In a case of first impression, the Fifth Circuit Court of Appeals found that a chapter 7 debtor’s right to appeal a state court judgment against him was property of the estate that could be sold by the trustee. Croft v. Lowry (In re Croft), No. 13-50020 (Dec. 10, 2013). [Read more…] about Fifth Circuit Finds Defensive Appellate Rights Property of Estate
Good Faith in the Plan Modification Context
Two recent cases deal with the determination good faith in the context of a chapter 13 plan modification. In re Martin, No. 10-64790 (Bankr. N.D. Ohio November 27, 2013) and In re Maxwell, No. 11-17873 (Bankr. E.D. Cal. Nov. 8, 2013). [Read more…] about Good Faith in the Plan Modification Context
Supreme Court to Decide Inherited IRA Exemption Issue
In other Supreme Court news, the Court granted certiorari in the case of Clark v. Rameker (In re Clark), No. 13-299. In that case, the Seventh Circuit created a split in the circuits when it held that a debtor may not exempt her inherited IRA in bankruptcy. In re Clark, No. 12-1241 & 12-1255 (April 23, 2013). The Fifth Circuit had reached the opposite conclusion in Chilton v. Moser, 674 F.3d 486 (5th Cir. 2012). NCBRC will file an amicus brief on behalf of the NACBA membership in this important case.
Petition for Certiorari filed in Chapter 7 Lien Stripping Case
The issue of whether a wholly unsecured lien can be stripped off in chapter 7 bankruptcy was brought before the Supreme Court in a petition for certiorari filed on December 9, 2013, in the case of Bank of America v. Sinkfield. [Read more…] about Petition for Certiorari filed in Chapter 7 Lien Stripping Case
Private School Tuition Payments Not Constructively Fraudulent Conveyance
A New York bankruptcy court found that the chapter 7 trustee’s legal theory for recovery of private school tuition payments was “fundamentally flawed” and “at odds with common sense.” Getzler v. Xavierian High School (In re Okanmu), No. 11-43773, AP 13-01105, 13-01107 (Bankr. E.D. N.Y. Dec. 4, 2013). The trustee filed an adversary complaint seeking to avoid the debtors’ private school tuition payments for their minor children as constructively fraudulent transfers under sections 544 and 548(a)(1)(B). [Read more…] about Private School Tuition Payments Not Constructively Fraudulent Conveyance
California Law Precludes Claim of Nondischargeability
State law precluded a creditor’s claim of nondischargeability due to fraud in the case of Heritage Pac. Fin. v. Montano (In re Montano), __ B.R. __, 2013 W.L.5890681 (B.A.P. 9th Nov. 1, 2013). [Read more…] about California Law Precludes Claim of Nondischargeability
New Filing Fee for Motions to Sell Property under Section 363(f)
The Judicial Conference for the United States has approved several changes to the federal court miscellaneous fee schedules including a new administrative fee for motions to sell property under section 363(f) of the Bankruptcy Code. Section 363(f) allows estate assets to be sold free and clear of liens and encumbrances. The committee rejected the idea of a sliding fee connected to the price of the property being sold, and settled on a flat fee of $176.00. The new fee will take effect December 1, 2013.
In instituting the new fee, the Judicial Conference is apparently taking advantage of the increasing trend in chapter 11 toward sale of businesses rather than restructuring. According to Jacqueline Palank of the Wallstreet Journal blog “Bankruptcy Beat,” this move comes in the face of a looming judicial budget crisis. A small percentage of operating funds comes from fees that the federal courts charge, and bankruptcy filing fees generate about 79% of the judicial operating funds that come from federal court fees in general. Where Congress appropriates most of the federal judiciary’s operating funds, recent government budget cuts negatively impact the judiciary. In his blog on the fee change, Cooley, LLP attorney, Robert L. Eisenbach, III, predicts that the new fee in this area could show significant revenue increase from chapter 11 cases. To a lesser extent, the change will impact chapter 7 as well.
Payments to Senior Lienholder Avoidable as to Junior Lienholder
Payments made to a senior lienholder within 90 days of bankruptcy were avoidable as a preferential transfer in favor of the junior lienholder. Gladstone v. Bank of America (In re Vassau), No. 09-9536, AP 11-90280 (Bankr. S.D. Cal. Sept. 25, 2013). [Read more…] about Payments to Senior Lienholder Avoidable as to Junior Lienholder
Annuity Purchased with Tax-Exempt Rollover Funds Exempt in Bankruptcy
The BAP for the Eighth Circuit found that, under section 522(b)(3)(C), the debtor could exempt an Annuity purchased with funds rolled over from a tax-exempt IRA. In re Miller, No. 13-6026 (Nov. 4, 2013). [Read more…] about Annuity Purchased with Tax-Exempt Rollover Funds Exempt in Bankruptcy
Debtor has Standing to Move to Avoid Statutory Lien
A debtor has standing under section 522(h) to bring an action to avoid a statutory lien under section 545(2). In In re McCarthy, No. 13-6042 (B.A.P. 8th Cir. Oct. 28, 2013), the debtor filed an adversary proceeding seeking to avoid an attorney fee statutory lien as impairing his homestead exemption under Minnesota law. The bankruptcy court dismissed the proceeding on the basis that, under section 545(2), the debtor “lacks the authority and ability to exercise the strong-arm powers of the trustee to defeat a statutory lien.” The BAP found that, while section 545 does provide that the “trustee may avoid the fixing of a statutory lien on property of the debtor,” the bankruptcy court’s inquiry should not have stopped there. Section 522(h), in conjunction with section 522(g)(1), provides an avenue for the debtor to avoid a lien that is avoidable by the trustee under section 545. Under these sections the BAP set forth five requirements that must be met to allow a debtor to avoid a statutory lien: “(1) the debtor’s transfer of property must have been involuntary; [§ 522(g)(1)(A)] (2) the debtor must not have concealed the property [§ 522(g)(1)(B)]; (3) the trustee must not have attempted to avoid the transfer [§ 522(h)(2)]; (4) the debtor must seek to exercise an avoidance power enumerated under § 522(h); and (5) the transferred property must be such that it could have been exempted if the trustee had avoided the transfer under the provisions of § 522(g) [§ 522(h)(1)].” Finding that section 522 gives the debtor the power to avoid the statutory lien, despite section 545’s limitation to the trustee, the court reversed and remanded to allow the bankruptcy court to address the merits of the debtor’s lien avoidance action.