Justia Bankruptcy Opinion Summaries

After debtor filed for Chapter 13 bankruptcy, his bankruptcy plan proposed retention of his GMC Sierra, "cram down" of the loan for the purchase of the Sierra, and surrender of the Toyota Camry as collateral for the purchase of the Camry. The bankruptcy court approved the plan, but the district court reversed.The Fifth Circuit affirmed the district court's judgment. The court explained that the text of 11 U.S.C. 1325(a)(5) does allow debtors to select a different option "with respect to each allowed secured claim." However, allowing a debtor to select a different section 1325(a)(5) option for each claim is different from allowing a debtor to select different options for different collateral securing the same claim. While section 1325(a)(5) allows the former, it does not allow the latter: its use of the conjunction "or" between the options provided in subsection (A), (B), and (C) makes it clear that debtors may choose only one of those three options for each claim. The court stated that a plan violates that requirement when it selects different options for different collateral securing the same claim. Furthermore, Williams v. Tower Loan of Mississippi, 168 F.3d 845 (5th Cir. 1999), which held that debtors must select the same section 1325(a)(5) option for all of the collateral securing a single claim, supports the court's decision. In this case, for the plan to be approvable under section 1325(a)(5), the plan must select the same section 1325(a)(5) option for both items of collateral securing the Camry Loan—the Camry and the Sierra. View "Evolve Federal Credit Union v. Barragan-Flores" on Justia Law

The Eighth Circuit affirmed the bankruptcy court's order denying relief requested by debtor for wrongful foreclosure in equity, holding that the record supports the bankruptcy court's conclusion that debtor could not have been lulled by the Bank into a false sense of security regarding the foreclosure sale. In this case, debtor stipulated that "KeyBank advised Plaintiff that she had to contact KeyBank's foreclosure counsel to obtain a written payoff statement that included legal costs and fees;" the notes from the Bank's telephone records, a stipulated exhibit, indicate that debtor was so advised and nowhere in debtor's briefing does she dispute that; the call notes also establish that debtor called the Bank's foreclosure department as instructed; and while there is no evidence proving debtor's receipt of the Reinstatement Notice, there is evidence that the Bank advised her that the correct amount would be forthcoming in a letter. Therefore, the court found that the bankruptcy court's conclusion that debtor was advised by the Bank about the inaccuracy of the notification statement was not clearly erroneous. View "Courtney v. KeyBank N.A." on Justia Law

The debtors each filed a bankruptcy petition and requested that the city return his vehicle, which had been impounded for failure to pay fines. The filing of a bankruptcy petition automatically “creates an estate,” 11 U.S.C. 541(a), that is intended to include any property made available by other provisions of the Bankruptcy Code. Section 542 provides that an entity in possession of bankruptcy estate property “shall deliver to the trustee, and account for” that property. The filing of a petition also automatically “operates as a stay, applicable to all entities,” of efforts to collect prepetition debts outside the bankruptcy forum, section 362(a), including “any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.”Vacating a Seventh Circuit holding, the Supreme Court held that the mere retention of estate property after the filing of a bankruptcy petition does not violate section 362(a). That section prohibits affirmative acts that would disturb the status quo of estate property as of the time when the bankruptcy petition was filed. Reading section 362(a)(3) to cover mere retention of property would contradict section 542, which carves out exceptions to the turnover command. Under the debtors’ reading, an entity would be required to turn over property under section 362(a)(3) even if that property were exempt from turnover under section 542. View "Chicago v. Fulton" on Justia Law

In 2007, GM sold a power plant to DTEPN, which leased the land under the plant for 10 years. DTEPN agreed to sell utilities produced at the plant to GM, to maintain the plant according to specific criteria, and to address any environmental issues. DTEPN’s parent company, Energy, guaranteed DTEPN’s utility, environmental, and maintenance obligations. Two years later, GM filed for bankruptcy. GM and DTEPN agreed to GM’s rejection of the contracts. DTEPN exercised its right to continue occupying the property. An environmental trust (RACER) assumed ownership of some GM industrial property, including the DTEPN land. DTEPN remained in possession until the lease expired. RACER then discovered that DTEPN had allowed the power plant to fall into disrepair and contaminate the property.The district court dismissed the claims against Energy, reasoning that RACER’s allegations did not support piercing the corporate veil and Energy’s guaranty terminated after GM rejected the contracts in bankruptcy.The Sixth Circuit reversed. Michigan courts have held that a breach of contract can justify piercing a corporate veil if the corporate form has been abused. By allegedly directing its wholly-owned subsidiary to stop maintaining the property, Energy exercised control over DTEPN in a way that wronged RACER. DTEPN is now judgment-proof because it was not adequately capitalized by Energy. RACER would suffer an unjust loss if the corporate veil is not pierced. Rejection in bankruptcy does not terminate the contract; the contract is considered breached, 11 U.S.C. 365(g). The utility services agreement and the lease are not severable from each other. Energy guaranteed DTEPN’s obligations under the utility agreement concerning maintenance, environmental costs, and remediation, so Energy’s guaranty is joined to DTEPN’s section 365(h) election. View "EPLET, LLC v. DTE Pontiac North, LLC" on Justia Law

Gateway is a small business debtor in an active Chapter 11 bankruptcy proceeding seeking a loan under the Paycheck Protection Program (PPP). Gateway applied for a PPP loan and falsely stated that it was not in bankruptcy in order to be eligible for the program. When Gateway filed a motion for approval in the bankruptcy court, the SBA objected that Gateway was ineligible for a PPP loan because it was in bankruptcy. The bankruptcy court granted Gateway's motion anyway, concluding that the SBA's rule rendering bankruptcy debtors ineligible for PPP loans was an unreasonable interpretation of the statute, was arbitrary and capricious under the Administrative Procedure Act, and as a result was unlawful and unenforceable against Gateway.The Eleventh Circuit vacated the bankruptcy court's approval order, concluding that the SBA's rule is neither an unreasonable interpretation of the relevant statute nor arbitrary and capricious. The court concluded that the SBA did not exceed its authority in adopting the non-bankruptcy rule for PPP eligibility; the rule does not violate the CARES Act, is based on a reasonable interpretation of the Act, and the SBA did not act arbitrarily and capriciously in adopting the rule; and the bankruptcy court committed an error of law in concluding otherwise in its approval order and its preliminary injunction order. Accordingly, the court remanded for further proceedings. The court dismissed the appeal from the memorandum opinion for lack of jurisdiction. View "USF Federal Credit Union v. Gateway Radiology Consultants, P.A." on Justia Law

The First Circuit affirmed the judgment of the Bankruptcy Appellate Panel (BAP) dismissing under the doctrine of equitable mootness this appeal brought by United Surety & Indemnification Company (USIC), holding that USIC's appeal was equitably moot.In 2013, Pedro Lopez-Munoz filed a voluntary petition for chapter 11 bankruptcy. In 2018, the bankruptcy court confirmed a reorganization plan. One of Lopez-Munoz's creditors was USIC, which had an unsecured claim in the amount of $2,700,000. USIC appealed. The BAP dismissed USIC's appeal under the doctrine of equitable mootness. The First Circuit affirmed after analyzing the three factors for determining whether an appeal is equitably moot, holding that USIC's appeal was equitably moot. View "United Surety & Indemnity Co. v. Lopez-Munoz" on Justia Law

Conti attended the University of Michigan, 1999-2003, obtaining a bachelor’s degree in musical arts. Conti obtained private loans from Citibank totaling $76,049. Conti’s loan applications are all expressly “[f]or students attending 4-year colleges and universities.” They request information regarding the school’s identity and the academic year and specify that the student may “borrow up to the full cost of education less any financial aid.” The applications include a section where the school financial aid office can certify the applicant’s year, enrollment status, and recommended disbursement dates. Each application incorporates by reference an attached promissory note, stating that “the proceeds of this loan are to be used for specific educational expenses.” Citibank apparently disbursed each loan to Michigan directly. None of the loan amounts exceeded the cost of attendance at Michigan for the relevant enrollment period minus the maximum sum of Conti's federal Pell grant for the same period. In 2011-2016, Conti made payments on the loans, which were assigned to Arrowood.In 2017, Conti filed for voluntary Chapter 7 bankruptcy, listing the Citibank loans as dischargeable. Conti filed an adversary proceeding seeking to determine that they were not excepted “qualified education loan[s]” under 11 U.S.C. 523(a)(8). The bankruptcy court granted Arrowood summary judgment. The district court and Sixth Circuit affirmed. The plain language of the loan documents demonstrated they were qualified education loans. View "Conti v. Arrowood Indemnity Co." on Justia Law

The Second Circuit affirmed the district court's judgment affirming the bankruptcy court's order granting debtor's motion to avoid a judicial lien. Debtor seeks, pursuant to 11 U.S.C. 522(d)(1) and (f)(1)(A), to exempt her interest in, and avoid a judicial lien upon, a property that her dependent son uses as a non-primary residence.The court held that the term "residence" in the so-called homestead exemption of section 522(d)(1) includes both primary and nonprimary residences. In this case, the ordinary meaning of the word "residence" does not exclude non-primary residences. Furthermore, Congress's deliberate choice of terminology, the text of the statute, and the legislative history weigh in favor of the court's conclusion. View "Donovan v. Maresca" on Justia Law

The Ninth Circuit reversed the district court's grant of summary judgment for defendants in an action brought by plaintiff under the Fair Debt Collection Practices Act (FDCPA). Plaintiff alleged that P&F violated the FDCPA by attempting to collect a debt that was no longer owed and that P&F's agent, AAS, violated the FDCPA in attempting to collect the debt.Walls v. Wells Fargo Bank, N.A., 276 F.3d 502 (9th Cir. 2002), precludes claims under the FDCPA. The panel held that Walls does not extend to this circumstance because plaintiff's FDCPA claims are based on the wholly independent ground of full payment, rather than being premised on a violation of the discharge order. View "Manikan v. Peters & Freedman, LLP" on Justia Law

The Bankruptcy Appellate Panel affirmed the bankruptcy court's order granting the Bank relief from the automatic stay. The panel held that the default provisions in debtor's Chapter 12 plan were dispositive of the Bank's motion for relief from the automatic stay. In this case, debtor admits he agreed to make certain payments on January 15, 2020; he made only a portion of those payments; and thus debtor was in default under his plan and the Bank was entitled to relief from the automatic stay. View "Brooks v. First Central Bank McCook" on Justia Law