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Does a Chapter 13 Debtor have the Absolute Right to Separately Classify “Codebtor Consumer Claims”? We don’t know says the 9th Circuit BAP

By | June 10, 2012 | Case Briefs, Cases, Chapter 13 | 2 Comments

Meyer v. Renteria (In re Renteria), — B.R. — (9th Cir. BAP May, 2012)

Issue:   May a chapter 13 plan, that pays a “codebtor consumer debt” in full and other unsecured creditors 9%, be confirmed without considering whether the discrimination is reasonable?

Holding:   Yes, but only on these facts where the trustee conceded that the plan was filed in good faith.

Judge Richard Lee, Eastern District of California

Opinion by Markell, concurring opinions by Pappas and Dunn

The “majority” opinion said that it appears that there is an absolute right to separately classify “codebtor consumer claims” and pay that claim in full and other unsecured creditors a nominal amount.  The majority did not reach the ultimate issue because the trustee conceded that the plan was filed in good faith.  One concurring opinion said categorically there is no absolute right; the other said categorically there is an absolute right.

9th Circuit BAP Rules Transfer of Note to Securitization Trust does not Affect Right of MERS to Foreclose

By | May 28, 2012 | Cases | 1 Comment

Cedano v. Aurora Loan Services, LLC (In re Cedano), — B.R. — (9th Cir. BAP April, 2012)

“[T]he transfer of the Note as part of a securitization process did not affect MERS’s right as a nominee under the DOT.”

“see also, Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 1149, 1151 (Cal. Ct. App. 2011) (further explaining the MERS system) and Morgera v. Countrywide Home Loans, Inc., 2010 WL 160348, at *8 (E.D. Cal. Jan. 11, 2010) (collecting cases).”

Judge Robert Kwan Rules that the Absolute Priority Rule Still Applies in Individual Chapter 11 Cases

By | May 26, 2012 | Absolute Priority Rule, Case Briefs, Chapter 11, Judges Corner | 1 Comment

In re Arnold,  — B.R. — , 2:12-bk-15623 (Bkrtcy, C.D. Ca. May, 2012  Kwan.J.)

Issue:   Does the absolute priority rule still apply in individual chapter 11 cases?

Holding:   Yes.

Judge Robert Kwan

The debtors here filed a individual chapter 11.  They own a number of pieces of real property.  They filed a chapter 11 disclosure statement and plan and US Bank objected on the basis that the disclosure statement did not contain adequate information and that the plan was patently unconfirmable because it violates the absolute priority rule.  The US Bank unsecured claim was based on a deficiency on property which the debtors had guaranteed.

Judge Kwan agreed with US Bank and refused to approve the disclosure statement.  As to whether the disclosure statement contained adequate information, the court found that the options given to unsecured creditors were confusing, did not advise creditors which option would apply, and did not advise creditors of the significance of various court rulings on the various options.  The disclosure statement also advised creditors that the debtors would make a new value contribution of $250,000 “at their election” but did not say where that money was going to come from and therefore the feasibility of making the contribution.

Read more…

Applicable Commitment Period Appeal

By | May 18, 2012 | Appeals, Chapter 13 | No comments

Last Friday, May 11th, 2012, Nancy Clark of Borowitz & Clark and Beth Schneider of Rod Danielson’s Office argued the applicable commitment issue before the 9th circuit.  I’ve been told that the three panel judge stated on the record that they did not have much knowledge of bankruptcy law and both attorneys had to spend some time explaining how things work in chapter 13 bankruptcy.  Hopefully, we will have some clarity on this last major issue in the near future.  We have been waiting for about seven years since BAPCPA was enacted for the courts to tell us what the “applicable commitment period” actually means.  Keep your fingers crossed.

Aki Koyama

The Homestead Exemption and Substance Abuse

By | May 12, 2012 | Cases, Chapter 7 | 1 Comment

An odd couple you say?  The skit put on at the Inns of Court meeting last week made me want to have another beer, then retire.  There were three would-be clients who had three issues that I thought I knew (one I actually did).  The poor lawyer, 40 years experience he kept saying, gave the wrong advice three times, started tipping the bottle and received advice from the state bar – very well done.

Client one had just sold their home.  They had $65,000 proceeds in the bank.  “That money’s safe if I file chapter 7 now – right?”  “No doubt about it, I’ve been doing this for 40 years.”  Wrong.  That exemption applies only if the debtor has actually filed a Declaration of Homestead prepetition.  Gulp.

Client two had just sold their home.  They had $65,000 proceeds in the bank.  “That money’s safe if I file chapter 7 now – right?”  “No doubt about it, I’ve been doing this for 40 years.”  Wrong.  That exemption applies only if the debtor actually reinvests the proceeds in a new home within six months from the sale of the first.  The trustee can hold up the estate closing and wait for the reinvestment.  No reinvestment, the proceeds magically become not exempt at the end of the six months.  (I knew that one).

Client three still owned the home.  They wanted to file chapter 7, sell the home and use the $175,000 proceeds for retirement.  “We can do that – right?”  “No doubt about it, I’ve been doing this for 40 years.”  Wrong – sort of.  A secured creditor got relief from stay during the case and foreclosed.  The debtors got the $175,000 from the sale.  They did not reinvest it.  At the end of the six months, the trustee was there with his hand out.  The exemption applies again only if the debtor reinvests within six months.  This is actually a new 9th Circuit case, In re Jacobson.

Financial Lawyers Conference: BANKRUPTCY UPDATE

By | May 11, 2012 | Case Briefs, Current Events, Programs | No comments

BANKRUPTCY UPDATE: FLC’s annual review of recent developments in bankruptcy law including discussion of significant judicial opinions from around the country.

This meeting is jointly sponsored by The Financial Lawyers Conference
and The Los Angeles County Bar Association Commercial Law and Bankruptcy Section, Bankruptcy Committee

Speakers:
Jeffrey H. Davidson, Stutman, Treister & Glatt, P.C. 
K. John Shaffer, Stutman, Treister & Glatt, P.C.

Location:
The City Club
333 S. Grand Ave., 54th Floor
Los Angeles, California

Time:    Thursday, June 7, 2012
6:00 pm – 7:00 pm – Registration and Cocktail
Reception with Appetizers & Buffet
7:00 pm – 8:00 pm – Program

Read more…

Free Cases on Google

By | May 7, 2012 | Cases | No comments

Thanks to Dennis McGoldrick, Certified Bankruptcy Specialist, for the following information:

A lot of cases are free on Google — go to scholar.google. com

Click the circle for Legal opinions and journals.

Then type the case name in the search box. You will almost always immediately, and without cost, get a copy of the case.

9th Circuit BAP Affirms that Bankruptcy Judges May Enter Final Monetary Judgments in Non-Dischargeability Cases

By | April 30, 2012 | Case Briefs, Chapter 7, Supreme Court | No comments

Dietz v. Ford (In re Deitz), — B.R. — (9th Cir. BAP April, 2012)

Issue:   May the bankruptcy court enter a final judgment for money in a non-dischargeability action given Stern v. Marshall?  Did the bankruptcy court properly find fraud on these facts?

Holding:   Yes on both    Judge Richard Ford, Eastern District of CA

Pappas, Dunn, Markell

Opinion by Pappas, concurring opinion by Markell

The debtor, a contractor, agreed to do work on Fords’ home.  His license was suspended at the time and, in any event, he collected 25% more than the contract price and ultimately did only about 65% of the work.  At trial, the bankruptcy court found fraud under 523(a)(2) as well as under 523(a)(4) and willful and malicious injury under 523(a)(6).  He entered judgment against the debtor for $368,000.  On appeal, the debtor argues that under Stern v. Marshall, the bankruptcy court cannot enter a final judgment either as to the dischargeability of the debt or the amount of the debt.

The BAP affirmed.  As to the court’s power to enter final judgment, the BAP said that non-dischargeability “claims arose under the Bankruptcy Code, subject matter jurisdiction existed in the district court, and by its referral, in the bankruptcy court, as well.  Moreover, “determinations as to the dischargeability of particular debts . . .” are expressly included in the statutory list of core proceedings. 28 U.S.C. § 157(b)(2)(I).  As a result, Congress has provided that the bankruptcy court may enter a final judgment on exception to discharge claims, subject only to appellate review. 28 U.S.C. § 157(b)(2)(I).  Indeed, since 1970, the bankruptcy court, via the reference from the district court, has had the exclusive authority to determine the dischargeability of debts under § 523(a)(2), (4) and (6). See § 523(c)”

As to entry of a monetary judgment, the BAP said, “The Ninth Circuit has also expressly held, pre-Stern, that a bankruptcy court may enter a monetary judgment on a disputed state law fraud claim in the course of determining that the debt is nondischargeable. Cowen v. Kennedy (In re Kennedy), 108 F.3d 1015 (9th Cir. 1997).”  It comments that it must follow the 9th circuit unless the Supreme Court unless it is “clearly irreconcilable.” As to the finding of fraud, the BAP said the court’s findings were not clearly erroneous.

Read more…

Transcript Available of Supreme Court Argument Yesterday in RADLAX Hotel

By | April 24, 2012 | Cases, Chapter 11, Supreme Court | 1 Comment

The transcript of oral argument yesterday can be accessed here.   It sure looks to me like secured creditors are going to retain the right to credit bid.  Kennedy asked no questions.

In re Taylor — District Court Reverses Judge Wayne Johnson and Rules “Chapter 13 debtor’s right to convert to Chapter 7 is absolute.”

By | April 18, 2012 | Appeals, Chapter 13 | 2 Comments

In re Taylor — Case No. EDCV 11-1879-GHK

Appeal from Bankruptcy Court’s (Judge Johnson, Riverside) dismissal of Chapter 13 case at the confirmation hearing “for failure to make payments and….timely file a secured debt payment history declaration” even though Debtors had filed their Notice of Conversion from Chapter 13 to Chapter 7 the day before the confirmation hearing.

The District Court reversed holding that “a Chapter 13 debtor’s right to convert to Chapter 7 is absolute…the Bankruptcy Court erred in failing to give effect to Appellants’ Notice of Conversion and subsequently dismissing Appellants’ Chapter 13 case.” Case was remanded to the Bankruptcy Court.

Read the decision, written by Hon. George H. King, here.  I sat next to Judge King at Federal Bar Association program a couple of months ago (Dean Chemerinsky’s annual Supreme Court Review)!

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