Non-Dischargeability: Shuffling Assets Among Entities May Lead To Non-Dischargeability No Matter How Indirect and Difficult to Follow

Dz Bank Ag Deutsche Zentral-Genossenschaft Bank v. Meyer, 869 F.3d 939 (9th Cir. 2017)

The debtors caused assets to be transferred out of a closely-held corporation. A bank creditor alleged that the indirect transfer constituted a fraudulent transfer, and as a result the creditor’s debt was non-dischargeable. The bankruptcy court agreed but limited the amount of non-dischargeable debt to the value of assets attributable to the creditor’s security interest. The district court took a different approach that precluded consideration of assets titled in the corporation absent a showing that the corporation was an alter ego of the debtors. The creditor appealed to the 9th Circuit. Continue reading

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Statutory Liens: May Not Necessarily Be Unassailable

Los Angeles County Treasurer v. Mainline Equipment, Inc. (In re Mainline Equipment, Inc.), 865 F.3d 1179 (9th Cir. 2017) –

A Chapter 11 debtor sought to avoid a county’s prepetition personal property tax liens pursuant to section 545 of the Bankruptcy Code. The bankruptcy court ruled in favor of the debtor; the Bankruptcy Appellate Panel (BAP) affirmed; and the county appealed to the Ninth Circuit. Continue reading

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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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