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Chief Judge James P. Smith

The Chapter 13 debtors filed an adversary proceeding seeking damages against the IRS, alleging that the IRS had attempted to collect certain taxes in violation of their Chapter 13 discharge.  The court dismissed the complaint and held that pursuant to 26 U.S.C. § 7433, a plaintiff is required to exhaust its administrative remedies before it can bring a complaint for damages under section 7433.

The plaintiff, a law firm, contended that the debtor had agreed to pay his outstanding legal fees, as well as subsequent fees, as soon as he received his income tax refund if the law firm would continue to represent him in certain state court litigation. The law firm continued to represent the debtor, the debtor failed to pay his legal fees, and the law firm obtained a state court judgment against the debtor in state court. After the debtor filed bankruptcy, the law firm contended the debt was nondischargeable under 11 U.S.C. § 523(a)(2)(A). The court held that the debtor’s oral representation to use his tax refund to pay the legal fees was not a statement respecting his financial condition, that the law firm’s reliance was justifiable, and that, if the law firm proved the remaining elements of section 523(a)(2)(A), the law firm’s claim for damages included legal fees incurred both prior to and subsequent to the alleged misrepresentation.

The Chapter 13 debtor’s plan separately classified and paid in full an unsecured debt guaranteed by his father while other unsecured creditors would receive a fourteen percent dividend. Some 51.5 percent of the “classified debt” was incurred to pay the debtor’s income taxes. The court held that although the debtor was paying all his disposable income into the plan, 11 U.S.C. § 1325(b)(1)(B), that the classified unsecured debt was not a “consumer debt” because a majority of it was incurred to pay an income tax debt. The court also held that the separate classification of the unsecured debt guaranteed by the father unfairly discriminated against other creditors. 11 U.S.C. § 1322(b)(1).

Debtor may not exempt a health savings account under O.C.G.A. § 44-13-100(a)(2)(C) or (E). An HSA is not the type of illness benefit contemplated by the exemption statute because it does not serve as a replacement for income.

Loan agreement between the debtor and oversecured creditor provided for 15% attorney fees. Such attorney fees are only enforceable under state law if perfected by a notice that gives the debtor 10 days to avoid the fees by paying the debt in full. The creditor did not send the 10-day notice prior to the petition date, yet requested the contractual amount of attorney fees pursuant to 11 USC § 506(b). The Court allowed attorney fees, but limited them to an amount determined to be reasonable.

Debtor who omitted from his schedules information about significant financial assets relating to a business, a worker's compensation claim, and a divorce and who resisted fully answering questions about the assets at trial was denied a discharge under 11 USC § 727(a)(4)(A) for making a false oath in connection with his bankruptcy case.

For debts subject to a co-signer, when the debtor's plan fails to provide for payment of interest at the contract rate, the creditor is entitled to stay relief against the codebtor to collect any amounts due under the contract but not provided for in the plan.

Upon motion of the Chapter 13 trustee, the Court disallowed a late-filed general unsecured claim under 11 U.S.C. § 502(b)(9) when the creditor had timely notice of the claims bar date. The Court concluded it had no equitable power to allow the claim when Code provides for disallowance of untimely claims in Chapter 13 and the Rules prohibit extension of the time to file a claim except in limited circumstances not present in this case.

Court denied Debtor-Defendant's motion for summary judgment on determination of dischargeability and objection to discharge when the movant's Statement of Uncontested Facts failed to include any facts probative of the causes of action.

Judge John T. Laney, III

On Summary Judgement the Court was asked to decide a narrow issue regarding federal tax liens. Specifically, the issue before the Court was whether accounts receivable acquired by the debtor more than 45 days after the filing of a notice of tax lien on the debtor's property may be considered proceeds of contract rights acquired by the debtor prior to the expiration of that 45 day period, so as to give the security interest of a commercial creditor in the receivables priority over the tax lien. The Court held that payments received by the Debtor under its contract after the filing of the tax liens were identifiable proceeds of contract rights, rather than accounts receivable. Therefore, pursuant to 26 U.S.C. §§ 6323(a) and (c) the Bank's prior perfected security interest in the contract payments is senior to the IRS's tax lien.