Plan Valuation of Secured Claims: What Happens When Foreclosure Value Is Higher Than Without Foreclosure?

First Southern Nat’l. Bank v. Sunnyslope Housing Ltd. P’ship. (In re Sunnyslope Housing Ltd. P’ship.), 859 F.3d 637 (9th Cir. 2017)

A creditor appealed a bankruptcy court order valuing a secured claim at $3.9 million for purposes of a Chapter 11 plan. The district court affirmed, but the Court of Appeals panel reversed and remanded. Then the 9th Circuit granted a rehearing en banc. The primary issue was how to value property subject to low-income housing restrictions. The court also addressed the proper “cramdown” rate and feasibility of a 40-year balloon payment plan. Continue reading

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Surcharging Collateral: Amazing How Long People Can Fight over Money

Peters v. Clark (In re Bryan), 857 F.3d 1078 (10th Cir. 2017)

After a convoluted history of appeals and remands, issues relating to the sale of a residence by a chapter 7 trustee once again came before the 10th Circuit. This time the court addressed whether the trustee could properly surcharge a judgment creditor’s interest in the sale proceeds for expenses related to litigation involving the creditor’s liens. Continue reading

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Claiming Insurance Proceeds: Watch for State Law Twists and Turns

Park Restoration, LLC v. Erie Insurance Exchange (In re Trustees of Conneaut Lake Park, Inc.), 855 F.3d 519 (3rd Cir. 2017) –

When the debtor’s property was destroyed by fire, the insurance company applied the insurance proceeds first to delinquent property taxes based on a state statute. The company that managed and insured the property objected on several grounds. The bankruptcy court ruled that the proceeds were properly applied to the delinquent taxes, and the management company (not the debtor) was entitled to the balance. The district court agreed that the management company was entitled to the insurance proceeds, but concluded no portion of the proceeds should be applied to the delinquent taxes. The tax authorities appealed to the Third Circuit. Continue reading

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Stale Debt and the FDCPA: Unenforceable Does Not Necessarily Mean No Payment

Midland Funding, LLC v. Johnson, ___ U.S. ____, 137 S. Ct. 1407, 197 L. Ed. 2d 790 (2017) –

The question before the court was whether filing a bankruptcy proof of claim for a debt where the limitations period has run was a prohibited practice under the Fair Debt Collection Practices Act (FDCPA). Specifically, would the debt collector be making a “false, deceptive, or misleading representation,” or using an “unfair or unconscionable means” to collect the debt? Continue reading

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Non-Recourse Loan Redux: Turning into Recourse and Back Again

Mastan v. Salamon (In re Salamon), 854 F.3d 632 (9th Cir. 2017) –

A deed of trust creditor filed a claim in a Chapter 11 case contending that its nonrecourse loan was entitled to treatment as a recourse loan under section 1111(b) of the Bankruptcy Code. The bankruptcy court ruled against the creditor, agreeing with the debtors that the claim was barred by a state anti-deficiency statute. The bankruptcy court decision was affirmed by the 9th Circuit Bankruptcy Appellate Panel (BAP), and the creditor appealed to the 9th Circuit. Continue reading

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Automatic Stay: Beware State Specific Quirks When Filing Liens

In re Linear Electric Co., 852 F.3d 313 (3rd Cir. 2017) –

After a general contractor filed bankruptcy, two of its suppliers filed construction liens against property of owners who had contracts with the contractor. The debtor sought a determination that this violated the automatic stay. The bankruptcy court concluded that the stay was violated; the district court affirmed; and the suppliers appealed to the Third Circuit. Continue reading

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Lease Claims: Exactly How Does the Cap Work?

Kupfer v. Salma (In re Kupfer), 852 F.3d 853 (9th Cir. 2016) –

The controversy before the 9th Circuit involved interpretation of the cap on landlord claims under section 502 of the Bankruptcy Code. Prior to bankruptcy the leases in question had been terminated and were the subject of arbitration. The debtors claimed that the arbitration fees and attorney fees awarded to the landlords were subject to the cap. The bankruptcy court, as affirmed by the district court, held that the fees were not capped.
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