Recent Cases
Sub V Chapter 11 bankruptcy case Debt ‘Cap’ in Peril of Reverting from present 7.5 million cap, to About $3 Million and Chapter 13 bankruptcy case debt ‘Cap’ Will Revert to Old (lower) limits, unless Congress passes extension bill by 6/21/24
The debt limits for Subchapter V and chapter 13 will expire on June 21, 2024, but a bill to extend the existing caps for two more years is being blocked by one senator. In April, a bipartisan group of senators from the Senate Judiciary Committee (consisting of Sens. Richard Durbin (D-Ill.), Lindsey Graham (R-S.C.), Sheldon Whitehouse (D-R.I.), Charles Grassley (R-Iowa), Christopher Coons (D-Del.) and John Cornyn (R-Texas)) introduced S. 4150, the Bankruptcy Threshold Adjustment Extension Act, to push the sunset dates out to 2026. It is a one-sentence bill. Due to its simplicity and perceived lack of opposition, the sponsors…
City of Phoenix v. Haley (In re Bercy), ___F.4th____ (9th Circuit Court of Appeals, May 30, 2024)
City of Phoenix v. Haley (In re Bercy), ___F.4th____ (9th Circuit Court of Appeals, May 30, 2024), appeal number 22-16463. Debtor had not standing to sue on, or collect on, debtor’s claim that debtor was subjected to racial harassment at her employment, before she filed bankruptcy, and after she filed bankruptcy, because debtor did NOT schedule her claim for racial discrimination in bky schedules. As a result, the Chapter 7 Trustee got the claim, and settled it, and debtor got ZERO. The lesson to learn from this case is that a debtor MUST accurately schedule all assets, in the debtor’s…
Truck Insurance Exchange v. Kaiser Gypsum Co. Inc., 22-1079 (Sup. Ct. June 6, 2024)
In Truck Insurance Exchange v. Kaiser Gypsum Co. Inc., 22-1079 (Sup. Ct. June 6, 2024) the US Supreme Court unanimously ruled that an Insurer for the bankruptcy debtor is a party in interest under 11 USC 1109(b) of the Bankruptcy code, and therefore has standing to object to a proposed Chapter 11 plan. Reversing the Fourth Circuit today, the Supreme Court held that a chapter 11 plan that is “insurance neutral” does not deprive the insurer of standing to raise objections to the plan. For a unanimous Court, Justice Sonia Sotomayor said, “Courts must determine on a case-by-case basis whether…
In re Cummings,___ BR___ (Bankr. Court D.N.M. May 22, 2024) case no, 23-10321
In re Cummings,___ BR___ (Bankr. Court D.N.M. May 22, 2024) case no, 23-10321: This Bankruptcy Court Decision discusses 6 different theories (with 6 different outcomes) that other cases have used, to determine whether a Chapter 7 Trustee can be paid any trustee fee, and if so, what dollar amount of trustee fee, when a Chapter 7 debtor converts the debtor’s Chapter 7 bankruptcy case to Chapter 13, after the Chapter 7 trustee discovers assets that the debtor concealed/failed to schedule, but before Chapter 7 Trustee can sell those assets: In re Cummings decision discusses that Courts have used at least…
Chamber of Commerce of the United States of America, et al, v Consumer Financial Protection Bureau, ___F.4th.____ (5th Cir. 5/1/24), case No. 24-10248:
The U.S. Circuit Court of Appeals for the Fifth Circuit, on 5/1/24, directed a US District Judge in Texas, to rule, by the end of next week, whether or not to issue a preliminary injunction, to block the U.S. Consumer Financial Protection Bureau’s new rule capping credit card late fees at $8. The order, opens new tab late Tuesday by the three-judge panel of the New Orleans-based 5th U.S. Circuit Court of Appeals came in response to a bid by banking and business groups to have the appellate court itself decide whether the rule should be blocked. Groups including the…
In re Bestwall LLC, __BR__ (Bankr. W.D.N.C. Feb. 21, 2024, case no. 17-31795)
In re Bestwall LLC, __BR__ (Bankr. W.D.N.C. Feb. 21, 2024, case no. 17-31795) holds Lack of Financial Distress of person/entity filing bankruptcy does NOT Divest a Bankruptcy Court of Subject Matter Jurisdiction over the bankruptcy case, but Bankruptcy Court can dismiss the bankruptcy case for being filed in bad faith, or can grant relief from stay to creditors, etc. Example: In In re LTL Management LLC, 58 F.4th 738, 64 F.4th 84 (3d Cir. Jan. 30, 2023), the Third Circuit dismissed the chapter 11 case of a Johnson & Johnson subsidiary for lack of “financial distress”, but didn’t rule there…
Raymond James & Associates Inc. v. Jalbert (In re German Pellets Louisiana LLC), 23-30040 (5th Cir. Jan. 30, 2024)
Raymond James & Associates Inc. v. Jalbert (In re German Pellets Louisiana LLC), 23-30040 (5th Cir. Jan. 30, 2024): US court of appeals for the 5th Circuit rules, in a published decision, that a creditor that does not file a proof of claim, and does not file any pleadings in Ch11 case, is still bound by the Ch11 plan, if the BkyCt confirms that plan. This 5th Circuit Court of Appeals decision holds that knowledge of existence of a chapter 11 bankruptcy case is enough to bind a creditor to the terms of a plan, if the Bankruptcy Court confirms…
In re McIntosh, ___BR___ (Bankruptcy Court, SD Fla 01/12/24: Bankruptcy Court ordered Debt Purchaser to pay Debtor $65,000 (including $21,500 punitive damages, plus $10,000 emotional distress damages) for violating debtor’s bankruptcy Discharge, by debt purchaser trying to collect a debt from debtor, that had been discharged in debtor’s bankruptcy
Bankruptcy Judge Scott M. Grossman of Fort Lauderdale, Fla., explained why “merely selling a debt to another holder” does not “somehow immunize a creditor and create a fair ground of doubt as to whether that debt was discharged.” Taggart decision doesn’t give more protection to a purchaser of debt than it does to the original creditor, Judge Scott Grossman says. Finding that the conduct of the purchaser of discharged debt was “reckless, reprehensible, and egregious,” Judge Grossman awarded the debtor almost $65,000, including $10,000 for emotional distress and some $21,500 in punitive damages. The Chapter 7 Discharge in 2002 The…
Courts Are Split on Counting Future Rent Toward the $7.5 Million Debt Cap in Sub V Chapter 11
If future liability on unexpired leases and executory contracts is counted, many companies will be ineligible for Subchapter V of chapter 11. Courts disagree on whether future liability on a lease counts toward the $7.5 million eligibility limit for Subchapter V. See In re Zhang Medical PC, 23-10678 (Bankr. S.D.N.Y. Nov. 30, 2023) Not counting future rent liability, Bankruptcy Judge Philip Bentley of New York disagreed with Bankruptcy Judge Klinette H. Kindred of Alexandria, Va., who knocked a debtor out of Subchapter V solely as a result of liability on a long-term lease. See In re Macedon Consulting Inc., 652…
Barclay vs. Boskoski, ___F.4th___, 2022 WL 16911862 (9th Circuit Court of Appeals. November 14, 2022)
In Barclay, a published decision, the United States Court of Appeals for the Ninth Circuit found that the bankruptcy court correctly applied the $600,000 homestead exemption in effect on the filing date of the bankruptcy petition, rather than the significantly lower homestead exemption available when the judgment lien was recorded seven years prior. As a result, the judgment lien was avoided in its entirety. FACTS In 2014, Greek Village, LLC, Konstantinos Manassakis, and Aimilia Manassakis recorded a $256,075.95 judgment lien (“Greek Village Judgment Lien”) against Debtor Dejan Boskoski’s Carlsbad, California home. Because the debtor was married in 2014, the maximum…