Bankruptcy Sales: Buyers Are Not the Only Ones Who Should Beware

In Re Vista Marketing Group LTD., 557 B.R. 630 (Bankr. N.D. Ill. 2016)

The purchaser of property from a chapter 11 debtor was surcharged by a sanitary district for a connection fee that arose because the initial connection fee was based on estimated water use and actual use exceeded the estimate. The purchaser contested the surcharge on the grounds that it bought the property “free and clear” of the sanitary district’s claims. Continue reading

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When the Debtor Holds a Junior Lien: Can a Senior Lien Creditor March On or Is It Stayed?

Invest Vegas, LLC v. 21st Mortgage Corp. (In re Residential Capital, LLC), 556 B.R. 555 (Bankr. S.D. N.Y. 2016) –

A debtor held a note secured by a first priority deed of trust on property that was also subject to a super priority homeowner’s association lien securing delinquent assessments against the property. The HOA foreclosed its lien after the debtor filed bankruptcy. The issue for the bankruptcy court was whether the HOA violated the automatic stay, and thus whether the deed of trust was extinguished by the foreclosure. Continue reading

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IRS Lien Release: Does Release of A Lien Necessarily Mean That The Underlying Tax Liability Was Satisfied?

Lewis v. IRS (In re Lewis), 557 B.R. 233 (M.D. Ala. 2016)

A chapter 13 debtor objected to a proof of claim filed by the IRS on the grounds that a previously issued Certificate of Release of Federal Tax Lien extinguished not only the tax lien but also the underlying tax debt. The IRS objected, and the bankruptcy court found in favor of the government. The debtor appealed to the district court. Continue reading

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Continuing a Foreclosure Sale: Violation of the Automatic Stay or Not?

Perez v. Deutsche Bank Nat’l Trust Co. (In re Perez), 550 B.R. 527 (1st Cir. BAP 2016)

A chapter 13 debtor sought damages for a mortgagee’s violation of the automatic stay, which he contended occurred when the mortgagee continued a foreclosure sale while the bankruptcy case was pending. The bankruptcy court ruled in favor of the mortgagee, finding that the first continuation of the sale was not willful and the second continuation “merely preserved the status quo.” The debtor appealed to the Bankruptcy Appellate Panel (BAP). Continue reading

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Purchase Agreements: Say What You Mean … The More Precise the Better?

JJCC Real Estate LLC v. Brooklyn Renaissance, LLC (In re Brooklyn Renaissance, LLC), 556 B.R. 68 (Bankr. N.D. N.Y. 2016)

After a proposed sale of the debtor’s real estate failed to close, the debtor declared a default and retained the buyer’s deposit as liquidated damages. The buyer sued to recover its deposit. The complaint included claims for breach of contract, unjust enrichment and fraud. In response the debtor moved to dismiss. Continue reading

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Buyer Standing: No Leg to Stand On

Buyer Standing: No Leg to Stand On

Arlington Capital, LLC v. Bainton McCarthy LLC (In re GT Automation Group, Inc.), 828 F.3d 602 (7th Cir. 2016)

After a debtor’s assets were auctioned off, the bankruptcy trustee unsuccessfully sued the buyer and insiders of the debtor contending that they colluded to depress the purchase price. When the trustee sought court authorization to pay legal fees, the buyer objected. The bankruptcy court approved the fees over its objection and the district court affirmed. So the buyer appealed to the 7th Circuit. The 7th Circuit focused on the threshold issue of whether the buyer had standing. Continue reading

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Time-Barred Proof of Claim: To File or Not to File, That Is the Question

Johnson v. Midland Funding, LLC, 823 F.3d 1334 (11th Cir. 2016)

In two chapter 13 bankruptcy cases that were consolidated on appeal the debtors claimed that a creditor violated the Fair Debt Collection Practices Act (FDCPA) by filing a bankruptcy proof of claim for claims barred by a statute of limitations. The district court found for the creditors on the basis that there was an implied repeal of a portion of the FDCPA by the Bankruptcy Code. The debtors appealed to the 11th Circuit. Continue reading

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