Justia Bankruptcy Opinion Summaries

Baker Hughes Oilfield Operations, Inc., an undersecured creditor in this bankruptcy proceeding appeals the refusal to allow it to promote its unsecured claim to secured status claim under Bankruptcy Code section 1111(b)(2). Baker Hughes and other creditors filed a petition for involuntary Chapter 7 bankruptcy against R. L. Adkins, Corp. in 2011 and the case was converted into a Chapter 11 proceeding shortly thereafter. Scott Oils, Inc. proposed to purchase the mineral properties of the debtor and filed its Second Amended Plan of Organization. The Plan proposed the sale of substantial mineral interests, some 90 mineral leases and several wells, to Scott Oils “pursuant to Bankruptcy Code Section 363,” in exchange for over 3.4 million dollars. The Plan recognized that Baker Hughes had a lien on four of these mineral leases and one well. The full claim of Baker Hughes in the well was shown to be $321,506.28 but only a secured $38,753.22 interest. Four other creditors were shown to have secured interests in the same well. Baker Hughes filed for an election pursuant to section 1111(b) to have its claim treated as secured to the full extent. Scott Oils replied by pointing to the terms of the statute that denied the election where “such property is sold under [section] 363 of this title or is to be sold under the Plan.” Several days of hearing on confirmation of the Plan were held in April of 2013 and the Plan was confirmed in May. Baker Hughes did not appear at the hearing on confirmation and did not object or appeal any act or decision of the bankruptcy court prior to the confirmation. Nor was the confirmation appealed. Following the confirmation, Baker Hughes continued to pursue its Section 1111 claim and argued that either it had the right to make a credit bid at the sale of the collateral or be granted election sought under 1111(b). Finding no reversible error in the bankruptcy or district courts' rejection of Baker Hughes' claim, the Fifth Circuit affirmed. View "Baker Hughes Oilfield Oprt Inc v. Torres" on Justia Law

Brooks, a mother of two minor children, filed for Chapter 13 bankruptcy. Brooks reported her monthly wages of $6214.50 and her $400.00 monthly child support payments from her ex-husband; claimed applicable standardized deductions for living expenses for a household of three people; and deducted her $400.00 monthly child support payments in response to an instruction to “[e]nter the monthly average of any child support payments … for a dependent child … that you received in accordance with applicable nonbankruptcy law, to the extent reasonably necessary to be expended for such child,” 11 U.S.C. 1325(b)(2). Brooks’s monthly disposable income was reduced to $111.46. Brooks deducted another $141.00 for day care, which left her with negative disposable income. Brooks submitted a plan, proposing to pay $100.00 per month for 60 months, which would have resulted in no distribution to unsecured creditors; substantially all payments would have gone to other arrearages, and trustee’s and attorney’s fees. The bankruptcy court concluded that Brooks’s child support payments were fully excludable from disposable income; although a double deduction would be theoretically possible, Congress’s desire to preserve child support payments for their intended beneficiaries prevailed over that risk and the “reasonably necessary” qualification functions as an independent backstop. The district court and Seventh Circuit affirmed. View "Clark v. Brooks" on Justia Law

The Peets sought relief under chapter 13 of the bankruptcy code on December 5, 2011. When they filed their petition for relief, the Peets and Marilynn Peet's parents held title to real property in Missouri as joint tenants, and Marilynn Peet and her father held title to a 2005 Ford half-ton pickup registered in Missouri as joint tenants. On the Peets' motion, the bankruptcy court converted the case to chapter 7 on January 23, 2014. Checkett was appointed the chapter 7 trustee. Marilynn Peet's father passed away on April 14, 2014. Her mother passed away the following day. That summer, the trustee proposed to sell the real property and the pickup. The Peets objected. The bankruptcy court overruled the Peets' objections and authorized the trustee to sell the real property and the pickup. The Eighth Circuit Bankruptcy Appellate Panel affirmed. The filing of a petition for relief does not sever a joint tenancy. The Peets' undivided estate in the real property and Marilyn Peet's undivided estate in the pickup are property of the bankruptcy estate, and the trustee is entitled to the proceeds from their sales. View "Peet v. Checkett" on Justia Law

After their bankruptcy was converted from a chapter 11 reorganization to a chapter 7 liquidation, appellants Marco and Roxanne Cantu sued their bankruptcy attorney Ellen Stone relating to her representation prior to the conversion of their case. The chapter 7 trustee, Michael Schmidt, intervened in the action against Stone contending that the claims belonged to the estate. The parties eventually settled the malpractice case and the funds were deposited into the court registry pending a determination whether the settlement proceeds belonged to the Cantus individually or to the bankruptcy estate. The bankruptcy court held that the proceeds belonged to the estate, and the district court affirmed. The Fifth Circuit agreed with the bankruptcy court's analysis that the estate suffered injuries from Stone’s representation that would have allowed it to assert claims against her prior to conversion, and affirmed. View "Cantu v. Schmidt" on Justia Law

The bankruptcy court declined to grant a discharge to defendant-appellant Dean Buescher and defendant-appellant Sherry Buescher. Dean operated a home-building business through Buescher Interests, L.P. (“BIL”). Sherry, Dean’s spouse and a Texas-licensed attorney, often served as the closing officer for BIL’s real estate transactions. Plaintiff-appellee First United Bank & Trust Co. loaned BIL approximately $19 million. Dean personally guaranteed the loans First United made to BIL. The Bueschers filed a joint Chapter 7 bankruptcy petition. First United filed an adversary complaint arguing, inter alia, that the bankruptcy court should refuse to discharge both Dean and Sherry from the bankruptcy action. Sherry argued on appeal that First United did not have standing to object to her discharge, because it was not her creditor (she never personally guaranteed the First United loans). Because Texas is a community property state, and because Sherry and Dean own jointly-held community property, the Fifth Circuit concluded that First United could satisfy a claim against Sherry through an in rem suit. The Fifth Circuit found no reversible error in the bankruptcy court's judgment, and affirmed in all respects. View "Buescher v. First United Bank & Trust" on Justia Law

Chapter 7 bankruptcy trustee Carl Davis appealed a decision by the U.S. Bankruptcy Court for the District of Kansas which was affirmed by the U.S. Bankruptcy Appellate Panel of the Tenth Circuit (BAP). Davis sought to avoid, as a fraudulent conveyance, debtor Tung Nguyen’s transfer to his sister of his interest in a piece of real property. Both the Bankruptcy Court and the BAP concluded that Nguyen possessed only bare legal title to the property and that such an interest is not one that may be avoided under the Bankruptcy Code. Finding no reversible error, the Tenth Circuit affirmed. View "Davis v. Pham" on Justia Law

Mark and Tammy Davis owned property that secured a credit line deed of trust held by Huntington National Bank. The Davises failed to pay their 2005 and 2006 real property taxes, resulting in a notice of delinquency being published. The Davises subsequently filed for Chapter 7 bankruptcy. A second notice of delinquency was then published announcing that the tax lien would be sold. A notice of the tax lien sale was mailed to the Davises but was returned undeliverable. The Davises received a discharge in bankruptcy, after which the tax lien was sold. No party redeemed the property, and the tax deed was issued to Rebuild America, Inc. The Davises then filed this action seeking to set aside the tax sale. The circuit court granted relief, finding that the issuance of the two statutory notices of delinquency while the Davises were under the protection of a bankruptcy stay voided the tax deed. The Supreme Court affirmed, holding that the bankruptcy stay rendered the statutory notices void ab initio, and therefore, the tax lien sale did not comply with the required statutory procedure. Accordingly, the tax deed issued in this matter must be set aside. View "Rebuild America v. Davis" on Justia Law

France had a Chicago dental business and fraudulently billed insurers for city employees. France closed his practice after being injured in an accident and started collecting benefits from a disability income policy. In 1999, he exchanged monthly payments, for a limited time, for a lump sum of $300,000. He transferred this money to other people, including his wife, Duperon, before filing a Chapter 7 bankruptcy petition. He failed to disclose the payment or transfers. He later pleaded guilty to mail fraud, 18 U.S.C. 1341, and to knowingly making a false declaration under penalty of perjury, 18 U.S.C. 152(3). The district court sentenced France to 30 months in prison and ordered him to pay $800,000 in restitution. The bankruptcy trustee obtained title to ongoing disability insurance payments. France and Duperon divorced. A California court approved a settlement with payments for child support from the disability payments. France’s insurance company sued in California to resolve conflicting claims. The parties reached an agreement, which the bankruptcy court approved, purporting to control all other judgments, but did not mention the criminal restitution lien. The government filed Illinois citations to discover assets. France moved to quash, but the insurance company responded and began withholding $9,296 that had been going to France. The government moved to garnish the entire distribution under the Mandatory Victims Restitution Act (MVRA), 18 U.S.C. 3613(a). The Seventh Circuit affirmed a ruling allowing the government to garnish the entire disability payment. View "United States v. France" on Justia Law

Debtor is a talented singer. Wilson agreed to help manage the Debtor’s career. The two entered into a series of agreements. Wilson claims to have spent significant funds to advance Debtor’s career, but did not identify any related debts in his own 2008 bankruptcy. Debtor filed a Chapter 7 petition in 2012. Wilson filed an adversary proceeding and appealed bankruptcy court rulings denying his requests for: a judgment of nondischargeability under 11 U.S.C. 523; a money judgment; enforcement of a money judgment against Debtor’s non-filing spouse or her company; and denial of the Debtor’s discharge under 11 U.S.C. 727. The Eighth Circuit Bankruptcy Appellate Panel affirmed, finding that Debtor owed no debt to Wilson. Two contracts between the Debtor and Wilson were void as unconscionable; Wilson had no claim for a lost investment in the Debtor or his career. Wilson had no cause of action under section 523 and there was no basis upon which to deny the Debtor’s discharge, View "Wilson v. Walker" on Justia Law

Debtor filed a voluntary chapter 11 petition. Debtor had a program under which independent contractor drivers could lease and acquire ownership of trucks. Trucks were financed or leased from creditors, including Daimler. At the time of filing, Daimler was the lessor of 14 trucks and held security interests in 99 others and in driver lease payments and other proceeds generated by the use of such trucks. Daimler sought sequestration to prevent unauthorized use of that money. The parties submitted an agreed order, providing that Daimler would sell 21 trucks and credit the net proceeds. Debtor would retain 80 trucks subject to Daimler’s security interest and would make adequate protection payments. The order was silent about Daimler’s security interest in proceeds from the use of the trucks. The bankruptcy court confirmed a plan. The debtor appealed with respect to application of excess adequate protection payments, claiming it overpaid for erosion in the value of the trucks and argued that the court erred when it supplemented the secured portion of Daimler’s claim with an award of $51,909.40 as proceeds from the use of Daimler’s trucks. The Eighth Circuit dismissed for lack of jurisdiction. The orders were interlocutory. The debtor now possesses no trucks; no meaningful relief could be granted. Debtor did not propose a plan that was denied, so it is not an aggrieved party, and does not have standing. View "O&S Trucking, Inc. v. Mercedes Benz Fin. Servs., USA" on Justia Law