Justia Bankruptcy Opinion Summaries

When Revel entered Chapter 11 bankruptcy, its tenant, IDEA, continued to operate nightclubs and a beach club on Revel's Atlantic City casino premises. IDEA sought to protect its right to continue operating by filing an adversary proceeding. Polo became the defendant in the proceeding (and IDEA’s landlord) when the court approved a Purchase Agreement. The Sale Order authorized Polo’s purchase of Revel’s assets “free and clear of all liens, claims, encumbrances and other interests of any kind” under 11 U.S.C. 363(f). The Order contained carve-out provisions that expressly preserved certain rights relating to IDEA’s continued use of the casino premises under the Lease. After entering the Order, the Bankruptcy Court granted Revel’s long-pending motion to reject the Lease retroactively. IDEA filed a notice of its election to retain its rights as a tenant under section 365(h), as expressly allowed by the Sale Order. In an omnibus order, the Bankruptcy Court clarified major aspects of the post-petition landlord–tenant relationship between IDEA and Polo. The Third Circuit affirmed the Bankruptcy Court and the district court. IDEA is permitted to reduce its rental obligations under a tenant-protective provision, 11 U.S.C. 365(h), the Lease, and the doctrine of equitable recoupment, regardless whether its rights arose before or after Revel filed for bankruptcy and regardless whether they arose before or after Revel rejected the Lease. View "Revel AC Inc v. IDEA Boardwalk, LLC" on Justia Law

In 2008, IMMC filed a Chapter 11 bankruptcy petition in the District of Delaware. The liquidating trustee filed an adversary proceeding, alleging that Appellees, IMMC’s former officers and directors, had breached their fiduciary duties by pursuing a risky and costly litigation strategy in an unrelated suit against a competitor, overcompensating themselves in the process. In 2011, the Bankruptcy Court held that it lacked jurisdiction to hear the adversary proceeding, rejecting arguments that the adversary proceeding was a “core” proceeding or that the adversary proceeding was a non-core proceeding “related to” a Chapter 11 case. The trustee did not appeal. The Bankruptcy Court then considered the trustee’s request to transfer the adversary proceeding to the Eastern District of Pennsylvania under 28 U.S.C. 1631 and concluded that it lacked authority to transfer the adversary proceeding. The district court and Third Circuit agreed. The Bankruptcy Court lacked authority over the claims in the adversary proceeding. Exercising jurisdiction over the adversary proceeding so as to transfer it under section 1631 would have been ultra vires, regardless of whether bankruptcy courts fall under section 610’s definition of courts as referenced in section 1631. The court noted that bankruptcy courts have limited authority. View "IMMC Corp. v. Erickson" on Justia Law

In May 1995, Charlene’s parents created CJPM Family Partnership, Ltd. Charlene’s parents are the general partners. Charlene, her parents, and her siblings are limited partners of CJPM. Philip and Charlene married in June 1995. CJPM made three loans to Philip totaling $150,000, which were credited against Charlene’s partnership interest. Philip did not repay the debt. The two divorced in 2011. Their stipulated dissolution judgment awarded Charlene all interest to any community interest in CJPM, assigned to Philip, as his separate obligation, his debt to CJPM, and required Philip to indemnify Charlene from that debt. Philip filed for Chapter 7 bankruptcy. All of his debts, including his CJPM loan, were discharged. Years later, Charlene unsuccessfully moved to reopen bankruptcy proceedings to obtain a ruling that Philip’s debt to CJPM was nondischargeable. Charlene then moved to recover Philip’s CJPM debt in state court. The trial court determined that Philip’s CJPM debt was nondischargeable under the 11 U.S.C. 523(a)(15) exemption and calculated that Philip owes Charlene $345,963. The court of appeal affirmed. When the nature of a debt is such that its discharge will directly and adversely impact the finances of the debtor’s spouse or former spouse, it is nondischargeable in bankruptcy, even if it is not directly payable to the spouse. View "Marriage of Vaughn" on Justia Law

Wilson filed her voluntary Chapter 7 bankruptcy petition in December 2013, electing to take the federal exemptions and listing the “wildcard” exemption. Wilson’s condominium was valued at $250,000 and was subject to a $246,440 mortgage. Wilson listed her exemption as $3,560, the equity in her home as of the petition date. The value of the property increased. In July 2016, Wilson amended her Schedule C, claiming “100% of fair market value, up to any applicable statutory limit,” stating the value of the property at $412,500, and listing Washington’s homestead exemption as the basis for the amended exemption. The bankruptcy court held that an amendment to update the value of an exemption in light of post-petition changes in value was not permitted. The district court and the Ninth Circuit affirmed. Declining to decide whether the definition of the value of exemptions in 11 U.S.C. 522(a)(2) applies to state law exemptions as well as to federal ones, the court concluded that under section 541(a)(1) the debtor’s interests in property transfer to the bankruptcy estate as of the commencement of the bankruptcy action. Following this transfer, any appreciation enures to the bankruptcy estate. The debtor’s exemption was limited to her equity in the property as of the date of her bankruptcy petition. View "Wilson v. Rigby" on Justia Law

The Bankruptcy Appellate Panel reversed the district court's denial of debtor's motion for summary judgment seeking a discharge of her NCSLT debt under 11 U.S.C. 523(a)(8). The panel held that the district court made ample findings based on undisputed facts to support its conclusion that the loan was an educational loan within the meaning of section 523(a)(8)(A). However, the panel held that the bankruptcy court's inference in NCST's favor that TERI "funded" the loan was not reasonable because it was not supported by the evidence. Therefore, the panel remanded the issue regarding TERI's guarantee of the loan and funding of the program for further consideration. View "Page v. National Collegiate Student Loan Trust" on Justia Law

The bankruptcy trustee filed suit against Opportunity Finance and DZ Bank, seeking to avoid as fraudulent transfers under the Minnesota Uniform Fraudulent Transfer Act (MUFTA) over $250 million in loan payments made to PettersCB, prior to Thomas Petters's acquisition of Polaroid. A second amended complaint (SAC) alleged that PHC and PCE were the successors in interest to Petters CB.The Eighth Circuit affirmed the bankruptcy court's grant of defendants' motion to dismiss. The court held that the SAC failed to state a claim of actual or constructive fraudulent transfers under MUFTA. In this case, the trustee erred in failing to adequately plead claims under the MUFTA. Rather, the trustee relied on the ponzi scheme presumption rejected by Finn v. Alliance Bank, 860 N.W.2d 638, 645-53 (Minn. 2015). The court also held that the district court did not abuse its discretion in denying leave to file a third amended complaint. View "Stoebner v. Opportunity Finance, LLC" on Justia Law

The Fourth Circuit affirmed the district court's decision affirming the bankruptcy court's order requiring the bankruptcy trustee to return debtor's post-petition Chapter 13 payments to him. The court held that the plain language of 11 U.S.C. 1326(a)(2) required the trustee to return the post-petition payments to debtor. The court explained that section 1326(a)(2) prevents the Division from levying upon the trustee when he is in possession of the post-petition payments. In this case, once the trustee returned the funds to debtor, the Division or any other creditor was free to levy upon debtor or others who possess his property. View "Commonwealth of Virginia v. Webb" on Justia Law

The Bankruptcy Appellate Panel vacated the bankruptcy court's order allowing Lariat's claim against debtor in the reduced amount of $308,805.00. The panel held that Lariat's predicate claim had been satisfied and Lariat cannot recover any additional amount from debtor's spouse. In this case, there were no preexisting creditor rights left for MINN. STAT. 513.41-513.51 to protect. Therefore, the panel remanded for entry of an order disallowing Lariat's claim in its entirety. View "Lariat Companies, Inc. v. Wigley" on Justia Law

The Ninth Circuit certified the following question of bankruptcy law to the Supreme Court of California: Does the form of title presumption set forth in section 662 of the California Evidence Code overcome the community property presumption set forth in section 760 of the California Family Code in Chapter 7 bankruptcy cases where: (1) the debtor husband and non-debtor wife acquire property from a third party as joint tenants; (2) the deed to that property conveys the property at issue to the debtor husband and non-debtor wife as joint tenants; and (3) the interests of the debtor and non-debtor spouse are aligned against the trustee of the bankruptcy estate? View "Brace v. Speier" on Justia Law

In 2014, Lane sold her residence to the Deans. They subsequently discovered mold and sued her. The state court submitted the dispute to binding arbitration. The arbitrator awarded the Deans $126,895.57. A Kentucky court entered judgment on the award. The Deans filed their judgment lien against Lane’s current residence in May 2017. Lane filed a voluntary chapter 13 petition in July, proposing to avoid the Deans’ judgment lien as impairing her exemption rights. The Deans filed an Objection, asserting that the judgment lien was not avoidable under 11 U.S.C. 522(f) and that, under section 1322(b), Lane was not entitled to “modify” their rights as holders of a claim secured by her residence. The Bankruptcy Court overruled the Objection and confirmed the Debtor’s Plan. The Deans did not appeal. In November, the Deans, as pro se creditors, filed a dismissal motion, which the court denied. The Sixth Circuit Bankruptcy Appellate Panel dismissed an appeal. The order denying the Deans’ motion to dismiss is not a final order and the record presents no grounds for granting leave to appeal under well-settled Sixth Circuit case law, even treating the pro se notice of appeal as a motion for leave to appeal under Federal Rule of Bankruptcy Procedure 8004(d). View "In re: Lane" on Justia Law