if no one timely objects, the chapter 13 jurisdictional limit is waived. In this December 15, 2011 decision, Judge Arthur Briskman in the Middle District of Florida, citing In Re Sullivan, 245 BR 416(N.D. FL 1999), denied a motion to dismiss or convert to chapter 7 filed by a creditor(it appears the creditor was the former wife).

Robin Weiner, Chapter 13 Trustee in Broward and Palm Beach County, Florida, has announced that, depending on the case, she will not assert that the debtor is over the jurisdictional limit.

On November 30, 2011, the 11th Circuit Court of Appeals (which is binding upon bankruptcy decisions in Florida) entered a decision pertaining to interest that an oversecured creditor may obtain during a chapter 13 plan. In re Garner, 2011 US App Lexis 23811, involved a secured creditor that had a contract rate of interest of 10.5%. The creditor wanted to be paid in the plan at this rate until it used up its equity cushion. The creditor objected to a plan that proposed under Section 506 a reduced interest rate. The bankruptcy court had allowed the cram down interest rate of 4.25%. (Till rate)

Garner held the creditor was entitled to contract interest rate post-petition until confirmation, but was only entitled to the cram down interest rate of 4.25% post-confirmation.

Chapter 13 attorneys must understand this case.

Judge Olson is one of the two bankruptcy judges based in Fort Lauderdale, FL. In a consolidated case, with lead case name and number In re MacFarland, Case No. 11-13345, Judge Olson sanctioned several chapter 13 bankruptcy attorneys suspending them from practicing in bankruptcy court from 30-60 days. The court concluded that attorneys acted either in bad faith or with concerted conduct amounting to fraud on creditors and the court by engaging in a pattern of filing baseless objections to claims.

Attorneys here and across the country have attempted to help their clients by objecting to claims to help meet chapter 13 jurisdictional limits or to reduce the amount debtors would have to pay during a chapter 13 plan to meet a “liquidation” test. Without advance warning, Judge Olson entered Orders to Show Cause which led to the order. According to the court, “The orders to show cause entered in these cases have a singular aim-to address what was become a pervasive problem within this district stemming from wholesale unjustified claim objections, and to stop that practice.” The sanctions were expressly imposed not just as sanctions against the “offending attorney”, but also to deter other attorneys from taking the risk of engaging in this conduct.

In other words, the Court concluded: don’t object to claims unless you really have what the court considers a basis to object.

BAPCPA changed the law and restricted cramming down car values unless the car was financed more than 910 days prior to filing. But a debtor can still extend the term and payoff the note during the chapter 13 plan. Additionally, the debtor can reduce the contractual rate to the so-called Till rate, which has been 5.25% for some time in the Southern District of Florida.

But in a recent case, Judge Olson held that the good faith requirements of chapter 13 to confirm a plan are relevant as to recently financed vehicles. In the case In re Blackmon, , 2011 Bankr Lexis 3619, 2011 WL 4543923(Case NO 10-41452)(September 29, 2011), the debtors had already met with bankruptcy counsel, financed 2 vehicles at high interest, and filed bankruptcy within less than 80 days after obtaining the vehicle. Judge Olson denied confirmation of the plan which reduced the interest rate.

The jurisdictional limit for unsecured debt in a chapter 13 is $360,475.00. One way around this limit is to consider the debt separately of a husband and wife who file bankruptcy. Essentially, a joint filing is really two individuals filing a case that is jointly administered. So, for example, if the husband owes $200,000 and the wife owes $250,000 in separate debt, then the court does have chapter 13 jurisdiction.

However, keep in mind that when a debtor has joint debt with the spouse, then this joint debt must be considered as debt when calculating both the husband’s and wife’s debt.

On August 4, 2011, Judge Olson sitting in the Broward County division of the bankruptcy court in the Southern District of Florida, held that debtors could treat separately their debt limit to remain in chapter 13. In re Hannon, 2011 Bankr Lexis 2949, Case No. 10-45771. However, on the facts of this case, the debtor has substantial joint debt which still placed each debtor over the jurisdication limit.

This decision will be of great help to those who file a Fort Lauderdale chapter 13 bankruptcy.

This past Wednesday the 11th Circuit Court of Appeals entered an important decision on sovereign immunity, In re Diaz, Florida Department of Revenue v Diaz, 2011 US App Lexis 15462 (11th Cir 2011). This is an important case for practitioners to review, but I am not going to review the sovereign immunity analyses of the case.

I do want to comment on how this affects chapter 13. Sometimes I just do not understand the 11th circuit decisions when they consider chapter 13 cases. In what appears to me to be directly contrary to the United States Supreme Court decision in US Student Aid Funds v Espinosa, the court held that a creditor with a non-dischargeable claim for child support as well as taxes is not bound by the claim allowed in the bankruptcy court. Even though the creditor was fully paid in the plan based on the allowed claim, the creditor could still claim moneys it is owed such as interest because the underlying debt could not be discharged.

Consider a homeowner who is behind on the mortgage payments but never signed the note or mortgage. It is likely the lender will not even speak with the owner to try and modify, because the homeowner was not the original party to the mortgage.

This could happen if the owner acquired the property by inheritance. More difficult might be a case where the owner transfers title by deed without paying off the existing mortgage and in violation of the due on sale clause in the mortgage.

Judge Glenn recently entered an opinion denying a creditor’s motion for relief from stay and permitting the debtor to treat the secured claim in a chapter 13 plan. In re Lozada, 444 BR 604(M.D. FL March 31, 2011) The debtor claimed ownership interest because of a quit claim and alternatively claimed she was the rightful heir of her mother’s estate. The court relied on In re Ramos, 357 BR 669(Bankr. S.D. FL 2006).

Two Florida bankruptcy judges have upheld a debtor’s right to cure a mortgage in a chapter 13 even though they were not the original owner. This is also consistent with long-running practice. As a Broward bankruptcy attorney filing bankruptcies in the Ft. Lauderdale area, I can say that these cases are good news for current homeowners to help them save their property.