Justia Bankruptcy Opinion Summaries

Debtor filed for Chapter 7 bankruptcy and claimed a $15,000 exemption in a homestead he owned as a tenant in the entirety with his wife. The bankruptcy court granted debtor's motion to avoid CRP's judicial lien and the BAP affirmed. CRP appealed. The court vacated and remanded to the bankruptcy court for it to determine whether CRP has a judicial lien on the property that is either enforceable or unenforceable. View "CRP Holdings v. O'Sullivan" on Justia Law

In 2013, the City of Detroit filed for chapter 9 bankruptcy protection, facing problems “run[ning] wide and deep”—including the affordable provision of basic utilities. In 2014, plaintiffs, customers, and the purported representatives of customers, of the Detroit Water and Sewerage Department (DWSD), filed an adversary proceeding, based on DWSD’s termination of water service to thousands of residential customers. Citing 42 U.S.C. 1983 and the Supreme Court holding in Monell v. Department of Social Services, plaintiffs sought injunctive relief. The Sixth Circuit affirmed dismissal. Section 904 of the Bankruptcy Code explicitly prohibits this relief. Whether grounded in state law or federal constitutional law, a bankruptcy court order requiring DWSD to provide water service at a specific price, or refrain from terminating service would interfere with the City’s “political [and] governmental powers,” its “property [and] revenues,” and its “use [and] enjoyment of . . . income-producing property,” 11 U.S.C. 904. Plaintiffs’ due process and equal protection claims were inadequately pled. View "Lyda v. City of Detroit" on Justia Law

Debtors filed a voluntary Chapter 7 bankruptcy petition in 2008, signed by Fullen as the attorney of record. The original petition, schedules, and statement of financial affairs (SoFA), did not disclose Debtors’ interests in several trusts and corporations, annuities, property held for others, bank accounts, and an assignment to Grusin. The Trustee required both Debtors to submit an affidavit, affirming that they had read and signed their documents; that they were personally familiar with the information contained in the documents; and that, to the best of their knowledge, that information was true and correct. During the section 341 Meeting, Debtors testified under oath that they had helped prepare, had read, and had signed their bankruptcy petition; that it listed all of their assets and liabilities; that the information contained in their schedules and SoFA was true; and that the statements in their Affidavits were true. The SoFA and schedules were amended multiple times. The Trustee and creditors conducted extensive discovery and filed an adversary proceeding, seeking denial of discharges. The bankruptcy court removed Fullen and Grusin as counsel for Debtors, imposed sanctions on the attorneys, and, after a trial with new counsel, denied discharges pursuant to Bankruptcy Code sections 727(a)(2)(A) and (B) and 727(a)(4). The Sixth Circuit Bankruptcy Appellate Panel affirmed the denial of discharges under section 727(a)(4) for making false oaths. Separately, the Panel vacated sanctions against Grusin. View "In re: Blasingame" on Justia Law

The bankruptcy court imposed Rule 9011 sanctions against attorneys stemming from their representation of debtors in an adversary proceeding in which a creditor and the trustee sought denial of discharge. The attorney filed notice of appeal regarding the sanctions order. The bankruptcy court subsequently set the amount of sanctions and, days later, amended that order and imposed additional sanctions under 28 U.S.C. 1927. The Sixth Circuit Bankruptcy Appellate Panel first denied motions to dismiss an appeal, holding that it had jurisdiction because the amount of sanctions was set forth in a final order. Notice of appeal was timely filed. Resolution of the sanctions issue will have no discernable impact on the pending discharge issue. The Panel subsequently vacated the sanctions order. In seeking the sanctions, the creditor did not comply with Rule 9011’s “safe harbor” notice requirement and the exception to that requirement did not apply. The bankruptcy court also erred as a matter of law in concluding that the attorney’s “shadow representation” of the debtors vexatiously and unreasonably multiplied the proceedings. In a separate opinion, the Panel upheld the bankruptcy court's ultimate denial of discharges.. View "In re: Blasingame" on Justia Law

After New Investments defaulted on a note borrowed from Pacifica, Pacifica commenced non-judicial foreclosure proceedings. New Investments then filed for Chapter 11 bankruptcy. The bankruptcy court confirmed New Investments’s plan of reorganization proposing to cure the default by selling the property to a third party and using the proceeds of the sale to pay the outstanding amount of the loan at the pre-default interest rate. In Great W. Bank & Tr. v. Entz-White Lumber & Supply, Inc., the court held that a debtor who cures a default “is entitled to avoid all consequences of the default— including higher post-default interest rates.” At issue is whether Entz-White’s rule that a debtor may nullify a loan agreement’s requirement of post-default interest remains good law in light of 11 U.S.C. 1123(d), a provision that Congress enacted after Entz-White. The court held that Entz-White’s rule of allowing a curing debtor to avoid a contractual post-default interest rate in a loan agreement is no longer valid in light of section 1123(d). In this case, the court concluded that Pacifica is entitled to receive payment of the loan at the post-default interest rate. Accordingly, the court reversed and remanded for further proceedings. View "Pacifica L 51 LLC v. New Investments Inc." on Justia Law

After the bankruptcy court enjoined Alfred Galaz from pursuing any claims related to Worldwide Subsidy Group (WSG) against his former daughter-in-law, Lisa Katona, Galaz appealed to the district court. The district court affirmed. The court concluded that Galaz’s suit in state court is arguably a violation of Katona’s discharge rights, directly implicating the bankruptcy court’s “arising under” jurisdiction; the bankruptcy court’s interpretation of the 2011 Settlement Agreement is determinative of Katona’s claim, and the bankruptcy court’s order was within its statutory authority; the bankruptcy court did not abuse its discretion in refusing to abstain because the proceeding at issue is “core” under 28 U.S.C. 157(b); Galaz’s claims are barred by res judicata, compromise and settlement, and accord and satisfaction; the bankruptcy court did not abuse its discretion in applying judicial estoppel; and the district court did not err in denying his motion for summary judgment. Accordingly, the court affirmed the judgment. View "Galaz v. Katona" on Justia Law

Frances Scott and her husband Galen Amerson filed for Chapter 7 bankruptcy protection. Scott amended her petition to identify as an asset her interest in a Florida state action that she and her half-sister had filed contesting the legitimacy of their father’s will. The bankruptcy trustee retained Florida counsel, who in turn reached a tentative settlement of the ongoing probate contest. The trustee then moved the bankruptcy court to approve the settlement agreement. The bankruptcy court granted the trustee’s motion over Scott’s objection and approved the settlement agreement. Scott appealed to the Tenth Circuit Bankruptcy Appellate Panel (BAP), which affirmed the bankruptcy court’s decision. Scott appealed the BAP’s decision to the Tenth Circuit Court of Appeals. At issue was whether Scott’s interest in a spendthrift trust created by her late father was properly treated as property of the bankruptcy estate, or if that interest was excluded. Finding no error in the BAP's conclusion, the Tenth Circuit affirmed inclusion of that Florida interest in Scott's bankruptcy estate. View "Scott v. King" on Justia Law

Barker filed a Chapter 13 bankruptcy petition; the bankruptcy court issued a notice that the deadline for creditors to file a proof of claim was January 8, 2013. On September 8, 2012, the Bankruptcy Noticing Center sent the notice to the Credit Union by first class mail. In September 2012, Barker filed her Chapter 13 plan, which was sent to the Credit Union that day via first class mail. Barker’s schedules of assets and liabilities listed the Credit Union as a secured creditor holding a $6,646.00 purchase money security interest in a Ford F-150 and as an unsecured creditor holding a $47,402.00 claim. Barker amended the plan several times over the next few months. Each time, Barker sent a notice to the Credit Union; the Bankruptcy Noticing Center notified the Credit Union of each court order. More than four months after the deadline expired, the Credit Union filed claims. The Trustee sent a “Notice of Late Filed Claims” to the Credit Union, which requested a hearing, asserting that a “disgruntled employee” failed to timely file the claims. The court disallowed the claims. The Ninth Circuit Bankruptcy Appellate Panel and the Ninth Circuit affirmed. If a creditor wishes to participate in the distribution of assets under a Chapter 13 plan, it must file a timely proof of claim. The debtor’s acknowledgment of debt in a bankruptcy schedule does not relieve the creditor of this affirmative duty. View "Spokane Law Enforcement Federal Credit Union v. Barker" on Justia Law

Appellant, a financially sophisticated individual, petitioned for bankruptcy. A bankruptcy court denied the petition, in part, because Appellant omitted the existence of his Cash Balance Plan (CBP), a retirement account, from his Schedule B filing. When questioned on whether he had a CBP that he failed to list on his Schedule B, Crawford said, “I gave all this information to [my former attorney].” Crawford, however, did disclose the account’s value through inclusion with a second retirement account, a 401(k). The bankruptcy court concluded that Crawford’s failure to include his CBP in his schedule B amounted to a false oath. The District of Massachusetts affirmed the false oath claim. The First Circuit affirmed, holding that, by omitting an account from his Schedule B, Appellant committed a false oath. View "Premier Capital, LLC v. Crawford" on Justia Law

Patrick Hannon and his wife sought protection from their creditors by filing a voluntary bankruptcy petition under Chapter 11 of the Bankruptcy Code. Three companies filed an adversary complaint against Hannon in the bankruptcy proceeding objecting to his discharge in bankruptcy. The Companies then moved for partial summary judgment on their claim that Hannon had made a false oath or filed a false account in connection with his bankruptcy proceeding, and therefore, he should be denied a discharge. After a hearing, the bankruptcy judge granted summary judgment in favor of the Companies and refused to grant Hannon a discharge in bankruptcy. The First Circuit affirmed, holding that the Companies were entitled to judgment as a matter of law because Hannon made a false statement under oath in the course of his bankruptcy proceeding, Hannon did so knowingly and fraudulently, and the false statement related to a material fact. View "Hannon v. ABCD Holdings, LLC" on Justia Law