Justia Bankruptcy Opinion Summaries

Plaintiff, the creditor, appealed from the judgment of the bankruptcy court holding that a debt of defendant, the debtor, to creditor was not excepted from the debtor's discharge pursuant to 11 U.S.C. 523(a)(6). At issue was whether collateral estoppel applied based on the criminal action or the civil action to bar relitigation of the issues of willfulness and maliciousness in the bankruptcy court. If collateral estoppel did not apply, the second issue was whether the bankruptcy court properly denied the creditor's request to except the debt owed to him from the debtor's discharge pursuant to section 523(a)(6) based on lack of finding of maliciousness. The court affirmed the bankruptcy court's decision that collateral estoppel was inapplicable and held that there was no error in the bankruptcy court's finding that the debtor did not act with maliciousness for the purposes of section 523(a)(6). Therefore, the debt owed by the debtor to creditor was not excepted from the debtor's discharge.

Appellant, the debtors' attorney, as a holder of an administrative claim for his attorney fees, appealed the Bankruptcy Court's Order denying his motion to reconsider an Order denying his Rule 60(b) motion. The court held that the Bankruptcy Court did not abuse its discretion in denying appellant's motion where the motion could not serve as a substitute for a timely appeal from orders authorizing a surcharge and where there were no exceptional circumstances or grounds establishing excusable neglect which would warrant the granting of the motion. The court also rejected appellant's claim that the motion was justified by newly discovered evidence.

Debtor appealed the bankruptcy court's order granting creditor relief from the automatic stay to proceed with arbitration of its claim against debtor's bankruptcy estate. At issue was whether the bankruptcy court erred by not ruling on the issue of whether the agreement to arbitrate between the parties was obtained by fraud and whether the bankruptcy court should have tailored its order to require creditor's claim to be arbitrated by allegedly, then-pending class action arbitration. The court held that the bankruptcy court correctly determined that debtor's challenge to the contract between the parties was subject to arbitration where debtor's failure to raise an independent challenge before the bankruptcy court to the agreement to arbitrate was basis alone to affirm the bankruptcy court's order. The court also held that debtor failed to appreciate that separately alleging that an agreement to arbitrate was obtained through fraud was different from offering a separate basis for the fraud and the only fraud debtor alleged was that creditor misrepresented that it was affiliated with Ford Motor, Co., that this fraud induced the arbitration, and that this fraud induced the contract as a whole. Consequently, there was no need for the bankruptcy court to intervene or, in this case, deny creditor's motion for relief from the stay. The court further held that the bankruptcy court was not required to tailor its order to require arbitration in the class action arbitration in Texas where the arbitration panel in Texas declined to certify the class and the issue was therefore, moot. Accordingly, the court affirmed the bankruptcy court's order granting creditor relief from the automatic stay to proceed with the arbitration of its claim against debtor's bankruptcy estate.

Debtor appealed from an order of the bankruptcy court sustaining creditor's objection to her claim of a homestead exemption as to the bank's claim. Debtor used the proceeds from the sale of her Cerromar property to build the Pleasant Hill property, in which she asserted a homestead exemption. At issue was whether the bankruptcy court properly sustained the bank's objection to debtor's homestead exemption. The court held that creditor established that its debt was incurred before debtor acquired the Pleasant Hill property, which meant the property would not be exempt from creditor's judgment and that the Cerromar property was not legally debtor's homestead and she could not avail herself to the protection of Iowa Code 561.20. Accordingly, the court affirmed the judgment because the bankruptcy court properly sustained creditor's objection to debtor's claim of homestead exemption as to creditor's preexisting debts.

Appellee initially filed for bankruptcy protection under Chapter 13 but after one of his creditors, appellant, filed objections to appellee's Chapter 13 plan, appellee converted the case to a Chapter 7 proceeding. At issue was whether the bankruptcy court erred in ordering appellee to convert his case back to a Chapter 13 proceeding, or to face dismissal, following appellee's failure to rebut a presumption of abuse arising from the means test pursuant to 11 U.S.C. 706(b)(2). The court found no error and held that the bankruptcy court acted pursuant to 11 U.S.C. 707(b)(1) by forcing appellee to either consent to a reconversion or face dismissal because of the unrebutted presumption of abuse that arose in his case.