Phil Hart

[Famspear]

Phil Hart is still playing his games. Here's a motion filed by the government this morning in Hart's latest Chapter 13 bankruptcy case.

UNITED STATES’ OPPOSITION TO DEBTOR’S MOTION TO EXTEND THE AUTOMATIC STAY

For the second time, debtor Philip Hart (“Hart”) has filed a Chapter 13 bankruptcy petition days before being deposed in connection with the United States’ suit to collect his federal income tax liabilities. He voluntarily dismissed his first bankruptcy: he scheduled his federal income tax liabilities as an unsecured debt, and accordingly had too much unsecured debt to be eligible for Chapter 13 relief under 11 U.S.C. § 109(e). Hart now asks the Bankruptcy Court to extend the automatic stay even though he has not filed his schedules. The Court should decline to give Hart the benefit of the automatic stay when he has not shown he is eligible for Chapter 13 relief.

In October 2011, the United States filed suit against Hart in federal district court to collect his federal income tax liabilities. The suit also seeks to foreclose federal tax liens on Hart’s residence, a piece of real property located at 4430 E. Sarah Loop, Athol, Idaho. (Compl., United States v. Hart, No. 11-513-EJL (D. Idaho filed Oct. 27, 2011).) The United States first scheduled Hart’s deposition in that case for May 31, 2012, but Hart filed a Chapter 13 bankruptcy petition on May 29. (Petition, In re Hart, No. 12-20648-TLM (Bankr. D. Idaho) (“In re Hart I”).) Hart stipulated that he was not eligible for Chapter 13 relief. (Stip. re: Dismissal or Conversion, In re Hart I (filed Aug. 9, 2012).) Hart then moved to dismiss the case. (Mot. Dismiss, In re Hart I (filed Aug. 15, 2012).) The United States rescheduled Hart’s deposition for October 30, 2012. He filed the Chapter 13 petition in this case on October 24.

Under 11 U.S.C. § 362(c)(3), if a debtor files a second bankruptcy petition within a twelve-month period, the automatic stay presumptively terminates 30 days after the filing of the petition. See § 362(c)(3)(A). In order to extend the stay, a movant must “demonstrat[e] that the filing of the later case is in good faith as to the creditors to be stayed.” § 362(c)(3)(B). If the second case is under Chapter 13, it is presumptively not filed in good faith if “there has not been a substantial change in the financial or personal affairs of the debtor since the dismissal of the next most previous case . . . or any other reason to conclude that the later case will be concluded” with a confirmed Chapter 13 plan. § 362(c)(3)(C)(i)(III), (III)(bb).

Despite being given notice of the omission, Hart has failed to file his bankruptcy schedules and Chapter 13 plan. (See Deficiency Notice of Additional Missing Documents (ECF No. 15).) That information is critical to permit the Court and creditors to evaluate his eligibility for Chapter 13 relief. See, e.g., In re Scovis, 249 F.3d 975, 982 (9th Cir. 2001) (holding that Chapter 13 “eligibility should normally be determined by the debtor's originally filed schedules”). Without Hart’s schedules, it is not possible to determine whether Hart is now eligible for a Chapter 13 bankruptcy, despite stipulating three months ago that he was not. Furthermore, the information Hart has filed does not suggest that his eligibility will have changed.

First, Hart contends that the IRS’s claim “is an unliquidated, disputed amount.” (Hart Decl. ¶ 14 (ECF No. 25). He is wrong as a matter of law. As the Ninth Circuit has explained, a debt is “liquidated . . . if the amount of the debt is readily determinable.” In re Slack, 187 F.3d 1070, 1073 (9th Cir. 1999). In turn, “[w]hether the debt is subject to ‘ready determination’ will depend on whether the amount is easily calculable or whether an extensive hearing will be needed to determine the amount of the debt, or the liability of the debtor.” Id. at 1074. Therefore, “[e]ven if a debtor disputes the existence of liability, if the amount of the debt is calculable with certainty, then it is liquidated for the purposes of § 109(e).” Id. at 1074-75. See also, e.g., In re Mazzeo, 131 F.3d 295, 304-05 (2d Cir. 1997). The United States’ federal income tax claim is easily calculable with certainty. Assessments of tax, interest, and penalty have been made against Hart; interest and penalty accrue on unpaid tax liabilities as provided by statute. Indeed, the United States filed a precise claim against Hart in his previous bankruptcy for $564,091.54. (Am. Claim 3, In re Hart I (filed July 17, 2012).) Accordingly, the Court should treat the United States’ claim against Hart as liquidated.

Because the United States has a large noncontingent, unliquidated claim for federal income taxes against Hart, whether that claim is secured affects Hart’s eligibility for a Chapter 13 bankruptcy. A Chapter 13 debtor must have “noncontingent, liquidated, unsecured debts of less than $360,475.” 11 U.S.C. § 109(e). Hart stated in his previous bankruptcy that the United States had an unsecured claim of approximately $550,000. (Am. Sched. E, In re Hart I (filed June 12, 2012).) In the Declaration accompanying his Motion to extend the automatic stay, Hart refers to the United States’ claim as secured. (Hart Decl. ¶ 6 (ECF No. 25).) The United States believes its claim is secured by Hart’s residence, the real property nominally titled in the name of the Sarah Elizabeth Hart Trust. The United States contends that the property was fraudulently conveyed to the trust, that the trust is a sham, and that Hart is the real owner. Because Hart has not filed his schedules, it is not clear whether he is admitting that he actually owns the real property, and as a result, it is not clear whether he believes the United States’ claim should be treated as secured or unsecured.

Furthermore, until Hart files his schedules, it is impossible to tell the extent to which the United States’ claim is undersecured. The United States’ claim is secured only to the extent that Hart has property to which the United States’ federal tax liens can attach. See 11 U.S.C. § 506(a). According to the Kootenai County Assessor’s Office, Hart’s residence is worth $235,426. (See Assessor Information for 4430 E. Sarah Loop, Athol, ID, Ex. A to Decl. of Adam Strait Supp. U.S. Opp. Mot. Extend Automatic Stay.) In Hart’s previous bankruptcy, the United States filed a claim for $564,092. Therefore, even if Hart lists his residence as his own property, under § 506(a), the United States would have a secured claim for $235,426 and an unsecured claim for $328,666. Thus, the United States’ claim alone puts Hart near the eligibility threshold for unsecured debt, $360,475. 11 U.S.C. § 109(e). Indeed, his Schedule E in his previous bankruptcy listed an unsecured debt to the Idaho State Tax Commission of $42,000. (Am. Sch. E, In re Hart I (filed June 12, 2012).) That debt would push him over the limit for unsecured debt in a Chapter 13.

Finally, because Hart’s federal income tax liabilities far exceed the value of his residence, it is clear that Hart has no equity in the property and that the United States’ claim is undersecured. See 11 U.S.C. § 362(d)(2)(A). Accordingly, the Court should require Hart to show that the property is necessary to an effective reorganization before staying the United States’ suit in district court. Id. § 362(d)(2)(B); In re Bonner Mall P’ship, 2 F.3d 899, 902 (9th Cir. 1993) (noting that upon showing that a secured creditor’s claim is undersecured, burden shifts to debtor to show that property is necessary to reorganization). The Court should also require Hart to show that he has a reasonable possibility of confirming a Chapter 13 plan. See In re Bonner Mall P’ship, 2 F.3d at 902.

Hart’s failure to file his schedules appears calculated: an attempt to get the Court to extend the automatic stay without adequate information. Hart bears the burden of showing that this case was filed in good faith. Without disclosing the information required by his schedules, he cannot carry that burden. The Court should deny Hart’s motion to extend the automatic stay.

Respectfully submitted this 13th day of November, 2012.

[signed, Adam Strait]
ADAM D. STRAIT
....
Trial Attorney, Tax Division
U.S. Department of Justice.....

--At docket entry 37, In re Philip L. Hart, case no. 12-21220-TLM, U.S. Bankr. Court for the District of Idaho.

[Famspear]

A hearing was held on this today, Tuesday, November 13, 2012.

Docket entry 38:

Hearing Held
Appearances: Brant Stevens - Counsel for the Debtor, Warren Derbidge - Counsel for the USA, Barry Zimmerman - Ch. 13 Trustee

Report of Proceedings: Debtors Motion to Extend the Automatic Stay, Doc. No. 24 and Objection Thereto. Argument presented. The Court deems the matter submitted and takes the issue under advisement. A decision is forthcoming.

(RE: related document(s)24 Motion to Extend Automatic Stay filed by Debtor Philip Lewis Hart) (Battle, Mel)

[Quixote]

So Hart's house is like Schrodinger's cat. It is his when he needs to show he is eligible for Chapter 13, but not his when he wants to prevent the IRS from foreclosing on the lien. The Bankruptcy Court will open the box and collapse the wave function.

[Famspear]

So Hart's house is like Schrodinger's cat. It is his when he needs to show he is eligible for Chapter 13, but not his when he wants to prevent the IRS from foreclosing on the lien. The Bankruptcy Court will open the box and collapse the wave function.

Another example of Einstein's "spooky action at a distance"?

Phil Hart and his Quantum Court Cases.....

[Cathulhu]

So Hart's house is like Schrodinger's cat. It is his when he needs to show he is eligible for Chapter 13, but not his when he wants to prevent the IRS from foreclosing on the lien. The Bankruptcy Court will open the box and collapse the wave function.

Another example of Einstein's "spooky action at a distance"?

Phil Hart and his Quantum Court Cases.....

Nonetheless, I'm certain it's turtles all the way down.

http://en.wikipedia.org/wiki/Turtles_all_the_way_down

edited to add reference in case my humor is getting too obscure for all the people who aren't "Dr. Sheldon Cooper".

[jcolvin2]

Nonetheless, I'm certain it's turtles all the way down.

http://en.wikipedia.org/wiki/Turtles_all_the_way_down

edited to add reference in case my humor is getting too obscure for all the people who aren't "Dr. Sheldon Cooper".

Good to find a kindred soul. I've been telling people it is "turtles all the way down" for years. I first encountered the story in Clifford Geertz's "Interpretation of Cultures." My anthropology professor at Reed College in Portland was amused (or maybe mortified) that I fell into tax law, where it really is "turtles all the way down."

[Kestrel]

Nonetheless, I'm certain it's turtles all the way down.

Like this?

[Famspear]

On Friday, November 16, Hart filed his bankruptcy schedules, statement of financial affairs, and proposed Chapter 13 plan in this second bankruptcy.

Quick review -- Hart wisely discloses the primary residence at Athol, Idaho, but continues to maintain that the home is not part of the bankruptcy estate -- in his words: "due it [sic] being in an irrevocable trust." See "Schedule A - Real Property," at docket entry 40, Nov. 16, 2012; In re Philip Lewis Hart, case no. 12-21220-TLM, U.S. Bankruptcy Court for the District of Idaho.

On unsecured priority claims, he shows the Internal Revenue Service for years 2009 through 2011, with the claim amount being only $3,116.22.

In general unsecured claims, he shows a disputed, unliquidated claim for the Internal Revenue Service of $564,091.54 for years 1996 through 2008.

Also in general unsecured claims, he shows the Idaho State Tax Commission for years 1996 through 2004 as having a disputed, unliquidated claim of $62,173.55.

[Famspear]

On Friday, November 23, the Court issued an Order denying Hart's motion to extend the automatic stay. See docket entry 47, and the Court's 12 page opinion at entry 46.

Thirty days from the petition filing date of October 24 would be November 23 -- which just happens to be the same day as the aforementioned order.

I haven't had a chance to read the Court's opinion in full, but the Court does note that the schedules and statements filed by Hart with the Court a few days ago in this second bankruptcy are incomplete and internally inconsistent, in that they do not disclose the litigation in Federal district court to foreclose the federal tax liens on the real estate in Kootenai County, Idaho.

Oops.



The Court has also set a hearing for December 17th on whether to dismiss this second bankruptcy.

[Lambkin]

http://www.spokesman.com/stories/2012/d ... /[quote]In his final days as an Idaho state lawmaker, Rep. Phil Hart, of Athol, appeared before a bankruptcy trustee Friday for another round of questions on his income and assets.

And just as he did in July, Hart declined to provide many answers – mainly regarding the house he lives in – under a barrage of questions from a U.S. Justice Department lawyer.[/quote]

On Friday, U.S. Tax Attorney Adam Strait again probed Hart’s living arrangement, including how the home came to be placed in a trust with Hart’s daughter listed as the beneficiary. Hart declined to answer about two dozen questions related to the property, saying the attorney representing the trust should be present for such questioning.

[Famspear]

On Friday, U.S. Tax Attorney Adam Strait again probed Hart’s living arrangement, including how the home came to be placed in a trust with Hart’s daughter listed as the beneficiary. Hart declined to answer about two dozen questions related to the property, saying the attorney representing the trust should be present for such questioning.

Hey, Phil, here are some clues:

1. The attorney for the Trust is not the person in bankruptcy here. You are. I suspect that the questions that were asked of you involved matters within your personal knowledge.

2. If the government happens to have some questions for the attorney for the Trust, the government is fully capable of making the appropriate arrangements to ask those questions of him or her.



Hey, Phil, what do you suppose your chances for keeping the house are? Hmmmm?????

Not too early to start looking for an apartment, Phil!

[Famspear]

Hart is mentioned in a separate story:

Betsy Z. Russell, "Idaho lawmakers to receive formal ethics training," The Spokesman-Review, Dec. 1, 2012:

After a string of ethical lapses and questions about Idaho lawmakers’ conduct, new lawmakers will face something unprecedented when they arrive in Boise for their organizational session next week: formal ethics training.....

http://www.spokesman.com/stories/2012/d ... -training/

Why? Whose behavior is prompting this? Well, here is one of the examples cited in the report:

Rep. Phil Hart, R-Athol, was the subject of three ethics complaints in 2011 and 2010 over his ongoing fight against paying back state and federal income taxes, his repeated invoking of legislative privilege to win delays in his tax cases and his illegal logging of state school endowment land in 1996 to build his log home in Athol, for which he never paid an outstanding judgment. Hart lost his bid for re-election....

Gee, thanks, Phil. Because of people like you, people who haven't done anything wrong now have to go back to school......

[AndyK]

Does anyone else find any humor in "Rep. Phil Hart, R-Athol"?

What about "Rep. Phil Hart, R-an-Athol"?

Speak it slowly, and slur.

[Pantherphil]

In the long distant past when Endicott "Chubb" Peabody was governor of Massachusetts, it was said that he was the only governor of Massachusetts with four towns named after him: Endicott, Peabody, Marblehead and Athol.

[Lambkin]

http://www.spokesman.com/blogs/boise/20 ... protesting former Idaho Rep. Phil Hart, R-Athol, is now proposing in bankruptcy court to pay just $106 a month for three years to satisfy more than $626,000 in debts, a total of $3,816 - less than a third of the amount he proposed paying in his earlier, dismissed bankruptcy filing.[/quote]

[Famspear]

On Monday, December 17, 2012, the Court dismissed Hart's second Chapter 13 bankruptcy case. From the case docket, at entry 63:

Hearing Held
Appearances: Brant Stevens - Counsel for the Debtor, Warren Derbidge - Counsel for the USA, Barry Zimmerman - Ch. 13 Trustee

Report of Proceedings: Court Motion to Dismiss, Doc. No. 46; IRS Motion to Dismiss, Doc. No. 55 and Chapter 13 Trustee Motion to Dismiss, Doc. No. 59. Argument presented. After consideration, the Court orally enters findings and conclusions. The Court GRANTS the IRS and Trustee Motions to Dismiss. An order is forthcoming by the IRS, the order shall be endorsed to form only by Debtors Counsel.

---Entry 63, Dec. 17, 2012, In re Philip Lewis Hart, case no. 12-21220-TLM, U.S. Bankruptcy Court for the District of Idaho (Coeur d'Alene Div.).

[Lambkin]

http://www.spokesman.com/stories/2012/d ... d/[quote]A federal bankruptcy judge has dismissed former Idaho state Rep. Phil Hart’s second bankruptcy filing, opening the way for federal authorities to go after his log home in Athol for back federal income taxes and for the state to launch collection efforts over his state tax debts.[/quote]

[notorial dissent]

Well color me shocked and amazed-NOT. I would normally say I was surprised he tried this again after his last epic fail at it, since it is basically a verbatim reenactment, but based on previous actions, it is no surprise as Hart doesn't seem to learn, and is convinced he is yet going to pull the wool over everyone's eyes with his fancy footwork, yet evidence to date shows him to be a woofer instead of a hoofer.

[AndyK]

If the Honorable Mister Hart follows form with other big-name tax evaders (jackson, etc), what's the over/under on how long before he appears on the TP road show circuit touting his technique and boasting of his victories ?

[notorial dissent]

Probably true, except for a few minor problems, he is hardly a big name. I doubt if anyone outside of ID would even recognize him, let alone know who he was, and as they say, he couldn't even get reelected in ID, so name recognition not so much, and Victories???? well even he will have a hard time spinning out much of anything from his past record. I think more likely he will end his days in one of his kids basements, or the geriatric ward a some prison or another.