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Anti-Deficiency Protection, on Purchase Money DOT Residential Loans, Expanded by new CA statute signed into law on 7/11/13 by governor, to Include Short Sale Done with DOT Lender Consent, not Just Non-Judicial Foreclosure Sale by Lender
SUMMARY On July 11, 2013 Governor Brown signed into law SB 426 which expands the anti-deficiency language in Code of Civil Procedure ("C.C.P.") sections 580b and 580d by expressly prohibiting not only: (i) a deficiency judgment against the borrower in connection with either a "purchase money" deed of trust covered under C.C.P. §580b or following a non-judicial foreclosure of a deed of trust covered under C.C.P. §580d, but now also (ii) any liability for any deficiency in the foregoing situations. However, SB 426 expressly recognizes the right of a lender to collect any such deficiency from any additional collateral held…
Creditors–DON’T BE LATE
Creditors–DON’T BE LATE–Creditor Being a Few MINUTES Late in Filing Creditor’s Nondischargeability Adversary Proceeding against Debtor, in Debtor’s Bankruptcy Case, Resulted in Complaint being Thrown Out, as AFTER DEADLINE. In Anwar v. Johnson, ___ F.3d.___, 2013 DJDAR 8725 (9th Cir. 7/3/2013). Same reasoning would apply to cause Bankruptcy Court to have to throw out a creditor’s, trustee’s, or US Trustee’s Complaint seeking to deny the debtor any discharge, if filed after the deadline that the Bankruptcy Code sets for filing “nondischargeability” or “denial of discharge” complaints. There are certain excuses that may excuse untimely filing of Complaint, but none of…
US Supreme Court decision, Bullock v. BankChampaign
Bullock v. BankChampaign (United States Supreme Court, decided 5/13/13), decision on nondischargeability of debt pursuant to 11 USC 523(a)(4), which is nondischargeability of debt based on debt arising from debtor committing “fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny”. Unanimous United States Supreme Court decision, holding that "defalcation" under 11 USC 523(a)(4) of the Bankruptcy Code requires that the debtor, at time of the debtor’s defalcation, had “scienter”. “Scienter” element requires knowledge of, or gross recklessness in respect to, the improper nature of the fiduciary behavior. Bullock was decided in the context of a proceeding commenced…
The U.S. Bankruptcy Appellate Panel of the Ninth Circuit (BAP) has held that a recorded abstract of judgment attached to the proceeds from the sale of a debtor’s residence even though the abstract was recorded after the debtor’s fraudulent transfer of her interest in the residence to her daughter. Daff v. Wallace (In re Cass), BAP No. CC-12-1513-KiPaTa (9th Cir. BAP, Apr. 11, 2013)(unpublished).
Facts and Procedural Background Creditors sued the Debtor for nuisance and defamation. To prevent the potential seizure of her half million dollar home, the Debtor transferred her residence to her daughter for no consideration and reserved a life estate therein. The Debtor and her daughter then entered into a separate agreement where the daughter promised to reconvey the home ("Residence") back to the Debtor upon the Debtor’s request (the "Fraudulent Transfer"). The Fraudulent Transfer gave rise to further litigation, as Creditors then filed a second action alleging that the Debtor fraudulent transferred the Residence to her daughter. Creditors obtained a…
Quasi-judicial Immunity of Bankruptcy Trustees
Quasi-judicial Immunity of Bankruptcy Trustees: A bankruptcy court in Eastern District of Tennessee has held that a chapter 7 trustee and his auctioneer enjoy quasi-judicial immunity against allegations of theft, embezzlement, conversion and fraud when selling property pursuant to a court order. Lunan v. Jones (In re Lunan), In re Lunan, 2012 WL 77491912 (Bankr. E.D. Tenn. Mar. 22, 2013). Factual Background and Procedural History The chapter 7 trustee ("Trustee") moved to sell the debtor’s million dollar home, luxury vehicles and artwork. Insisting that the sale price was too low, the debtor opposed the sale motion. After losing in the…
In re Stockton municipal bankruptcy case, 4/1/13 Ruling of Bankruptcy Judge Christopher Klein, ruling that City of Stockton Is Eligible to be in Chapter 9 (Municipal) Bankruptcy
On Monday, April 1, 2013, U.S. Bankruptcy Judge Christopher Klein of the Eastern District of California ruled the City of Stockton to be eligible for chapter 9 bankruptcy protection and issued the Order for Relief necessary for the case to proceed pursuant to Bankruptcy Code §921(d). The decision came nine months after the city initially filed for bankruptcy and followed a three-day evidentiary hearing pitting the city against the Capital Markets Creditors who represent the holders of tens of millions of dollars in municipal bonds. The bondholders had argued, among other things, that the city was not eligible for bankruptcy…
New Bankruptcy Court Decision about law firm that filed bankruptcy
New Bankruptcy Court Decision about law firm that filed bankruptcy: Heller Ehrman LLP, Liquidating Debtor v. Jones Day (In re Heller Ehrman, LLP), Bankr. Case No. 08-32514DM, Adv. No. 10-3221DM (Bankr. N.D. Cal. March 11, 2013). Summary: Judge Dennis Montali, of the Bankruptcy Court for the Northern District of California, recently granted partial summary judgment in favor of the plaintiff debtor, a dissolved law firm, on the basis that the debtor’s waiver of rights under Jewell v. Boxer, 156 Cal. App. 3d 171 (1994) constituted an avoidable transfer under 11 U.S.C. section 548 and the California Uniform Fraudulent Transfer Act,…
O’Donnell, et. al. v. Tristar Esperanza Properties, LLC (In re Tristar Esperanza Properties, LLC)
The U.S. Bankruptcy Appellate Panel of the Ninth Circuit ("BAP") held that a judgment awarding the value of a withdrawing member’s interest in an LLC constitutes “damages arising from the purchase or sale of… a security” under 11 U.S.C. § 510(b), and therefore is vulnerable to mandatory subordination. O’Donnell, et. al. v. Tristar Esperanza Properties, LLC (In re Tristar Esperanza Properties, LLC), BAP No. CC-12-1340-KlPaDu (9th Cir. BAP Mar. 8, 2013). To read the opinion, click here: (Tristar) http://cdn.ca9.uscourts.gov/datastore/bap/2013/03/08/Tristar12-1340.pdf
Split Among Court Decisions re whether or not the absolute priority rule applies in an individual Chapter 11 case and individual Chapter 11 plan
The United States Court of Appeals for the Tenth Circuit (the "10th Circuit") has held that, notwithstanding the BAPCPA’s amendments to the Bankruptcy Code, individual chapter 11 debtors must still comply with the absolute priority rule (adopting the so-called "narrow view"). Dill Oil Company, LLC v. Arvin E. Stephens (In re Stephens), 704 F.3d 1279 (10th Cir., Jan. 15, 2013). To view the full decision, click: https://www.ca10.uscourts.gov/sites/ca10/files/opinions/01018983694.pdf. Facts The debtors, Mr. and Mrs. Stephens (the "Stephens"), owned a chain of convenience stores and filed a voluntary individual chapter 11 case because the stores were operating at a loss. The Stephens…
Pursuant to 11 USC 523(a)(8), student loan debt
Pursuant to 11 USC §523(a)(8), student loan debt– as defined by that Section (which is almost all student loan debt, whether loan is by government, by a school directly, or by a bank)–is only dischargeable in bankruptcy if the debtor brings an adversary proceeding, in the debtor’s bankruptcy case, and wins that adversary proceeding, by proving that it would be an undue hardship on the debtor, or on debtor’s dependents, if debtor had to repay student loan debt the debtor owes, over the debtor’s whole remaining working life. It has been reported in the news that about 1/4 of all…