May 31, 2008
Circuit Court of Appeals Bankruptcy Cases from Last Week
2nd Circuit Court of Appeals, May 29, 2008
In re Bd. of Dir. of Telecom Argentina, --- F.3d ----, 2008 WL 2220682 (2nd Cir, 2008)(Bankruptcy Court's recognition of ancillary foreign insolvency proceeding affirmed)
5th Circuit Court of Appeals, May 29, 2008
Coury v. Moss, --- F.3d ----, 2008 WL 2206645 (5th Cir, 2008)(Court affirms that sale of stock did not violate right of first refusal)
6th Circuit Court of Appeals, May 28, 2008
In re United Producers, Inc., --- F.3d ----, 2008 WL 2186465 (6th Cir. 2008)(appeal of confirmation of chapter 11 plan [in Sept 05] dismissed as moot)
6th Circuit Court of Appeals, May 30, 2008
In re Parmenter, --- F.3d ----, 2008 WL 2219839 (6th Cir. 2008)(Chapter 13 plan binds Ford Motor Credit who cannot thereafter seek an administrative claim)
8th Circuit Court of Appeals, May 29, 2008
In re Patch, --- F.3d ----, 2008 WL 2205270 (6th Cir. 2008)(Bankruptcy Court's ruling that debt is non-dischargeable as willful and malicious is reversed)
May 30, 2008
1st Circuit Rules on Exempting a Litigation Asset
Barroso-Herrans v. Lugo-Mender (In re Barroso-Herrans) 524 F.3d 341 (1st Cir., May, 2008)
Issue: When the chapter 7 debtor lists, as an asset, a lawsuit and values it at $4,000 and claims the $4,000 exempt, is the entire asset exempt or only $4,000?
Holding: Only $4,000 is exempt.
Appeal from District Court
At the time of the petition, the debtor had a lawsuit pending for damages. The damages included accounts receivable owed to the debtor which was separately listed as an asset with a value of about
$170,000. The debtor valued the lawsuit on his schedule B at $4,000 and claimed the $4,000 exempt. Later, the trustee settled the case for about $100,000, which included resolution of the accounts
receivable. The debtor claimed all of the funds arguing that he had claimed the asset, the suit, to be exempt in its entirety and that the trustee had not objected to the exemption. The bankruptcy court
held that only $4,000 was exempt. The District Court affirmed.
The 1st Circuit also affirmed. "The threshold question of what has been claimed calls for interpreting the schedules filed by the debtors. To start, we ask how a reasonable trustee would have understood the filings under the circumstances." "[T]he $4,000 sum appears to be an implausible full valuation for law suits seeking to collect a vastly greater amount-over $4 million-from a government authority for unpaid invoices." "Had [the debtor] listed the value of the suits as `unknown'-as the debtor did in Taylor-or used a nominal sum like $1 as a placeholder, he would have a much stronger argument. `Use of terms like `100% [of the property's value],' `unknown,' `to be determined,' `tba' and `$1.00' are red
flags to trustees and creditors,' 1 Collier on Bankruptcy P. 8.06(1) (c)(ii) (15th ed. rev.2007), and therefore put them on notice that if they do not object, the whole value of the asset-whatever it might
later turn out to be-will be exempt." "It is enough to resolve this case that the trustee's reading of the exemptions as limited to a $4,000 share of the proceeds from each law suit is objectively reasonable."
Note: I don't think listing the value as "unknown" and then exempting it does you much good in the 9th Circuit.
Financial Lawyers Conference Program June 5, 2008
The Financial Lawyers Conference next event will be held on June 5, 2008 at The Omni Hotel in Los Angeles and is entitled:
This meeting is jointly sponsored by The Financial Lawyers Conference and The Los Angeles County Bar Association Commercial Law and Bankruptcy Section, Commercial Law Committee
FLC's annual review of recent developments in bankruptcy law including discussion of significant judicial opinions from around the country.
Jeffrey H. Davidson
Stutman, Treister & Glatt, P.C.
K. John Shaffer
Stutman, Treister & Glatt, P.C.
Get the details here.
May 29, 2008
Supreme Court Statistics for this Term
The Scotusblog has some facinating statistics which can be found here. For example, Roberts and Scalia disagreed only 10% of the time this term so far. Roberts and Kennedy disagreed only 10% of the time. On the other end, Thomas and Ginsberg disagreed 45% of the time; Thomas and Stevens (and Thomas and Souter) disagreed 40% of the time.
The 9th Circuit had five cases reviewed by the Supreme Court and reversed all five. The 2nd Circuit had five of the six cases affirmed. In total, the Court affirmed the lower court 16 times and reversed 25 times.
Only 4 of the Court's 42 decisions so far this term were decided 5-4. 14 or one-third were 9-0.
These stats are all through roughly late-May 2008.
May 28, 2008
Elizabeth Warren Quoted in Washington Post Today
"The rise in bankruptcies is not about something that happened last week or last month," said Elizabeth Warren, a Harvard Law School professor and a bankruptcy expert. "It's about the fundamentals. It's about declining wages, rising costs, inadequate health insurance, job instability. More hardworking middle-class families simply can't make it in this economy, and it's only getting worse."
May 27, 2008
8th Circuit Rules that Debtor may Appeal Confirmation of her own Plan
Zahn v. Fink (In re Zahn) ---- F. 3d ----, 2008 WL 2130508 (8th Cir., May, 2008)
Issue: May the chapter 13 debtor appeal confirmation of her own chapter 13 plan? May a debtor appeal a refusal to confirm a chapter 13 plan?
Holding: Yes, when she has been forced by the court to file a plan to which she objects. No, denial of confirmation is not a final order.
The debtor filed a 36 month chapter 13 plan. The trustee objected saying that the plan must be 60 months because she must include her husband’s IRA distributions in her CMI. The court agreed. The debtor appealed and the BAP dismissed the appeal as interlocutory. The debtor amended the plan increasing it to 60 months and filed an objection to the plan. The court confirmed the plan and the BAP dismissed the appeal saying the debtor has no standing.
The 8th Cir reversed on the standing issue. “The BAP correctly recognized, ‘[i]n order to have standing to appeal the decision of the bankruptcy court, an appellant must be a person aggrieved.’” “The BAP then concluded ‘[Zahn] is not an aggrieved party.’” “The BAP reasoned, ’[w]hen the court confirmed her plan, [Zahn] got all the relief for which she asked.’” “That a party may appeal from a judgment in his favor when there has been some error prejudicial to him, or he has not received all he is entitled to, has quite generally been held by the courts, and there is no sound reason otherwise.” “The extended length of Zahn’s plan—a consequence of the inclusion of her non-filing husband’s IRA distributions—is material and prejudicial to Zahn. Zahn is thereby an aggrieved party.” The 8th Circuit also confirmed that denial of a chapter 13 plan is not an appealable order.
May 25, 2008
6th Circuit BAP Rules that Anti-Modification of Loan on Residence is Unchanged by the Addition to the Code of a Definition of "Principle Residence"
Davis v. Green Tree Servicing, LLC (In re Davis) ---- B.R. ----, 2008 WL 1733396 (6th Cir. BAP, April, 2008)
Issue: Does the addition of a definition of “principle residence” in the Bankruptcy Code, Section 101(13A), change the analysis when the debtor attempts to modify a debt secured by the debtor’s principle residence in his chapter 13 plan?
Holding: No, a modification of a secured debt is only prohibited if the collateral is both real property and the debtor’s principle residence, irrespective of the new definition of principle residence.
Judge Marilyn Shea-Stonum
This chapter 13 debtor had a loan secured by both real property and a mobile home. The plan proposed to bifurcate the secured debt paying only the secured portion in full. The bankruptcy court refused to confirm the plan based on the anti-modification provision in § 1322(b)(2) which states that “a debtor’s plan may ‘modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence.’” There was no finding by the court that the mobile home was real property. The creditor argued that the addition to the code of a definition of “principle residence” in Section 101(13A) negated the need for the court to find that the debtor’s residence was real property, i.e., the court need only find that the lien is secured by the debtor’s residence. The Bankruptcy Court agreed and refused to confirm the plan.
The 6th Circuit BAP reversed. The plan language of 1322(b)(2) requires the court to find that the collateral is both, 1) real property and 2) the debtor’s principle residence, before the anti-modification applies. Here there was no finding whether or not the mobile home was real property and therefore the matter is remanded.