Recent Cases
Wellness International n Network, Ltd. v. Sharif, ___F.3d___, 2013 Westlaw 4441926 (7th Circuit 2013)
SUMMARY: In Wellness International n Network, Ltd. v. Sharif, ___F.3d___, 2013 Westlaw 4441926 (7th Circuit 2013) , disagreeing with the Ninth Circuit, the Seventh Circuit has held that a debtor’s objection to a bankruptcy court’s constitutional authority to enter a final judgment cannot be waived. Facts: After a creditor obtained a judgment against a debtor, the debtor filed a Chapter 7 bankruptcy petition. The creditor then brought an adversary complaint seeking to block his discharge and seeking a declaratory judgment that a trust administered by the debtor was actually his alter ego. As the result of discovery violations, the court…
The U.S. Court of Appeals for the Ninth Circuit has held that: (1) a motor vehicle, including a luxury vehicle, may fall within California’s wildcard or grubstake exemption; and (2) if an exempt vehicle is a tool of the debtor’s trade, the debtor can avoid a non-possessory, non-purchase money lien against it under 11 U.S.C. 522(f)(1)(B). Orange County’s Credit Union v. Angie M. Garcia (In re Garcia) ___ F. 3d ___ (9th Cir. 2013). To read the full opinion, click here (Garcia)
http://cdn.ca9.uscourts.gov/datastore/opinions/2013/03/05/11-56076.pdf Factual Background In November 2006, real estate agent Angie Garcia ("Debtor") borrowed $22,160 from Orange County’s Credit Union ("OCCU"), using her Mercedes Benz automobile as collateral. OCCU properly perfected its non-possessory, non-purchase money lien on the Mercedes. When the Debtor later filed for Chapter 7 relief, she listed the car’s value at $5,350, with an outstanding balance of $12,715.50 owed to OCCU. The Debtor claimed that the car was exempt from her bankruptcy estate under California Code of Civil Procedure section 703.140(b)(5), known as California’s "wildcard" exemption. The bankruptcy court ruled that the Debtor could not exempt her Mercedes…
In re Welsh, ___F.3d___ , 2013 U.S. App. LEXIS 5880 (9th Cir. 3/25/2013)
Ninth Circuit Court of Appeals joined the Fifth and Tenth Circuits in holding that it was not bad faith for a debtor to decline to devote social security income to paying unsecured creditors in a chapter 13 plan. The court rejected the trustee’s argument that this allowed the debtor to have money left over that could be used to pay creditors, stating that: Congress chose to remove from the bankruptcy court’s discretion the determination of what is or is not "reasonably necessary." It substituted a calculation that allows debtors to deduct payments on secured debts in determining disposable income. That…
Samuels vs. Midland Funding, LLC, 2013 Westlaw 466386 (S.D. Ala. 2013)
A United States District court in Alabama has held that a consumer debtor may bring a suit against a debt collector for malicious prosecution after the debt collector showed up for trial with no witnesses and no evidence. Facts: An individual debtor was sued by a debt collector. The debtor appeared at trial, but the debt collector had no evidence to prove the creation of the alleged debt, the date of the default, the amount due, or any other crucial fact. The debt collector also had no witnesses at trial. After the trial court entered judgment for the individual debtor,…
Black v. Bonnie Sptrings Family Ltd. partnership (In re Black), 9th Circuit
BAP, ___BR___, 2013 Daily Appellate Reports 2041 (2/13/12): debts arising from satate court judgment against debtor for abuse of process (judgment against debtors for 1.6 million, for abuse of process, and nuisance) were NOT dischargeable in debtor’s Chapter 7 bankruptcy case, because debtors’ conduct had caused “wilful and malicious injury” to plaintiffs, as those terms are used in 11 USC 523(a)(6) definition of
The Bankruptcy Appellate Panel of the 10th Circuit has held that a trustee in bankruptcy cannot avoid a mortgage lien, even though the underlying note was held by a lender, while the mortgage was recorded in the name of MERS, a separate entity. In re Trierweiler, 2012 Westlaw 6725589 (10th Cir. BAP (Wyo.)
Facts: Following a home mortgage transaction, the underlying promissory note was sold to a new lender. However, the mortgage was recorded in the name of Mortgage Electronic Registration Systems (“MERS”), as agent for the holder of the note. When the borrowers filed a bankruptcy petition, their trustee in bankruptcy filed an adversary complaint against the new lender and MERS, seeking to avoid the mortgage. The trustee claimed that the mortgage was unenforceable because of the separation between the promissory note and the mortgage. The trial court ruled in favor of the new lender, and the trustee appealed. Reasoning: The Bankruptcy…
Newman v. Schwartzer (In re Newman) 2013 DJDAR 1609 (9th Cir. BAP 2/4/2013)
Newman v. Schwartzer (In re Newman) 2013 DJDAR 1609 (9th Cir. BAP 2/4/2013): held debtor’s tax refund, which debtor received during the bankruptcy case, and which was for tax year before debtor’s bankruptcy case was filed (ie was refund for pre-petition tax period), was subject to being turned over to the Chapter 7 bankruptcy trustee, even if the debtor had already spent the tax refund. Tax refund was subject to turnover, even if debtor had already spent the refund, because debtor had possession, custody or control of the tax refund during the bankruptcy case.
In re Rowe, 2013 U.S. Dist. LEXIS 11970
In In re Rowe, 2013 U.S. Dist. LEXIS 11970 (E.D. Va., January 29, 2013), the United States District Court for the Eastern District of Virginia (the “District Court”) affirmed the decision of the United States Bankruptcy Court for the Eastern District of Virginia (the “Bankruptcy Court”), wherein the Bankruptcy Court reduced the requested compensation of the chapter 7 trustee significantly below the amount requested, which was calculated in accordance with Bankruptcy Code section 326 (a). the Bankruptcy Court concluded that the trustee had failed to “properly or timely complete his duties as trustee.” In re Rowe, 484 B.R. 667 (Bankr.…
Wells Fargo Bank, N.A. v. Texas Grand Prairie Hotel Realty, LLC (In the Matter of Texas Grand Prairie Hotel Realty, LLC), No. 11-11109 (5th Cir. Mar. 1, 2013)
Fifth Circuit Court of Appeals rules contra to how 9th Circuit Court of Appeals determines “cram down” interest rate to be used in Chapter 11 bankruptcy cases, to “cram down” Chapter 11 plan on objecting secured creditor. “Cram down” means that the Bankruptcy Judge confirms (approves) Chapter 11 plan over objection of secured creditor)The U.S. Court of Appeals for the Fifth Circuit has held that, in chapter 11 cases, the bankruptcy court decides the formula to use to determine the appropriate “cram down” rate under a plan, and the bankruptcy court’s decision is reviewed for clear error rather than de…
In re Blixseth, 484 B.R. 360 (9th Cir. BAP Dec. 17, 2012)
Reversing the Bankruptcy Court, the U.S. Bankruptcy Appellate Panel of the Ninth Circuit Court of Appeals (the "BAP") has ruled that even though the law generally provides that intangible assets have no physical location or are located where their owner resides, for purposes of determining the proper venue of an involuntary chapter 7 petition against a Washington resident whose principal assets were intangibles comprising interests in Nevada entities, those assets were located in Nevada. Facts and Procedural Background The debtor, a Washington state resident, held his principal assets through a Nevada limited liability company and a Nevada limited partnership (the…