Justia Bankruptcy Opinion Summaries

Michael and Rebecca Gordon filed a voluntary petition for bankruptcy. In their petition, they sought to treat $2,051 in a savings account as an exempt asset under the Colorado exemption for “[p]roperty . . . held in or payable from any pension or retirement plan or deferred compensation plan.” The Trustee objected on the ground that the exemption did not apply to funds once paid out from a retirement plan. The bankruptcy court sustained the Trustee’s objection and denied the Gordons’ motion for reconsideration. The United States District Court for the District of Colorado affirmed, and finding no reversible error, the Tenth Circuit also affirmed. View "In re: Gordon" on Justia Law

The Kawaharas loaned the Allisons $400,000. The Allisons executed a note to the Kawaharas in that amount secured by a deed of trust on a Reno property. The note was delivered in 2009 but was not recorded until 2011. When the Allisons’ car dealership became delinquent in taxes, the State Department of Taxation recorded certificates of tax lien against the Allisons. The lien was created and recorded in 2010. The Allisons filed for bankruptcy in 2011. The U.S. Bankruptcy Court for the District of Nevada approved the sale of the Reno property. The bankruptcy court certified two questions to the Nevada Supreme Court concerning the priority of the competing liens on the Reno property. The Supreme Court concluded (1) a recorded tax lien cannot be recognized as a mortgage lien, and therefore, the Department cannot claim to have recorded a mortgage lien when it filed a tax lien certificate; (2) the deed of trust had priority over a tax lien levied under Nev. Rev. Stat. 360.473; and (3) the Department’s tax lien is considered a judgment lien under section 360.473(2), and Nevada recording statutes do not protect judgment creditors against prior unrecorded conveyances. View "State, Dep't of Taxation v. Kawahara" on Justia Law

William Plise, a judgment debtor, did not attend his scheduled debtor’s examinations in the district court. Eliot Alper, the judgment creditor, sought an order to show cause why Plise should not be held in contempt of court. Before the hearing on that motion, Plise filed a bankruptcy petition. Alper participated in the bankruptcy proceeding and obtained an order from the bankruptcy court granting relief from the automatic stay and allowing the district court to conduct a hearing and enter an order with regard to Plise’s alleged criminal contempt. The district court found Plise guilty of contempt of court and sentenced him to twenty-one days incarceration. The court, however, conditionally allowed Plise to avoid criminal contempt punishment. Alper filed this petition seeking a writ of prohibition arguing that the district court exceeded the scope of the bankruptcy court’s order granting relief from the automatic stay when it allowed him to avoid incarceration by participating in a debtor’s examination. The Supreme Court granted the writ of prohibition, concluding that the district court’s order exceeded the scope of the bankruptcy court’s lift stay order because a contempt order that permits a judgment debtor to purge incarceration is civil, rather than criminal, in nature. View "Alper v. Eighth Judicial Dist. Court" on Justia Law

In 2006 plaintiff filed a Chapter 13 bankruptcy petition, but later voluntarily dismissed the petition. A credit-reporting agency received a copies from Lexis and reported the petition “dismissed.” In 2009 the plaintiff’s lawyer demanded that the agency remove all reference to her bankruptcy because it had been dismissed at her behest. The agency refused. In 2012 she told the agency: “my bankruptcy was not dismissed. It was voluntarily withdrawn prior to plan approval.” The agency then purged the reference to the bankruptcy from her file, but did so because it was seven years since she had filed the petition. Plaintiff alleged that by failing to report in 2006 that the petition had been voluntarily withdrawn, the agency had willfully violated the Fair Credit Reporting Act, and sought damages, 15 U.S.C. 1681n(a). The district court granted the credit agency summary judgment in without deciding whether to certify a class. The Seventh Circuit affirmed. An agency must report that a bankruptcy petition was withdrawn “upon receipt of documentation certifying such withdrawal” and must “follow reasonable procedures to as-sure maximum possible accuracy of the information concerning the” person who had filed for bankruptcy. In 2006, when the plaintiff’s petition was withdrawn, no documentation certifying such withdrawal was submitted to the agency. View "Childress v. Experian Information Solutions" on Justia Law

The Commodity Futures Trading Commission and the Securities and Exchange Commission concluded that Battoo committed fraud. Battoo and his companies, all located outside the United States, defaulted in the suits. The district judge froze all assets pending a final decision about ownership. The court appointed a Receiver to marshal the remaining assets and try to determine ownership. The Receiver has been recognized as the assets’ legitimate controller in several other nations, including China (Hong Kong), Guernsey, and the Bahamas. Battoo defied the injunction and transferred control of some investment vehicles, located in the British Virgin Islands, to court-appointed Liquidators, who asked the judge to modify the injunction and allow them to distribute assets located in the U.S. or England immediately. The Liquidators maintain that, because Battoo no longer has control, the justification for freezing the assets has lapsed. The court assumed that the Liquidators are now under judicial control, but declined to modify the injunction, ruling that the funds should remain available so that an eventual master plan of distribution can treat all investors equitably. The Seventh Circuit affirmed. It is not clear whether some investment interests can be disentangled reliably from those affected by Battoo’s frauds against U.S. investors; the Liquidators have not argued that any investor is suffering loss as a result of the Receiver’s investment decisions. View "Commodity Futures Trading Comm'n v. Battoo" on Justia Law

Debtor filed for bankruptcy in 2011 and claimed numerous exemptions. At issue are debtor's requests for exemption for: (1) an annuity worth well over $150,000; and (2) the nearly $15,000 cash surrender value of a whole life insurance policy. The court affirmed the denial of both exemptions, concluding that Georgia Code 44-13-100(a)(9) does not violate equal protection where it is rationally related to the purpose of bankruptcy legislation and where Section 44-13-100(a)(9) does not violate the Bankruptcy Clause. A plain reading of 11 U.S.C. 522 does not, as debtor alleges, allow a bankruptcy debtor to use a state exemption statute where the state itself has rendered the statute inapplicable. Rather, very near the opposite is true; states have been authorized to define and restrict the applicability of their bankruptcy exemptions. View "McFarland v. Wallace" on Justia Law

Lariat and Tenant entered into a 10-year lease for operation of a restaurant. Debtor personally guaranteed Tenant's performance. Tenant was evicted in 2010 and obtained a judgment of $2,224,237.00, plus interest and attorney fees. In 2011, Lariat filed an involuntary chapter 7 petition against Debtor, which was dismissed by agreement. The same creditors filed suit against Debtor's wife. After the involuntary petition was dismissed, they added Debtor as a codefendant. The court held Debtor and his wife liable for fraudulent transfers ($795,098.00) and awarded interest and costs. In 2013, Debtor sued Lariat; the court dismissed, based on collateral estoppel. Appeal is pending. In 2014 Tenant filed a chapter 11 petition and an adversary proceeding against Lariat. The bankruptcy court dismissed the adversary proceeding. On the Trustee's motion, Tenant’s chapter 11 case was dismissed. Debtor filed his own chapter 11 petition. Lariat filed a proof of claim for $1,734,539.00. Debtor objected on grounds that the amount sought based on Debtor's personal guaranty under the lease exceeded the amount allowable under 11 U.S.C. 502(b)(6) and the amount sought based on fraudulent transfers was duplicative of, and subject to the same limitation as, sought based on thatl guaranty. Lariat filed an amended proof of claim for $1,610,787.00. The court capped Lariat's claim at $445,272.93. The Eighth Circuit Bankruptcy Appellate Panel remanded for recalculation of damages under the lease and of fees and expenses, but agreed that damages for fraudulent transfers were duplicative. View "Lariat Co., Inc. v. Wigley" on Justia Law

The Bankruptcy Code provides preferential treatment to domestic support obligations. Young filed for bankruptcy shortly after he and his wife, Stephens, divorced. The divorce decree required Young to pay alimony. Young did not pay. Stephens filed contempt proceedings in state court and Young was jailed. Young responded by filing an adversary proceeding against Stephens in the bankruptcy court, alleging a violation of the stay. In the bankruptcy, including the adversary proceeding, attorney Cruz represented Young. She repeatedly mischaracterized past-due post-petition alimony obligations as past-due prepetition obligations and falsely asserted Young was current on his alimony payments, representing that Young would "continue" to make alimony payments. In reliance on these representations, the bankruptcy court confirmed a plan. After discovering Cruz's false statements, the court entered a show-cause order and concluded that Cruz had no basis in law or fact for her assertions. Citing Federal Rule of Bankruptcy Procedure 9011, the court imposed, and the Bankruptcy Appellate Panel and Eighth Circuit affirmed, sanctions; suspending Cruz from practice in the Arkansas bankruptcy courts for six months, fining her $1,000, and directing her to attend CLE. Rule 9011 required Cruz to "make a reasonable inquiry into whether . . . a factual and legal basis" supported her assertions. View "In re: Cruz" on Justia Law

This dispute stemmed from a house that Debra Stevenson and her son Eugene Smith both own. After Stevenson refinanced her mortgage twice and then filed for bankruptcy, HSBC filed suit in Bankruptcy Court seeking equitable subrogation, which permits courts to declare that the owner of a mortgage (HSBC) has the same rights as an earlier-in-time owner of another mortgage (Wells Fargo). Only Stevenson signed the paperwork for the second refinancing with HSBC and Smith refused to sign because he thought the interest rate was too high. HSBC went ahead with the mortgage in full without Smith's signature. The court affirmed the Bankruptcy Court's conclusion that HSBC is entitled to equitable subrogation and rejected Stevenson and Smith’s claims that the mortgage is invalid under D.C. and federal lending laws. The court affirmed the judgment. View "In Re: Debra M. Stevenson" on Justia Law

Debtor filed a voluntary petition for Chapter 13 bankruptcy. The bankruptcy court appointed a Trustee and confirmed Debtor’s Chapter 13 plan, which contained a tax return production requirement. When the Trustee received neither a copy of Debtor’s tax return under the tax return production requirement nor a request for an extension, the Trustee filed a motion alerting the bankruptcy court to Debtor’s failure to comply with the tax return production requirement. When Debtor belatedly furnished Trustee with a copy the extension request, the bankruptcy court imposed a $100 sanction on Debtor. The district court upheld the sanction. the First Circuit rejected Debtor’s challenge to the sanction, holding that the district court did not err in upholding it. View "Charbono v. Sumski" on Justia Law