The Bankruptcy Law Firm, Prof. Corp.
Mass. Dept. of Revenue v. Shek (In re Shek), ___ F3d ___ (11th Cir. Jan. 23, 2020), appeal case number 18-14992, widens the Circuit Split over whether Income Taxes can ever be discharged in bankruptcy, where the tax return for those taxes was filed even one day late
Widening an existing split of circuits, the Eleventh Circuit rejected the one-day-late rule adopted by three circuits and held that a tax debt can be discharged even if the return was filed late. The Atlanta-based circuit aligned itself with the Third, Fourth, Sixth, Seventh, Eighth and Eleventh Circuits, which employ the four-part Beard test, named for a 1984 Tax Court decision. Beard v. Commissioner of IRS, 82 T.C. 766 (1984), aff’d, 793 F.2d 139 (6th Cir. 1986). Following Beard, it’s possible — but not automatic — to discharge the debt on a late-filed tax return. The First, Fifth and Tenth…
United States Dep’t of Agriculture v. Hopper (In re Colusa Reg’l Med. Ctr.)
In United States Dep’t of Agriculture v. Hopper (In re Colusa Reg’l Med. Ctr.), 604 B.R. 839 (9th Cir. BAP 2019), the U.S. Bankruptcy Appellate Panel of the Ninth Circuit vacated a bankruptcy court’s order surcharging a secured creditor for a substantial portion of the Trustee’s attorneys’ fees, and the entire statutory fee, of a chapter 7 trustee. The basis for the decision was that the bankruptcy court failed to correctly apply either the objective test for surcharge adopted by the Ninth Circuit (that the funds were expended directly, specifically and primarily for the benefit of the secured creditor) or…
In re Palladino, 942 F.3d 55 (1st Cir. Court of Appeals 2019)
In re Palladino, 942 F.3d 55 (1st Cir. Court of Appeals 2019): Bankruptcy Trustee recovered—as constituting fraudulent transfers–the tuition payments that parents made to college, to pay college tuition for parent’s daughter. Whether paying the college tuition for daughter was a fraudulent transfer had to be analyzed from the point of view of the creditors of parents. Creditors of the parents did not receive any benefit from parents paying the daughter’s college tuition. Note: These were not sympathetic debtors, they had been found liable for running a Ponzi scheme. The First Circuit reversed a bankruptcy court order, that had granted…
Supreme Court Rules that ‘Unreservedly’ Denying a Lift-Stay Motion Is Appealable
Building on Bullard, the US Supreme Court on 011420 ruled unanimously that a lift-stay motion is a “procedural unit” that’s appealable if the bankruptcy court “conclusively” denies the motion. Note: Where a bankruptcy court order is “final”, the party complaining about the order must file a Notice of Appeal within 14 days after the order is entered by the Bankruptcy Court, and loses the right to appeal a final order if the party complaining about the order FAILS to file a Notice of appeal within 14 days after the order is entered in the Bankruptcy Court docket. The Supreme Court…
Hospitals Are Seizing Patients’ Homes And Wages For Overdue Bills
Credit and Collection e-newsletter of 1/6/20 reports that the American Hospital Association, the biggest hospital trade group, says it promotes “best practices” among medical systems to treat patients more effectively and improve community health. But the powerful association has stayed largely silent about hospitals suing thousands of patients for overdue bills, seizing homes or wages and even forcing families into bankruptcy. Atlantic Health System, whose CEO is the AHA’s chairman, Brian Gragnolati, has sued patients for unpaid bills thousands of times this year, court records show, including a family struggling to pay bills for three children with cystic fibrosis. AHA,…
Rising Credit Card Defaults Are Reported by 1/1/2020 Credit & Collection E-Newsletter
Rising credit card defaults are reported by 1/1/2020 Credit & Collection e-newsletter: Consumer credit card losses, or charge-offs, among the Top 100 U.S. banks, are continuing to rise to levels for a third-quarter not seen since early 2013. Meanwhile, delinquency, the precursor of charge-offs, is also hovering at seven-year highs. The trends are concerning to card issuers as it adds more evidence the U.S. economy is headed into a downturn in 2020, or already unraveling. Third-quarter card charge-offs among the Top 4 U.S. bank credit card declined sharply from the prior quarter, a historical pattern, but up slightly from one-year…
In re Golan, ___BR___ (Bankr. E.D.N.Y. Dec. 19, 2019), E.D.N.Y case #19-75598
In re Golan, ___BR___ (Bankr. E.D.N.Y. Dec. 19, 2019), E.D.N.Y case #19-75598: Bankruptcy Court decision holds that it did not violate the bankruptcy automatic stay for the state court to hold a contempt hearing, in a divorce suit, after the debtor filed bankruptcy, because the bankruptcy debtor failed to pay a $20,000 sanction to wife’s attorney, in divorce suit, which the state court had ordered the bankruptcy debtor to pay to wife’s divorce attorney. There was no stay violation for the state court to hold the contempt hearing, because the contempt hearing was criminal contempt, and 11 USC 362(b)(1) stay…
McCoy v. Mississippi State Tax Comm’n
McCoy v. Mississippi State Tax Comm’n, 666 F.3d 924 (5th Cir. 2012) held that if a tax return of a debtor was filed even ONE day late, the taxes reported in that return cannot be discharged. Case is referred to as the “McCoy rule,” or the “McCoy test”. In a nutshell, this 5th Circuit rule provides that if the debtor’s tax return was filed late, even by one day, it is invalid and the tax cannot be dischargeable. The rule has been adopted in the 1st, 5th, and 10th circuits, but rejected in the 11th Circuit. Expect that eventually the…
In re Emerge Energy Services LP, ___BR___ (Bky Ct D. Del 12/5/19) case #19-11563 December 10, 2019: Failure to Opt Out Won’t Justify Imposing Third-Party Releases, Delaware Bky Judge Says
Saying she is in the minority in her district, a new Delaware judge ruled that allowing creditors to opt out won’t permit a plan to impose nonconsensual, third-party releases. Disagreeing with some of her colleagues in Delaware, a newly appointed bankruptcy judge refused to approve third-party releases binding creditors and equity holders who receive no distribution in a chapter 11 plan but had been given the option of opting out from the releases. In her December 5 opinion, Bankruptcy Judge Karen B. Owens could not conclude that the failure to opt out represented consent to granting the releases, under the…
U.S. Bank NA v. Saccameno, ___F.3d___ (7th Cir. Nov. 27, 2019) (case number 19-1569)
American Bankruptcy Institute (ABI) reports on this case as follows: Seventh Circuit Limits Punitive Damages to Total Compensatory Damages of $582,000 Despite atrocious mortgage servicing, the circuit court cut a jury’s $3 million award of punitive damages to $582,000. As a matter of constitutional law, the Seventh Circuit reduced punitive damages from $3 million to $582,000 when the jury had awarded the debtor $582,000 in compensatory damages as a consequence of the mortgage servicer’s “reprehensible conduct” and its “obstinate refusal” to correct its mistakes. The story told by Circuit Judge Amy J. St. Eve in her November 27 opinion would…