Justia Bankruptcy Opinion Summaries

After debtors filed for bankruptcy relief, the Bankruptcy Administrator, Marjorie Lynch, moved to dismiss the case as an abuse because debtors used the National and Local Standard amounts for certain categories of expenses rather than the actual amount of their expenses, which were less than the standardized amounts. The bankruptcy court denied the motion to dismiss. The court granted the appeal as to the issue of whether 11 U.S.C. 707(b)(2) permits a debtor to take the full National and Local Standard amounts for expenses even though the debtor incurs actual expenses that are less than the standard amounts. The court concluded that debtors are entitled to the full National and Local Standard amount for a category of expenses if they incur an expense in that category. Accordingly, the court affirmed the judgment of the bankruptcy court. View "Lynch v. Jackson" on Justia Law

Debtor’s bankruptcy schedules indicated she had $1,500 in a checking account and no cash on hand. The Kentucky Medicare Fraud Unit subsequently searched her home and seized $270,000 in cash. Debtor was indicted for fraudulently claiming Social Security benefits, bankruptcy fraud, and money laundering. Debtor’s mother, Newton, who allegedly lived with Debtor, deposited $51,000 in cash into their joint bank account, then transferred $50,000 to retain a law firm as Debtor’s criminal counsel. Debtor was convicted. The chapter 7 trustee initiated an adversary proceeding to pursue the attorney fee. The bankruptcy court held that the fee was not subject to turnover, acknowledging: "Trustee offered substantial evidence that the Debtor was the source of the $50,000,” which may have been estate property before its transfer, but that the trustee’s “claim to estate property is no greater than the debtor’s claim.” The court held that because the trustee never sought to avoid that transfer under 11 U.S.C. 549, it was not estate property. The Sixth Circuit Bankruptcy Appellate Panel affirmed. The Trustee did not meet her burden of establishing that the attorney fee is property of the estate; fraudulently transferred property only becomes estate property upon avoidance of the transfer. The trustee did not establish that the fee was property of the estate under the Rules of Professional Responsibility. View "In re: Bruner" on Justia Law

Plaintiff-Appellant Asarco, LLC appeals the entry of summary judgment against it in its contribution action against Noranda Mining, Inc., under Section 113(f) of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). The district court held that Asarco was judicially estopped from pursuing its claim because of representations it made to a bankruptcy court concerning its settlement agreement with the EPA for the site in question. After review, the Tenth Circuit reversed, finding that the district court abused its discretion in applying judicial estoppel: "The overall context of the CERCLA settlement approved by the bankruptcy court makes it apparent that Asarco's positions are not clearly inconsistent, that to allow Asarco to pursue its claim would not create the perception that a court was misled, and that Asarco would not necessarily gain an unfair advantage by being allowed to pursue its claim now." View "Asarco v. Noranda Mining" on Justia Law

Smith’s husband obtained a Capital One credit card that he used for family consumer debts. Smith subsequently filed for bankruptcy. Smith’s husband did not join Smith’s petition and was not listed as a co‐debtor. The bankruptcy court confirmed Smith’s Chapter 13 plan. During Smith’s repayment period, Capital One, through attorney Kohn, sued Smith’s husband and obtained a Wisconsin state court judgment for amounts owed on his credit card; it has not attempted to enforce the judgment. Smith initiated a successful bankruptcy court adversary proceeding, arguing that Smith’s husband’s credit card debt was covered by the co‐debtor stay due under Wisconsin marital law and alleging violations of the co‐debtor stay, 11 U.S.C. 1301(a); the Wisconsin Consumer Act; and the Fair Debt Collection Practices Act, 15 U.S.C. 1692(d)(e). The district court reversed, holding that “consumer debt of the debtor” does not include a debt for which the debtor is not personally liable but that may be satisfied from the debtor’s interest in marital property. The Seventh Circuit affirmed. Smith’s suggested expansion of the co‐debtor stay is contrary to its plain meaning and purpose, which is to prevent undue pressure that creditors could otherwise exert by threatening action against third-parties who have co‐signed the debtor’s debts. View "Smith v. Capital One Bank (USA), N.A." on Justia Law

Debtor was unable to pay $70,000 attorney fees accrued over several years. The attorney continued to provide legal services. In May 2008, Debtor gave the attorney possession of the titles to a 1954 MG and a 1977 Ferrari as security. There was no written security agreement. When a bank began putting pressure on Debtor, she turned over possession of the vehicles in 2012. Debtor did not sign over the titles or complete assignment of ownership forms until six days before Debtor’s Chapter 7 bankruptcy filing. The vehicles were not in working order. The attorney had some repairs done and sold the vehicles to a third party for $40,000 in November 2013. Eight months later, the Chapter 7 trustee filed an adversary complaint, 11 U.S.C. 547(b). The bankruptcy court concluded that the attorney did not have a valid or perfected attorney lien under Ohio law and that the transfer occurred within the look-back period for avoidance. The bankruptcy court granted the trustee judgment for $32,000, plus prejudgment interest. The Sixth Circuit Bankruptcy Appellate Panel affirmed, upholding the determination of value. The transfer was preferential; the bankruptcy court found unsecured creditors would receive no distribution, so the attorney received more than he would have in the Chapter 7. View "In re: Hadley" on Justia Law

Mrs. Edelson filed a Chapter 13 bankruptcy petition. She and her husband, who did not join her petition or file his own, held their Chicago home as “tenants by the entirety,” until seven months before the petition, when they conveyed it to the husband’s living trust. The conveyance states that “the beneficial interest” in the trust is held by the Edelsons, “husband and wife, as tenant[s] by the entirety.” The bankruptcy petition named Loventhal, Mrs. Edelson’s former husband, as an unsecured creditor for $92,000. Mrs. Edelson proposed a payment plan that would give Loventhal $16,000 over five years and designated the residence as exempt. Loventhal argued that the transfer to the husband’s trust eliminated the tenancy by the entirety. The bankruptcy judge, district court, and Seventh Circuit rejected his argument, citing 11 U.S.C. 522(b)(3)(B): “any interest in property in which the debtor had, immediately before the commencement of the case, an interest as a tenant by the entirety” is exempted “to the extent that such interest … is exempt from process under applicable nonbankruptcy law,” and Illinois law, which exempts tenancies by the entirety from process to satisfy judgment “against only one of the tenants.” While the trust instrument includes provisions inconsistent with tenancy by the entirety, the Joint Tenancy Act forbids any construction that would sever the tenancy by the entirety. View "Loventhal v. Edelson" on Justia Law

After Appellants went bankrupt, Appellees foreclosed on their home. Appellants each received an IRS Form 1099-A in the mail at the end of the tax year stating that the foreclosure might have tax consequences. The mortgage debt, however, was discharged during Appellants’ Chapter 7 bankruptcy proceedings. Appellants sued Appellees, claiming that the Forms were a coercive attempt to collect on the mortgage debt, which Appellees had no right to collect. The bankruptcy court found the Forms gave Appellants “no objective basis” to believe Appellees were trying to collect the discharged mortgage debt. The district court affirmed. The First Circuit affirmed, holding that the evidence in the record showed that the Forms were not objectively coercive. View "Bates v. CitiMortgage, Inc." on Justia Law

The underlying dispute in this case concerned a mortgage purported granted by Andrew and Maureen DeMore to the predecessor in interest to HSBC Bank, USA, N.A. on a parcel of property owned by the DeMores. This appeal came by way of bankruptcy court after each of the DeMores filed separate voluntary petitions for bankruptcy under Chapter 7 of the Bankruptcy Code. Donald Lassman, as trustee for the DeMores’ bankruptcy cases, filed adversary actions against HSBC to avoid the mortgage, arguing that the mortgage on the DeMores’ property was voidable under Massachusetts state law because the certificate of acknowledgment was “materially defective.” Specifically, Lassman asserted that the certificate failed to make clear that the DeMores executed the mortgage as their free act and deed. The Bankruptcy Court granted summary judgment to Lassman. The district court reversed. The First Circuit affirmed, holding that the certificate of acknowledgment was not materially defective because it made clear that the DeMores had executed the mortgage as their free act and deed. View "HSBC Bank USA, N.A. v. Lassman" on Justia Law

Bobby Long, the debtor in this Chapter 7 bankruptcy proceeding, claimed an exemption in $60,000 worth of life insurance proceeds that he received as a beneficiary shortly prior to filing his bankruptcy petition. The Trustee objected to the claimed exemption, but the bankruptcy court overruled the objection and sustained Long’s claimed exemption. The Trustee appealed to the district court, which affirmed the bankruptcy court’s decision. The Trustee appealed, but finding no reversible error, the Tenth Circuit affirmed the bankruptcy court's decision. View "Nelson v. Long" on Justia Law

The second appeal in this bankruptcy proceeding involved Augustine Bustos’s efforts to pursue an exception-to-discharge claim pursuant to 11 U.S.C. 523(c) against Steven Molasky, who filed for chapter 11 bankruptcy. Bustos moved to intervene in a section 523 adversary proceeding initiated by OneCap Funding Corporation, which represented Bustos’s interest under a loan-servicing agreement. The bankruptcy court allowed Bustos to intervene but prohibited him from filing his own complaint. OneCap was later dismissed from the proceeding for failure to prosecute. The bankruptcy court dismissed the adversary proceeding in its entirety, concluding that because Bustos failed to assert a timely separate objection to dischargeability, Bustos could not continue to prosecute the action. The Bankrtupcy Appellate Panel (BAP) affirmed. The Fourth District reversed, holding that Bustos was entitled to continue prosecuting the section 523 claim originally filed by OneCap. View "Bustos v. Molasky" on Justia Law