The debtor’s ex-wife’s interest in the marital residence did not enter the bankruptcy estate even though the property was titled to the debtor, where their dissolution agreement gave her half interest and the debtor was prohibited from unilaterally disposing of the property. But the debtor’s ex-wife did not show that his failure to comply with the dissolution agreement generally, was an indication that he undertook the debts created by the agreement by fraud where the evidence did not support her contention that he never intended to comply. Williams v. Williams, No. 18-1197 (Bankr. D. Colo. Jan. 8, 2021). Read More
Tag Archive: Property of Estate
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Ex-Wife’s Interest In Marital Residence Does Not Enter Debtor’s Estate
Posted by NCBRC - March 17th, 2021
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NACBA Files Amicus in Technical Abandonment Case
Posted by NCBRC - March 1st, 2021
NACBA/NCBRC filed an amicus brief in support of the debtors in a case where, two years after he elected not to administer a fully-disclosed cause of action against Ocwen, and the debtors’ bankruptcy case was closed, the chapter 7 trustee moved to reopen the case to obtain approval for a settlement agreement with Ocwen. Stevens v. Whitmore (In re Stevens), No. 20-60044 (9th Cir.) (filed Feb. 26, 2021). Read More
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Legal Malpractice Claim Accrued When Debtors Denied Discharge
Posted by NCBRC - February 12th, 2021
Where the only injury resulting from bankruptcy counsel’s conduct was denial of discharge, the cause of action for legal malpractice accrued post-petition and belonged to the debtors rather than the chapter 7 bankruptcy estate. Church Joint Venture, L.P. v. Blasingame, No. 19-5505 (6th Cir. Jan. 26, 2021).
The debtors filed for chapter 7 bankruptcy but were denied discharge when the court learned of undisclosed assets in the form of personal property, shell companies, family trusts, etc. The debtors filed a malpractice lawsuit against their bankruptcy attorneys in state court. When the trustee declined to bring a suit against the debtors’ attorneys on behalf of the bankruptcy estate, the debtors’ primary creditor, CJV, obtained derivative standing to do so. CJV moved for summary judgment on the issue of whether the cause of action belonged to the estate. The court treated the debtors’ response as a cross-motion for summary judgment and granted judgment in favor of the debtors. The BAP for the Sixth Circuit affirmed. Church Joint Ventures, L.P. v. Blasingame (In re Blasingame), 597 B.R. 614 (B.A.P. 6th Cir. 2019). Read More
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Unlawful Possession of Real Property Does Not Create Property Interest
Posted by NCBRC - December 11th, 2020
Where the debtor was subject to a state court judgment cutting off his right to cure the default on an installment land contract, he had no interest in the property despite his continued unlawful possession and, therefore, the bankruptcy court erred in confirming the debtor’s chapter 13 plan that provided for payment of the default judgment. In re Peralta, No. 20-2380 (E.D. Pa. Dec. 4, 2020).
The debtor entered into an installment contract with the creditor for the transfer of real property. After the debtor defaulted on the contract, a new agreement was reached obligating the debtor in the event of future default to submit to a default judgment and vacate the property. He defaulted and the creditor obtained a judgment in the amount of $41,151.70, as well as a Judgment for Possession in state court. But rather than vacate the property, the debtor filed for chapter 13 bankruptcy and proposed a plan under which he would pay off the judgment and obtain possession of the property free and clear of the creditor’s interest. The bankruptcy confirmed the plan over the creditor’s objection. Read More
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California Clarifies Marital Property Presumptions
Posted by NCBRC - November 24th, 2020
Relying on the answer to a certified question propounded to the California Supreme Court regarding presumptions attached to marital property, the Ninth Circuit found that one of two properties owned by the individual debtor and his wife was community property despite its being designated a joint tenancy. Brace v. Speier (In re Brace), No. 17-60032 (9th Cir. Nov. 9, 2020).
The debtor and his wife acquired the San Bernardino property sometime after they married in 1972, and the Redlands property in 1977 or 1978. When the husband filed for chapter 7 bankruptcy, the trustee sought to sell both properties and distribute the proceeds to the debtor’s creditors. Even though both deeds characterized the properties as joint tenancies, the bankruptcy court found that, under the California Family Code, they were community property and could be sold to satisfy the husband’s debts. The BAP affirmed. In re Brace, 566 B.R. 13 (B.A.P. 9th Cir. 2017). Read More
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Debt Paid by Mother Pre-Bankruptcy Not Preferential Transfer
Posted by NCBRC - October 30th, 2020
When the debtor’s mother made a direct payment to one of the debtor’s creditors from an account over which the debtor had no interest or control, the transfer was not an avoidable preferential transfer under section 547(b). Walters v. Stevens, Littman, Biddison, Tharp and Weinberg, LLC. (In re Wagenknecht), No. 19-1206 (10th Cir. Aug. 24, 2020). Read More
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Post-Petition Appreciation Not Part of Chapter 7 Estate upon Conversion
Posted by NCBRC - October 14th, 2020
A Bankruptcy Appellate Panel for the Tenth Circuit found that appreciation in value of the debtors’ homestead while in chapter 13 belongs to the debtors upon conversion to chapter 7. Rodriguez v. Barrera (In re Barrera), No. 20-3 (B.A.P. 10th Cir. Oct. 10, 2020) (unpublished).
When the debtors filed for bankruptcy, their homestead was valued at $396,606, encumbered by two liens totaling $336,209. They claimed their $75,000 homestead exemption leaving no equity for the bankruptcy estate. During the course of their chapter 13 bankruptcy, they sold the homestead for $520,000. They then converted to chapter 7. The trustee sought turnover of the sale proceeds in excess of the debtors’ exemption. The bankruptcy court denied the trustee’s motion, holding that the value of the property consisted of the value it had on the original petition date. Read More
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IRA Funds Garnished Pre-Petition Not Part of Bankruptcy Estate
Posted by NCBRC - October 9th, 2020
Where the judicial lien against the debtor was fully satisfied before the debtor filed his bankruptcy petition, the transfer of funds from his IRA used to satisfy the lien was not an avoidable transfer under section 547 or section 522(f) or (h). Elliott v. Pacific Western Bank, No. 18-17421 (9th Cir. Aug. 12, 2020).
When the debtor defaulted on a loan held by Pacific Western Bank, PWB obtained a state court judgment against him and instituted a levy against the debtor’s employee retirement plan (IRA). Under California law, the funds in the debtor’s IRA were exempt only to the extent they were necessary for the debtor’s post-retirement support. The state court issued an executory lien against the debtor’s IRA, and PWB garnished the funds to cover the amount owed. Three months later, the debtor filed chapter 7 bankruptcy. After he received his discharge, he filed an adversary complaint seeking to recover the funds garnished from his IRA under the theory that they were exempt under state law and section 522(f) of the Bankruptcy Code. PWB argued that the funds were not exempt in the bankruptcy proceeding because the lien had been fully executed prior to the filing of the bankruptcy and, therefore, they did not become part of the bankruptcy estate. The bankruptcy court agreed. The district court affirmed. Read More
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Debtor’s Assumption of Lease Removes Property from Estate
Posted by NCBRC - September 29th, 2020
Once the trustee declines to assume an ongoing lease, the leased property drops out of the estate and new debt based on the debtor’s failure to make payments on the lease is not an administrative expense under section 503(b). Microf LLC v. Cumbess, No. 19-12088 (11th Cir. June 3, 2020).
When he filed for chapter 13 bankruptcy, the debtor’s plan provided that the arrears owed on an unexpired lease for an HVAC unit would be paid through the estate and he would assume the ongoing lease, paying for it outside the plan. He failed to maintain the lease payments and the HVAC creditor, Microf, sought to have the new arrears treated as administrative expenses by the bankruptcy court and given priority for repayment. The trustee objected. The bankruptcy court sustained the objection, finding that when the debtor assumed the lease, the property exited the bankruptcy estate and the new debt could not be deemed an administrative expense. The district court affirmed. Read More
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Funds Fraudulently Transferred Pre-Conversion Are Recoverable by the Chapter 7 Trustee
Posted by NCBRC - September 17th, 2020
Funds fraudulently transferred during a chapter 13 case remain in the debtor’s “constructive possession” and become part of the chapter 7 estate upon conversion. Brown v. Barclay, No. 18-60029 (9th Cir. March 23, 2020).
The chapter 13 debtor received an inheritance while in bankruptcy which he divided between himself and his three brothers without notifying the chapter 13 trustee. When the trustee learned of the unauthorized transfer, he moved the court to convert the debtor’s case to chapter 7 as a sanction. Finding the debtor had acted in bad faith, the bankruptcy court ordered the conversion. The chapter 7 trustee sought turnover of the funds from all the brothers. One of the brothers, the appellant in this case, fought turnover on the basis that because the debtor was not in control of the funds at the time of conversion, they did not become part of the chapter 7 estate. The bankruptcy court disagreed, and the bankruptcy appellate panel affirmed. Read More
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