Welcome to the National Consumer Bankruptcy Rights Center (NCBRC), your pivotal resource for the latest developments in consumer bankruptcy law. This page is to keep you informed on the most recent court opinions and legal updates that impact consumer debtors and bankruptcy attorneys across the nation.  We have also included, when available, the briefs submitted in these cases. We hope this will assist you in drafting your appellate arguments and briefs.

Opinion/Briefs (Click)JurisdictionDateSummaryCode/Rule
Ryniker v Sumec Textile2nd Circuit11/22/23The court ruled that the district court's grant of a motion to set aside a default judgment is not a final appealable order. Further, the court found unavailing the "collateral order doctrine" exception.

"First, as a general matter, five circuits have held that an order setting aside a judgment pursuant to Federal Rule of Civil Procedure 60(b) is not an appealable, final order. See Nat'l Passenger R.R. Corp. v. Maylie, 910 F.2d 1181, 1183 (3d Cir. 1990) ("When an order granting a Rule 60(b) motion merely vacates the judgment and leaves the case pending for further determination, the order is akin to an order granting a new trial and in most instances, is interlocutory and nonappealable." (citations omitted)); Joseph v. Off. of Consulate Gen. of Nigeria, 830 F.2d 1018, 1028 (9th Cir. 1987) ("A district court's grant of a motion to set aside a default is not an appealable final order, where the setting-aside paves the way for a trial on the merits." (collecting cases)); Parks By & Through Parks v. Collins, 761 F.2d 1101, 1104 (5th Cir. 1985) ("When an order granting a Rule 60(b) motion[] merely vacates the judgment and leaves the case pending for further determination, the order is akin to an order granting a new trial and is interlocutory and nonappealable." (internal quotation marks and omitted)); Kummer v. United States, 148 F.2d 191, 193 (6th Cir. 1945) ("The order setting aside the default against [one defendant] and allowing her to plead was procedural only, and did not dispose of the case on its merits or determine the litigation between the parties. It was not appealable." (citations omitted)); Arrington v. Duvoisin, 36 F.3d 1091, 1091 (4th Cir. 1994) (unpublished opinion) ("An order granting a motion to set aside a default judgment is not an appealable final order." (collecting cases)). We have not explicitly addressed this issue; however, we see no reason to reach a different conclusion. ...

"We find the Litigation Administrator's attempt to invoke the collateral order doctrine to be similarly unavailing. "The collateral order doctrine . . . is a judicially created exception to the final decision principle; it allows immediate appeal from orders that are collateral to the merits of the litigation and cannot be adequately reviewed after final judgment." Germain v. Conn. Nat'l Bank, 930 F.2d 1038, 1039-40 (2d Cir. 1991). An order is final under the collateral order doctrine if it "(1) conclusively determine[s] the disputed question, (2) resolve[s] an important issue completely separate from the merits of the action, and (3) [is] effectively unreviewable on appeal from a final judgment." EM Ltd. v. Banco Cent. de la República Arg., 800 F.3d 78, 87 (2d Cir. 2015) (internal quotation marks and citation omitted). "In making this determination, we do not engage in an individualized jurisdictional inquiry. Rather, our focus is on the entire category to which a claim belongs." Mohawk Indus., Inc. v. Carpenter, 558 U.S. 100, 107, 130 S. Ct. 599, 175 L. Ed. 2d 458 (2009) (internal quotation marks and citations omitted). Here, there is no question that a district court's vacatur of a default judgment is reviewable on appeal from a final judgment. See, e.g., Johnson v. N.Y. Univ., 800 F. App'x 18, 19-20 (2d Cir. 2020) (summary order) (reviewing the district court's grant of a motion to vacate default judgment under Fed. R. Civ. P. 55(c) together with dismissal of the complaint); Sik Gaek, Inc. v. Yogi's II, Inc., 682 F. App'x 52, 55 (2d Cir. 2017) (summary order) (reviewing the district court's grant of a motion to set aside a notation of default, and subsequent denial of a motion for default judgment, together with its grant of summary judgment in favor of defendant). Therefore, notwithstanding the Litigation Administrator's practical concerns regarding his ability to effectuate service on Sumec and ultimately collect on any judgment, we see no basis to apply the collateral order doctrine to hear an appeal challenging the vacatur of a default judgment which can be reviewed, if necessary, upon the entry of a final judgment in the adversary proceeding."
Rule 9024
LVNV Funding v Myers9th Circuit11/21/23In reversing the BAP's decision, the court allowed a claim that failed to provide documentation necessary to enforce the claim under Nevada law. Since Rule 3001 allowing claims conflicts with Nevada law, the requirements of Rule 3001 prevail.

"The BAP held (and the Debtors conceded) that LVNV's proof of claim complied with Fed. R. Bankr. P. 3001 and was therefore entitled to prima facie validity. But the BAP concluded that LVNV's claim must be disallowed under 11 U.S.C. § 502(b)(1) because the documentation LVNV provided was insufficient to enforce the debt under Nevada law, in that the proof of claim did not comply with Nevada procedural requirements set out in Nev. Rev. Stat. §§ 97A.160 and 97A.165 (collectively, the "Nevada laws"). The BAP erred in this holding, because the principles of Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938), dictate that federal procedural law—Rule 3001, in particular—governs the requirements for a proof of claim.

"Under Erie principles, federal bankruptcy courts apply federal procedural law and state substantive law. See Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443, 450, 127 S. Ct. 1199, 167 L. Ed. 2d 178 (2007). To determine whether a state law applies in a federal action, "we decide whether the state law conflicts with a valid [federal procedural rule]." Martin v. Pierce Cnty., 34 F.4th 1125, 1128 (9th Cir. 2022). A federal procedural rule is valid if it "is a 'general rule[] of practice and procedure' that does 'not abridge, enlarge or modify any substantive right' and is 'procedural in the ordinary use of the term.'" Id. at 1128-29 (citation omitted).

"Here, Rule 3001 clearly controls over the Nevada laws. The Nevada laws conflict with this federal rule because the two give different answers to the same question: What must a creditor provide in support of a proof of claim on an open-end credit card account? See Rule 3001(c)(3); Nev. Rev. Stat. § 97A.160. Furthermore, Rule 3001 is a valid procedural rule. There is a strong presumption that federal rules of procedure have been properly promulgated under the applicable enabling statute and do not impinge on substantive rights. See Hanna v. Plumer, 380 U.S. 460, 471, 85 S. Ct. 1136, 14 L. Ed. 2d 8 (1965). And Rule 3001, in particular, is a typical procedural rule: it does no more than set out the procedural requirements for a proof of claim, see Rule 3001(a)-(e), and specify when a properly executed proof of claim constitutes prima facie evidence of its validity and amount, see Rule 3001(f)-(g). Consequently, Rule 3001 prevails over the Nevada laws, meaning that the Nevada laws are not "applicable law" that can render a claim "unenforceable" under 11 U.S.C. § 502(b)(1). Thus LVNV's failure to comply with Nev. Rev. Stat. §§ 97A.160 and 97A.165 is not a ground for disallowing its proof of claim."
11 U.S.C. § 502(b)(1)
Rule 3001
Paulsen v OlsenD. N.D. IL11/20/23The court made two rulings affirming the bankruptcy court's determination that the debtor's exemption based on tenancy by the entirety should be disallowed. First, the court expressed concern about the number of arguments made in the brief and quoted United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991) ("Judges are not like pigs, hunting for truffles buried in briefs."). Second the court found that under Illinois law, a transfer of an ownership interest in real estate to a tenancy by the entireties can be defeated if the transfer was made solely to protect the property from ongoing collection.

"The Court counts at least eight assignments of error—not including those packed into the Pandora's box of repeated arguments, sub-arguments, and sub-sub-arguments. The Court attempts to address each of the Paulsens' alleged assignments of error in turn. See United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991) ("Judges are not like pigs, hunting for truffles buried in briefs."). ...

"As the Paulsens allude, the "badges of fraud" analysis is "not to be used to avoid a transfer" under 735 ILCS 5/12-112. Premier Prop. Mgmt., Inc. v. Chavez, 191 Ill. 2d 101, 728 N.E.2d 476, 482, 245 Ill. Dec. 394 (Ill. 2000). The "tenancy by the entirety provision," 735 ILCS 5/12-112, "expressly includes its own standard to be used when a creditor challenges a transfer to that estate." Id. at 481. The "sole intent" standard is "substantially different" from the "actual intent" standard in that it "provides greater protections from creditors for transfers of property to tenancy by the entirety." Id. at 482. What's more, "if property is transferred to tenancy by the entirety to place it beyond the reach of the creditors of one spouse and to accomplish some other legitimate purpose, the transfer is not avoidable." Id. Critically, that same transfer "would be avoidable under the actual intent standard, which only requires an actual intent to defraud a creditor." Id.

"The complaint alleges that the transfer of the Paulsens' interests in the residential property was "made by [Mr. Paulsen] with the sole intent to avoid the payment of debt which existed" at the time of the transfer "which was beyond [Mr. Paulsen's] ability to pay as it became due." Dkt. 12-1 at 13-14. This allegation alone is sufficient to state a plausible claim to relief. See RBS Citizens, N.A. v. Gammonley, No. 12 C 8659, 2015 U.S. Dist. LEXIS 2775, at *19-20 (N.D. Ill. Mar. 6, 2015) ("Plaintiff alleges that 'the transfer . . . into a tenancy by the entirety was designed with the sole intent to avoid any creditors pursuant to 735 ILCS 5/12-112.' . . . This is sufficient to withstand a motion to dismiss.")."
In re ByrneBankr. ME11/20/23The court dismissed a chapter 13 bankruptcy under 11 U.S.C. § 1307(c) with a five month bar on refiling for missing an installment payment on her filing fee under 11 U.S.C. § 349(a). The court found that the "the debtor does not understand the importance of (or is not interested in) disclosing the true extent of her financial affairs in connection with a bankruptcy case."

"In general, every petition must be accompanied by the filing fee for commencing the case. Fed. R. Bankr. P. 1006(a). In this case, the debtor made an oral motion to pay the filing fee in installments under Fed. R. Bankr. P. 1006(b)(1). That motion was granted after a hearing on August 10, 2023. The order granting the motion set a schedule for the installment payments and specifically cautioned as follows:

If the debtor misses any of the deadlines set forth in this order, this case will be dismissed without further notice or hearing under 11 U.S.C. § 1307(c) and the Court will impose a ban on the filing of a subsequent bankruptcy petition by the debtor under 11 U.S.C. § 349(a).

[Dkt. No. 10]. This warning should not have come as a surprise to the debtor: similar warnings were given to the debtor during the hearing on August 10. See [Dkt. No. 7]. The debtor made her first two installment payments, but has not made the third, which was due on November 6. She has not asked for additional time to make that payment.

"This chapter 13 case is hereby dismissed for cause under 11 U.S.C. § 1307(c). This dismissal is with prejudice to the debtor's right to commence a voluntary case under any chapter of the United States Bankruptcy Code in any court through and including April 20, 2024. See 11 U.S.C. § 349(a). This five-month ban on future filings is being imposed because the debtor's performance in connection with this case and another recent attempt to obtain chapter 13 relief has been woefully deficient. In neither case has the debtor shown a good faith effort to perform the duties imposed by law on an individual who seeks a chapter 13 discharge. Chapter 13 is complex, and the debtor has attempted to navigate the process without the benefit of counsel. That said, the debtor has been given as much in the way of explanation and latitude as any litigant can reasonably expect from any court. Based on a review of the filings in this case and in the debtor's prior case — Case No. 22-10117 - and based on the representations made by the debtor in multiple hearings in both cases, the Court is left with the definite and firm conviction that the debtor does not understand the importance of (or is not interested in) disclosing the true extent of her financial affairs in connection with a bankruptcy case.
11 U.S.C. § 349(a)
11 U.S.C. § 1307©
In re Vien Thi Ho9th Circuit BAP11/17/23The court affirmed the bankruptcy court's dismissal of an action for violation of the automatic stay when the chapter 7 debtor filed bankruptcy one day before the creditor filed a state court libel complaint and did not list the creditor in her schedules. The court addressed the following issues: Did the bankruptcy court abuse its discretion by dismissing Debtor's adversary complaint? Did the bankruptcy court err by denying leave to amend the adversary complaint?

"Debtor's complaint is nearly devoid of factual allegations and thus, dismissal was unquestionably appropriate. While the complaint is replete with legal conclusions, the only real fact Debtor alleges is that Ms. Roshanian filed and maintained the Libel Action after the petition date. Not only does Debtor fail to make any argument relevant to the stay violation claim, but her own admissions—and the court's prior findings of fact—foreclose any possibility of a willful stay violation.

"Section 362(a)(1) prohibits the commencement or continuation of a judicial action against a debtor to recover a prepetition claim. A creditor commits a willful violation of the automatic stay if she knows of the stay and her actions that violate the stay are intentional. Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210, 1215 (9th Cir. 2002).

"Filing and maintaining the Libel Action is a clear violation of the stay, but Debtor did not allege that Appellees had notice of the stay, and the court specifically found they did not have notice until July 7, 2022. Thus, Appellees' actions were not a willful violation of the stay. ...

"Pursuant to Civil Rule 15, made applicable by Rule 7015, leave to amend a complaint should be freely given when justice so requires. The court "should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). "This policy is 'to [*13] be applied with extreme liberality,'" Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (per curiam) (quoting Owens v. Kaiser Foundation Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001)), and the rule favoring liberal application "is particularly important for the pro se litigant," Crowley v. Bannister, 734 F.3d 967, 977-78 (9th Cir. 2013).

"In determining whether to grant leave to amend, the bankruptcy court should consider several factors including: (1) undue delay; (2) bad faith or dilatory motive by the movant; (3) repeated failure to cure deficiencies by previous amendments; (4) undue prejudice to the opposing party; and (5) futility of amendment. Brown v. Stored Value Cards, Inc., 953 F.3d 567, 574 (9th Cir. 2020) (citing Foman, 371 U.S. at 182). The consideration of prejudice to the opposing party carries the greatest weight. Eminence Cap., LLC, 316 F.3d at 1052. "Absent prejudice, or a strong showing of any of the remaining Foman factors, there exists a presumption under Rule 15(a) in favor of granting leave to amend." Id. (citation omitted).

"Debtor does not make any cogent argument why the court abused its discretion in denying leave to amend. She cites the Foman factors, but she does not address how the court abused its discretion by determining that amendment would be futile or that it would prejudice Appellees. Moreover, we find no abuse of discretion."
11 U.S.C. §§ 362(a) &(k)
Rule 7015
Johnson v Bankers Healthcare Grp9th Circuit11/16/23In affirming the non-dischargeability of the underlying debt under 11 U.S.C. §§ 523(a)(2)(A) & (B), the court refused to hear the appellant's argument on the damage award on appeal because it was not raised below and no exceptions applied.

"We turn to Dr. Johnson's argument that the bankruptcy court erred in its award of damages to BHG. Dr. Johnson did not "specifically and distinctly" raise this argument below. Padgett v. Wright, 587 F.3d 983, 985 n.2 (9th Cir. 2009). Thus, he has waived the argument by not raising it with the BAP. See In re Burnett, 435 F.3d 971, 975-76 (9th Cir. 2006) (HN6 "Absent exceptional circumstances, issues not raised before the BAP are waived."). While we have recognized three exceptions to the general waiver rule, none of them applies here because Dr. Johnson failed to explain why he did not raise the issue before the BAP, there is no evidence that a change in law provided a new ground for this appeal, and this issue is not a purely legal one. See In re Mercury Interactive Corp. Sec. Litig., 618 F.3d 988, 992 (9th Cir. 2010). We decline to address Dr. Johnson's damages argument."
11 U.S.C. §§ 523(a)(2)(A) & (B)
In re Kane

Kane - Appellants Brief

Kane - Appellees Brief

Kane - Appellants Reply Brief
9th Circuit11/15/23The court affirmed the bankruptcy court's denial of a motion to convert the chapter 7 to a chapter 11 case. The court held it was not an abuse of discretion to consider the debtor's post-petition income when deciding whether to convert the case.

"South River first argues that the bankruptcy court erred by considering Kane’s interest in his post-petition income because that interest runs contrary to the goals and policies of the Bankruptcy Code. But Chapter 7 explicitly allows debtors to keep their post-petition income to further the goals of the Bankruptcy Code. Chapter 7 “allows a debtor to make a clean break from his financial past, but at a steep price: prompt liquidation of the debtor’s assets.” Harris v. Viegelahn, 575 U.S. 510, 513 (2015). In exchange for that “steep price,” the debtor’s post-petition earnings are shielded from creditors, enabling the debtor “to make the ‘fresh start’ the Bankruptcy Code aims to facilitate.” Id. at 518 (quoting Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367 (2007)). It was therefore not an abuse of discretion to consider Kane’s interest in his post-petition earnings when deciding whether to convert the case.

"South River also argues that the revisions to the Bankruptcy Code in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) reflect an “expectation that a debtor will pay a portion of disposable income to creditors.” But BAPCPA’s relevant revisions to Chapter 7 apply only to debtors with primarily consumer debts, and South River conceded that Kane did not fall into that category. Because the relevant provisions of BAPCPA did not apply to Kane, there was no need for the bankruptcy court to address them. "
11 U.S.C. § 706(b)
In re Thurman-Prior

Thurman - Motion to Dismiss

Thurman - Brief in Response to Motion to Dismiss
Bankr. W.D. MI11/14/23The court held that an incorrectly listed creditor may file an untimely non-dischargeability complaint under 11 U.S.C. § 523(a)(2) through 11 U.S.C. § 523(a)(3).

Prior to filing the debtor owed the Michigan Department of Health and Human Services for an overpayment. The debtor identified the creditor as the State of Michigan and included an address found on the last demand letter. Subsequent to the 60 day deadline to file a dischageability complaint based on fraud, the creditor filed an adversary proceeding to determine that the debt was non-dischargeable under Section 523(a)(3). The debtor filed a motion to dismiss.

"In general, § 523(c) requires creditors seeking to except debts from discharge under § 523(a)(2), (4), or (6) to obtain a nondischargeability determination from the bankruptcy court by filing an adversary proceeding. 11 U.S.C. § 523(c); see also Fed. R. Bankr. P. 7001(6). Bankruptcy Rule 4007(c) governs the time for bringing such a request. In chapter 13 cases, it provides that a complaint to determine the dischargeability of a debt under § 523(a)(2) or (4) must be filed "no later than 60 days after the first date set for the meeting of creditors under § 341(a)." Fed. R. Bankr. P. 4007(c). This time period may be extended "for cause," but only if a party in interest files a motion to extend prior to expiration of the 60-day period. Id. In this case, the 60-day period for filing a complaint to determine the dischargeability of debts under § 523(a)(2) or (4) expired on January [*11] 3, 2023. There is no question that the MDHHS failed to file its adversary complaint or a motion to extend prior to the deadline.

"If, however, the MDHHS lacked timely notice of the Debtor's bankruptcy case, as it has alleged, the debt it is owed may be excepted from discharge under § 523(a)(3). See In re Wilcox, 529 B.R. 231, 236 (Bankr. W.D. Mich. 2015); see also Chemetron Corp. v. Jones, 72 F.3d 341, 346 (3d Cir. 1995) ("Inadequate notice is a defect which precludes discharge of a claim in bankruptcy."). Section 523(a)(3) governs the claims of creditors who are omitted from the debtor's schedules....

"Pursuant to Bankruptcy Rule 4007(b), a complaint to determine the dischargeability of a debt under § 523(a)(3) "may be filed at any time." Fed. R. Bankr. P. 4007(b) (establishing the [*12] time frame for filing a complaint "other than under § 523(c)"); In re Wilcox, 529 B.R. at 236 n.6 ("A complaint to except a debt from discharge under § 523(a)(3) is a complaint 'other than under §523(c),' even if the debt is 'of a kind' described in § 523(a)(2), (a)(4), and (a)(6).") The rationale for this distinction is readily apparent, as it would not make sense "to hold creditors to a deadline of which they were not aware, especially given a debtor's duty - the first duty listed in the statute - to make them aware by filing a list of all creditors so that they may have notice of the proceedings in time to participate." In re Wilcox, 529 B.R. at 236 (citing 11 U.S.C. § 521(a)(1)(A)).

"In this proceeding, it is undisputed that the MDHHS lacked actual notice of the Debtor's bankruptcy filing prior to the deadline for filing a nondischargeability complaint because both the Notice of Chapter 13 Bankruptcy Case and the Chapter 13 Plan were served electronically on the MARCS Bankruptcy Unit, which is not affiliated with the MDHHS. ...

"For the foregoing reasons, the court concludes that the MDHHS did not receive adequate notice of the Debtor's bankruptcy case in time to file a timely nondischargeability complaint. As a result, the MDHHS may seek a determination that the debt it is owed is nondischargeable under § 523(a)(3). The Debtor's Motion to Dismiss the complaint as untimely is denied and a separate order shall be entered accordingly."
11 U.S.C. § 521(a)(1)(A)
11 U.S.C. § 523(a)(2)
11 U.S.C. § 523(a)(3)
11 U.S.C. § 523(c)
Rule 1007(a)(1)
In re Ky Emps Ret Sys

Ky Emps Petition for Writ of Mandamus
6th Circuit11/14/23The court denied an appellant's petition for writ of mandamus to direct the bankruptcy court to enter final judgment pursuant to an opinion and mandate in a parallel appeal.

""The traditional use of the writ in aid of appellate jurisdiction . . . has been to confine the court against which mandamus is sought to a lawful exercise of its prescribed jurisdiction." Cheney v. U.S. Dist. Ct. for D.C., 542 U.S. 367, 380 (2004) (cleaned up). Because "the writ is one of 'the most potent weapons in the judicial arsenal,'" reserved for only extraordinary causes, three conditions must be present before the petitioner can obtain relief. Id. (quoting Will v. United States, 389 U.S. 90, 107 (1967)). First, the petitioner cannot have adequate alternative means to obtain the relief it seeks—"a condition designed to ensure that the writ will not be used as a substitute for the regular appeals process." Id. at 380-81. Second, the petitioner must show a "clear and indisputable" right to the relief sought. Id. at 381 (quoting Kerr v. U.S. Dist. Ct. for N.D. Cal., 426 U.S. 394, 403 (1976)). "Third, [*2] even if the first two prerequisites have been met, the issuing court, in the exercise of its discretion, must be satisfied that the writ is appropriate under the circumstances." Id.

"KERS has multiple adequate alternative means to obtain review of the bankruptcy court's order. To begin, KERS already has a pending interlocutory appeal before us from the district court's order denying leave to appeal. See In re Seven Cntys Servs., Inc., No. 23-5383 (6th Cir. 2023).

"We have rejected similar attempts in the past, denying protective mandamus petitions on the ground that a parallel direct appeal provides an adequate alternative means to relief. See, e.g., In re Harris Cnty., TX, No. 22-3493 (6th Cir. Dec. 13, 2022). And the Supreme Court has long held that mandamus should not be used to circumvent or accelerate the appeals process. See Ex parte Fahey, 332 U.S. 258, 260 (1947) ("[Common law writs] should be resorted to only where appeal is a clearly inadequate remedy. We are unwilling to utilize them as a substitute for appeal.")."
In re Fletcher

Fletcher - Appellants Brief

Fletcher - Appellees Brief

Fletcher - Appellants Reply Brief
E.D. MI11/14/23The court ruled that a chapter 7 discharge is not an automatic bar to conversion to a chapter 13.

Prior to filing her chapter 7 bankruptcy, the debtor conveyed a one-half interest in her residence to her daughter. Post-discharge the debtor was concerned that the chapter 7 trustee would pursue the daughter for a fraudulent conveyance. The debtor filed a motion to set aside the discharge order and convert the case to a chapter 7.

"Under the Bankruptcy Code, a Chapter 7 debtor "may convert" to Chapter 13 "at any time" as long as the case has not previously been converted and the debtor qualifies as a Chapter 13 debtor. 11 U.S.C. § 706(a), (d). The Supreme Court has rejected [*4] the argument that the right to convert is absolute and held that the Bankruptcy Code does not limit the authority of the court to deny a motion to convert upon a showing of bad faith on the part of the debtor. Marrama v. Citizens Bank, 549 U.S. 365, 370-71, 127 S. Ct. 1105, 166 L. Ed. 2d 956 (2007). The Bankruptcy Court here did not reach the issues of bad faith or whether Appellant otherwise qualifies as a Chapter 13 debtor. Instead, it found that the previously issued discharge in Appellant's Chapter 7 case precluded conversion. As noted in the Bankruptcy Court's order denying Appellant's motion for reconsideration, this is consistent with a number of cases, including In re Alcantar, No. 19 B 24926, 2021 Bankr. LEXIS 2488 (Bankr. N.D. Ill. Sept. 10, 2021), that have reached this conclusion.1 (See ECF No. 5, PageID.118 (citing cases).) These cases assume that post-discharge, there are no remaining debts to be paid pursuant to a Chapter 13 plan. See, e.g., Alcantar, 2021 Bankr. LEXIS 2488 at *10. But there is another line of cases that has rejected this holding. See, e.g., Mason v. Young (In re Young), 237 F.3d 1168, 1173-74 (10th Cir. 2001); In re Oblinger, 288 B.R. 781, 785 (Bankr. N.D. Ohio 2003); In re Carter, 285 B.R. 61, 68 (Bankr. N.D. Ga. 2002); In re Mosby, 244 B.R. 79, 88 (Bankr. E.D. Va. 2000). ...

"The Court finds this analysis persuasive. This reasoning also refutes the notion that only non-dischargeable debt would be subject to any Chapter 13 plan. See In re Croghan, No. 21-10523, 2022 Bankr. LEXIS 3535, at *3-4 (Bankr. N.D. Ind. Aug. 31, 2022) (overruling an objection to a claim on the basis of a discharge entered prior to conversion from Chapter 7 to Chapter 13); In re Pike, 622 B.R. 898, 903 (Bankr. S.D. Ill. 2020) (same). And to the extent Appellee raises the issue of a potential abuse of the bankruptcy process, as the Mosby court reasoned, "the court is not without the means to deal with such attempts on a case by case basis."2 Mosby, 244 B.R. at 86. Thus, the Court finds that a Chapter 7 discharge is not an automatic bar to conversion to a Chapter 13 proceeding. This finding does not necessarily lead to a conclusion that Appellant is entitled to convert her case here. Instead, on remand, the Bankruptcy Court must consider whether Appellant qualifies as a Chapter 13 debtor. See Marrama, 549 U.S. at 374-76."
11 U.S.C. § 706
Purdy v Burnett

Purdy - Appellants Brief

Purdy - Appellees Brief

Purdy - Appellants Reply Brief
E.D. NC11/13/23The court affirmed the bankruptcy court's imposition of a ten and five year bar on refiling for the debtors. The debtors sought review, in part, on the length of time they were barred from refiling another bankruptcy.

"The Purdys contend that the bankruptcy [*10] court improperly dismissed their case with prejudice and improperly barred them from refiling bankruptcy for a period of time. See [D.E. 17] 22-23. "Unless the court, for cause, orders otherwise, the dismissal of a case under this title does not bar the discharge, in a later case under this title, of debts that were dischargeable in the case dismissed." 11 U.S.C. § 349(a). Except as provided in 11 U.S.C. § 109(g), dismissal of a case does not "prejudice the debtor with regard to the filing of a subsequent [bankruptcy] petition." See id. If a debtor's case "was dismissed by the court for willful failure of the debtor to abide by orders of the court," then the debtor may not refile for bankruptcy for 180 days. 11 U.S.C. § 109(g). This provision, however, "merely provides a minimum amount of time before a case may be refiled, not a maximum period of time for which the bankruptcy court may dismiss a case with prejudice when there is a dismissal for cause." Lerch v. Fed. Land Bank of St. Louis, 94 B.R. 998, 1001 (N.D. 111. 1989) (emphasis in original); see In re Tomlin, 105 F.3d 933, 939 (4th Cir. 1997); In re Stockwell, 579 B.R. 367, 373 (Bankr. E.D.N.C. 2017); In re Weaver, 222 B.R. 521, 523 n.1 (Bankr. E.D. Va. 1998); In re Robertson, 206 B.R. 826, 830-31 (Bankr E.D. Va. 1996); In re Jolly, 143 B.R. at 387.

"The bankruptcy court properly found that "a substantial temporal bar on filing subsequent petitions is appropriate." [D.E. 10-2] 19. The evidence established that Amanda Purdy intentionally devised a scheme to forge a letter from the Trustee to obtain [*11] a debt that she knew violated court orders. See id. Even if Marcus Purdy had no knowledge of Amanda Purdy's forgery, Marcus Purdy knew the court had explicitly denied the Purdys' requests to incur the debt, and he reaped the benefits of the Veterans United mortgage anyway. See id. The Trustee asked the bankruptcy court to bar the Purdys from refiling for bankruptcy for 15 years. See [D.E. 10-1] 25. Ultimately, the bankruptcy court barred Amanda Purdy from filing for bankruptcy for ten years and barred Marcus Purdy from filing for bankruptcy for five years. See [D.E. 10-2] 4. The record supports the bankruptcy court's finding of bad faith and that the Purdys egregiously abused the bankruptcy system. Accordingly, the court affirms the bankruptcy court's decision to bar the Purdys from refiling for bankruptcy for several years."
11 U.S.C. § 109(g)
In re Chen

Chen - Appellants Brief

Chen - Appellees Brief

Chen - Appellants Reply Brief
9th Circuit BAP11/13/23The court ruled that a chapter 13 plan may modify and bifurcate an undersecured lien secured by the debtor's principal residence pursuant to 11 U.S.C. § 1322(c)(2).

"...Mission Hen argued that the plan violated the anti-modification provision of § 1322(b)(2). It argued that a chapter 13 plan may not modify a lien secured only by a debtor's principal residence, including a claim that is undersecured. While § 1322(c)(2) allows a modification of a "payment of the claim" if the final payment falls within the plan term, Mission Hen argued that [*8] the statute allows for modification of only the payment term, not the claim itself. ...

"Mission Hen asserts that the reasoning of Nobelman v. American Savings Bank, 508 U.S. 324 (1993), prohibits the bankruptcy court from modifying anything other than the repayment terms of its claim. In Nobelman, the bankruptcy court denied confirmation of a chapter 13 plan that would have allowed the debtors to bifurcate the secured creditor's lien on their real property into unsecured and secured claims [*13] and to make payments on only the secured portion. ...

"Mission Hen's argument based on Nobelman fails. The Court's decision was founded on statutory interpretation. About a year after the Nobelman decision, Congress amended the statute by enacting current § 1322(c)(2). Congress undoubtedly has the power to overcome the Supreme Court's interpretation of a statute by amending the statute. Nobelman does not help us construe the amended statute. See In re Collier-Abbott, 616 B.R. 117, 122 (Bankr. E.D. Cal. 2020) ("When the Supreme Court issued its ruling in Nobelman, there was not, and there could not have been, consideration of the then yet to be enacted exception to 11 U.S.C. § 1322(b)(2) residence secured claim valuation limitation.").

"Although the Ninth Circuit has not squarely addressed whether § 1322(c)(2) permits the bifurcation and stripdown of an undersecured, soon-to-mature claim, the [*14] Fourth Circuit, Eleventh Circuit, and other courts have answered in the affirmative. ...

"Therefore, because Mission Hen's secured claim matures during the plan term, the plain language of § 1322(c)(2) allows the Debtors to bifurcate and cram down the Mission Hen claim.4 The bankruptcy court did not err in holding that Mission Hen's claim was not protected by the anti-modification provision."
11 U.S.C. § 1322(b)(2)
11 U.S.C. § 1322(c)(2)
Truong v Crandall

Truong Motion for Leave to Interlocutory Appeal

Truong Response to Motion

Truong Reply to Response to Motion
D. OR11/9/23The court ruled that the Business Judgment Rule applies to the rejection of a real estate purchase contract in a chapter 13 plan. Further, the court affirmed the bankruptcy court's ruling that debtor's second plan, which purported to provide reasons for the rejection, was barred by the law of the case doctrine.

In the debtor's first plan proposing to reject the executory contracts, he did not adequately explain the reasons for the rejection. "Under the "business judgment" rule, a bankruptcy court should approve rejection of an executory Contract unless the debtor's reasoning behind rejection "is so manifestly unreasonable that it could not be based on sound business judgment." Id. at 13 (quoting In re Pomona Valley Med. Grp., Inc., 476 F.3d 665, 670 (9th Cir. 2007)). The court found that Mr. Truong failed to offer any evidence that he was exercising sound business judgment and rejected his plan....

"There is no substantial ground for difference of opinion on whether the business judgment rule applies to the rejection of a real estate purchase contract in Chapter 13 because the circuits are not in dispute on this question and it is not a novel or difficult issue of first impression.

"Bankruptcy Code § 1322(b)(7) provides that a Chapter 13 plan may provide for the assumption, rejection, or assignment of any executory contract or unexpired lease "subject to section 365 of this title." 11 U.S.C. § 1322(b)(7). Section 365 authorizes a debtor to assume or reject an executory contract "subject to court approval." 11 U.S.C. § 365(a). The Supreme Court endorsed use of the business judgment rule under Section 365(a) as early as 1943. Grp. of Institutional Inv'rs v. Chicago, Milwaukee, St. Paul & Pac. R. Co., 318 U.S. 523, 550, 63 S. Ct. 727, 87 L. Ed. 959 (1943) ("[T]he question whether a lease should be rejected and if not on what terms it should be assumed is one of business judgment."). And when discussing whether a higher standard should apply to collective bargaining agreements, the Supreme Court has acknowledged that "the traditional 'business judgment' standard [is] applied by the courts [*11] to authorize rejection of the ordinary executory contract." N.L.R.B. v. Bildisco & Bildisco, 465 U.S. 513, 523, 104 S. Ct. 1188, 79 L. Ed. 2d 482 (1984). ...

"The law of the case doctrine expresses the practice of courts generally to refuse to reopen issues that have been decided. Jeffries v. Wood, 114 F.3d 1484, 1489 (9th Cir. 1997), rev'd on other grounds. It is a jurisprudential doctrine which applies when the issue in question was decided either expressly, or by necessary implication in the previous disposition. Id., Thomas v. Bible, 983 F.2d at 154. The Ninth Circuit has held that the doctrine applies to interlocutory orders as it was created to avoid reconsideration of settled matters during a single continuing lawsuit. Pit River Home & Agric. Coop. Ass'n v. United States, 30 F.3d 1088, 1097 (9th Cir. 1994). Here, the bankruptcy court's decision to reject Mr. Truong's initial plan was an interlocutory [*13] decision.

The bankruptcy judge acknowledged, as I do here, the tension between the liberal standards for modification of Chapter 13 plans and the policy underlying the law of the case doctrine. Hearing Tr. [ECF 7] at 25. But the policy reasons underlying the doctrine as described in the Ninth Circuit are fully applicable to Chapter 13 bankruptcy proceedings. Id. at 27. Litigants in bankruptcy proceedings have the same interest in certainty as other litigants, and bankruptcy courts have the same interest in judicial economy. Other courts have invoked these policy reasons to support applying the law of the case in the context of an amended plan. E.g., In re Budd, No. 20-21419-ABA, 2022 Bankr. LEXIS 592, 2022 WL 660591, at *7 (D.N.J. Mar. 4, 2022) ("The Debtor had his day in court."). Therefore, the question of applicability of the law of the case doctrine here is not a novel or difficult issue of first impression.

"I further note that if I take up the second way of characterizing Mr. Truong's question, whether the bankruptcy judge erred in applying the doctrine in this case, there is still no ground for substantial difference of opinion. A court's decision whether to apply the doctrine is reviewed for abuse of discretion. Stacy v. Colvin, 825 F.3d 563, 568 (9th Cir. 2016). Here, the judge acknowledged the exceptions where the doctrine [*14] should not be applied. Hearing Tr. [ECF 7] at 27. The judge acknowledged that Mr. Truong presented new information but found it vague and hypothetical. Id at 18. Bearing the relevant standard in mind, a fair-minded jurist could not conclude that me [sic] judge abused his discretion."
11 U.S.C. § 365
11 U.S.C. § 1322(b)(7)
In re ParsonsBankr. W.D. TN11/9/23The court denied the chapter 7 pro se debtors' request to release unclaimed funds four years after their case was closed.

"Section 347(a) of the Bankruptcy Code addresses the disposition of unclaimed property in chapter 7 cases. ... Once unclaimed funds are deposited with the court, disposition of those funds is governed by Chapter 129 of title 28. ...

"Section 2042 of chapter 129 governs the withdrawal procedure for unclaimed funds deposited with a court. ...

""There are three requirements that a claimant must meet to withdraw funds held under these statutes." In re Bradford Prod., Inc., 375 B.R. 356, 358-59 (Bankr. E.D. Mich. 2007). "First, the claimant must file a petition." Id. at 359. "Second, there must be notice of the petition to the United States attorney." Id. "The third requirement is that the claimant must show that it is 'entitled to any such money' by providing 'full proof of the right thereto.'" Id. The Debtors in the case at bar failed to satisfy [*11] the second and third prongs of the Bradford test and, thus, their Application must be denied. ...

"In pursuing an application for payment of unclaimed funds, the movant carries the burden of proof and must demonstrate its entitlement to the funds by a preponderance of evidence. In re Transp. Grp., Inc., No. 93-30015, 2007 Bankr. LEXIS 667, 2007 WL 734817, at *2 (Bankr. W.D. Ky. Mar. 7, 2007). "Under statutory requirements and due process principles, the Court has the duty to protect the original claimant's property interest by making sure that unclaimed funds are disbursed to their true owner." In re Applications for Unclaimed Funds Submitted in Cases Listed on Exhibit "A", 341 B.R. 65, 69 (Bankr. N.D. Ga. 2005). ...

"Pursuant to 28 U.S.C. § 2041, "[t]he 'rightful owner' of unclaimed funds paid into the Court under § 347(a) is the holder of the proof of claim on account of which the trustee made the distribution." In re Applications for Unclaimed Funds Submitted in Cases Listed on Exhibit "A," 341 B.R. at 69."
11 U.S.C. § 347(a)
28 U.S.C. § 2041
28 U.S.C. § 2042
In re Stevenson

Stevenson - Obj to Confirmation

Stevenson - Response to Obj to Conf
Bankr. E.D. VA11/8/23The court held that even in the absence of in personam liability against the debtor, a mortgage creditor's claim against the debtor's inherited property is a claim and can be cured pursuant to 11 U.S.C. § 1322(b)(2).

"The question is whether Wesbanco's in rem rights against the Property constitute a "claim" as defined by section 101(5) of the Bankruptcy Code, which claim can properly be included in the Plan.

"The Fourth Circuit has not addressed this issue. Across the county, there is a split of authority as to whether a Chapter 13 plan may cure a defaulted secured claim when no privity of contract exists between the debtor and the creditor. The majority of courts apply the Supreme Court's broad interpretation of "claim" in Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991), to permit confirmation of Chapter 13 plans that cure arrears where there are only in rem rights and no contractual privity between the debtor and creditor. See, e.g., In re Curinton, 300 B.R. 78, 80 (Bankr. M.D. Fla. 2003); Bank of America, N.A. v. Garcia (In re Garcia), 276 B.R. 627 (Bankr. D. Ariz. 2002); In re Trapp, 260 B.R. 267 (Bankr. D.S.C. 2001); In re Allston, 206 B.R. 297 (Bankr. E.D.N.Y. 1997); In re Rutledge, 208 B.R. 624 (Bankr. E.D.N.Y. 1997); In re Hutcherson, 186 B.R. 546 (Bankr. N.D. Ga. 1995); Citicorp Mortgage, Inc. v. Lumpkin (In re Lumpkin), 144 B.R. 240 (Bankr. D. Conn. 1992)). On the other hand, a minority of courts interpret "claim" narrowly, such that a "claim" does not exist when there is no in personam liability. See, e.g., In re Parks, 227 B.R. 20 (Bankr. W.D.N.Y. 1998); Ulster Savings Bank v. Kizelnik (In re Kizelnik), 190 B.R. 171 (Bankr. S.D.N.Y. 1995); In re Threats, 159 B.R. 241 (Bankr. N.D. Ill. 1993).

"The Court finds Johnson to be instructive and will adopt the majority approach."
11 U.S.C. § 101(5)
11 U.S.C. § 1322(b)(2)
IRS v Wallace

IRS v Wallace - Motion for Leave to Take Interlocutory Appeal

IRS v Wallace - Response to Motion
C.D. IL11/7/23The court ruled that a dischargeability adversary brought by a chapter 7 debtor against the Internal Revenue Service is not a justiciable controversy unless the IRS has threatened to collect on the disputed debt.

"The IRS cites a string of cases indicating that "dischargeability [*13] actions brought by debtors against the United States before the IRS had staked out a position on the dischargeability of the subject federal tax debts and commenced (or threatened to commence) collection activity are not currently justiciable disputes." Doc. 3 at 13 (citing Hinton v. United States, JHL-09-6920, 2011 U.S. Dist. LEXIS 52103, 2011 WL 1838724 (N.D. Ill. May 12, 2011); Namai v. United States (In re Namai), MMH-20-44, 2023 Bankr. LEXIS 2080, 2023 WL 5422627 (Bankr. D. Md. Aug. 21, 2023); Erikson v. United States (In re Erikson), WS-12-5546, 2013 Bankr. LEXIS 2049, 2013 WL 2035875 (Bankr. E.D. Mich. May 10, 2013); Sheehan v. United States (In re Sheehan), AIH-09-1351, 2010 Bankr. LEXIS 3884, 2010 WL 4499326 (Bankr. N.D. Ohio. Oct. 29, 2010); Mlincek v. United States (In re Mlincek), 350 B.R. 764 (Bankr. N.D. Ohio. 2006).16 The Court has reviewed these cases and adopts their reasoning but refrains from rehashing the repeated analysis in its entirety. Instead, the Court notes that these decisions arising from debtor-initiated adversarial proceedings without imminent threat of an IRS collection are rooted in principles of justiciability. Whether a court abstained from presiding over a case or dismissed an adversarial complaint for lack of jurisdiction, the underlying principle remains the same: A debtor does not have carte blanche to bring an action under § 523(a)(1) to determine whether his tax debts are excepted from discharge, as there is no justiciable controversy unless the IRS has argued that the exception applies or has otherwise threatened to collect the debtor's tax debts. ...

"This Court is confident that, had the IRS threatened to collect Mr. Wallace's tax debt when he [*14] filed his Complaint, then he would have had standing to determine the extent of the dischargeability of his tax debts, as his injury (i.e., the IRS collection) would have most certainly been imminent and the case would have been ripe. Mathis v. Metro. Life Ins. Co., 12 F.4th 658, 663-64 (7th Cir. 2021) ("A case is ripe when it is not dependent on contingent future events that may not occur as anticipated, or indeed may not occur at all.") (quotation omitted).18 In this way, and in this case, the issues of standing and ripeness cannot help but bleed into one another and form a justiciable controversy. See Smith v. Wis. Dep't of Agric., Trade & Consumer Prot., 23 F.3d 1134, 1141 (7th Cir. 1994) ("The doctrines of standing and ripeness are closely related, and in cases like this one perhaps overlap entirely."). And so, under such hypothetical facts, the Bankruptcy Court could have rightly found it had subject matter jurisdiction over the Complaint. See Ind. Right to Life, Inc. v. Shepard, 507 F.3d 545, 549 (7th Cir. 2007) ("A case or controversy requires a claim that is ripe and a plaintiff who has standing.")."
11 U.S.C. § 523(a)(1)(c)
In re Powell

Powell - Emergency Motion for Stay
M.D. PA11/6/23The appellate court rejected debtor's argument that the bankruptcy court used the wrong standard of proof under the doctrine of "invited error". Debtor's counsel verbally stated that he had "a high burden to meet" under the clear and convincing standard.

"As an initial matter, even if the Court were to accept the argument that Judge Conway erred in applying the clear and convincing standard, as Powell had only one prior bankruptcy matter pending within one year of the underlying matter,4 any such error was invited by Powell. "The doctrine of invited error refers to an error that a party cannot complain of on appeal because the party, through conduct, encouraged or prompted the trial court to make the erroneous ruling."5 "That is to say, when a litigant takes an unequivocal position [below], he cannot on appeal assume a contrary position simply because the decision in retrospect was a tactical mistake, or perhaps a candid but regretted concession."6 In the underlying proceedings, Judge Conway explicitly asked Powell's attorney—the same attorney representing Powell on appeal before this Court—whether they were proceeding under 11 U.S.C. § 362(c); Powell's attorney agreed that they were, and stated that he understood [*3] he had "a high burden to meet" under the clear and convincing evidence standard.7 Powell's attorney then argued at length regarding the clear and convincing standard, and asserted that the evidence met that standard.8 As a consequence, Powell invited any purported error, and may not challenge on appeal the standard of proof required by Judge Conway."
11 U.S.C. § 362(c)
In re Sperry

Sperry - UST Motion to Dismiss

Sperry - Debtors Brief

Sperry - UST Supplemental Brief
Bankr. CT11/6/23The court granted the United States Trustee's motion to dismiss a chapter 7 case converted from chapter 13 under the totality of the circumstances. During the chapter 13 bankruptcy, the debtor had successfully modified his mortgage which eliminated a $104,000 mortgage arrearage and correspondingly a monthly cure payment of $1,745.86. After conversion the UST moved to dismiss based on the debtor's ability to pay unsecured creditors subsequent to the modification.

The court ruled that bad faith under means test is calculated at the time of the original filing unless there was a bad faith conversion. "Regarding the relevant date for the Means Test calculation, the conversion of a case from one chapter to another "does not effect a change [*11] in the date of the filing of the petition, the commencement of the case, or the order for relief." 11 U.S.C. § 348(a); ... A finding of bad faith in conversion would reset the relevant date for the Means Test from the "date of the filing of the petition, the commencement of the case, or the order for relief" to the conversion date. 11 U.S.C. § 348(f); 11 U.S.C. § 348(a)."

However, the court ruled it could examine the post-petition ability to pay unsecured creditors under the totality of circumstances test. "Although this Court's consideration of information on the debtor's financial situation after the petition date is not appropriate in calculating a debtor's Means Test, the Court is allowed to consider that information in its analysis of whether the granting of relief would be abusive under the totality of the circumstances test. ...

"Regarding whether the Debtor's disposable income permits the liquidation of his consumer debts with relative ease: This is emphatically true. The Debtor could pay the entirety of his unsecured claims under a Chapter 13 plan, amounting to some $25,842.00. Given the substantial increase in the Debtor's disposable income from curing the mortgage arrearage, this could likely be accomplished in less than two years. If the Debtor is allowed to proceed with his Chapter 7 Plan, these [*19] unsecured claims, taken together, would receive a distribution of $0. ...

"Therefore, in light of the Debtor's indisputable financial ability to pay a significant dollar amount or percentage of his unsecured debts, as well as the factors enumerated above, the Court finds that the Debtor's Chapter 7 case shall be dismissed within 10 days hereof unless reconverted to a Chapter 13 with consent of the Debtor."
11 U.S.C. § 348
11 U.S.C. § 707(b)
In re Oliver

Oliver - Appellants Brief

Oliver - Appellees Brief

Oliver - Appellants Reply Brief
9th Circuit11/2/23The court held the bankruptcy court did not abuse its discretion when it imposed terminating sanctions for discovery misconduct resulting in a complete denial of discharge."Before imposing terminating sanctions, the bankruptcy court considers five factors. See Conn. Gen. Life Ins. Co., 482 F.3d at 1096. The bankruptcy court properly balanced and provided reasons for all five factors. As to the fifth factor, the availability of less drastic sanctions, the bankruptcy court weighed Oliver's failure to comply with multiple court orders and monetary sanctions regarding his discovery misconduct and concluded that any "lesser sanction would be utterly useless."11 U.S.C. § 727
In re Fiedler

Fiedler - Order to Show Cause

Fiedler - Response to Order to Show Cause
Bankr. E.D. CA11/2/23The court sanctioned a creditor and its lawfirm for filing a frivolous boilerplate complaint objecting to discharge under 11 U.S.C. § 523(a)(2).

"This is a case of sue first and ask questions later. … The boilerplate Complaint alleged only two operative facts. First, Golden One made an unsecured loan of $9,000 on November 3, 2022, for the stated purpose of helping Defendant retire a $12,500 Wells Fargo credit card debt at 24.3% interest. Second, on December 20, 2022, the Defendant did not make the [*2] first payment when due. Those two facts, without more, were alleged to suffice to prove an intentional fraud perpetrated on November 3. ... Nevertheless, when it comes to commencing a legal action by filing a fraud Complaint, the existence of an early payment default fraud indicator may trigger an inquiry by a creditor but is not alone sufficient ground for a lawsuit in which the essential elements of fraud must be proved by preponderance of evidence. There still must be the "inquiry reasonable under the circumstances" and that is precisely what did not happen here. ... By any measure, there was not an "inquiry reasonable under the circumstances." ...

"A creditor who requests determination of dischargeability of a "consumer debt" under § 523(a)(2) that ultimately is discharged is liable for the debtor's costs and a reasonable attorney's fee for the proceeding if the court finds that the position of the creditor was not substantially justified, unless special circumstances would make the award unjust. 11 U.S.C. § 523(d). ... The law of the Ninth Circuit regarding § 523(d) was established by First Card v. Hunt (In re Hunt), 238 F.3d 1098 (9th Cir. 2001) ... The creditor plaintiff has the burden to prove its position was substantially justified, which entails demonstrating a reasonable basis in law and fact. ... Rocha's argument is not persuasive — or worse. ...

"What is reasonably necessary to deter repetition of the conduct in this instance is to impose a requirement of prefiling review by the undersigned judge of every complaint alleging nondischargeable debt before it is filed in the U.S. Bankruptcy Court for the Eastern District of California by Karel Rocha or the law firm of Prenovost, Normandin, Dawe & Rocha between now and June 30, 2025."
11 U.S.C. § 523(a)(2)
11 U.S.C. § 523(d)
In re Keith

Keith - Defendants Motion for Summary Judgment

Keith - Plaintiffs Response

Keith - Defendants Reply
Bankr. W.D. TX10/30/23The court granted debtor's motion for summary judgment on the non-dischargeability claim under 11 U.S.C. § 523(a)(2)(A) based on the allegation that the debtors failed to disclose outstanding debts when applying for loans. The court held that omissions regarding the debtors financial condition are not a basis for non-dischargeability under Section 523(a)(2)(A).

"Confining the limiting phrase only to oral or written statements and not omissions about the debtor's financial condition leads to an odd result. If a debtor signed the statement "I am not in arrears on any debts," a creditor (like Kapitus here) could later argue that the debtor both omitted [*11] information about financial condition (violating § 523(a)(2)(A)) and supplied false information about financial condition (violating § 523(a)(2)(B)). This is despite Congress's intent to segregate these two claims. H.R. Rep. 959-595 at 129-132 (1977). Kapitus's reading of § 523(a)(2)(A) flouts legislative history suggesting that such a reading would encourage less scrupulous creditors to rush debtors through the loan application process, allowing the creditor to later file a nondischargeability action against an unwitting debtor. See Appling, 138 S. Ct. at 1763-64 (describing how § 523(a)(2)(B) was enacted specifically to counter Congressionally alleged creditor abuse and manipulation). HN8 Thus, creditors who seek nondischargeability for statements respecting financial condition have a higher burden: they need to get it in writing. The provisions of §§ 523(a)(2)(A) and (B) are mutually exclusive and binary—a statement either respects a Debtor's financial condition, or it does not. ...

"All of the statements and omissions Kapitus alleges in support of its nondischargeability claim were made about Keith's or Coyote's financial condition. Pl.'s Compl. 17. Thus, Kapitus has not alleged an actionable nondischargeability claim under § 523(a)(2)(A). "

11 U.S.C. § 523(a)(2)(A)