Justia Bankruptcy Opinion Summaries

In 2014, Jackson filed a Chapter 7 Bankruptcy petition. His mortgagee (BOA), sought relief from the stay; abandonment of his residence, a condominium; and in rem relief for two years under 11 U.S.C. 362(d)(4)(B), alleging a substantial arrearage and prior bankruptcy filings that included the Condominium as scheduled property. The court granted the motion. BOA and Jackson entered into a loan modification agreement. The owners’ association (Carlton House) sought a permanent in rem order. The court stated that post-petition amounts were current “and the issue seems to be the desire to move forward with the foreclosure for the outstanding [pre-petition] approximately $5,900.” The court entered a two-year in rem sanction. Jackson received his discharge; the case was closed. Carlton House immediately went to state court to schedule a sheriff’s sale--the final step in a foreclosure action commenced in 2008 by BOA’s predecessor. Carlton House and the lender had obtained a foreclosure decree in 2009. The bankruptcy court reopened the case, concluded that Carlton House violated discharge order by scheduling the sale, awarded monetary sanctions, and enjoined re-scheduling of the sale. The Sixth Circuit Bankruptcy Appellate Panel reversed, noting that Carlton House has statutory obligations to other unit owners. The bankruptcy court effectively imposed an “equity requirement” that is not part of the Ohio foreclosure sale process. View "In re: Jackson" on Justia Law

In 2003, Valley View and, Bedford Downs, wanted to operate “racinos,” combination horse tracks and casinos. Each would need the last harness-racing license available in Pennsylvania to do so. Valley View agreed to acquire Bedford for $55 million, with Citizens Bank acting as escrow agent. Valley View borrowed money from Credit Suisse. Valley View then obtained the harness-racing license, but failed to secure the needed gambling license and filed for Chapter 11 bankruptcy. The Trustee sued Merit, a 30% shareholder in Bedford, alleging that Bedford’s transfer to Valley View was avoidable under 11 U.S.C. 544, 548(a)(1)(b), and 550, and the money was properly part of the bankruptcy estate. Merit maintained that the transfer was protected under the safe harbor, 11 U.S.C. 546(e), which protects transfers that are “margin payment[s]” or “settlement payment[s]” “made by or to (or for the benefit of)” certain entities including commodity brokers, securities clearing agencies, and “financial institutions” and transfers “made by or to (or for the benefit of)” the same types of entities “in connection with a securities contract.” Merit relied on the involvement of Citizens Bank and Credit Suisse. The district court agreed with Merit. The Seventh Circuit reversed; section 546(e) does not protect transfers that are simply conducted through financial institutions (or the other section 546(e) entities), where the entity is neither the debtor nor the transferee but only the conduit. View "FTI Consulting, Inc. v. Merit Mgmt. Group, LP" on Justia Law

Wierzbicki owned a 40‐acre Wisconsin farm, where she lived for a time with her three minor children and their father, Griswold. In 2012 Wierzbicki gave Griswold a quitclaim deed to the farm. Fourteen months later she filed for Chapter 7 bankruptcy. The bankruptcy trustee brought an adversary proceeding to avoid the transfer as fraudulent, alleging that Wierzbicki was insolvent at the time of the transfer and that she had not received reasonably equivalent value, 11 U.S.C. 548(a)(1)(B). Wierzbicki and Griswold had been engaged in state court litigation, 2009-2012. Although a state court had dismissed Griswold’s principal appeal, Wierzbicki claims that the quitclaim deed was given in exchange for an end to the litigation. Griswold accepted liability for about $149,000 in debt secured by the property. The bankruptcy judge avoided the transfer. The district court and Seventh Circuit affirmed. The fair market value of the farm was $300,000, so Wierzbicki had equity of approximately $151,000 at the time of the transfer. Griswold’s promise to cease his “meritless appeals” in exchange for that interest had no material value. The benefit of avoiding further family conflict was too “nebulous” to “support a finding of reasonable equivalence” in the bankruptcy context, View "Griswold v. Zeddun" on Justia Law

The Koenigs filed for Chapter 7 bankruptcy protection in 2014, claiming exemptions under Wisconsin’s bankruptcy exemption statute for three annuities then worth a total of $292,185.97. The annuities had been purchased in the approximately 18 months before their bankruptcy petition. Wis. Stat. 815.18(3)(j) fully exempts retirement assets, including annuities, that meet certain requirements. Paragraph (3)(f) protects a broader category of annuities, but the exemption is limited to $150,000, except that the cap is just $4,000 for annuities issued less than 24 months before the debtor claims the exemption. The trustee argued that an annuity, to qualify for the exemption, must comply with 26 U.S.C. 401–09, which generally deal with tax‐deferred “qualified” retirement plans. The Koenigs argued that an annuity is exempt under section 815.18(3)(j) as long as the annuity qualifies for favorable tax treatment under 26 U.S.C. 72, which deals with annuities more generally. The Seventh Circuit affirmed the judgment of the bankruptcy court, in favor of the Koenigs, stating that the key statutory text is ambiguous on the decisive point, and citing the statute’s structure and purpose, along with the legislature’s instruction to construe exemptions in favor of debtors, View "Wittman v. Koenig" on Justia Law

Blake Roussel and LuAnne Deere formed Clear Sky, LLC d/b/a Exit First Choice Realty - an Exit Realty brokerage franchise - in Conway, Arkansas. Deere and Clear Sky subsequently filed suit against Roussel for breach of fiduciary duty, fraud, breach of contract, and violations of Arkansas law. A jury found in favor of plaintiffs and awarded plaintiffs money judgments. Roussel then filed for Chapter 7 bankruptcy, and Clear Sky and Deere filed an adversary proceeding against Roussel, requesting that the bankruptcy court declare the entire state court judgment nondischargeable under 11 U.S.C. 523(a)(4) and 523(a)(6). The court concluded that the district court did not err in concluding that the Judgment Debt is nondischargeable under section 523(a)(6) where the facts show that Roussel acted willfully and he knew that consequences were certain, or substantially certain, to result from his conduct. The court also concluded that apportionment is inappropriate here because Deere’s breach-of contract-claim is deeply intertwined with the breach-of-fiduciary-duties claim by Deere and Clear Sky. Accordingly, the court affirmed the judgment. View "Roussel v. Clear Sky Properties, LLC" on Justia Law

Debtor appealed the bankruptcy court's order denying her request to discharge her student loan for undue hardship pursuant to 11 U.S.C. 523(a)(8). The BAP concluded that, under the totality of the circumstances, the record demonstrates that debtor has sufficient income to make the $42 student loan payment and the bankruptcy court did not clearly err in so finding. The BAP also considered other relevant facts and circumstances, concluding that debtor failed to prove that she lacks the present ability to make payments on her student loans and her claim of undue hardship must fail. Accordingly, the BAP affirmed the judgment. View "Hurst v. Southern Arkansas Univ." on Justia Law

Civic Partners appealed the bankruptcy court's order dismissing its chapter 11 bankruptcy case. Northwest Bank holds a mortgage against the Promenade and an assignment of rents to secure a promissory note executed by Civic Partners. The City also holds a mortgage against the Promenade to secure a promissory note executed by Civic Partners. Main Street leases and occupies the majority of the space in the Promenade. The BAP concluded that the original lease, not the amended lease, controls Civic Partners' relationship with Main Street. In keeping with its earlier rulings, the bankruptcy court did not consider the possibility that Civic Partners might be able to propose a confirmable plan predicated on the original lease. This is a relevant factor that should be given significant weight in determining whether to dismiss Civic Partners' chapter 11 case. Accordingly, the BAP reversed the bankruptcy court's order dismissing Civic Partners' chapter 11 bankruptcy case and remanded for further proceedings. View "Civic Partners Sioux City, LLC v. Main Street Theatres" on Justia Law

After Old GM filed for bankruptcy, New GM emerged. This case involves one of the consequences of the GM bankruptcy. Beginning in February 2014, New GM began recalling cars due to a defect in their ignition switches. Many of the cars in question were built years before the GM bankruptcy. Where individuals might have had claims against Old GM, a ʺfree and clearʺ provision in the bankruptcy courtʹs sale order barred those same claims from being brought against New GM as the successor corporation. Various individuals nonetheless initiated class action lawsuits against New GM, asserting ʺsuccessor liabilityʺ claims and seeking damages for losses and injuries arising from the ignition switch defect and other defects. The bankruptcy court enforced the Sale Order to enjoin many of these claims against New GM. The court concluded that the bankruptcy court had jurisdiction to interpret and enforce the Sale Order; the ʺfree and clearʺ provision covers pre‐closing accident claims and economic loss claims based on the ignition switch and other defects, but does not cover independent claims or Used Car Purchasersʹ claims; the court found no clear error in the bankruptcy court's finding that Old GM knew or should have known with reasonable diligence about the defect, and individuals with claims arising out of the ignition switch defect were entitled to notice by direct mail or some equivalent, as required by procedural due process; because enforcing the Sale Order would violate procedural due process in these circumstances, the bankruptcy court erred in granting New GMʹs motion to enforce and these plaintiffs cannot be bound by the terms of the Sales Order; and the bankruptcy courtʹs decision on equitable mootness was advisory. Accordingly, the court affirmed in part, reversed in part, vacated in part, and remanded. View "In re Motors Liquidation Co." on Justia Law

Plaintiff appealed the district court’s grant of summary judgment dismissing her discrimination complaint on the ground of judicial estoppel. The district court found that plaintiff failed to disclose this suit and related administrative proceedings on the schedules she filed with the bankruptcy court. In exercising its decision to invoke judicial estoppel, the district court relied on the court's opinion in Moses v. Howard University Hospital. In Moses, the court wrote: “every circuit that has addressed the issue has found that judicial estoppel is justified to bar a debtor from pursuing a cause of action in district court where that debtor deliberately fails to disclose the pending suit in a bankruptcy case.” Moses held that a debtor could not avoid judicial estoppel if he omitted his pending cause of action but reported “pending lawsuits that, unlike the instant case, reduced the overall value of his assets through wage garnishment.” The district court held that plaintiff was in the same position as the plaintiff in Moses. The court concluded that the district court properly invoked judicial estoppel to grant summary judgment in favor of defendants, and the court affirmed the judgment. The court noted that other courts of appeals have evaluated the frequent contentions of bankruptcy debtors in light of the Supreme Court’s observation – in a case that did not involve inadvertence or mistake – that “it may be appropriate to resist judicial estoppel when a party’s earlier position was based on inadvertence or mistake.” The court saw no need to take sides in this debate. View "Marshall v. Honeywell Tech. Sys." on Justia Law

Plaintiff filed suit against Midland under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692e, alleging that Midland violated the FDCPA by filing a proof of claim on a time-barred debt. The district court dismissed for failure to state a claim. The court declined to extend the FDCPA to time-barred proofs of claim, concluding that an accurate and complete proof of claim on a time-barred debt is not false, deceptive, misleading, unfair, or unconscionable under the FDCPA. The court explained that the bankruptcy code provides for a claims resolution process and these protections against harassment and deception satisfy the relevant concerns of the FDCPA. Accordingly, the court affirmed the district court's judgment. View "Nelson v. Midland Credit Mgmt." on Justia Law