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Consumer Bankruptcy Law and Practice: 18.8.2.4 Steps to Take

The clients’ immediate concern will be to assure themselves of services to the building. Ordinarily, in a chapter 7 case in which the building has been privately developed, there is no reason to oppose foreclosure and sale.901 The major concern will be to ensure that services continue in any interim period and perhaps to assist in the smooth transfer of ownership.

Consumer Bankruptcy Law and Practice: 18.4.2 Class Proofs of Claim

The filing of a class proof of claim should be considered when large numbers of consumers are involved, such as in the bankruptcy of a retailer, a lender, or a large apartment building.153 A class claim may also be particularly appropriate when employees have priority wage claims.154 Class proofs of claim have been approved by the Fourth,155 Sixth,156 Seventh,157

Consumer Bankruptcy Law and Practice: 18.5.2.1 Generally

If property held by the entity in bankruptcy is treated as being held in trust for the consumer, it will not be part of the bankruptcy estate, nor will it be subject to the Code’s distribution rules. Instead, the consumer can recover the property directly. Trust theories apply not only to property subject to a formal trust agreement, but also in situations in which the court may impose a trust, such as when a debtor holds deposits from a consumer or when the debtor has obtained the property by fraud.186

Consumer Bankruptcy Law and Practice: 18.5.2.4 Consumers’ Right to Recoupment

The consumer creditor is often subject to an obligation to pay money to a debtor in bankruptcy. This payment obligation can arise from a loan, a lease, a sales finance agreement, a service contract, or a variety of other transactions. The existence of such an obligation owed to the debtor may trigger the consumer’s right to seek recoupment.

Consumer Bankruptcy Law and Practice: 12.2.1 Overview

A threshold issue, which can occasionally be troublesome, concerns eligibility to file a chapter 13 case. In addition to section 109(a) and the section 109(h) credit counseling requirement, which are applicable to cases under all chapters filed by individual debtors, the key chapter 13 eligibility provision is section 109(e) of the Code. That section provides that to be a chapter 13 debtor, the debtor must:

Consumer Bankruptcy Law and Practice: 12.2.2 Individuals with Regular Income

Probably the most common issue for low-income debtors is whether the debtor is an “individual with regular income.” This phrase is defined in section 101(30) as an “individual whose income is sufficiently stable and regular to enable such individual to make payments under a plan under chapter 13.” The legislative history makes clear that the intent of the statute is to include others besides wage earners, and to expand eligibility to recipients of public benefits such as welfare and Social Security, small business proprietors, and those supported by other income such as alimony or pensions

Consumer Bankruptcy Law and Practice: 18.7.2.5 The United States Trustee

In 1986, after a period of experimentation, Congress established a permanent United States trustee system, covering every state except Alabama and North Carolina.526 The United States Attorney General appoints United States trustees for twenty-two regions around the country, each region composed of one or more judicial districts.527 Assistant United States trustees may also be appointed.528

Consumer Bankruptcy Law and Practice: 18.7.4.2 General Standards

Section 1104 permits the court on the request of a party in interest or the United States trustee to order the appointment of a trustee “[f]or cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management either before or after the commencement of the case, or similar cause”; or in the (best) interests of the creditors.565

Consumer Bankruptcy Law and Practice: 18.7.4.4 Grounds for Appointment of a Trustee Under Section 1104(a)(2)

Even absent a finding of cause under subsection 1104(a)(1), the court may appoint a trustee if it is in the best interests of the parties.589 Subsection 1104(a)(2) provides a flexible standard for the appointment of a trustee,590 allowing the court to exercise equity powers to appoint a trustee to protect the interests of creditors, equity security holders, and other interests in the debtor’s estate.591 Unlike the “cause” standard, the “be

Consumer Bankruptcy Law and Practice: 18.7.4.7 Practice and Procedure

An application for appointment of a trustee or an examiner is by motion and may be made by any party in interest or by the United States trustee.611 A trustee may also be appointed by the court sua sponte.612 Although the motion can be filed at any time, the court may be reluctant to appoint a trustee or an examiner based on prepetition mismanagement. It may therefore, be preferable to wait for evidence of postpetition misconduct.

Federal Practice Manual for Legal Aid Attorneys: 2.8.6 Pullman Abstention

When federal constitutional claims arise from unsettled issues of state law, federal courts have discretion to abstain from exercising jurisdiction. When they do so, the federal courts avoid predicting what state courts would decide and permit the state courts the first opportunity to interpret state law. Doing so may also dispose of the need of the federal court to decide the federal constitutional issue later.