Nondischarge for Fraud and the Like: Going After the Debtor May be Harder Than You Would Expect

Cowin v. Countrywide Home Loans, Inc. (In re Cowin), 864 F.3d 344 (5th Cir. 2017) –

Deed of trust holders sought to except debts from discharge in a debtor’s individual chapter 11 case on the grounds of debtor’s larceny, embezzlement, or willful and malicious injury. This was based on an alleged conspiracy to (1) strip their liens from property through tax lien foreclosure sales and (2) misappropriate excess foreclosure sale proceeds. The bankruptcy court found in favor of the deed of trust holders; the district court affirmed; and the debtor appealed to the Fifth Circuit. Continue reading

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Deficiency Claims: State Law Procedures Can Safely Be Ignored … Or Not

Melikian Enterprises, LLLP v. McCormick, 863 F.3d 802 (8th Circuit 2017)

Individual chapter 11 debtors objected to a proof of claim filed by a deed of trust creditor for the deficiency remaining after a trustee’s sale of their property. The debtors contended that the creditor was not entitled to a deficiency claim because it did not comply with state law, while the creditor argued that the state requirements were not applicable. The bankruptcy court sustained the debtors’ objection; the district court affirmed; and the creditor appealed to the Eighth Circuit. Continue reading

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Sale Free and Clear of Lease: The Battle Between Section 363 and Section 365

Pinnacle Restaurant at Big Sky, LLC v. CH SP Acquisitions, LLC (In re Spanish Peaks Holdings II, LLC), 862 F.3d 1148 (9th Cir 2017)

The buyer of substantially all of the debtor’s real and personal property moved for an order confirming that the sale was “free and clear” of all liens and encumbrances, specifically including restaurant and telecommunication leases. The bankruptcy court ruled in favor of the buyer; the district court affirmed; and the tenants appealed to the 9th Circuit. Continue reading

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Trustee Abandonment: Abandon Not Hope but A Home of Inconsequential Value

Jahn v. Burke (In re Burke), 863 F.3d 521 (6th Cir. 2017) –

After a chapter 7 trustee moved to evict the debtors from their residence, the debtors moved to compel the trustee to abandon the property, arguing that the market value less the amount due on the mortgage left no equity for the bankruptcy estate. The bankruptcy court agreed that the net value was inconsequential and granted the debtors’ motion. The district court concurred, and the trustee appealed to the Sixth Circuit. Continue reading

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Chapter 13 Debtors: Do Not Take It For Granted That a Chapter 13 Debtor Can Exercise Trustee Powers

Andrade v. Essenfeld (In re Andrade), 570 B.R. 121 (Bankr. D. Mass. 2017) –

The debtor owned real estate with her brother and sister as tenants-in-common. After she filed bankruptcy, she sought authority to sell both her interests and the interests of her co-owners in the property under section 363(h) of the Bankruptcy Code. Although the brother and sister did not respond, the court sua sponte dismissed the claim. Continue reading

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Assignment of Rents: Who Has What Interests?

Town Center Flats, LLC v. ECP Commercial II LLC (In re Town Center Flats, LLC), 855 F.3d 721 (6th Cir. 2017) –

A commercial mortgagee exercised its assignment of rents prior to bankruptcy. After it then commenced a foreclosure action, the debtor filed bankruptcy. The mortgagee filed a motion to prohibit the debtor from using rents. The bankruptcy court determined that the rents qualified as cash collateral of the bankruptcy estate and denied the motion. The district court reversed, and the debtor appealed to the 6th Circuit. Continue reading

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Asset Protection: Legitimate Planning or Fraudulent Transfer Based on Actual Intent to Hinder or Delay Creditors (Who Knows)?

Wiggains v. Reed (In re Wiggains), 848 F.3d 655 (5th Cir. 2017) –

A chapter 7 trustee sought to avoid a pre-petition partition of community property as a fraudulent transfer. The bankruptcy court ruled in favor of the trustee. After sale of the property the non-debtor’s wife moved for an award of a portion of the sale proceeds based on her homestead interest. The bankruptcy court determined that she would be limited by her debtor-husband’s capped exemption. Both decisions were appealed directly to the 5th Circuit. Continue reading

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