Justia Bankruptcy Opinion Summaries

In this appeal concerning the state's Emergency Mortgage Assistance Program (EMAP), Conn. Gen. Stat. 8-265cc through 8-265kk, which is designed to assist homeowners in avoiding foreclosure, the Supreme Court concluded that the EMAP notice requirement in section 8-265ee(a) is not jurisdictional in nature and that section 8-265ee(a) requires that a mortgagee provide an EMAP notice for each foreclosure action initiated.At issue on certified appeal were two questions relating to the requirement set forth in section 8-265ee(a) that mortgagees provide notice to homeowners to inform them of the resources available under EMAP. The Supreme Court concluded (1) an EMAP notice sent before the commencement of a prior foreclosure action by the predecessor mortgagee is not jurisdictional; and (2) an EMAP notice sent before the commencement of a prior foreclosure action by the predecessor mortgagee was not valid for a subsequent action initiated by the successor mortgagee. View "KeyBank, N.A. v. Yazar" on Justia Law

From 2014-2018, the Affordable Care Act’s individual mandate instructed most Americans to purchase health insurance, 26 U.S.C. 5000A(a) Juntoff opted not to buy the minimum health insurance and failed to make his Shared Responsibility Payment of 2.5% of the taxpayer’s income, subject to a floor and a ceiling. After he declared bankruptcy, the IRS tried to collect the Payment from him and filed a proof of claim in bankruptcy court. The agency asked for priority above other debtors under a provision that covers bankruptcy “claims” by “governmental units” for any “tax on or measured by income,” 11 U.S.C. 507(a)(8)(A). The bankruptcy court denied the request, reasoning that the Shared Responsibility Payment was not a “tax on or measured by income” but was a penalty. The Bankruptcy Appellate Panel reversed.The Sixth Circuit ruled in favor of the government. The Shared Responsibility Payment is a “tax” under section 507(a)(8) and is “measured by income.” View "In re: Juntoff" on Justia Law

Debtors, husband and wife filed for Chapter 13 bankruptcy. They listed their home among their assets with a value of $500,000, a mortgage with an outstanding balance of $375,077, and a homestead exemption of $124,923. The bankruptcy court confirmed a Chapter 13 plan, but after roughly twenty months, which included a temporary job loss and deferral of mortgage payments due to the pandemic, the husband contracted Parkinson’s Disease, and the couple could no longer make their required payments. Debtors exercised their right to convert to Chapter 7. In the interim, their home had risen in value by an estimated $200,000. The Chapter 7 trustee (“Trustee”) filed a motion to sell Debtors home to recover the value for creditors.   The Ninth Circuit affirmed the district court’s order which affirmed the bankruptcy court’s order, the panel held that post-petition, pre-conversion increases in the equity of an asset belonging to the bankruptcy estate rather than to debtors who, in good faith, convert their Chapter 13 reorganization petition into a Chapter 7 liquidation. The panel held that the plain language of Section 348(f)(1)(A), coupled with the Ninth Circuit’s previous interpretation of 11 U.S.C. Section 541(a), compelled the conclusion that any appreciation in the property value and corresponding increase in equity belonged to the estate upon conversion. The panel looked to the definition of “property of the estate” in Section 541(a), which addresses the contents of the bankruptcy estate upon filing under either Chapter 7 or Chapter 13, and the court’s prior opinions holding that the broad scope of Section 541(a) means that post-petition appreciation inures to the bankruptcy estate, not the debtor. View "IN RE: JOHN CASTLEMAN, SR., ET AL V. DENNIS BURMAN" on Justia Law

Petitioners moved to quash trial subpoenas issued by the United States Bankruptcy Court for the Central District of California, requiring them to testify via contemporaneous video transmission from their home in the U.S. Virgin Islands. The bankruptcy court denied their motions, and the Petitioners sought mandamus relief from this court. Petitioners argued that Federal Rule of Civil Procedure 45(c)(1) prohibits the bankruptcy court from compelling them to testify, even remotely, where they reside out of state over 100 miles from the location of the trial.   The Ninth Circuit granted the petition. The panel held that the bankruptcy court erred in refusing to quash the trial subpoenas because, under the plain meaning of the text of the Rules, the geographic limitations of Rule 45(c) apply even when a witness is permitted to testify by contemporaneous video transmission. The panel concluded that Rule 45(c) governs the court’s power to require a witness to testify at trial and focuses on the location of the proceeding, while Rule 43(a) governs the mechanics of how trial testimony is presented. Weighing the Bauman factors to determine whether issuance of a writ of mandamus was appropriate, the panel concluded that the third factor, clear error, weighed in favor of granting mandamus relief. The panel concluded that the fifth Bauman factor also weighed in favor because the petition presented an important issue of first impression. The panel held that the third and fifth Bauman factors were sufficient on their own to warrant granting mandamus relief in this case. View "IN RE: JOHN KIRKLAND, ET AL V. USBC, LOS ANGELES" on Justia Law

Bouchard Transportation Company and its affiliates (collectively “Bouchard”)—debtors in bankruptcy—prepared to sell some of their assets at an auction. Fearing the auction would go poorly, Bouchard solicited a “stalking horse bidder” to start the auction and set a floor price. In exchange, Bouchard agreed to pay the stalking horse bidder a $3.3 million break-up fee and to reimburse expenses up to $1.5 million. The question is whether those payments were a permissible use of estate funds. As the bankruptcy and district courts found, the stalking horse payments were lawful under both applicable provisions of the Bankruptcy Code—they provided an actual benefit to the estate and were issued in the reasonable exercise of business judgment.
The Fifth Circuit affirmed the district court’s judgment affirming the bankruptcy court’s order that Bouchard pay Hartree a break-up fee and a capped expense reimbursement. The court explained that Bouchard’s payment to the stalking horse bidder is justified under either the stringent administrative-expense standard or the more relaxed business judgment rule. The court further wrote that there is “no basis to conclude that the board did not thoroughly review the presentation and make a well-reasoned, careful decision to designate Hartree as the stalking-horse bidder.” In signing the Hartree purchase agreement, Bouchard acted well within the bounds of reasonable business judgment. Section 363(b) does not require more. View "Official Committee v. Hartree" on Justia Law

Gary and Jeanette Merritt own four residential properties in Marysville, Washington. Between 2005 and 2007, the Merritts opened five home equity lines of credit (HELOCs), executing five five promissory notes (notes or HELOC agreements) in favor of USAA Federal Savings Bank. The Merritts secured these loans by executing deeds of trust on the properties with USAA as the beneficiary. In November 2012, the Merritts filed for Chapter 7 bankruptcy. The Merritts stopped making their monthly payments on the USAA loans prior to the November 2012 bankruptcy filing. USAA never accelerated any of the loans or acted to foreclose on the properties. In 2020, the Merritts filed four quiet title complaints seeking to remove USAA’s liens on each of the properties. Relying on Edmundson v. Bank of America, NA, 378 P.3d 272 (2016), the Merritts argued that the six-year statute of limitations to enforce the deeds of trust expired six years after February 12, 2013, the day before their bankruptcy discharge. In October 2020, the Merritts moved for summary judgment in each case. In November 2020, the trial court denied each of these motions. In February 2021, USAA moved for summary judgment in each case. USAA argued that the plaintiffs were not entitled to quiet title because the statute of limitations to foreclose on the deeds of trust would not begin to run until the maturity date of each loan, the earliest of which will occur in 2025. The Court of Appeals affirmed the trial court, holding that the the six-year statute of limitations had not begun to run on enforcement of the deeds of trust since none of the loans had yet matured. The issue this case presented for the Washington Supreme Court's review was whether a bankruptcy discharge triggered the statute of limitations to enforce a deed of trust. The Court affirmed the Court of Appeals and the trial court and hold that bankruptcy discharge did not trigger the statute of limitations to enforce a deed of trust. View "Merritt v. USAA Federal Savings Bank" on Justia Law

The property at issue in this case was a residential home that was purchased in 2007 by Shawn and Stephanie Kurtz. The house was located in a subdivision, which required property owners to pay homeowners association (HOA) assessments to petitioner Copper Creek (Marysville) Homeowners Association. If the assessments were not paid, then Copper Creek was entitled to foreclose on its lien. However, Copper Creek’s lien was “subordinate to any security interest perfected by a first deed of trust or mortgage granted in good faith and for fair value upon such Lot.” The Kurtzes stopped paying their HOA assessments and the home loan in varying times in 2010. The Kurtzes (in the process of divorcing) individually filed for bankruptcy. Neither returned to the house, nor did they make any further payments toward their home loan or their HOA assessments. However, there was no attempt to foreclose on the deed of trust. As a result, the house sat vacant for years and fell into disrepair. The Kurtzes remained the property owners of record and HOA assessments continued to accrue in their names. In 2018, Copper Creek recorded a notice of claim of lien for unpaid HOA assessments, fees, costs, and interest. In January 2019, Copper Creek filed a complaint against the Kurtzes seeking foreclosure on the lien and a custodial receiver for the property. The issue this case presented concerned the statute of limitations to foreclose on a deed of trust securing an installment loan after the borrower receives an order of discharge in bankruptcy. As detailed in Merritt v. USAA Federal Savings Bank, No. 100728-1 (Wash. July 20, 2023), the Washington Supreme Court held that a new foreclosure action on the deed of trust accrues with each missed installment payment, even after the borrower’s personal liability is discharged. Actions on written contracts are subject to a six-year statute of limitations. Therefore, the nonjudicial foreclosure action on the deed of trust in this case was timely commenced as to all unpaid installments within the preceding six years, regardless of the borrowers’ bankruptcy discharge orders. In addition, the Court held the trial court properly exercised its discretion to award fees as an equitable sanction for respondents’ litigation misconduct. View "Copper Creek (Marysville) Homeowners Ass'n v. Kurtz" on Justia Law

The bankruptcy court, administering a complex bankruptcy, dismissed NexPoint Advisors, LP’s objection to professional fees paid to myriad organizations. NexPoint appealed to the district court, sitting as an appellate court. The district court dismissed for lack of standing to appeal. NexPoint appealed.   The Fifth Circuit affirmed. The court held that NexPoint failed to establish that the adversary proceeding “directly, adversely, and financially impacts” it beyond anything other than mere speculation. Further, the court held that: Lexmark does not expressly reach prudential concerns in bankruptcy appeals and brought no change relevant here. The court wrote by failing to raise the Cajun Electric argument simultaneously, NexPoint waived its right to do so here. Finally, the court wrote that Collins, when read in conjunction with the “party in interest” language from Bankruptcy Code Sections 330 and 1109, still fails to engage the court’s longstanding precedent that appellate standing in bankruptcy actions is afforded only to a “person aggrieved.” View "NexPoint Advisors v. Pachulski Stang" on Justia Law

In this case regarding the "homestead act," Public Acts 1993, No. 93-301, 2 (P.A. 93-301), and involving a certified question in a bankruptcy appeal from the United States District Court for the District of Connecticut, the Supreme Court held that Public Acts 2021, No. 21-161, 1 (P.A. 21-161) applies in all bankruptcy proceedings filed on or after the effective date of the act to debts that accrued prior to that date.When the legislature enacted the act in 1993 a debtor could protect up to $75,000 of the value of a primary residence from attachment in postjudgment proceedings or bankruptcy, but the act included the following carve-out: the homestead exemption could not be claimed for debts accrued prior to the effective date. In 2021, the legislature amended the act by, among other things, increasing the exemption to $250,000. This time, however, the legislature did not include a special carve-out for a debtor's preexisting debts. At issue was whether the Supreme Court should read such a carve-out into P.A. 21-161. The Supreme Court answered the question in the negative and that P.A. 21-161, 1 was not retractive as applied to the debtor's bankruptcy petition in this case. View "In re Cole" on Justia Law

From 2003 to 2007, Plaintiff took out ten student loans to attend college in Washington state. Defendants National Collegiate Student Loan Trusts (collectively, “the Trusts”) ultimately purchased Plaintiff’s loans. The Trusts appointed Defendant U.S. Bank as their special servicer. The Trusts also hired Defendant Transworld Systems, Inc. (“Transworld”), to collect the defaulted loans, and hired Defendant Patenaude & Felix (“Patenaude”), a law firm specializing in debt collection, to represent them in debt collection actions. Several years after taking out the loans, Plaintiff filed for Chapter 13 bankruptcy relief.   The Ninth Circuit affirmed in part and reversed in part the district court’s dismissal for failure to state a claim, Plaintiff’s action alleging that Defendants’ attempts to collect debts that were discharged in bankruptcy violated the Fair Debt Collection Practices Act and the Bankruptcy Code. Affirming the dismissal of Plaintiff’s claims that were based on a violation of his bankruptcy discharge order, the panel reiterated that Walls v. Wells Fargo Bank, 276 F.3d 502 (9th Cir. 2002), precludes FDCPA claims and other claims based on violations of Bankruptcy Code Section 524. The panel reversed the district court’s dismissal, as barred by the one-year statute of limitations, of Plaintiff’s remaining FDCPA claim based on the theory that Defendants knowingly brought a meritless post-discharge debt collection lawsuit because they knew they could not prove ownership of Plaintiff’s debts. The panel concluded that Plaintiff sufficiently alleged one post-filing FDCPA violation in the filing of an affidavit that presented a new basis, not contained in the complaint, to show that Defendants owned the debts. View "OSURE BROWN V. TRANSWORLD SYSTEMS, INC., ET AL" on Justia Law