In a cursory opinion, the District Court for the Eastern District of New York found the chapter 13 trustee was entitled to retain his statutory fees despite the fact that the debtor’s bankruptcy was dismissed before confirmation. Soussis v. Macco (In re Soussis), No. 20-5673 (E.D.N.Y. Jan. 24, 2022) (online publication only). [Read more…] about Trustee in Dismissed Case May Keep Pre-Confirmation Fees
Costs of Attorney Disciplinary Proceeding Not Dischargeable
An order by the state that a lawyer pay the costs of the regulatory authority’s action against him for professional misconduct was penal rather than compensatory for purposes of nondischargeability. Osicka v. Office of Lawyer Reg., No. 21-1556 (7th Cir. Feb. 7, 2022).
The Chapter 7 debtor, a Wisconsin lawyer, was subjected to disciplinary proceedings before the Wisconsin Office of Lawyer Regulation for misconduct in the handling of one of his clients’ cases. The referee recommended a temporary suspension of his law license, full restitution of $150, and the costs of the disciplinary proceedings. In re Disciplinary Proceedings Against Osicka, 765 N.W.2d 775 (Wis. 2009). The debtor appealed to the Wisconsin Supreme Court, which reduced the suspension to a public reprimand and upheld but reduced the order for costs to $12,500.64. [Read more…] about Costs of Attorney Disciplinary Proceeding Not Dischargeable
Debtor May Reopen Case 8 Years after Closing to Seek to Avoid Liens
There was “cause” to permit the debtor to reopen his chapter 7 bankruptcy eight years after closure to allow him to move to amend his schedules, claim a homestead exemption, and avoid judicial liens, where there was no evidence that reopening would cause undue prejudice to any party, and the debtor’s quest was not clearly futile. In re Paduch, No. 12-32101 (Bankr. D. Conn. Feb. 14, 2022).
More than eight years after his Chapter 7 bankruptcy case was closed, the debtor sought to reopen to claim his homestead exemption in an amount greater than $0 and to list two judicial liens on his schedules as secured debts. In his motion to reopen, the debtor acknowledged that his ultimate goal was to avoid the judicial liens as impairing his homestead exemption. The trustee opposed the motion to reopen based on the doctrine of laches, arguing that the debtor could have claimed the exemption and sought to avoid the liens before the conclusion of his bankruptcy case. The trustee further argued that the debtor did not meet the standards for post-closure amendment of bankruptcy schedules. [Read more…] about Debtor May Reopen Case 8 Years after Closing to Seek to Avoid Liens
Debtor May Avoid Transfer under § 522(h) when § 522(f) Not Available
A debtor may avoid a judgment lien impairing her homestead exemption under section 522(h) even though she did not meet the requirements for lien avoidance under section 522(f). In re Garbo, No. 21-11053 (Bankr. W.D. N.Y. Jan. 27, 2022).
Before filing for Chapter 7 bankruptcy, the debtor and her husband divorced. Their divorce settlement stipulated that the husband would quit-claim to the debtor his half-interest in their marital residence. Before he executed the quitclaim deed, however, Discover Bank obtained a judgment lien against him for $3,310.63. He then quitclaimed the property to the debtor. When the debtor filed for bankruptcy, the value of the home was $170,000 and was security for a first mortgage of $90,640. The debtor claimed her New York homestead exemption for $89,975, leaving no equity to cover Discover Bank’s lien. She sought to avoid Discover Bank’s lien as a lien against her homestead exemption under section 522(f)(1). [Read more…] about Debtor May Avoid Transfer under § 522(h) when § 522(f) Not Available
Split on Chapter 13 Trustee Retention of Fees in Unconfirmed Cases Deepens
Deepening the split among lower courts, in McCallister v. Evans, et al., No. 20-112 (D. Ida. Feb. 8, 2022). Chief Judge Nye of the District of Idaho held that the chapter 13 trustee is entitled to retain her commission on funds collected from the debtors even though the debtors’ case was dismissed before confirmation. While recognizing the split of authority, the court followed in the footsteps of the Ninth Circuit Bankruptcy Appellate Panel in favoring the language of 28 U.S.C. § 586(e)(2) and dodging the clear textual differences between section 1326(a)(2)—applicable in chapter 13—and section 1226(a)(2)—applicable in chapter 12. [Read more…] about Split on Chapter 13 Trustee Retention of Fees in Unconfirmed Cases Deepens
Calculating Values for 109(e) Bankruptcy Eligibility
In the face of a good-faith challenge to the debtors’ eligibility for chapter 13 bankruptcy under section 109(e), the bankruptcy court considered evidence beyond the debtors’ schedules and conducted its own eligibility calculation. In re Beach, 2022 Bankr. LEXIS 313, Case no. 21-10762 (Bankr. D. N.M. Feb. 7, 2022). [Read more…] about Calculating Values for 109(e) Bankruptcy Eligibility
Discharge of Judgment Related to Ponzi Scheme
A judgment against the debtor based on fraudulent transfer of funds arising out of his gains in a Ponzi scheme was dischargeable where the court found that only a debt traceable to a securities law violation committed by the debtor is excepted from discharge under section 523(a)(19), and the debtor in this case was not liable for a securities violation. In re Simons, 2021 WL 5225940 (Bankr. D. Minn. Nov. 9, 2021) (case no. 4:20-bk-40631; adv. proc. no. 4:21-ap-4027). [Read more…] about Discharge of Judgment Related to Ponzi Scheme
Post-Petition Appreciation Not Part of Converted Estate
In the absence of bad faith, post-petition appreciation does not enter the Chapter 7 estate upon conversion from Chapter 13. Rodriguez v. Barrera (In re Barrera), No. 20-1376 (10th Cir. Jan. 9, 2022). NCBRC filed an amicus brief on behalf of the NACBA membership in support of the debtor in this case.
When the debtors filed for Chapter 13 bankruptcy, the value of their home was less than the sum of the liens plus their homestead exemption. However, the value of their home appreciated such that, when they sold it during their bankruptcy, the sale proceeds exceeded the liens and exemptions by $140,251. They then converted to Chapter 7, and the trustee moved for turnover of the non-exempt portion of the proceeds. The bankruptcy court denied the motion, and the BAP affirmed. [Read more…] about Post-Petition Appreciation Not Part of Converted Estate
Estate Cannot Continue To Collect Trust Distributions after Debtor Dies
The bankruptcy court erred in finding that the portion of the debtor’s interest in ongoing Trust distributions that were part of the bankruptcy estate would continue to enter the bankruptcy estate after the debtor died and the Trust was distributed to his children. In re Rens, — B.R. —-, 2021 WL 5049829 (B.A.P. 9th Cir. Oct. 29, 2021) (case no. 20-1131). [Read more…] about Estate Cannot Continue To Collect Trust Distributions after Debtor Dies
Debtor Not Entitled to Attorney Fees Under State Statute for Alleged Bankruptcy Misconduct
The debtor was not entitled to an award of attorney fees under a state fee-shifting provision when she prevailed on her opposition to the creditor’s time-barred claims, where the bankruptcy litigation was not connected to the substance of the claims but was a procedural issue dependent on the misconduct of parties or attorneys, and, therefore, federal law was controlling. LVNV Funding, LLC v. Andrade-Garcia, No. 21-1115 (B.A.P. 9th Cir. Jan. 11, 2022). [Read more…] about Debtor Not Entitled to Attorney Fees Under State Statute for Alleged Bankruptcy Misconduct