Chapter 7 Sales: The Debtor May Be Pretty Much Irrelevant

Pasley v. Keats (In re Pasley), 603 B.R. 6 (6th Cir. BAP 2019) –

A chapter 7 trustee sought to sell real estate owned by the debtor’s limited liability company (LLC). When the bankruptcy court entered an order approving the sale over the debtor’s objection, the debtor appealed to the Bankruptcy Appellate Panel (BAP). Continue reading

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Sale Orders: What Constitutes a Collateral Attack?

Fulmer v. Fifth Third Equipment Finance Co., 931 F.3d 730 (8th Cir. 2019) –

A chapter 7 trustee sued more than 20 defendants alleging more than a dozen causes of action based on an allegation that a higher price could have been obtained at a pre-conversion sale of estate assets. The bankruptcy court dismissed the claims on the grounds that they were either without merit or constituted an impermissible collateral attack on the sale order. The Bankruptcy Appellate Panel affirmed, and the trustee appealed to the Eighth Circuit. Continue reading

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Continuing Perfection: Does a Mortgage Lapse During Bankruptcy If State Law Would Otherwise Require Steps to Maintain Perfection?

River Parishes Dirt & Gravel, LLC v. BankPlus (In re Willow Bend Ventures, LLC), 603 B.R. 293 (Bankr. E.D. La. 2019) –

A lender’s secured claim was challenged on the basis that postpetition it failed to take steps required to maintain perfection of its mortgage as required by state law. The matter turned on whether section 108(c) of the Bankruptcy Code extended the deadline for taking those steps. Continue reading

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Mortgages in Foreclosure: Strategies Can Get Complicated, Particularly When Bankruptcy Is on the Horizon

In re Battershell, 603 B.R. 86 (Bankr. D. N.M. 2019) –

A chapter 13 debtor objected to a proof of claim filed by a junior mortgagee. The claim included an advance used to pay off a senior mortgage that was in foreclosure. The debtor sought to have the advance recharacterized as a purchase of the senior mortgage loan. The junior mortgagee responded that recharacterization would violate the prohibition on modifying rights of a holder of a mortgage secured by the debtor’s principal residence. Continue reading

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Default Interest: What Does the Plan of Reorganization Say?

UMB Bank, N.A. v Linn Energy L.L.C. (In re Linn Energy, L.L.C.), 927 F.3d 350 (5th Cir. 2019) –

A lenders’ agent sought a court order directing payment of postpetition default interest, contending that this was required by the terms of a confirmed plan of reorganization. The bankruptcy court denied the motion; the district court affirmed; and the lenders’ agent appealed to the Fifth Circuit. Continue reading

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Homestead Exemption: The Back Story Matters

In re Montgomery, 602 B.R. 352 (Bankr. S.D. Ohio 2019) –

The debtor claimed a homestead exemption in residential property. The chapter 7 trustee objected that the debtor was not entitled to the exemption because he lived in a camper located on the property and his grandson occupied the house. Continue reading

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Mortgage Defaults: What Is the Most Effective Path for Resolving Troubled Properties?

In re Big Dog II, LLC, 602 B.R. 64 (Bankr. N.D. Fla. 2019) –

A mortgagee sought relief from the automatic stay for cause on the grounds that (1) it was not adequately protected, and (2) the debtor did not have any equity in the property and the property was not necessary for an effective reorganization. Among other things, the debtor argued that there was an equity cushion that provided adequate protection. Continue reading

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