In what the panel called a strained application of a legal fiction, the BAP for the Tenth Circuit found that money paid by the chapter 7 debtor’s mother directly to one of the debtor’s creditors was a preferential transfer where it preceded the bankruptcy by fewer than 90 days, was secured by a promissory note by the debtor, and favored one creditor over the debtor’s other creditors. Stevens, Littman, Biddison, Tharp and Weinberg, LLC. v. Walters (In re Wagenknecht), 2019 WL 2353534 (B.A.P. 10th Cir. June 4, 2019) (case no. 18-93).
[Read more…] about Payment of Pre-Petition Debt by Debtor’s Mother Is Preferential TransferCase Bites: Interesting Issues and Decisions from This Week’s Cases
- In an adversary discharge proceeding, can the bankruptcy court treat a motion for summary judgment (that asserts a new affirmative defense) as a motion to amend an answer? (Bankr. S.D.N.Y.)
- Can a chapter 7 trustee be awarded attorney’s fees incurred in defense of the trustee’s fee application? (Bankr. D.Colo.)
- Does a bankruptcy court have the authority to extend the time to file a dischargeability complaint on a motion filed after the deadline? (Bankr. N.D.Ga.)
- Does a pre-petition default judgment operate as collateral estoppel in a non-dischargeability complaint for fraud in bankruptcy? (Bankr. E.D.Mich.)
- Post-filing, can a mortgage company postpone scheduled nonjudicial foreclosure sales (rather than dismiss the action) without violating the automatic stay? (Bankr. D.Ut.)
To read the case outlines and opinions click here
City Did Not Violate Stay by Failing to Rescind Warrant
The city had no obligation under the automatic stay to take affirmative action to rescind a warrant for the debtor’s arrest or to issue a letter of compliance to the state, where the City had taken no post-petition action to enforce the warrant, and the debtor was not in compliance with the court order to pay a traffic fine. Edwards v. City of
Ferguson, No. 18-6032 (B.A.P. 8th Cir. July 3, 2019).
Debt for Overpayment of DSO not Itself DSO
Debts based on overpayments to debtors for government welfare benefits are not non-dischargeable domestic support obligations. Dennis v. Illinois Dept. of Human Serv., Nos. 18-2899, 18-2952 (7th Cir. June 27, 2019).
Chapter 13 debtor, Devan Dennis entered bankruptcy owing the Illinois Department of Human Services for overpayments under the state Child Care Assistance Program. Chapter 7 debtor, Tyeane Halbert, owed the DHS for overpayments of her SNAP benefits. The bankruptcy court rejected the DHS’s argument that the overpayments were non-dischargeable domestic support obligations under section 507(a)(1)(B) and DHS appealed.
NACBA filed an amicus brief on behalf of the debtors.
[Read more…] about Debt for Overpayment of DSO not Itself DSOHalbert v. Illinois Dept. of Hum. Serv., Nos. 18-2899, 18-2952 (7th Cir.)
Type: Amicus
Date: March 28, 2019
Description: Whether debt based on overpayment of SNAP benefits is non-dischargeable domestic support obligation
Result: Affirmed, June 27, 2019.
Bankruptcy Court Suspends Counsel for Changing Schedules After Signing. Employing “Trust But Verify” the Court “Peeked and Shrieked.”
It’s going to be a bad opinion when the judge brings up Pandora’s Box at the beginning of the
opinion and titles the last section of the opinion “This Is The End.”
On June 25, 2019, the Bankruptcy Court for the Southern District of Florida, in a 172-page opinion (including attachments), suspended an attorney from practice for two years before the Bankruptcy Court, terminated her CM/ECF privileges, referred the attorney to District Court’s attorney review committee and the Florida Bar with recommendations to disbar, and referred the attorney to the United States attorney for investigation.
The Debtor filed a Chapter 7 bankruptcy. He was represented by the Attorney. Neither the Debtor nor the Attorney attended the 341 meeting. Subsequently, the trustee filed an adversary objecting to the Debtor’s discharge under 11 U.S.C. § 727(a)(2), (3), and (4). The basis of the Trustee’s complaint was that the Debtor’s schedules indicated virtually no detail, were not consistent with other documents the trustee received (tax returns), and that required information was missing (missing lawsuit). In addition, the Trustee cited the Debtor’s and Attorney’s failure to attend the 341 meeting. When asked by the Trustee, the Attorney said they didn’t plan on proceeding and wanted the case dismissed.
Two days after the adversary was filed, the Attorney moved to withdraw as counsel for the Debtor. The Debtor, now pro se, stated to the Trustee that the schedules were not provided to him before filing and that he did not sign the schedules that were filed.
To read more click here.
7th Circuit Overrules Precedent and Dismisses Direct Appeal for Failure to File Timely Petition
Rule 8006(g) states a mandatory requirement that a party seeking direct appeal file a petition in support. Failure to do so, if properly invoked by the opposing party, is cause for dismissal. In re Wade, No. 18-2564 (7th Cir. June 14, 2019).
This case came to the Seventh Circuit on certification of direct appeal by the bankruptcy court to address the scope of section 362(c)(3)(A), which, in the case of successive petitions, lifts the automatic stay after 30 days concerning the property of the debtor. The Wades’ previous attorney, Kreisler Law, P.C., filed a lien against Ms. Wade’s residence while the Wades’ second bankruptcy was pending and the Wades sought sanctions for violation of the automatic stay. The bankruptcy court determined that the stay was no longer in effect when the lien was filed and denied the motion for sanctions. Recognizing, however, that courts have disagreed as to the meaning of the phrase “concerning the debtor,” in section 362(c)(3)(A), the bankruptcy court certified the Wades’ appeal to the Seventh Circuit.
[Read more…] about 7th Circuit Overrules Precedent and Dismisses Direct Appeal for Failure to File Timely PetitionCase Bites – Interesting Bites from This Week’s Cases
Case Bites issues:
- If service of an adversary complaint is not completed until 21 days after the Clerk issues the summons, and no response is filed, can a Court sua sponte deny a request for entry of default judgment for improper service?
- Can a chapter 13 Trustee avoid the claim of a creditor who did not perfect its security interest until after a chapter 13 is filed?
- Are negative procedural rulings against a party grounds to recuse the bankruptcy judge for bias?
- What is the standard to challenge a trustee’s decision to settle litigation?
- Can a motion for sanctions under Rule 11 be dismissed as untimely if filed after final adjudication of the offending pleading or motion?
To read more click here.
7th Circuit Rules Chicago Can Not Ignore the Automatic Stay and Hold Vehicles Until Tickets are Paid
On June 19, 2019 the 7th Circuit Court of Appeals affirmed the decisions of the lower bankruptcy courts.
In four Chapter 13 bankruptcies, the City of Chicago impounded vehicles owned by the Debtors for failure to pay multiple traffic fines. After the Debtors filed chapter 13, the City refused to return the vehicles claiming they needed to maintain possession to continue their perfection on them and wouldn’t return the vehicles until the fines were paid.
The bankruptcy courts held that the City violated the automatic stay by exercising control over the vehicles, that no exceptions applied, and ordered the return of the vehicles and sanctions. The City appealed and the 7th Circuit consolidated the appeals in this case.
The Debtors were represented in part by NACBA members John Wonais of the Semrad Law Firm, and Eugene Wedoff. NACBA member Tara Twomey supported the Debtors by filing an amici curiae brief for NACBA and the National Consumer Bankruptcy Rights Center. NACBA member David Yen filed an amicus curiae brief for the Legal Assistance Foundation.
To read more click here.
Hard View of Religious Tithing (and other things) in Student Loan Discharge Case
In a bad-facts-make-bad-law situation, the Southern District of New York affirmed the denial of student loan discharge where the chapter 7 debtor sought to have his religious contributions deducted from his income, and, unfortunately, in so holding, the district court went beyond the bankruptcy court holding to add some unpleasant dicta of its own. In re Lozada, No. 18-11643 (S.D.N.Y. June 12, 2019).
[Read more…] about Hard View of Religious Tithing (and other things) in Student Loan Discharge Case