Justia Bankruptcy Opinion Summaries

The bankruptcy trustee filed suit against parties involved in the sale of a bankruptcy estate's assets under 11 U.S.C. 363. The Eighth Circuit affirmed the bankruptcy appellate panel's decision affirming the bankruptcy court's dismissal of the trustee's claims and denial of leave to amend the second amended complaint (SAC).The court held that the trustee's claims were impermissible collateral attacks on an earlier order approving the sale in bankruptcy that was consummated under section 363. In the alternative, the trustee was not entitled to relief from the sale order, because the amended complaint failed to state a plausible claim for fraud on the court. The court also held that the trustee was not entitled to relief from the sale order under Federal Rule of Civil Procedure 60, and the district court properly denied leave to amend the complaint based on futility. View "Fulmer v. Fifth Third Equipment Finance Co." on Justia Law

The Fifth Circuit withdrew its prior opinion and substituted the following opinion.42 U.S.C. 405(h)—which states that no claim arising under the Social Security Act can be brought under 28 U.S.C. 1331 and 1346—does not bar bankruptcy courts from exercising their jurisdiction under section 1334 to hear Social Security claims. The court joined the Ninth Circuit, holding that the plain text of section 405(h)'s third sentence does not bar section 1334 jurisdiction and the district court erred by concluding otherwise. The court offered guidance on remand, clarifying what type of decision section 405(h)'s second sentence channels. The court believed that section 405(h)'s second sentence applied only where the would-be plaintiff is challenging a decision regarding his entitlement to benefits. Accordingly, the court reversed and remanded for further proceedings. View "Benjamin v. United States" on Justia Law

The Bankruptcy Appellate Panel affirmed the bankruptcy court's orders dismissing debtor's adversary proceeding and denying his post-dismissal motion. The panel held that the bankruptcy court properly dismissed debtor's adversary proceeding as a collateral attack on prior rulings. In this case, the post-dismissal motion repeated the same arguments already made by debtor. View "Raynor v. Walker" on Justia Law

The Second Circuit affirmed the district court's decision affirming the bankruptcy court's order requiring the law firm to remit $59,432 to the trustee of debtor's bankruptcy estate. The amount the law firm was ordered to remit was part of the proceeds of an unauthorized post-petition transfer by the debtor of the estate's property. The court held that the trustee's recovery of a portion of the Thompson Loan from the law firm did not constitute a double recovery in violation of 11 U.S.C. 550(d). View "In re: Alice Phillips Belmonte" on Justia Law

The Bankruptcy Appellate Panel affirmed the bankruptcy court's order directing the entry of judgment in favor of defendants on plaintiffs' complaint to determine the dischargeability of their claims against defendants. In this case, plaintiffs' appeal was premised on the bankruptcy court's perceived error in not giving preclusive effect to the state court default judgment. However, the court held that the issue was no longer before the bankruptcy court despite the bankruptcy court's passing reference to the state court default judgment. Therefore, the panel did not reach either of the issues raised by plaintiffs. The panel held that, by withdrawing their motion for partial summary judgment and submitting the matter to the bankruptcy court on an agreed record–without renewing their claim that the state court default judgment should be given preclusive effect–plaintiffs abandoned that claim. View "Abel v. Queen" on Justia Law

Under 28 U.S.C. 1930(a)(6), quarterly fees paid by a chapter 11 debtor to the bankruptcy Trustee are based on the debtor’s disbursements. The Bankruptcy Court determined that certain payments made by the customers of CranGrow to its lender should not be considered “disbursements” for purposes of that calculation. The payments covered a post-petition revolving line of credit that was used both to pay operating expenses and reduce the balance of CranGrow’s pre-petition debt to the same lender. CranGrow’s customers made payments to the lender directly. The Seventh Circuit reversed, holding that the language of the fee statute requires that payments made by CranGrow’s customers to CranGrow’s lender be considered disbursements. The term “disbursements” has been interpreted broadly to mean all payments by or on behalf of the debtor. The payments by CranGrow’s customers to CoBank were payments made on behalf of CranGrow and resulted in the reduction of CranGrow’s prepetition debt. The customer payments, therefore, are disbursements under section 1930(a)(6). The court found no authority for a waiver and declined “CranGrow’s belated invitation to consider the constitutionality of the fee statute. View "Cranberry Growers Cooperative v. Layng" on Justia Law

Novak was the sole shareholder of CMCG. By 2008, CMCG’s solvency was questionable. In 2012 Novak committed suicide, leaving CMCG to Comess, who filed a voluntary Chapter 7 petition weeks later. For four years before the bankruptcy filing, Comess and Hathaway, another friend of Novak’s, had received significant payments from CMCG, though they were not employees. Hathaway received $45,400.81; she runs a small yoga studio and her email correspondence indicated that the payments were personal gifts.The trustee brought an avoidance action and sought discovery sanctions against Hathaway. The bankruptcy judge determined that the women had received money from CMCG while it was insolvent, that Novak typically failed to record the transactions, that CMCG did not receive reasonably equivalent value in exchange, and that the transfers were voidable under 11 U.S.C. 548 and the Illinois Uniform Fraudulent Transfer Act (IUFTA), which applied under section 544(b)(1) because CMCG had unsecured creditors at the time of the conveyances, the IRS and a credit-card company. The judge declined to impose sanctions for Hathaway’s failure to respond to interrogatories and produce tax returns but imposed sanctions ($11,187.25) for Hathaway’s delay and failure to comply with court orders concerning emails causing the Trustee to expend additional time and resources.The district judge and Seventh Circuit affirmed, rejecting arguments concerning trial exhibits for evaluating CMCG's financial health; challenging the finding that CMCG did not receive reasonably equivalent value; and that CMCG did not have IUFTA “creditors.” The court noted Hathaway's violations of appellate procedure. View "Fox v. Hathaway" on Justia Law

The Bankruptcy Appellate Panel affirmed the bankruptcy court's judgment determining that SMC's claim against debtor was nondischargeable. The panel held that the bankruptcy court's finding that SMC was the proper party holding the claim against debtor was not clearly erroneous. In this case, the bankruptcy court permissibly viewed the evidence as demonstrating that Vinco was only acting on SMC's behalf and that SMC was the real party in interest. View "SMC Holdings v. McCann" on Justia Law

The Bankruptcy Appellate Panel affirmed the bankruptcy court's grant of the city's motion for summary judgment and denial of debtor's motion for summary judgment in an adversary proceeding alleging that the city violated the automatic stay by refusing to release the warrant for her arrest and refusing to release her driver's license without payment of the fine.The panel held that debtor failed to identify any post-petition action by the city that would be in violation of the stay. The panel agreed with the bankruptcy court that the city was not required to issue a compliance letter regarding debtor's driver’s license. Therefore, debtor failed to show that the city's inaction regarding the compliance letter has somehow led to her inability to obtain a driver's license. Finally, the panel agreed with the city that the reference in the bankruptcy court's order to a driver's license being property of the estate was taken out of context by debtor and was not a factor in the bankruptcy court's decision. View "Edwards v. City of Ferguson" on Justia Law

The Debtors each owed debts to the Illinois Department of Human Services (DHS). Dennis owed $7,962.25 for overpayments made to her under the Illinois Child Care Assistance Program; Halbert owed for overpayments made to her under the Supplemental Nutrition Assistance Program. The Debtors each filed for bankruptcy. The bankruptcy court in each case held that the overpayment debts were not priority domestic support obligations, 11 U.S.C. 547(c)(7). The Seventh Circuit affirmed. Debtors do not owe DHS money for support payments; they owe DHS because they received money they were not statutorily entitled to. Because such a payment is not in the nature of alimony, maintenance, or support, this is merely an overpayment of benefits and the debt is subject to avoidance in bankruptcy. View "Halbert v. Dimas" on Justia Law