Justia Bankruptcy Opinion Summaries

Green Tree appealed the district court's judgment concerning an adversary proceeding that debtors filed against Green Tree in the bankruptcy court. The district court affirmed the bankruptcy court’s ruling that Green Tree violated the discharge injunction under 11 U.S.C. 524(a)(2) by filing a proof of claim in debtors’ instant bankruptcy proceeding to collect a debt that was discharged in their previous bankruptcy proceeding. The order also affirmed the bankruptcy court’s award of both compensatory and non-compensatory sanctions to debtors. Determining that it has jurisdiction over the appeal, the court held that section 524(a)(2) prohibits filing a proof of claim for a discharged debt where the objective effect of the claim is to pressure the debtor to repay the debt. In this case, the bankruptcy court correctly concluded that Green Tree violated the discharge injunction. The court vacated both monetary awards and remanded to the district court with instructions to vacate and remand to the district court. The court concluded that the non-compensatory sanctions were punitive and must be vacated because there is no indication on the record that the bankruptcy court employed the procedural protections owed to an alleged criminal contemnor. The court vacated the compensatory sanctions and directed the district court to instruct the bankruptcy court, upon remand, to reconsider debtors' request for compensatory relief in light of Lodge v. Kondaur Capital Corp. View "Green Point Credit v. McLean" on Justia Law

Green Tree appealed the district court's judgment concerning an adversary proceeding that debtors filed against Green Tree in the bankruptcy court. The district court affirmed the bankruptcy court’s ruling that Green Tree violated the discharge injunction under 11 U.S.C. 524(a)(2) by filing a proof of claim in debtors’ instant bankruptcy proceeding to collect a debt that was discharged in their previous bankruptcy proceeding. The order also affirmed the bankruptcy court’s award of both compensatory and non-compensatory sanctions to debtors. Determining that it has jurisdiction over the appeal, the court held that section 524(a)(2) prohibits filing a proof of claim for a discharged debt where the objective effect of the claim is to pressure the debtor to repay the debt. In this case, the bankruptcy court correctly concluded that Green Tree violated the discharge injunction. The court vacated both monetary awards and remanded to the district court with instructions to vacate and remand to the district court. The court concluded that the non-compensatory sanctions were punitive and must be vacated because there is no indication on the record that the bankruptcy court employed the procedural protections owed to an alleged criminal contemnor. The court vacated the compensatory sanctions and directed the district court to instruct the bankruptcy court, upon remand, to reconsider debtors' request for compensatory relief in light of Lodge v. Kondaur Capital Corp. View "Green Point Credit v. McLean" on Justia Law

In 1996, Bocchino, a stockbroker, learned from a superior that Traderz “might go public” and that the endeavor was supported by “some commitment” from a popular fashion model. Based solely on that, and without any independent investigation into the quality of the entity, Bocchino immediately sought investment from clients. Bocchino received over $40,000 in commissions from Traderz sales. The second involved Fargo. The source of Bocchino’s information regarding Fargo is unclear. Bocchino only obtained cursory documentation about the entity before soliciting sales. He did not conduct any independent investigation, despite awareness that Fargo’s principal’s “full-time ‘job’ was law student.” Bocchino received $14,000 in commissions for his clients’ stock purchases in Fargo. Traderz and Fargo turned out to be fraudulent ventures. The principals of each entity were criminally convicted, and the anticipated value of the investments vanished. The Securities and Exchange Commission brought civil law enforcement actions against those who sold investments in the entities. The bankruptcy court held that those civil judgments against Bocchino were nondischargeable, 11 U.S.C. 523(a)(2)(A). The district court and Third Circuit affirmed, finding that collapse of the private placements was neither abnormal nor extraordinary given Bocchino’s lack of due diligence. View "In Re: Bocchino" on Justia Law

Appian was created by the Enea brothers, who were its only shareholders and officers. Appian managed real estate development projects, including Monticello, of which Appian was a General Partner, and Monterrosa, of which Appian was the Managing Member. Double Bogey invested approximately $4 million in Monticello as its Limited Partner, and $1 million in Monterrosa as a non-managing member. Double Bogey never recovered any of its investment in Monterrosa and did not receive profits from either investment. After Appian failed to provide an accounting of its investments, Double Bogey filed suit. The Eneas and Appian separately filed for Chapter 7 bankruptcy. Double Bogey brought an adversary proceeding, claiming that: Appian was Double Bogey’s fiduciary with respect to the investments; Appian was liable for lost principal and profits; the liabilities were created by Appian’s “defalcation;” and the Eneas were also liable for such non-dischargeable debt either because of their own defalcation or as alter egos of Appian. Liabilities created by a fiduciary’s defalcation are not dischargeable in bankruptcy under Bankruptcy Code Section 523(a)(4). The bankruptcy court rejected the claims. The Ninth Circuit affirmed, agreeing that merely finding the Eneas were alter egos of Appian under California law was insufficient to hold that they were Double Bogey's “fiduciaries” under Section 523(a)(4). View "Double Bogey LP v. Enea" on Justia Law

Tetzlaff, age 56, lives with his mother, is unemployed, and owes approximately $260,000 in student loan debt, which is guaranteed by Educational Credit Management Corporation. When Tetzlaff filed for Chapter 7 bankruptcy in 2012, he sought to have this debt discharged, claiming that repayment constituted an “undue hardship” under 11 U.S.C. 523(a)(8). The bankruptcy court held that Tetzlaff’s student debt could not be discharged. The district court and Seventh Circuit affirmed, noting that the bankruptcy court found that Tetzlaff’s financial situation has the ability to improve given that “he has an MBA, is a good writer, is intelligent, and family issues are largely over” and that “Tetzlaff is not mentally ill and is able to earn a living.” The courts rejected an argument that the bankruptcy court erred in refusing to consider Tetzlaff’s payments to Florida Coastal Law School (which were not included in the discharge action) in concluding that he had not made a good faith effort to repay the debt held by Educational Credit. View "Tetzlaff v. Educ. Credit Mgmt. Corp." on Justia Law

Debtor filed a voluntary chapter 7 bankruptcy petition and listed Dennison, Ohio as the mailing address on the petition, but listed Debtor’s residence as 2035 First Street, Dock 9, Sandusky, Ohio. This location is the dock slip where Debtor kept his boat. Debtor listed the boat on Schedule B as “residential boat 46 foot 1988 SeaRayBoat.” On schedule C, Debtor claimed the boat exempt pursuant to Ohio’s homestead exemption. In July 2012, Debtor’s 38-year marriage ended. As part of the dissolution, Debtor transferred real property to his ex-wife, including their former marital home. Debtor asserts that after the dissolution of his marriage3 he moved into his boat and began using it as his full-time residence. The mailing address on the petition is Debtor’s former marital home, now belonging to and occupied by his ex-wife. The Trustee timely filed an objection and sought turnover of the boat. The bankruptcy court held that “the Chapter 7 Trustee has met his burden of proving by a preponderance of the evidence that the Sea Ray boat was not Debtor’s residence at the time of filing. The Sixth Circuit Bankruptcy Appellate Panel agreed that the Ohio homestead exemption cannot be claimed on the vessel and ordered turnover of the boat. View "In re: Aubiel" on Justia Law

Debtor, a billing services technology company, is a limited liability business and its sole member is Joli, Inc. Heverly owns 75 percent of Joli. A printing company holds the single largest claim against Debtor and the Debtor’s CEO, Heverly’s husband, for $9,359,630.91, arising from a judgment. Debtor filed a voluntary Chapter 11 petition. Debtor’s unsecured claims, not including the printing claim, total less than $1.3 million. Debtor filed a Fourth Amended Plan of Reorganization, under which a third-party, One2One (Plan Sponsor) would acquire a membership interest in Debtor. A Plan Support Agreement provided the Plan Sponsor with the exclusive right to purchase 100% of Debtor’s equity for $200,000. Neither the Plan Sponsor nor any third-party was to contribute any additional capital. The Plan incorporated the terms of the Committee Agreement concerning distributions and the waiver of preference actions against unsecured creditors. Over the objection of the printing company, the bankruptcy judge entered a Confirmation Order. The district court affirmed. The Third Circuit declined to overrule its 1996 adoption of the doctrine of equitable mootness, but concluded that the district court abused its discretion under that precedent and remanded for consideration of the merits of the printing company appeal. View "In re: One2One Communications" on Justia Law

Taylor’s brother died in an accident. Caiarelli, the decedent’s ex-spouse and guardian of their minor child, obtained a state court declaration that the child was entitled to assets distributed to Taylor ($1.4 million). The estate assigned the judgment to Caiarelli. Taylor sought a probate court declaration that the assignment was void. Before resolution, Taylor filed for Chapter 11 bankruptcy, triggering the automatic stay. Caiarelli initiated an adversary proceeding, objecting to discharge of the judgment. The bankruptcy court dismissed, finding that Caiarelli failed to establish standing. The judgment was discharged, and Taylor’s creditors enjoined from collecting, 11 U.S.C. 524(a)(2). Caiarelli returned to probate court, which ratified the assignment. Taylor claimed that Caiarelli and her attorneys violated the discharge and plan injunctions. The bankruptcy court entered a civil contempt order and issued a damages order and judgment for $165,662.36 in attorney’s fees. While appeal was pending, Taylor notified the district court that he reached a settlement with the legal malpractice insurance carrier for Caarelli’s attorneys. The attorneys denied that a full settlement had been reached. The bankruptcy court indcated that vacatur would be approved if the parties returned to the court, so the district court denied Taylor’s motion to dismiss but reversed the contempt order, damages order, and judgment, finding no violation of the statutory discharge or plan injunctions. The Seventh Circuit affirmed, finding that the appeal was not moot. View "Taylor v. Caiarelli" on Justia Law

The court previously affirmed the district court’s affirmance of the bankruptcy court’s order granting debtor’s motion to strip Bank of America’s junior mortgage lien. The Supreme Court vacated the opinion and remanded the case for consideration in light of Bank of America, N.A. v. Caulkett. In Caulkett, the Supreme Court held “a debtor in a Chapter 7 bankruptcy proceeding may not void a junior mortgage lien under 11 U.S.C. 506(d) when the debt owed on a senior mortgage lien exceeds the current value of the collateral.” Consequently, in light of Caulkett, the court's own holding in In re McNeal and Folendore v. United States Small Business Administration are overruled. Accordingly, the district court erred in affirming the bankruptcy court’s grant of debtor’s motion to strip off Bank of America’s junior lien. The court denied Bank of America’s motion for summary reversal, vacated the district court’s judgment affirming the bankruptcy court, and remanded for further proceedings. View "Bank of America v. Waits" on Justia Law

Robb filed a Chapter 7 petition. Harder, the trustee, discovered a defect in the deed of trust securing the debt on Robb’s home. Robb converted her case to Chapter 13. Harder filed proof of claim ($450), describing an unsecured priority claim for “time spent by trustee in examining documents regarding avoidance of lien, preparing objection to homestead exemption, and filing objection to conversion to Chapter 13 case, and tracking debtors’ [sic] conversion to chapter 13.” Robb objected, arguing that trustee compensation is subject to 11 U.S.C. 326 and, because Harder did not disburse any moneys before conversion, she was not entitled to payment. The bankruptcy court allowed the claim, holding that section 326(a) is not the only method of trustee compensation and that allowing the claim when no money was distributed encourages trustees to be diligent in looking for assets and discourages debtors from concealing assets. The Eighth Circuit Bankruptcy Appellate Panel dismissed for lack standing. Robb did not plead any facts establishing that the order diminished her property, increased her burdens, or impaired her rights. If she had shown that all creditors would be paid in full and the length of the plan could have been shortened, it is possible that she would have been an aggrieved party. View "Robb v. Harder" on Justia Law