Justia Bankruptcy Opinion Summaries

Debtor filed a chapter 7 bankruptcy petition seeking to discharge nearly $3,500,000 in unsecured debt. The bankruptcy court denied Debtor a discharge, concluding that Debtor had not satisfactorily explained the disposition of his assets during the period leading up to the filing of his bankruptcy petition. The Bankruptcy Appellate Panel upheld the denial of the discharge on the grounds that Debtor had violated both 11 U.S.C. 727(a)(3) and 11 U.S.C. 727(a)(5). The First Circuit affirmed, holding that because Debtor failed, without any objectively reasonable justification, to keep and preserve records, and because Debtor failed to submit any information resembling a satisfactory explanation for his apparent losses and deficiencies, the bankruptcy court did not err in denying Debtor a discharge. View "Harrington v. Simmons" on Justia Law

The Smiths lived in a Joliet home, title to which passed to wife in 2004 as an inheritance. Real estate taxes had gone unpaid in 2000, resulting in a tax lien. At a 2001 auction, SIPI purchased the tax lien and paid the delinquent taxes—$4,046.26—plus costs and was awarded a Certificate of Purchase. Smith did not redeem her tax obligation. SIPI recorded its tax deed in 2005 and sold the property to Midwest for $50,000. In 2007, the Smiths filed for Chapter 13 bankruptcy relief and sought to avoid the tax sale. The bankruptcy judge and the Seventh Circuit found a fraudulent transfer (11 U.S.C. 548(a)(1)(B)) because the property was not transferred for reasonably equivalent value, but found Midwest a subsequent transferee in good faith. The 1994 Supreme Court decision, BFP v. Resolution Trust, that a mortgage foreclosure sale that complies with state law is deemed for “reasonably equivalent value” as a matter of law, does not apply in Illinois. Unlike mortgage foreclosure sales and some other states’ tax sales, Illinois tax sales do not involve competitive bidding where the highest bid wins. Instead, bidders bid how little money they are willing to accept in return for payment of the owner’s delinquent taxes. The lowest bid wins; bid amounts bear no relationship to the value of the real estate. View "Smith v. Sipi, LLC" on Justia Law

Wettach was a partner at theTitus law firm, which rented space from Trizec under a long-term lease. After the firm's 1999 dissolution, Trizec filed suit against Titus’s former partners for unpaid rent. The Pennsylvania court found the partners jointly and severally liable for more than $2,700,000. Before that court entered final judgment Wettach filed a voluntary Chapter 7 bankruptcy petition, listing $3,551,500 in assets, including $2,951,500 in personal property, retirement accounts, insurance, and a checking account held by the entireties with his wife. Wettach claimed all of this property as exempt, primarily relying on the exemption for property held by the entireties, 11 U.S.C. 522(b)(1), (3)(B). Wettach joined another law firm and earned wages that the firm directly deposited into the entireties account. The Trustee claimed that these deposits constituted recoverable fraudulent transfers. Before the bankruptcy court could rule, the case was reassigned. The parties consented to the court issuing findings without a new trial. The court ruled in favor of the Trustee, awarding $428,868.12, plus $37,139.01 in interest. The district court and Third Circuit affirmed, rejecting challenges to allocation of the burdens of persuasion and production on the fraudulent transfer claims; evidentiary findings; and a legal determination that the deposit of wages into an account held by the entireties constituted “transfer” of an “asset” under Pennsylvania state law. View "In re: Wettach" on Justia Law

After debtor flagrantly and repeatedly abused bankruptcy and court processes to retain assets for himself and defeat the legitimate claims of his business partners, the bankruptcy and district courts dismissed the bankruptcy case under 11 U.S.C. 707(a). The court concluded that the bankruptcy rules permitted this matter to be pursued as a contested motion, and the bankruptcy court conducted the proceeding appropriately. Moreover, any error by the bankruptcy court in hearing this matter as a contested motion was harmless. The court also concluded that debtor's right to due process was more than vindicated by the court’s processes. Further, this circuit joins those courts that have held a debtor’s bad faith in the bankruptcy process can serve as the basis of a dismissal “for cause,” even if the bad faith conduct is arguably encompassed by other provisions of the Code. In this case, there is no clear error in the bankruptcy court's findings. The record is replete with evidence that debtor filed bankruptcy for illegitimate purposes, misled the court and other parties, and engaged in bare-knuckle litigation practices, including lying under oath and threatening witnesses. Accordingly, the court affirmed the judgment. View "Krueger v. Torres" on Justia Law

Creditor appealed the bankruptcy court's order granting debtor's motion to avoid its judgment lien. Creditor concedes that its judgment lien attached to the residence, but argues that its judgment lien did not fix upon debtor’s tenant by the entirety property interest in the residence, because debtor did not have an interest to which its judgment lien could fix. The panel concluded that, under Missouri law, even if it conceded that the residence was not subject to Creditor’s lien and that the lien was therefore unenforceable, the panel would still find that an unenforceable judgment lien arose, so that it is possible for debtor to avoid it under 11 U.S.C. 522(f). Further, even if the docketing and registration of Creditor’s judgment lien did not attach an enforceable judgment lien to the residence, at a minimum, the judgment lien creates a cloud on the title to the residence. View "CRP Holdings A-1, LLC v. O'Sullivan" on Justia Law

The Debtors own the Atlantic City Trump Taj Mahal casino. The union represents 1,136 employees. The 2011 collective bargaining agreement was to remain in effect through September 14, 2014 and continue in full force and effect from year to year thereafter, unless either party served 60 days written notice of its intention to terminate, modify, or amend. In March 2014, the Debtors gave notice of their “intention to terminate, modify or amend” and sought to begin negotiations. The Union initially declined. On August 20 the parties met. The Debtors emphasized their critical financial situation. No agreement was reached. The Debtors filed for Chapter 11 bankruptcy. On September 11, the Debtors asked the Union to extend the term of the CBA. The Union refused. The CBA expired. On September 17, the Debtors sent the Union a proposal with supporting documentation. After meetings, the Debtors successfully moved, under section 1113, to reject the CBA and implement the terms of the Debtors’ last proposal, asserting that rejection of the CBA was necessary to the reorganization.While 11 U.S.C. 1103 allows a debtor to terminate a CBA under certain circumstances, the National Labor Relations Act prohibits an employer from unilaterally changing CBA terms even after its expiration; key terms of an expired CBA continue to govern until the parties reach a new agreement or bargain to impasse. The Third Circuit affirmed, finding section 1113 does not distinguish between the terms of an unexpired CBA and terms that continue to govern after the CBA expires. View "In re: Trump Entm't Resorts" on Justia Law

Debtor-Appellant Nathan Welch appealed a district court’s order denying his motion for judgment on the pleadings and determining that a default judgment was nondischargeable in bankruptcy. This case arose from the failure of the Talisman project, a high-end real estate development project in Wasatch County, Utah. Appellee Robert Tripodi was one of these investors, eventually putting $1 million into Talisman. To secure Tripodi’s investment, Welch issued three promissory notes to Capital Concepts, which in turn, assigned the notes to Tripodi. Welch ultimately defaulted on the notes. In January 2009, Tripodi filed a complaint against Mr. Welch in federal district court, alleging violations of state and federal securities laws. For seven months, Welch did not respond. In March 2010, Tripodi filed a motion for entry of default. The court granted the motion for entry of default and issued an order to show cause as to why a default judgment should not be entered. Receiving no response, the district court entered an order granting the entry of default judgment against Welch. Welch filed a voluntary petition for Chapter 7 bankruptcy in August 2011. Nearly two years later, Tripodi sought relief from the automatic stay. In his defense, Welch opposed Tripodi's proof of damages and costs, and attempted to have the default judgment set aside. The district court denied Welch's request to set aside the judgment, ruling the judgment was nondischargable. Finding no reversible error on the district court's judgment, the Tenth Circuit affirmed. View "Tripodi v. Welch" on Justia Law

Eden Place appealed the BAP's decision affirming the bankruptcy court’s determination that Eden Place violated the automatic stay provisions of the Bankruptcy Code by evicting debtor from a residential property. After considering the court's applicable precedent, SS Farms, LLC v. Sharp, and the clear language of the statute, the court held that the bankruptcy court’s order that Eden Place violated the automatic stay was final and appealable. On the merits, the court concluded that the unlawful detainer judgment and writ of possession entered pursuant to California Code Civil Procedure 415.46 bestowed legal title and all rights of possession upon Eden Place. Accordingly, the court concluded that the bankruptcy court erred when it ruled that Eden Place violated the automatic stay provisions of the Bankruptcy Code and reversed the bankruptcy court order. In this case, debtor had no legal or equitable interest remaining in the property after issuance of the unlawful detainer judgment and writ of possession in state court. View "Eden Place v. Perl" on Justia Law

The purchaser of viatical settlements paid approximately $507,000 for life settlements with the debtor and received $9,000,000 in death benefits when he died shortly thereafter. The bankruptcy trustee filed an adversary proceeding to recover the market value of the life settlements. The court held that debtor's interests in the term life insurance policies, including the secondary market value of the policies and resulting life settlements, constitute a recoverable “interest of the debtor in property” pursuant to 11 U.S.C. 548(a)(1). In this case, debtor had a legal and equitable interest in the property at issue within the meaning of section 541(a), the property was not excluded from the estate under section 541(b), and the property was not the subject of a proper exemption in this case. The court further concluded that the district court properly held that the trustee's avoidance action was not time-barred because debtor's fraudulent concealment equitably tolled the statute of limitations from commencing. Finally, the district court correctly concluded that the bankruptcy court should have granted the trustee leave to amend her avoidance action. View "Gladstone v. U.S. Bancorp" on Justia Law

Sentinel, a cash-management firm, invested customers' cash in liquid low-risk securities. It also traded on its own account, using money borrowed from BNYM, pledging customers’ securities; 7 U.S.C. 6d(a)(2), 6d(b)), and the customers’ contracts required the securities to be held in segregated accounts. Sentinel experienced losses that prevented it from maintaining its collateral with BNYM and meeting customer demands for redemption of their securities. Sentinel used its BNYM line of credit to meet those demands. In 2007 it owed BNYM $573 million; it halted customer redemptions and declared bankruptcy. BNYM notified Sentinel that it planned to liquidate the collateral securing the loan. The bankruptcy trustee refused to classify BNYM as a senior secured creditor, considering the use of customer funds as collateral to be fraudulent transfers, 11 U.S.C. 548(a)(1)(A) and claiming that BNYM was aware of suspicious facts that should have led it to investigate. The district judge dismissed the claim, finding that Sentinel had not been shown to have intended to defraud its customers. The Seventh Circuit reversed, holding that Sentinel made fraudulent transfers. On remand, the judge neither conducted an evidentiary hearing nor made additional findings, but issued a “supplemental opinion” that BNYM was entitled to accept the collateral without investigation. The Seventh Circuit reversed in part. BNYM remains a creditor in the bankruptcy proceeding, but is an unsecured creditor because it was on inquiry notice that the pledged assets had been fraudulently conveyed. View "Grede v. Bank of New York" on Justia Law