Justia Bankruptcy Opinion Summaries

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Hidalgo, which is in Chapter 11 bankruptcy, alleged that it was denied a Paycheck Protection Program (PPP) loan under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) based on its status as a bankruptcy debtor. The bankruptcy court ruled in favor of Hidalgo and issued a preliminary injunction mandating that the SBA handle Hidalgo's PPP application without consideration of its ongoing bankruptcy. The Fifth Circuit held, under well-established circuit precedent, that the bankruptcy court exceeded its authority when it issued an injunction against the SBA Administrator. The court explained that the issue at hand is not the validity or wisdom of the PPP regulations and related statutes, but the ability of a court to enjoin the Administrator, whether in regard to the PPP or any other circumstance. Accordingly, the court vacated the preliminary injunction. View "Hidalgo County Emergency Service Foundation v. Carranza" on Justia Law

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The Bankruptcy Code does not prevent debtors from proposing and confirming plans with an estimated duration. After determining that it had jurisdiction over debtors' appeal, the Ninth Circuit held on the merits that the text and structure of the Code do not mandate a fixed term requirement for all Chapter 13 plans and that the panel should not add one without clear direction from the statute. The panel also held that none of the reasons given by the bankruptcy appellate panel justify the finding that debtors proposed their initial plans in bad faith. Finally, the panel held that the bankruptcy court did not fail to hold a confirmation hearing within the timeframe prescribed by the Code and properly exercised its discretion by deferring consideration of debtors’ estimated-duration provisions until it could adequately address them. Accordingly, the panel affirmed in part, reversed and vacated in part, and remanded for further consideration. View "In re Nanette Marie Sisk" on Justia Law

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Violation of a bankruptcy court discharge order is not an arbitrable dispute. The Second Circuit affirmed the district court's order denying appellants' motions to compel arbitration of a dispute with two debtors who previously held credit card accounts managed by appellants. Appellants argued that debtors were obliged to arbitrate the dispute concerning whether appellants violated the bankruptcy court's discharge orders when they failed to correct the status of debtors' credit card debt on their credit reports. Though the text and history of the Bankruptcy Code are ambiguous as to whether Congress intended to displace the Federal Arbitration Act in this context, the court held that circuit precedent is clear that the two statutes are in inherent conflict on this issue. In Anderson v. Credit One Bank, N.A., 884 F.3d 382 (2d Cir.), cert. denied, 139 S. Ct. 144 (2018), the court refused to enforce the parties' arbitration agreement, finding that Congress did not intend for disputes over the violation of a discharge order to be arbitrable. View "Belton v. GE Capital Retail Bank" on Justia Law

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The Ninth Circuit affirmed, although on different grounds, the district court's dismissal of appellant's challenge to an exculpation clause approved by the bankruptcy court as part of a settlement and confirmation plan in Chapter 11 proceedings. As a preliminary matter, the panel declined to dismiss the appeal because of appellant's failure to reply to the show cause order. The panel remained bound by its earlier decision that appellant's challenge to the exculpation clause is not equitably moot. On the merits, the panel held that 11 U.S.C. 524(e) does not prohibit the exculpation clause at issue, because the clause covers only liabilities arising from the bankruptcy proceedings and not the discharged debt. View "Blixseth v. Credit Suisse" on Justia Law

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After the State Bar of California suspended one of its members for misconduct, it conditioned her reinstatement of the payment of court-ordered discovery sanctions and costs associated with its disciplinary proceedings. The suspended attorney sought to discharge the payment in bankruptcy. The Ninth Circuit held that, while a debtor may not discharge the costs of the State Bar's attorney disciplinary proceedings imposed under California Business and Professions Code 6086.10, the discovery sanctions under California Procedure Code 2023.030 were dischargeable. Under the plain text of 11 U.S.C. 523(a)(7), they were not payable to and for the benefit of a governmental unit and were compensation for actual pecuniary losses. Finally, the panel rejected the attorney's claim that the State Bar violated 11 U.S.C. 525(a) by failing to reinstate her law license because of her nonpayment of dischargeable debts. Accordingly, the panel affirmed in part and reversed in part. View "Albert-Sheridan v. State Bar of California" on Justia Law

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After debtor filed for bankruptcy under Chapter 13, the trustee objected to confirmation of the plan. The bankruptcy court agreed to confirm the plan only if debtor chose one of two non-statutory conditions. The first option would require debtor to agree to divert all his disposable income for the first seven months to pay the unsecured creditors, and the second would incorporate into the confirmation order what is known as the Molina language. Debtor chose the Molina language. The court held that, unless debtor's plan fell short of the 11 U.S.C. 1325(a) criteria, the court was required to confirm the plan, subject to subsection 1325(b). The court analyzed the claimed shortcomings under section 1325(a) and rejected them. On de novo review, the court held that debtor's plan complied with 1325 (b)(1)(A), and the bankruptcy court was not prohibited by that section from confirming the plan. The court further held that imposing the Molina language was not necessary or appropriate to carry out any part of the Bankruptcy Code identified in the appeal. Finally, the court held that the Molina language violates section 1329. Accordingly, the court vacated the confirmation order and remanded to the bankruptcy court for further proceedings. View "Brown v. Viegelahn" on Justia Law

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After filing a Chapter 13 bankruptcy petition, Bastani asked the judge to stay a pending state court foreclosure procedure. Bastani’s previous bankruptcy petition had been dismissed less than a year earlier, creating a presumption that the new filing was not in good faith, 11 U.S.C. 362(c)(3)(C)(i), and meaning that the automatic stay would end 30 days after the new proceeding began. The bankruptcy and district courts denied Bastani’s motion. The Seventh Circuit denied relief and also denied Bastani’s motion for leave to file in forma pauperis under 28 U.S.C. 1915. Chapter 13 is designed for people who can pay most of their debts; someone eligible for Chapter 13 relief cannot establish that she cannot pay judicial fees in the absence of extraordinary circumstances. The court further concluded that Bastani’s second bankruptcy petition was filed in actual bad faith; Bastani appeared to be trying to achieve a Chapter 13 benefit (keeping her home) without the detriment of having to pay her debts. View "Bastanipour v. Wells Fargo Bank, N.A." on Justia Law

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The Court of Appeals reversed the judgment of the Court of Special Appeals reversing the judgment of the circuit court quashing Respondent's writ of garnishment, holding that Md. Code Ann. Cts. & Jud. Proc. (CJ) 5-102(a)(3) does not operate to toll the statute of limitations on claim against a bankruptcy debtor that does not result in a dismissal of the petition. Petitioner was an insolvent debtor participating in an active bankruptcy case. Respondent was an unsecured creditor of Petitioner who held a claim in Petitioner's bankruptcy case arising from a judgment he obtained against her. Respondent sought to garnish the proceeds of a settlement Petitioner received that the bankruptcy court, but Petitioner argued that Respondent's judgment had expired under Md. Code Ann. Cts. & Jud. Proc. (CJ) 5-102(a)(3) because it had not renewed it. The circuit court quashed the writ of garnishment. The Court of Special Appeals reversed, holding that CJ 5-202 tolled the statute of limitations. The Court of Appeals reversed, holding that under the plain language of section CJ 5-202, the statute does not operate to toll the statute of limitations on a claim against a bankruptcy debtor that does not result in a dismissal of the petition. View "Hoang v. Lowery" on Justia Law

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In 2005, revelations surfaced that Body Armor—a publicly-traded company—was manufacturing its body armor, which it sold to law enforcement agencies and the U.S. military, using substandard materials. Its stock price plummeted, prompting shareholders to bring numerous actions that were consolidated into a shareholders’ class action and a derivative action on behalf of Body Armor against specified officers and directors. Since then, the matter has traveled, through bankruptcy, trial, and appellate courts throughout three U.S. jurisdictions. In its second review of the case, the Third Circuit affirmed a 2015 Bankruptcy Court for the District of Delaware order, approving a settlement entered in the Chapter 11 bankruptcy case of S.S. Body Armor I. The court reversed in part the Bankruptcy Court’s order that granted the objector fees on a contingent basis and remanded for a determination of the appropriate amount of the fee award. The court affirmed the part of that order that denied the objector’s claim to attorneys’ fees and expenses under the Bankruptcy Code and an order awarding fees to counsel in one of the underlying lawsuits. View "In re: SS Body Armor I Inc." on Justia Law

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The language of 11 U.S.C. 365(p)(1) is crystal clear: "If a lease of personal property is rejected or not timely assumed by the trustee . . . the leased property is no longer property of the estate." The Eleventh Circuit affirmed the district court's decision upholding the bankruptcy court's denial of Microf's claim for administrative-expense priority. Where, as here, it is undisputed that the trustee did not assume the Microf lease, section 365(p)(1) means that the Microf lease dropped out of the bankruptcy estate upon confirmation of debtor's Chapter 13 plan. Because Microf has not otherwise shown that the lease confers a benefit on the estate, the court held that its claim of administrative-expense priority was properly denied. View "Microf LLC v. Cumbess" on Justia Law