Structured Dismissal: Congress Does Not Hide Elephants in Mouseholes?

Czyzewski v. Jevic Holding Corp., 580 U.S. ____, 137 S.Ct. 973, __ L. Ed. 2d ___ (2017) –

Settlement of LBO litigation led to a structured dismissal of a chapter 11 bankruptcy case that resulted in distributions to general unsecured creditors even though former employees with higher priority wage claims received nothing. The district court and Third Circuit affirmed the bankruptcy court dismissal, and the wage claimants sought and the Supreme Court granted certiorari. Continue reading

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Foreclosure: Debtor Who Fails to Pay Has an Uphill Battle Finding a Remedy Based on Procedural Defects

Turner v. Wells Fargo Bank N.A. (In re Turner), 859 F.3d 1145 (9th Cir. 2017) –

The debtors brought multiple claims following foreclosure of their residence. After the bankruptcy court dismissed the claims in a decision that was affirmed by the Bankruptcy Appellate Panel, the debtors appealed to the 9th Circuit. Continue reading

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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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