Bankruptcy

The bankruptcy code does not authorize a release and injunction that, as part of a Chapter 11 plan of reorganization effectively seek to discharge claims against a nondebtor without the consent of affected claimants. Under 11 USC 1123(b), a Chapter 11 plan may contain five specific types of orders, all of which concern the debtor's rights and responsibilities, and "… Read More

A liability insurer liable on claims against the debtor is a "party in interest" that is entitled to raise and have heard its objections to the debtor's Chapter 11 plan under 11 USC 1109(b).  The Bankruptcy Code uses party in interest to broadly cover anyone whose interests might be adversely affected by a Chapter 11 plan.  The legislative history shows… Read More

Plaintiff alleged a hostile work environment claim against her employer, alleging a single course of harassing behavior over a two year period that began before she filed her bankruptcy petition and ended afterwards. Because plaintiff could have brought the claim before bankruptcy, the entire claim, including the post-bankruptcy damages, were property of the bankrupt estate and could be prosecuted only… Read More

Under 11 USC 523(a)(3)(A), a Chapter 7 discharge does not discharge a debt neither scheduled nor listed by the debtor with the creditor's name and address in time to allow the creditor to file a timely proof of claim unless the creditor had actual notice of the bankruptcy in time to file a timely claim or the Chapter 7 is… Read More

Plaintiff tried to refinance her Wells Fargo home loan with another lender but that effort was thwarted by a fraudulent third party's lien on the property.  Plaintiff contends that Wells Fargo should have helped her remove the fraudulent lien, but instead it started foreclosure proceedings on her loan.  She filed a Chapter 13 bankruptcy to avoid the foreclosure and listed… Read More

A bankruptcy trustee may avoid prospective liability for premises liability on property of the bankrupt estate by abandoning the property to the debtor.  However, the abandonment will not operate retrospectively to absolve the trustee of liability for injuries a visitor to the property suffered before the trustee abandoned the property.  Also, the Barton doctrine (Barton v. Barbour (1881) 104 U.S.… Read More

When a debtor voluntarily converts a bankruptcy from Chapter 13 to Chapter 7, any appreciation in the value of the debtor's assets during the period between the filing of the original Chapter 13 petition and the date of conversion to Chapter 7 is property that belongs to the Chapter 7 estate, not the bankrupt debtor. Read More

Following Walls v. Wells Fargo Bank (9th Cir. 2002) 276 F.3d 502 and distinguishing Manikan v. Peters & Freedman, LLP (9th Cir. 2020) 981 F.3d 712, this decision holds that a debtor may not bring an FDCPA claim based on the assertion that the debt that is being collected was discharged in bankruptcy.  The sole remedy for collection efforts barred… Read More

This decision holds that an unsecured creditor that was the chair of the committee of unsecured creditors in East Coast's Chapter 11 proceeding lacked Article III standing to appeal from the bankruptcy court's order awarding the Chapter 11 trustee the maximum allowable fees.  The confirmed Chapter 11 plan provided for the debtor's reorganization and full payment of all allowed claims,… Read More

Under 11 U. S. C. §523(a)(2)(A), a bankrupt may not discharge a debt for money, etc., to the extent obtained by false pretenses, a false representation, or actual fraud.  This decision holds that a fraud debt is nondischargeable even if the bankrupt did not commit the fraud but is held vicariously liable under state law for the fraud as a… Read More

Plaintiff filed a Chapter 11 and was debtor-in-possession until the bankruptcy appointed a trustee in her stead.  Following dismissal of the bankruptcy case, plaintiff sued her bankruptcy attorney for malpractice.  Held:  Plaintiff cannot sue the attorney, without bankruptcy court approval, for malpractice committed while attorney for plaintiff as debtor in possession.  The bankruptcy court appoints the attorney for the debtor-in-possession,… Read More

Property that the debtor has properly claimed as exempt (here, a homestead interest under Arizona law) is not property of the estate.  Therefore, the bankruptcy lacks authority under 11 USC 724(a) to avoid secured claims with liens on the exempt property since that section allows avoidance of liens only on property of the estate. Read More

Under 11 USC 365, a bankrupt may assume a lease that "has been" in default only if it (a) cures the default, (b) compensates the landlord for any monetary loss caused by the default, and (c) provides adequate assurance of future performance of the lease.  This decision holds that the bankrupt must satisfy the three conditions with respect to the… Read More

Over a strong dissent, this decision holds that under 1 USC 1124, when the debtor is solvent, it must pay contract interest (or interest at a rate set by state statute) on unimpaired claims of unsecured creditors, not the lower federal interest rate under 28 USC 1961. Read More

Indebtedness arising from the attorney’s obligation to reimburse the State Bar for the payments made to victims of his misconduct is dischargeable in bankruptcy.  Such an indebtedness is not a penalty, fine or forfeiture payable to a governmental agency, but rather is payable to and for the benefit of the State Bar and is compensation for the Fund’s actual pecuniary… Read More

Following Ritzen Group, Inc. v. Jackson Masonry, LLC (2020) 140 S.Ct. 582, this decision holds that an order denying relief from the automatic stay is immediately appealable so long as it finally resolves the issue of whether the movant is entitled to relief from stay on the basis on which relief was sought, even if the denial is without prejudice… Read More

A party moving under 11 USC 1112(b)(1) for relief such as conversion of a Chapter 11 case to a Chapter 7 case bears the burden of persuasion that cause exists for granting that relief.  Cause includes a material default in making payments due under the Chapter 11 plan.  Material isn't defined by the Bankruptcy Code, but gains meaning from the… Read More

Article I, section 8 of the Constitution empowers Congress to enact uniform laws on the subject of bankruptcy throughout the nation.  This decision holds that Congress violated the uniformity requirement when it raised US Trustee fees in 2017 because, at that time, it did not also raise the fees charged bankrupts in the six districts in Alabama and North Carolina… Read More

An order unconditionally granting or denying a motion for relief from the automatic stay in bankruptcy is final and appealable.  The 14-day window for filing an appeal from the order opens when the order is filed.  Stay relief is a proceeding separate from, and precedes, claim resolution. Read More

Corso obtained a default judgment against Rejuvi in a district court in South Australia.  Corso filed a proof of claim in Rejuvi's bankruptcy proceeding.  Rejuvi appealed from a bankruptcy court order allowing Corso's claim based on the South Australia default judgment.  Held, the claim was properly allowed.  Under California's Uniform Foreign-Country Money Judgment Recognition Act (CCP 1713 et seq.), Rejuvi… Read More