The Bankruptcy Law Firm, Prof. Corp.
US Solicitor General Urges US Supreme Court to Review Constitutionality of the 2018 Increase in U.S. Trustee Fees
On 12/08/21, the U.S. Solicitor General urged the Supreme Court to grant certiorari, resolve a circuit split and decide whether the increase in fees payable to the U.S. Trustee system in 2018 violated the uniformity aspect of the Bankruptcy Clause of the Constitution because it was not immediately applicable in the two states that have bankruptcy administrators rather than U.S. Trustees.
Sienega v. State of California Franchise Tax Board (In re Sienega)
Sienega v. State of California Franchise Tax Board (In re Sienega), ___F.4th___ (9th Circuit Court of Appeals 12/6/21): In Sienega, the Ninth Circuit Court of Appeals NARROWLY defines what is the equivalent of a tax return for dischargeability purposes, pursuant to 11 USC 523(a)(1)(B) of the Bankruptcy Code. Bad news for debtors who do not file tax returns on time, as failing to file a tax return on time prevents a debtor from seeking to discharge that tax debt in bankruptcy. Interpreting the hanging paragraph in Section 523(a), the Ninth Circuit sticks to the Beard test in deciding whether something…
Key Provisions in the Federal CARES Act
A key provisions in the federal CARES Act expires on March 28, 2022. Specifically, the maximum amount of debt a debtor can owe, and still be eligible to file bankruptcy in Subchapter V of Chapter 11, will decrease from $7.5 million, back to the original maximum debt amount of $2,725,625. It is uncertain whether Congress will extend this provision before it expires. The opportunity for a person or entity to file Subchapter V Chapter 11 (the simpler, faster, cheaper, more favorable for debtors kind of Chapter 11 bankruptcy case), where the debtor owes up to 7.5 million dollars of debt,…
Hawker v. Eastport Holdings LLC (In re GYPC Inc.), ___BR___ (Bankr. W.D. Ohio, Nov. 22, 2021, bankruptcy case 19-3054)
Bankruptcy Judge Decision holding that the US Supreme Court Taggart case means there is no strict liability for violating a corporate debtor’s automatic stay. Instead, the debtor must present persuasive authority before a creditor can be held in contempt for violating the automatic stay protecting a corporate debtor. Bankruptcy Court found that the creditor took an “ill-advised” action in violation of the automatic stay in a corporate debtor’s chapter 11 case but refused to hold the creditor in contempt, applying Taggart v. Lorenzen, 139 S. Ct. 1795 (2019), the Supreme Court held that there can be no sanctions for civil…
In re Moore
As discussed in In re Moore, a recent Bankruptcy Court decision, cases and bankruptcy treatises are split on the question of whether or not a debtor who proposes a Chapter 13 plan which provides to pay 100% of what debtor owes to general unsecured creditors, is NOT entitled to have the Bankruptcy Judge confirm (aka approve) the Chapter 13 Plan, so it goes into effect, binding debtor and creditors, unless the Plan provides to pay general unsecured creditors interest, on their general unsecured claims, over the life of the Chapter 13 Plan,where the Debot is not devoting all the debtor’s…
Jackson v. Le Centre On Fourth LLC (In re Le Centre On Fourth LLC), ___F4th___ (11th Cir. Nov. 15, 2021), appeal No. 20-12785
11th Circuit Court of Appeals expands Espinosa case reasoning, to say that a debtor’s failure to give notice–as required by FRBP Rule 2002(c)(3)–to creditors, that the bankruptcy debtor’s proposed plan would give releases to non-debtor third parties, not just to the bankruptcy debtor, is NOT fatal, so long as the proposed Plan was served on all creditors, and the Plan stated that the Plan, if confirmed, would give release to non-debtor third parties, not just to debtor. The 11th Circuit decision said Circuit was analogizing to the reasoning of the Espinosa case.
Bankruptcy Venue Reform Act
The American Bankruptcy Institute 11/10/21 e-newsletter reports that: A Bipartisan Coalition of Attorneys General Support the US Congress passing, and President Biden signing into law, the Bankruptcy Venue Reform Act The National Association of Attorneys General (NAAG) sent a letter yesterday to Congress signed by 43 attorneys general in support of the Bankruptcy Venue Reform Act of 2021. Venue reform has long been needed, to require corporations, LLCs and partnerships to file bankruptcy in the State which is the principal place of business of the corporation, LLC or partnership, instead of having the option of filing bankruptcy in the State…
Stuart v. City of Scottsdale (In re Stuart), ___BR___ (B.A.P. 9th Cir. Nov. 10, 2021, appeal No. 21-1063): Creditor which obtained an attachment before the debtor filed bankruptcy, has NO Duty to Release that Attachment, when debtor files bankruptcy, holds 9th Circuit BAP, relying on the US Supreme Court Fulton case
The BAP decision may have a hint that failure to stop proceedings after bankruptcy can be an automatic stay violation, even after Fulton. Concluding that the Supreme Court’s Fulton decision overruled prior Ninth Circuit authority, the Ninth Circuit Bankruptcy Appellate Panel held that a creditor no longer violates any provision of the automatic stay in Section 362(a) by maintaining the status quo and declining to vacate a prepetition attachment. While the decision under Section 362(a)(3) is no surprise given that Fulton addressed the same subsection, the November 10 BAP opinion is noteworthy for finding no stay violations under any other…
In re Summit Financial Inc.
In re Summit Financial Inc., ___BR___ (Bankr. C.D. Cal. Nov. 5, 2021, bankruptcy case number 21-12276): Bankruptcy Court (Bankruptcy Judge Scott Clarkson) held it is improper for debtor’s attorney to put a “Disclaimer” on Debtor’s bankruptcy Schedules and Statement of Financial Affairs, because the “Disclaimer” contravened the debtor’s statutory obligation to update its schedules and statement of affairs. Judge Clarkson ruled that a debtor and debtor’s attorney cannot disclaim responsibilities that the bankruptcy debtor (and the bankruptcy debtor’s attorney) owe pursuant to the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure (here the debtor’s statutory obligation to update its…
In re Stevens, ___F.4th___(9th Cir. 2021)
In re Stevens, ___F.4th___(9th Cir. 2021) issued on 10/19/21, is important, because it holds that where a bankruptcy debtor lists a lawsuit (in which debtor is the plaintiff) in debtor’s Statement of Financial Affiars, but does NOT list the lawsuit in the debtor’s Asset Schedule (Schedule A/B), that the lawsuit is NOT abandoned back to the debtor, when the Bankruptcy Court closes debtor’s bankruptcy case. Note that assets that are accurately listed, in the bankruptcy debtor’s schedule A/B (asset schedule) are abandoned back to the debtor, per 11 USC 521(a), when the Bankruptcy Court closes the debtor’s bankruptcy case, if…