The Ninth Circuit is poised to address a set of important issues at the intersection of Chapter 13 practice and discharge enforcement in Valdellon v. Wells Fargo. The appeal challenges how § 524(i) applies when a mortgage servicer fails to honor the cure-and-maintain structure of a confirmed Chapter 13 plan and asks whether emotional-distress damages remain available as a contempt remedy after Taggart v. Lorenzen. The outcome will directly affect the reliability of Notices of Final Cure, the finality of the discharge order, and the remedies available to protect debtors from unlawful post-discharge collection efforts.
[Read more…] about Ninth Circuit to Address Scope of § 524(i) and Discharge Remedies in Valdellon v. Wells FargoNinth Circuit Rejects Claim Preclusion in Successive Exemption Claims
In a major win for consumer debtors and the attorneys who represent them, the Ninth Circuit Court of Appeals has reversed the District Court’s ruling in Warfield v. Nance, reaffirming that debtors may amend their bankruptcy exemptions even after earlier claims have been denied. The decision safeguards the principle that exemptions must be liberally construed in favor of debtors and upholds the right to a genuine “fresh start.”
[Read more…] about Ninth Circuit Rejects Claim Preclusion in Successive Exemption ClaimsNCBRC and NACBA Urge Second Circuit to Preserve Bankruptcy Court Jurisdiction Over Tax Dischargeability
July 31, 2025 — The National Consumer Bankruptcy Rights Center (NCBRC) and the National Association of Consumer Bankruptcy Attorneys (NACBA) filed an amicus brief in the Second Circuit in In re Goebel, No. 25-103, in support of a Chapter 7 debtor seeking a determination that over $500,000 in tax debts owed to the Internal Revenue Service (IRS) were discharged in bankruptcy. The amici urge the court to reject the IRS’s efforts to restrict the bankruptcy court’s ability to determine tax dischargeability and to reaffirm the rights of debtors to obtain a timely and final ruling on the scope of their discharge.
[Read more…] about NCBRC and NACBA Urge Second Circuit to Preserve Bankruptcy Court Jurisdiction Over Tax Dischargeability
Ninth Circuit Holds that SSA Cannot Automatically Recoup Overpaid Benefits from a Bankrupt Beneficiary
The Ninth Circuit has issued a significant ruling in In re Cooper, reversing the Bankruptcy Appellate Panel’s (BAP) decision that allowed the Social Security Administration (SSA) to recoup overpaid Social Security Disability Insurance (SSDI) benefits from a debtor who had received a bankruptcy discharge. The court’s decision strengthens the protections afforded to debtors under the Bankruptcy Code by ensuring that the SSA cannot automatically sidestep the discharge injunction through the doctrine of equitable recoupment.
[Read more…] about Ninth Circuit Holds that SSA Cannot Automatically Recoup Overpaid Benefits from a Bankrupt Beneficiary4th Circuit Considers Whether the FDCPA Protects Discharged Debtors From Improper Collection
The 4th Circuit Court is considering an appeal from the District Court for the Northern District of West Virginia which dismissed the Debtor’s FDCPA complaint due to lack of standing since his debt was discharged in a prior chapter 7 bankruptcy.
Facts
John Koontz entered into a mortgage loan with CitiFinancial, which was later serviced by SN Servicing Corporation (SNSC) and then by Land Home Financial Services (LHFS). After Koontz received a Chapter 7 bankruptcy discharge in 2017, he continued to make voluntary payments on the loan. He alleged that SNSC and LHFS charged excessive late fees and failed to respond to his requests for information.
Analysis
The district court analyzed whether Koontz had standing to pursue claims under the FDCPA and WVCCPA, given his bankruptcy discharge. Under the FDCPA, the court determined that Koontz was not obligated or allegedly obligated to pay the debt because the bankruptcy discharge extinguished his personal liability. The court referenced the Fourth Circuit’s decision in Lovegrove v. Ocwen Home Loans Servicing, LLC, where post-discharge mortgage statements containing disclaimers were not considered attempts to collect a debt. The court concluded that SNSC’s and LHFS’s communications, which included similar disclaimers, were not attempts to collect a debt under the FDCPA.
For the WVCCPA claims, the court held that Koontz was not a “consumer” as defined by the statute because his personal obligation to pay the mortgage debt was discharged in bankruptcy. The court referenced its previous decision in Fabian v. Home Loan Center, Inc., which held that a discharged debtor is not a “consumer” under the WVCCPA and therefore lacks standing to bring claims under the Act. The court rejected Koontz’s reliance on other federal court cases, noting that many involved phone calls rather than written correspondence and did not alter the applicability of Fabian.
The court dismissed Koontz’s claims, reaffirming that a bankruptcy discharge eliminates personal liability for the debt, thereby negating standing under the FDCPA and WVCCPA. The court emphasized the importance of clear and unequivocal disclaimers in post-discharge communications to avoid violating debt collection laws.
NCBRC along with the National Association of Consumer Bankruptcy Attorneys and the National Consumer Law Center filed a brief in support of the Debtor.
Amici Brief in Support of Appellant – Koontz vs SN Servicing
The 9th Circuit Holds A Homestead Exemption Is Limited to Statutory Cap in a Chapter 11 to 7 Conversion
The Ninth Circuit held that the failure to object to a claimed homestead exemption within the 30-day period does not allow the debtor to exempt more than the statutory limit when the case originated as a Chapter 11 bankruptcy and included conflicting representations regarding the exemptions.
Facts
Monte and Rosana Masingale filed for Chapter 11 bankruptcy in 2015, claiming a homestead exemption of “100% of FMV” (fair market value) for their residence. No party in interest objected within the 30-day window. The case was later converted to Chapter 7, and the Masingales sought to sell the home and retain all proceeds, despite the statutory cap on the homestead exemption.
Analysis
The court’s legal analysis focused on whether the initial lack of objection to the homestead exemption claim allowed the Masingales to exempt more than the statutory limit. The court distinguished this case from Taylor v. Freeland & Kronz and Schwab v. Reilly, which involved different circumstances and did not originate in Chapter 11.
The court noted that the Masingales, as Chapter 11 debtors-in-possession, owed fiduciary duties to their creditors. During the Chapter 11 proceedings, they made representations in their Disclosure Statement and Chapter 11 Plan that they were not claiming above-limit exemptions or that such exemptions would only be allowed after creditors were fully paid. These representations indicated that the homestead exemption would be limited to the statutory cap, contrary to their Schedule C notation of “100% of FMV.”
The court reasoned that these conflicting representations within the 30-day objection period affected whether the “100% of FMV” notation created a clear and objectionable exemption. The court emphasized that the fiduciary duties and specific statements made in Chapter 11 documents provided context that negated the need for an early objection based solely on the Schedule C notation. Therefore, the initial failure to object did not permit the Masingales to claim an exemption above the statutory limit.
Tips
- Clarify Exemption Claims: Ensure that exemption claims are clear and consistent across all bankruptcy documents to avoid disputes and objections.
- Understand Fiduciary Duties: Recognize that debtors-in-possession in Chapter 11 have fiduciary duties to creditors, and their representations can impact exemption claims.
- Timely Objections: While objections to facially invalid exemptions should be timely, consider the entire context and any additional representations made by the debtor within the objection period.
NCBRC filed an amicus brief in support of the Debtors and provided a moot court to Debtors’ counsel to prepare for oral arguments.
The 9th Circuit Reviews Whether Res Judicata Applies to Exemptions
The 9th Circuit Court in Nance v Warfield is considering whether to overrule the District Court of Nevada which held that the bankruptcy court erred in overruling the trustee’s res judicata-based objection to the debtor’s federal exemptions in the property and RV. The court also concluded that the bankruptcy court exceeded its authority by sua sponte granting an exemption for the RV under the federal wildcard exemption.
Facts
Lawrence Warfield, the trustee of Johnie Lee Nance’s bankruptcy estate, objected to Nance’s claimed exemptions for his property and RV under Arizona law. After the court sustained the trustee’s objections, Nance amended his schedule to claim exemptions under Washington law, and the trustee again objected. When those objections were sustained, Nance amended his schedule to claim federal exemptions. The bankruptcy court overruled the trustee’s objections to these federal exemptions and sua sponte granted an exemption for the RV under the federal wildcard exemption.
Analysis
The district court analyzed the applicability of res judicata to the debtor’s successive exemption claims. It noted that claim preclusion, a form of res judicata, bars litigation of claims that were or could have been raised in a prior action. The court applied the three-part test for claim preclusion: identity of claims, final judgment on the merits, and identity or privity between parties. The court found that the debtor’s claims for exemptions in the property and RV, regardless of the legal framework (Arizona, Washington, or federal law), arose from the same nucleus of operative facts and involved the same property. Therefore, the claims were identical.
The court also determined that the previous rulings sustaining the trustee’s objections constituted final judgments on the merits, satisfying the second criterion. Finally, the parties involved in the objections were identical, fulfilling the third requirement for claim preclusion. Consequently, the court concluded that the bankruptcy court erred in overruling the trustee’s objections based on res judicata.
Additionally, the court addressed the bankruptcy court’s sua sponte action to grant an exemption for the RV under the federal wildcard exemption. The court emphasized the principle of party presentation, which requires courts to decide only the questions presented by the parties. The court found that the bankruptcy court exceeded its authority by granting an exemption that the debtor had not claimed, noting that the debtor, represented by counsel, could have asserted the exemption but did not. Therefore, the court held that the bankruptcy court’s action was improper and reversed its decision.
NCBRC and NACBA filed an amicus brief in support of the Debtor/Appellant.
The Ninth Circuit Considers Whether Appellate Rights are Property of the Estate
In In re Lopez, Case No. 23-55682 (9th Cir. 2023), the Ninth Circuit is considering whether the bankruptcy court erred in (1) ruling that the Chapter 7 debtor’s right to appeal a prepetition personal injury judgment against her was property of the estate, (2) denying the debtor’s motion for the Chapter 7 trustee’s abandonment of the appeal rights, and (3) denying the debtor’s motion for reconsideration.
NCBRC filed an amicus brief requesting that the court narrowly confine its ruling to the specific facts of the case. The concern is that a broad ruling will have a significant impact in other factual situations.
The fact that something has monetary value is not sufficient, by itself, to make it property of the estate. Just as no one would argue that a debtor’s kidneys should be property of the estate because they could have monetary value, it is not difficult to find many examples of situations in which classifying a right to appeal as property, simply because a trustee could sell it, would be extremely problematic. A debtor could be involved in a hotly-contested custody case, where a very questionable decision was appealed. The opposing party, perhaps far wealthier than the debtor, could offer to buy from the trustee the debtor’s right to appeal for more than the debtor could afford, thus ending the appeal. Similarly, a debtor could be involved in a contested divorce, in which a clearly erroneous support order for $100,000, which would not be dischargeable in bankruptcy, 11 U.S.C. § 523(a)(5), was entered against the debtor. In that situation, too, the opposing party could offer the trustee $10,000 for the right to appeal, cutting off any review of the support order and leaving the debtor with a $100,000 debt after bankruptcy.
And such situations are not limited to family law matters. A debtor could be appealing an erroneous criminal conviction. The alleged crime victim, or even a prosecutor trying to save the costs of appeal, could purchase the debtor’s right to appeal from a bankruptcy trustee, perhaps causing the debtor to be imprisoned for years. Or the debtor might be appealing an erroneous judgment or other decision that would lead to loss of a professional license, which would severely impair the debtor’s fresh start.
The loss of a debtor’s right to appeal could also lead to large debts becoming nondischargeable in bankruptcy when, in fact, they should be discharged. For example, a debtor could erroneously be found liable for a large amount in a fraud judgment that, if not reversed, would result in a nondischargeability determination under 11 U.S.C. § 523(a)(2). See Grogan v. Garner, 498 U.S. 279, 111 S. Ct. 654 (1991) (collateral estoppel applies in dischargeability determination). If the plaintiff could pay the bankruptcy trustee for the debtor’s right to appeal, and then dismiss the appeal, the debt would not be discharged.
In all these situations, and undoubtedly many others, the fact that a right may have monetary value to the bankruptcy estate, and could be sold by the trustee, should not, by itself, make that right property.
The amicus brief for NCBRC and NACBA is here: Lopez amicus brief v4
The Fourth Circuit Rules That Parties in an Adversary Proceeding Cannot Manufacture a Final Judgment
In Kiviti v. Bhatt, No. 22-1216, 2023 U.S. App. LEXIS 24415 (4th Cir. Sep. 14, 2023), the court ruled that the parties in an adversary proceeding cannot manufacture a final judgment to appeal an otherwise interlocutory order. Further, the mootness doctrine employed by Article III courts to determine whether a case or controversy exists does not apply to bankruptcy courts as non-Article III courts.
Before filing the bankruptcy, the Chapter 7 Debtor (Bhatt) was contracted to renovate the creditor’s (Kiviti) home. Upon finding the Debtor was unlicensed, the creditor filed suit in state court to recover all funds paid ($58,770). Before judgment, the Debtor filed a Chapter 7 bankruptcy.
The creditors then filed an adversary proceeding with two counts. The first count asked the court to enter a judgment against the Debtor for the amount paid. The second count asked the court to find the debt non-dischargeable under 11 U.S.C. § 523(a)(2)(A). The creditors also filed a proof of claim despite the small bankruptcy estate.
The bankruptcy court granted the Debtor’s motion for summary judgment on the non-dischargeability count leaving only the first count asking for a money judgment. The creditors wished to appeal but needed a final judgment. Therefore, the parties agreed to dismiss the first count without prejudice.
On appeal, the court reviewed whether the case was final to review the bankruptcy court’s decision to dismiss the non-dischargeability count. The creditors argued that the adversary proceeding was moot because if they were unsuccessful in challenging the dismissal of the non-dischargeability count, their debt would be discharged and uncollectable. The court held that the parties can’t manufacture finality. Furthermore, the court held that mootness is a limitation on Article III courts (stemming from the case or controversy requirement) but not bankruptcy courts as non-Article III courts. Instead, bankruptcy courts can rule on moot proceedings
“The parties cannot manufacture finality
“The parties will be unsurprised by our holding that the bankruptcy court’s order was not final—and so not appealable—when entered. After all, that is why they agreed to dismiss Count I. They thought that, by doing so, they would make the order final because there would no longer be anything left to adjudicate in the adversary proceeding. J.A. 63 (agreeing to dismiss Count I “so as to give rise to a final order from which an appeal . . . may be taken”); J.A. 73 (“The instant appeal is from an interlocutory order that became a final order upon dispensation of the remaining cause of action below.”).
“They were wrong. They cannot “use voluntary dismissals as a subterfuge to manufacture jurisdiction for reviewing otherwise non-appealable, interlocutory orders.” See Waugh Chapel S., 728 F.3d at 359. When Congress requires finality, we must ensure that “every matter in the controversy . . . [is] decided in a single appeal.” Microsoft Corp. v. Baker, 582 U.S. 23, 36, 137 S. Ct. 1702, 198 L. Ed. 2d 132 (2017) (quoting McLish v. Roff, 141 U.S. 661, 665-66, 12 S. Ct. 118, 35 L. Ed. 893 (1891)). Yet, if we allowed the parties to appeal Count II now, there would be nothing to stop them from reinstating—and then separately appealing—Count I down the line. See J.A. 63 (agreeing that the dismissal is “without prejudice to the [Kivitis’] right to amend their pleadings to seek a finding of liability should there be an appellate remand”). Such tactics impermissibly “erode the finality principle” Congress enacted. See Microsoft, 582 U.S. at 37; see also In re AroChem Corp., 176 F.3d at 619 (explaining that the “flexible” nature of bankruptcy finality does not “overcome the general aversion to piecemeal appeals” (cleaned up)). So the voluntary dismissal did not make the bankruptcy court’s earlier, partial dismissal final.
“True, some partial dismissals are final and appealable after the parties voluntarily dismiss the remaining claims. See Affinity Living Grp., LLC v. StarStone Specialty Ins. Co., 959 F.3d 634, 638-39 (4th Cir. 2020). But that’s only when the district court dismisses some claims and, in the process, makes it legally impossible to prevail on the remaining claims, even while allowing them to limp on. Id. In this sense, the litigants do not impermissibly create finality by voluntarily dismissing the doomed claims; they merely recognize that it already effectively exists. See id. at 639 (hearing an appeal from a case that was “legally over” even before the voluntary dismissal).
“That is not what happened here. These parties set out to create finality, not recognize it. The adversary proceeding was not “legally over” after the bankruptcy court’s partial dismissal. See id. Count II’s dismissal did not mean the Kivitis could not prevail on Count I. Count I asked whether Bhatt was in debt to the Kivitis—i.e., whether Bhatt violated D.C. law by renovating the Kivitis’ house without a license and thus owed them money. Count II asked whether any such debt was dischargeable—i.e., whether Bhatt obtained such a debt through “false pretenses, a false representation, or actual fraud.” See 11 U.S.C. § 523(a)(2)(A). Just because the bankruptcy court found that Bhatt had obtained $=P13 no debt through fraud did not mean the Kivitis were wrong that he violated D.C. law. Count I was still very much alive.
“The parties agree that the Kivitis could have prevailed on Count I’s merits even after Count II’s dismissal. They maintained their proof of claim which sought the same monies. Yet the Kivitis still argue that their voluntary dismissal recognized rather than created finality because, they say, their Count II loss rendered the adversarial proceeding moot. According to them, a moot proceeding is “legally over” and so this appeal falls within Affinity Living Group‘s safe harbor.
“The root of their mootness argument is that, without Count II, any judgment they won via Count I could not be collected outside bankruptcy and their $58,770 would be recovered—if at all—only through the bankruptcy’s proof-of-claims process. So once Count II failed, they argued, Count I became legally moot. A case is moot when “a court can’t grant any effectual relief whatever” to the complaining party.5 Mission Prod. Holdings, Inc. v. Tempnology, LLC., 139 S. Ct. 1652, 1660, 203 L. Ed. 2d 876 (2019) (quoting Chafin v. Chafin, 568 U.S. 165, 172, 133 S. Ct. 1017, 185 L. Ed. 2d 1 (2013)). Recall that if a debt is discharged, it cannot be collected outside the bankruptcy proceedings. So if the bankruptcy court agreed Bhatt owed the Kivitis money (success on Count I), but determined that debt dischargeable (failure on Count II), the Kivitis could not directly use the judgment they won from Count I to force Bhatt to pay them outside of bankruptcy. Their only means of recovery would be within bankruptcy, via their already filed proof of claim. The Kivitis thus contend that they could not get “any effectual relief” from the adversary proceeding, rendering it moot. Appellant’s Supp. Br. at 10 (“[T]he Bankruptcy Court’s dismissal of Messrs. Kiviti’s claim . . . caused the remaining case to become moot, and to accordingly strip the Bankruptcy Court of Article III jurisdiction.”).
“The Kivitis’ argument is clever, but it misses at least one critical link: Mootness is an Article III doctrine, and bankruptcy courts are not Article III courts. Mootness arises out of Article III’s “case-or-controversy” requirement. The United States’s judicial Power extends only to cases or controversies. U.S. Const. art. III, § 2. To be a case or controversy, parties must have a “‘personal stake in the outcome’ of the lawsuit,” at each stage of the litigation. Lewis v. Cont’l Bank Corp., 494 U.S. 472, 478, 110 S. Ct. 1249, 108 L. Ed. 2d 400 (1990) (quoting Los Angeles v. Lyons, 461 U.S. 95, 101, 103 S. Ct. 1660, 75 L. Ed. 2d 675 (1983)); Campbell-Ewald Co. v. Gomez, 577 U.S. 153, 161, 136 S. Ct. 663, 193 L. Ed. 2d 571 (2016). If they lose that stake, their case drifts beyond the judicial Power and becomes moot. See United States v. Payne, 54 F.4th 748, 751 (4th Cir. 2022). But since bankruptcy courts are not Article III courts, [*17] they do not wield the United States’s judicial Power. Stern v. Marshall, 564 U.S. 462, 503, 131 S. Ct. 2594, 180 L. Ed. 2d 475 (2011). So they can constitutionally adjudicate cases that would be moot if heard in an Article III court.
“To be sure, a bankruptcy case must—at the start—be within the judicial Power. Section 1334 grants near-exclusive jurisdiction over bankruptcy matters to federal district courts. 28 U.S.C. § 1334(a). The district court may then refer a bankruptcy case to a bankruptcy judge (who serves as a unit of the district court). 28 U.S.C. §§ 157(a), 151.9 But, of course, a district court can only refer a case that it has jurisdiction over. See Ex parte McCardle, 74 U.S. 506, 514, 19 L. Ed. 264 (1868) (“Without jurisdiction the court cannot proceed at all in any cause.”). So before a bankruptcy case is referred to a bankruptcy court, the case must satisfy Article III. See In re Curtis, 571 B.R. 441, 447 (B.A.P. 9th Cir. 2017) (“[T]he bankruptcy court’s power to hear, or to hear and determine, as the case may be, bankruptcy cases and proceedings is entirely dependent upon the referral by the district court.”)
.“So too must Article III be satisfied after the bankruptcy court acts and the case is returned to the district court from the bankruptcy court. Every action by a district court is constrained by Article III, including reviewing a bankruptcy court order. So a district court has no authority to act without an existing constitutional case or controversy. See In re Thorpe Insulation Co., 677 F.3d 869, 880 (9th Cir. 2012); In re Croniser, No. 22-1227, 2022 U.S. App. LEXIS 28563, 2022 WL 7935991, at *1 (4th Cir. Oct. 14, 2022) (unpublished).
“But that limit on the district court’s authority does not constrain the bankruptcy court. Once a case is validly referred to the bankruptcy court, the Constitution does not require it be an Article III case or controversy for the bankruptcy court to act. See In re Technicool Sys., Inc., 896 F.3d 382, 385 (5th Cir. 2018) (“Bankruptcy courts are not Article III creatures bound by traditional standing requirements.”). That requirement comes from the Constitution’s limits on the judicial Power. Bankruptcy courts do not wield judicial Power. End of story
.“At least that is the end of the constitutional story. The statutory story—i.e., whether bankruptcy courts have statutory authority to decide a constitutionally moot matter—is more complex. Still, the tale concludes the same way: a bankruptcy court can adjudicate a constitutionally moot matter.
“Bankruptcy courts, as statutory creatures, have whatever power Congress lawfully gives them. So to see if bankruptcy courts can decide matters outside the judicial Power, we check to see if Congress has given them that power. And Congress has said that bankruptcy courts “may hear and determine all [bankruptcy] cases . . . and all core proceedings . . . referred” to them by a district court. 28 U.S.C. § 157(b)(1) (emphasis added). Not just those that could be fully adjudicated in district court. Once a bankruptcy case lands in bankruptcy court, any number of things could happen before the estate’s distribution is settled. As relevant here, the parties could embroil themselves in an adversary proceeding. But whether that proceeding could itself be adjudicated in an Article III court is of no moment. By § 157’s text, a bankruptcy court’s jurisdiction requires only that the case or core proceeding arise under Title 11 and be referred to the bankruptcy court. § 157(b)(1). Section 157 does not require every “discrete dispute[ ],” see Ritzen, 140 S. Ct. at 587, arising post-referral to satisfy Article III. Nor does any other provision.
“Against this silence, Congress has elsewhere explicitly imported some Article III type requirements onto bankruptcy courts. For example, it created so-called “bankruptcy standing” by giving “parties in interest” a right to be heard, at least in Chapter 11 bankruptcies. See 11 U.S.C. § 1109(b); In re Capital Contracting Co., 924 F.3d 890, 895 (6th Cir. 2019) (discussing § 1109(b)).11 And it also codified some version of mootness for real-property cases. See 11 U.S.C. § 363(m); In re Rare Earth Mins., 445 F.3d 359, 363 (4th Cir. 2006) (explaining that § 363(m) “creates a rule of ‘statutory mootness’”). Yet these principles are not the same as Article III’s limits and Congress has never imported all [*20] those limitations. We refuse to make that choice for it; indeed we cannot do so. See Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 96 (2012) (“[W]hat a text does not provide is unprovided.”).
“A few bankruptcy courts confronting this issue have disagreed. They point to a district court’s authority to “withdraw, in whole or in part, any case or proceeding” referred to a bankruptcy court. See 28 U.S.C. § 157(d). They also think it significant that Congress called bankruptcy courts “unit[s] of the district court,” with judges that are “judicial officer[s]” thereof. See § 151. Following these breadcrumbs, those courts have held that a bankruptcy court’s power depends on a district court’s power—and thus evaporates if the case strays outside of Article III’s bounds. See, e.g., In re Kilen, 129 B.R. 538, 542-43 (Bankr. N.D. Ill. 1991) (“In light of the derivative nature of the bankruptcy court’s power, it is obvious that the constitutional standards of Article III which bind the district court also bind the bankruptcy court.”); In re Interpictures, Inc., 86 B.R. 24, 28-29 (Bankr. E.D.N.Y. 1988); but cf. Stern, 564 U.S. at 500-01.12
“We are unconvinced. Congress requires bankruptcy courts to get cases from district courts and allows district courts to withdraw cases. And the Constitution limits the cases a district court can refer or withdraw. But these two facts do not add up to a limit on the types of matters a bankruptcy court can adjudicate after referral, nor a requirement that those matters be eligible for withdrawal. That could be how it works—if Congress said so. Yet Congress has not said so. So that is not how it works
.“In the same vein, we refuse to overread Congress’s designation of bankruptcy courts as “unit[s]” of the district court. See 28 U.S.C. § 151. Certainly, district courts oversee many aspects of bankruptcy courts. For example, when bankruptcy judges consider matters within the judicial Power, district courts can—indeed sometimes must—review those actions. § 157(a), (b)(1), (c)(1). But bankruptcy courts are not “mere adjuncts” of district courts. Stern, 564 U.S. at 487. They exercise “broad powers” under their own statutory grant of jurisdiction. See id. at 488. Congress did not impliedly limit that express grant through cryptic labelling in a separate provision
.“The argument to the contrary depends on finding something inherent about the words “cases” and “proceedings” in the bankruptcy jurisdictional provisions that brings them necessarily within the judicial Power. It assumes that when Congress gave federal courts (Article III and non-Article III alike) jurisdiction over bankruptcy “cases” and “proceedings,” it imbued those words with Article III’s limits. So that, even absent Article III, the statutes themselves would require the same level of adversariness.
“But we do not ordinarily interpret a jurisdictional statute’s constraints to be the same as the Constitution’s. In fact, we often go out of our way to create differences and draw distinctions even where—unlike here—the statute uses Article III’s precise language. See Navy Fed. Credit Union v. LTD Fin. Servs., LP, 972 F.3d 344, 352 (4th Cir. 2020) (“Unlike the constitutionally permitted ‘minimal diversity’ jurisdiction, diversity must be ‘complete’ to satisfy this Congressional grant.” (citing Strawbridge v. Curtiss, 7 U.S. 267, 267, 2 L. Ed. 435 (1806)).
“If we did, our caselaw would look very different. The constitutional-jurisdiction inquiry would often collapse into the statutory one. Yet it doesn’t. For example, litigants can have statutory jurisdiction to sue States even if the Constitution forbids it. See, e.g., Hans v. Louisiana, 134 U.S. 1, 10, 10 S. Ct. 504, 33 L. Ed. 842 (1890). More to the point, we dismiss moot cases because they are no longer Article III cases, not because they fall outside the scope of a statute. See, e.g., Eden, LLC v. Justice, 36 F.4th 166, 169-72 (4th Cir. 2022). So we refuse to read in Article III’s limits.
“To recap, bankruptcy courts are not Article III courts. So Article III constraints— such as mootness—do not apply to them as a matter of constitutional aw. They only apply if Congress said so in a statute. But it hasn’t. And that means whether Count I was constitutionally moot is beside the point. The bankruptcy court could still adjudicate it.
“Since the Kivitis cannot argue that their adversary proceeding was constitutionally moot when Count II was dismissed, they have not shown the proceeding was legally doomed when they dismissed Count I. They are thus left arguing the order was final because Count I was practically over post-dismissal. See, e.g., Appellant’s Supp. Br. at 4 (claiming there was “no judicial economy” to pursuing Count I before appealing Count II). Yet the Supreme Court rejected this exact reasoning in Microsoft. The Microsoft plaintiffs also thought it “economically irrational” to litigate their still-legally-viable claims to final judgment. Microsoft Corp., 582 U.S. at 34. Still, the Court refused to let them create finality by voluntarily dismissing those claims. Id. at 36; see also Affinity Living Grp., 959 F.3d at 639 (distinguishing between claims that are “legally” and merely “practically” over). Here too, it is irrelevant that the parties think there is “no judicial economy” in litigating Count I to final judgment before they appeal the order dismissing only Count II. Count I is legally viable, and its dismissal was without prejudice, so that dismissal did not create a final order under § 158(a). And that means the district court lacked jurisdiction to review it.”
The Ninth Circuit Reviews Whether an Exemption of “100% of FMV” Protects the Entire Value of the Property Including any Post-Petition Appreciation
UPDATE: The Ninth Circuit has since decided this case. Click here to read our article discussing their ruling.
The Ninth Circuit Court of Appeals is considering whether an exemption of “100% of FMV” protects all the equity in the property, over and above the allowable exemption, and any appreciation in value post-petition. The Ninth Circuit Bankruptcy Appellate Panel reversed the bankruptcy court and found that an exemption claim of “100% of FMV” included the entire value of the property, not the allowable exemption. Further, the court held that this exemption claim included any post-petition appreciation because there was no objection to the exemption. Masingale v. Munding, 644 B.R. 530 (B.A.P. 9th Cir. 2022). The BAP held:
“Monte L. Masingale and Rosana D. Masingale filed a chapter 11 bankruptcy petition and claimed a “100% of FMV [fair market value]” exemption in their homestead. No one objected. Years later, the bankruptcy court converted the case to chapter 7. Mrs. Masingale and the chapter 7 trustee disputed the amount of the homestead exemption to which Mrs. Masingale was entitled: the chapter 7 trustee argued that she was bound by the statutory limit under § 522(d)(1), but Mrs. Masingale contended that she was entitled to the entire fair market value of the property, because no one had objected to the claimed homestead exemption. The bankruptcy court agreed with the chapter 7 trustee and approved his request to sell the property, limiting the homestead exemption to $45,950.
“Mrs. Masingale appeals, arguing that the bankruptcy court erred in determining the amount of the homestead exemption. We agree with Mrs. Masingale. We REVERSE the portions of the order on appeal that determine the amount of the homestead exemption and REMAND. We publish to explain the effect of a “100% of FMV” exemption claim and to reiterate that parties must timely object to any improper exemption claim, no matter how frivolous. …
“As a matter of first impression, we hold that the Masingales’ claim of an exemption equal to “100% of FMV” includes postpetition appreciation and becomes incontestable if there is no timely objection. The snapshot rule is one of the limits on a debtor’s entitlement to exemptions. Taylor holds that, if no one objects, the debtor can get the benefit of exemptions to which the debtor is not entitled. In other words, in order to get the benefit of the snapshot rule, a trustee or party in interest must object to an exemption claim that contradicts that rule.”
The case is tentatively set for oral argument in early December 2023.
Appellant Trustee Munding Brief