Justia Bankruptcy Opinion Summaries

Appellant petitioned for protection under Chapter 7 of the Bankruptcy Code, listing a sales-commission agreement (SCA) as non-exempt personal property with an estimated value of $6 million. He did not claim that payments owed under the SCA were exempt property on Schedule C of the petition. On appeal, appellant argued that the bankruptcy court erred by disregarding his request to amend his schedule of exempt property and approving the settlement. The court concluded that the bankruptcy court did not abuse its discretion in denying a continuance and approving the settlement and therefore, affirmed the judgment. View "Hecker v. Seaver" on Justia Law

The Trustee filed this action against former directors and officers of Bancshares. The directors also all formerly served as the officers and directors of the Bank, a wholly owned subsidiary of Bancshares. The court held that the Trustee could pursue her claims only as to the directors' alleged improper subordination of Bancshares' LLC interest. Therefore, the court reversed and remanded the district court's judgment as to that claim, but affirmed its judgment in all other respects. Accordingly, the court held that the district court did not err in granting the directors' motion to dismiss except as to the claim for subordination of the LLC interest of Bancshares. View "Beach First National Bancshare v. Anderson" on Justia Law

The DeGroots divorced; Joel was ordered to pay child support. The court awarded Joy the residence and ordered Joy to pay $48,000 for Joel’s equity in installments. Joy paid $10,000.00. Joel later filed a no-asset chapter 7 petition, listing Joy’s claim of $10,336.33 for unpaid support and medical bills, but not listing the receivable or the lien as assets. Following negotiations, of which the trustee was aware, Joy waived claims to support and Joel released his lien. Neither sought relief from the stay. The Trustee filed notice claiming ownership of the lien for the estate (11 U.S.C. 541(a)(1)). Joy did not receive notice and, when the trustee notified creditors that there might be assets, did not file a claim because she believed it extinguished by the settlement. The trustee later reported no assets and the case closed. Joy attempted to refinance her mortgage and discovered the assignment of lien. The case was reopened (11 U.S.C. 350(b)). The Trustee agreed to subordinate his lien to that of the mortgage company in exchange for $5,000.00. The bankruptcy court concluded that, while the trustee may administer the $5,000.00, the balance should be deemed abandoned under 11 U.S.C. 554(c) and (d). The Bankruptcy Panel of the Sixth Circuit affirmed. View "In re: DeGroot" on Justia Law

Debtor appealed the judgment of the bankruptcy court determining that the debt he owed to the Bank was excepted from discharge under 11 U.S.C. 523(a)(2)(B) and denying any recovery on debtor's counterclaim. Debtor raised several issues on appeal. The Bankruptcy Appellate Panel (BAP) affirmed the bankruptcy court's judgment, holding that the bankruptcy court applied the correct legal standing in determining whether the Bank reasonably relied on debtor's written statements; the BAP could not conclude that the bankruptcy court's findings of fact were clearly erroneous; and debtor not only consented to the bankruptcy court's entering a final judgment on the state law counterclaims, he lacked standing to pursue an appeal from the bankruptcy court's final judgment on the counterclaims. View "Bank of Nebraska v. Rose" on Justia Law

The IRS assigned a taxpayer identification number to Crystal Cascades, LLC. The company changed its name to Crystal Cascades Civil, LLC (CCC), but did not notify the IRS and continued using the original number. A Nevada bank made loans to CCC and recorded trust deeds. CCC failed to pay employment taxes in 2003 and 2004. The IRS filed tax lien notices in 2004-2005, under the identification number and directed to “Crystal Cascades, LLC.” In 2005 RHB made loans to CCC. The Nevada bank initiated foreclosure. CCC filed under Chapter 11. RHB argued seniority over the tax liens. During foreclosure, RHB purchased the property. Under I.R.C. 7452(d), the IRS may redeem properties against which it has a valid tax lien. The parties negotiated for RHB to pay $100,000; the IRS released its right of redemption. The bankruptcy court concluded that the lien notices did not impart constructive notice to third parties and awarded RHB surplus sale proceeds. The Ninth Circuit Bankruptcy Appellate Panel affirmed. RHB sought return of the $100,000, asserting that the agreement was void for lack of consideration because the right of redemption was illusory. The Court of Federal Claims held that RHB failed to prove that the IRS acted in bad faith. The Federal Circuit affirmed. View "Rd. & Hwy. Bldrs., LLC v. United States" on Justia Law

These consolidated appeals arose from the district court's appointment of a receiver of Jeffrey Baron's personal property and entities he owned or controlled. Barron and Munish Krishan formed a joint venture involving the ownership and sale of internet domain names. Disputes arose between the venturers, resulting in at least seven lawsuits. The district court subsequently sought to stop Baron's practice of regularly firing one lawyer and hiring a new one. Baron appealed the receivership order and almost every order entered by the district court thereafter. The court reversed and remanded, holding that the appointment of the receiver was an abuse of discretion. Numerous motions and a writ of mandamus to overturn the bankruptcy court's striking of notices of appeal to the district court were also before the court. Most were denied as moot and the court addressed the remaining motions that were relevant. View "Netsphere Inc., et al v. Baron" on Justia Law

Debtors filed for chapter 7 bankruptcy in January 2010 and the bankruptcy administrator moved to dismiss the case or convert it to a chapter 13 on the ground that debtors' bankruptcy petition constituted an abuse of the chapter 7 process. The court held that a debtor's ability to pay his or her debts may be taken into account under the totality-of-the-circumstances test set forth in 11 U.S.C. 707(b)(3)(B). Accordingly, the court affirmed the district court's rejection of debtors' argument that the ability to pay could not be considered as part of the totality of the circumstances. View "Witcher, et al v. Early, III" on Justia Law

ASARCO filed a voluntary Chapter 11 bankruptcy petition in the bankruptcy court. Lehman was retained as ASARCO's financial advisor and investment banker during the bankruptcy proceedings. Lehman subsequently commenced its own bankruptcy proceedings. Barclays then acquired Lehman's investment banking and financial advisory businesses. At issue on appeal was the fee dispute between ASARCO and Barclays. The court held that the bankruptcy court erred in awarding the $975,000 fee enhancement to Barclays. Although the court found no reversible error, the court remanded to the district court with instructions to remand to the bankruptcy court for it to consider whether a Success Fee was appropriate in light of the court's conclusion that the fee enhancement award was made in error. View "ASARCO, L.L.C., et al v. Barclays Capital, Inc." on Justia Law

SEW operated 113 franchise Waffle House restaurants when it filed its Chapter 11 petition in 2008. From January, 2005, to the Petition Date, SEW did not pay federal income tax withholding, social security (FICA), or unemployment (FUTA) taxes or timely file returns. During four years before the Petition Date, the IRS assessed penalties of more than $1,500,000. SEW subsequently made payments that were applied to its tax obligations and also made undesignated prepetition payments that were applied in partial satisfaction of the assessed penalties. SEW later sought recovery of prepetition tax penalty payments of $637,652.07 or an offset against the tax amounts still owed. SEW alleged that payment of these penalties provided no value to SEW; that SEW did not receive reasonably equivalent value in exchange for the Penalty Payments; that at the time that of the payments, SEW was insolvent; and cited 11 U.S.C. 548 and 544. The government argued that dollar-for-dollar reduction in SEW’s antecedent tax-penalty liabilities constituted reasonably equivalent value. SEW did not allege that the penalty obligations were themselves avoidable. The Bankruptcy court dismissed SEW’s adversary petition for failure to state a clam. The Bankruptcy Appellate Panel and Sixth Circuit affirmed. View "SE Waffles, LLC v. U.S. Dep't of Treasury" on Justia Law

This was a preference action under 11 U.S.C. 547 by the Chapter 7 trustee to recover a payoff payment to Border State Bank from proceeds of debtor's liquidation sale. The bankruptcy court denied the Bank's motion for summary judgment, holding that the perfection of the Bank's lien was within the perfection period under section 547(b) and that the floating lien defense in section 547(c)(5) did not provide a defense to a security interest that was actually perfected during the preference period. The Bankruptcy Appellate Panel (BAP) held that the bankruptcy court did not err in holding that section 547(c)(5) did not apply and in thus ruling in favor of the trustee on the Bank's motion for summary judgment; the bankruptcy court did not err in holding that liquidation as part of the cessation of debtor's business was not ordinary course; and the bankruptcy court did not err in rejecting the Bank's new value defense. The court also held that payment to the bank of funds which were held in debtor's account at the Bank at the start of the liquidation period was not a preferential transfer or an improper setoff. However, the Bank should be required to pay for the services it hired to analyze its own best strategy and the court committed clear error in giving it credit for that expenditure. View "Velde v. Border State Bank" on Justia Law