BankruptcyProf Blog

Circuit Court of Appeals Cases from Last Week

(well - a week late)

5th Circuit Court of Appeals, October 30, 2009
In the Matter of: Proeducation Int'l. Inc., --- F.3d ---, 2009 WL ------------- (5th Cir. 2009)(counsel for creditor should not have been disqualified where: 1) the bankruptcy court should have considered counsel's evidence of his lack of involvement with the debtor while at his prior law firm in making its decision; and 2) counsel presented sufficient evidence to demonstrate that he did not operate under a conflict of interest when he undertook the representation of creditor).

10th Circuit Court of Appeals, October 28, 2009
In re Riebesell, --- F.3d ---, 2009 WL ------------- (5th Cir. 2009)(debt of attorney debtor to his former client not discharged where: 1) the parties had an attorney-client relationship during the relevant period under Colorado law; 2) the loans to debtor attorney were not "standard commercial transactions" exempt from the requirements of Colo. R. Prof'l Conduct 1.8(a); and 3) the bankruptcy court's finding that defendant had the requisite intent to deceive plaintiff was not clearly erroneous)

Transcript in Schwab v. Reilly

I'm finally getting a chance to read it.  You can access it here.   

Questions to the Trustee's Counsel:

JUSTICE GINSBURG: The question is whether -- the question is whether the trustee had to make an objection, when it seems really as clear as could be that what she was seeking was to keep her equipment, not to get the -- some monetary equivalent for it.

JUSTICE KENNEDY: What -- what -- what you are doing there, you -- you argue that ambiguities are construed against the person that made the form. I think that's a little harsh when the trustee is a repeat player and knows -- and know the rules.

Questions to Debtor's Counsel:

JUSTICE BREYER: How long do these creditors meetings last? How easy are they to postpone? How -how easy is it for the trustee to get the information together during the creditors meeting, et cetera, et cetera; where do I look to find out the answer to that question?

 JUSTICE SOTOMAYOR: Counsel, in -- what's interesting is that all of the circuits or most of the majority have not address -- announced the fixed rule. The rule they said is, it depends on the circumstances. And so it appears to me that most of the courts are saying to us, we don't want a default rule, because we have to see what has happened and see what has happened between the parties to determine in one situation rather than another what the intent was. It's not an irrational rule.  Why shouldn't we be considering that as an alternative? Because once we make an announcement like the one that you're proposing, it is an inducement to undervalue your property for a debtor because -- in the hopes that an overly worked trustee won't have either the time or opportunity or wherewithal to understand that the value is off and that they're going to lose something that the estate is entitled to.

October Filings Up

Total bankruptcy filings for October, 2009 were 130,200, up 3.7% from September, 2009 of 125,500; compared to 120,000 in August; 130,500 in July; 124,800 in June; 120,400 in May; 128,700 in April, 131,000 in March, 102,000 in February and 89,000 in January.

Total filings Jan through October, 2009; 1,211,300
Total filings Jan through October, 2008;   908,700
Total filings Jan through October, 2007;   687,000

I'm not sure this means things continue to get worse.  I am getting a lot of calls from people trying to hold off hoping to get a loan modification and slowly giving up.   

Supreme Court Grants Cert in Lanning

Boy, four bankruptcy cases in one term - so far!  The 10th Circuit opinion is here.  This is about what means "projected disposable income" in chapter 13.  Doesn't sound too tough, eh?  But the code is very specific about how to compute "disposable income" and that is by looking back to income for the past six months and then subtracting amounts from a bunch of charts - that is disposable income.  Do you take that amount and "project" it into the future, i.e., the net amount computed times x months?  Or do you ignore the computations and look to the future for the result?  Lanning says you ignore the computations  Kagenveama in the 9th Circuit says you do it the way the code says even though it gets you to a ridiculous result a lot of the time.  .