Justia Bankruptcy Opinion Summaries

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This appeal arose because debtor-appellant Margaret Kinney failed to make some of the required mortgage payments within her Chapter 13 bankruptcy plan’s five-year period. Shortly after the five-year period ended, however, she made the back payments and requested a discharge. The bankruptcy court denied the request and dismissed the case. The issue on appeal was whether the bankruptcy court could grant a discharge, and the answer turned on how the Tenth Circuit characterized Kinney’s late payments. She characterized them as a cure for her earlier default; HSBC Bank characterized them as an impermissible effort to modify the plan. The Tenth Circuit agreed with the bank and affirmed dismissal. View "Kinney v. HSBC Bank USA" on Justia Law

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The Bankruptcy Appellate Panel affirmed the bankruptcy court's decisions that debt owed by each debtor to Madison related to U.S. Bank in the amount of $1,676,162.20, plus interest, costs and any attorney's fees awarded in the matter are nondischargeable pursuant to Bankruptcy Code 523(a)(2)(A).The panel concluded that the bankruptcy court correctly analyzed first, under nonbankruptcy law the existence of a debt to Madison and second, under federal bankruptcy law the issue of dischargeability. In this case, the bankruptcy court appropriately found with respect to damages that debtors misrepresented and concealed material facts from Madison in order to further their conspiracy. View "Madison Resource Funding Corp. v. Marsh" on Justia Law

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The Eighth Circuit affirmed the bankruptcy appellate panel's decision affirming the district court's dismissal of plaintiffs' action based on issue preclusion grounds. Looking to North Dakota preclusion law for the federal common law principles of issue preclusion applicable in this case, the court concluded that its decision in Finstad II that plaintiffs do not have any interest in the property was an issue actually litigated in a prior suit between the parties that is binding on plaintiffs in this lawsuit. View "Finstad v. Gord" on Justia Law

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The Bankruptcy Appellate Panel vacated the bankruptcy court's order confirming debtor's chapter 12 plan, concluding that the bankruptcy court erred by failing to hold an evidentiary hearing to determine the value of the Bank's collateral where the collateral was disputed. The panel also concluded that the Bank needed to file a proof of claim. The panel explained that, until the bankruptcy court holds the requisite evidentiary hearing and determines the value of the Bank's collateral, it is impossible to say whether under the debtor's plan the Bank will be paid not less than the allowed amount of its secured claim. Accordingly, the panel remanded for further proceedings. Finally, the panel concluded that the record amply supports the bankruptcy court's finding of disposable income under 11 U.S.C. 1225(b)(1)(B). View "Citizens State Bank v. Schiller" on Justia Law

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After plaintiff filed for Chapter 7 bankruptcy, the discharge order was ambiguous as to whether plaintiff's private educational loans were discharged. The lender maintains that 11 U.S.C. 523(a)(8)(A)(ii) prevented the loans from being discharged in plaintiff's bankruptcy.The Second Circuit affirmed the bankruptcy court's denial of the lender's motion to dismiss after concluding that section 523(a)(8)(A)(ii)—which excepts from discharge "an obligation to repay funds received as an educational benefit, scholarship, or stipend"—does not cover private student loans. View "Homaidan v. Sallie Mae, Inc." on Justia Law

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Assuming without deciding that a general default judgment can be the basis of collateral estoppel under Florida law in an 11 U.S.C. 523(a)(2)(A) proceeding as to each of the claims asserted in a multi-count complaint, the Eleventh Circuit held that estoppel does not apply here. The court explained that each of the claims that could have satisfied the requirements of section 523(a)(2)(A) contained alternative factual allegations that did not do so. In such a scenario—one so far not addressed by Florida law—the court predicted that Florida courts would not afford preclusive effect to a general default judgment that does not specify its grounds.In this case, defendant's fraudulent misrepresentation claim cannot serve as the basis for collateral estoppel against debtor under section 523(a)(2)(A), because the default judgment as to this claim could have been based on a "should have known the falsity" theory, as opposed to an "actual knowledge of falsity" theory. Furthermore, because neither negligence nor constructive fraud suffices under section 523(a)(2)(A), the default judgment on the negligent misrepresentation claim does not have collateral estoppel effect under Florida law. Investment fraud under Fla. Stat. 517.301 also does not have collateral estoppel effect under section 523(a)(2)(A). Nor does the conspiracy to defraud claim. Accordingly, the court reversed and remanded. View "Harris v. Jayo" on Justia Law

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The Fifth Circuit held that 11 U.S.C. 363(m) forecloses the creditor's appeal of last-minute modifications to the terms of a bankruptcy sale because it failed to seek the required stay of the Sale Order. The court explained that Am. Grain Ass'n, 630 F.2d at 248, and In re Sneed Shipbuilding, Inc., 916 F.3d 405, 408 (5th Cir. 2019), are controlling in this case and thus the Committee's contentions to the contrary are unavailing. Accordingly, the court affirmed the district court's ruling that the Committee's appeal was statutorily moot under section 363(m). View "The Official Committee of Unsecured Creditors of Walker County Hospital Corp. v. Walker County Hospital District" on Justia Law

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In 1998, Old Ben Coal Company conveyed its rights to the methane gas in various coal reserves to Illinois Methane. A “Delay Rental Obligation” required the owner of the coal estate to pay Methane rent while it mined coal in areas that Methane had not yet exploited. A deed, including the Delay Rental Obligation was recorded. A few years later, Old Ben filed for bankruptcy and purported to sell its coal interests “free and clear of any and all Encumbrances” to Alliance. Old Ben did not notify Methane before the bankruptcy sale but merely circulated notice by publication in several newspapers. Alliance later sought a permit to mine coal. Methane eventually sought to collect rent in Illinois state court. Alliance argued that Old Ben’s “free and clear” sale had extinguished Methane’s interest.The bankruptcy court held that Alliance was not entitled to an injunction. The district court and Sixth Circuit affirmed. The deed indicates that the Delay Rental Obligation runs with the land and binds successors; it “is not simply a personal financial obligation between” Old Ben and Methane. The covenant directly affects the value of the coal and methane estates. Methane was a known party with a known, present, and vested interest in real property, entitled to more than publication notice. View "Alliance WOR Properties, LLC v. Illinois Methane, LLC" on Justia Law

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The Eighth Circuit affirmed the bankruptcy appellate panel's decision upholding the bankruptcy court's order that fully voided Waltrip's judicial lien on debtor's homestead. In this case, after Waltrip filed suit against debtor in October 2016 for breach of contract in Missouri state court, a fire damaged debtor's home. The homeowner's insurance policy paid debtor for damages and Waltrip obtained a consent judgment that gave Waltrip a judicial lien against the homestead property. The parties do not dispute that Waltrip had a valid, avoidable lien that was affixed to debtor's property before she filed her bankruptcy petition. At issue is the extent to which Waltrip's lien impairs debtor's claimed homestead exemption.The court concluded, under Missouri law, that when property is properly exempted under 11 U.S.C. 522, a debtor is the sole owner of the insurance proceeds covering the property. Without any precedent to support Waltrip's position, the court declined to include the amount of the insurance payout when calculating the fair market value of debtor's home on the petition date, and thus the court affirmed the bankruptcy court's ruling using the $3,000 to $6,000 valuation of the unrepaired, fire-damaged property as determined on the petition date. The court also concluded that, because Waltrip's lien is smaller than the extent of the impairment, the entirety of Waltrip's lien can be avoided. Finally, the court concluded that the bankruptcy court did not abuse its discretion in reopening the case to avoid the lien or in denying Waltrip's requests for attorneys' fees and costs related to the reopening. View "David G. Waltrip, LLC v. Sawyers" on Justia Law

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The Ninth Circuit reversed the district court's grant of summary judgment in favor of the 732 Hardy Way trust, the denial of summary judgment to the Bank, and the dismissal of the Bank's claims against the HOA in a quiet title action brought by the Bank, concerning title to real property in Nevada that was subject to a HOA nonjudicial foreclosure sale. At issue is whether the Bank, as the first deed of trust lienholder, may set aside a completed superpriority lien foreclosure sale on the grounds that the sale occurred in violation of the automatic stay in bankruptcy proceedings.The panel concluded that the Bank may raise the HOA's violation of the automatic stay provision and that the Bank has superior title. The panel explained that the Bank has standing under Nevada's quiet title statute, Nevada Revised Statute 40.010, and established case authority confirms that any HOA foreclosure sale made in violation of the bankruptcy stay—like the foreclosure sale here—is void, not merely voidable, Schwartz v. United States, 954 F.2d 569, 571–72 (9th Cir. 1992). Therefore, the district court erred in holding that the Bank lacked standing to pursue its quiet title claim in federal court. The panel remanded for further proceedings. View "Bank of New York Mellon v. Enchantment at Sunset Bay Condominium Ass'n" on Justia Law