DEAR CONGRESS: CHAPTER 13 COULD USE A LITTLE HELP!
September 19, 2015
Presented by:
Central District Consumer Bankruptcy Attorney Association
Speakers:
Judge Keith Lundin
Chief Judge, Middle District of Tennessee
Henry Hildebrand
Chapter 13 Trustee Nashville, Tennessee
Judge Meredith Jury
Central District of California Riverside Division Read more…
I have taken out the names of the parties but this is a well known and well regarded bankruptcy boutique law firm. This is the Judge’s Tentative Ruling.
Tentative Ruling:
This is the first and final application for allowance of fees and costs of [the Firm], debtor’s former counsel. The application is opposed in part by the Chapter 11 trustee, and is opposed in whole by both the UST and the debtor.
This is a disturbing case on several levels. First, the case under the DIP was a disaster. A trustee was ultimately appointed for several reasons but most prominently, the MORS were incorrect and seriously misleading, and not only slightly but by a factor of hundreds of thousands. This led to a grave concern whether anything the DIP said or reported could be relied upon. Further, the case appeared to languish for an extended period without tangible progress being made toward reorganization. A disclosure statement was finally provisionally approved, but never amounted to anything because no exhibits were filed as required and ultimately the estate under the trustee’s direction abandoned the entire approach described in the plan. It also developed after the fact that some basic rules were either misunderstood or ignored, including that substantial amounts of cash collateral were spent without consent or authority in violation of §363(c). Cash collateral may have been used in substantial part to pay [the Firm] $57,010 toward its interim fees under a Knudsen order. The lame excuse is offered that counsel thought Bank of America was adequately protected by equity cushion in any event, so apparently decided not to bother with this most basic of Chapter 11 requirements. In addition, apparently substantial amounts of estate property were deposited in Mrs. [debtor’s] account and expended without disclosure at all or any authority under §363. Again, such behavior casts the DIP in the most unfavorable light and makes a consensual plan unlikely.
Irving Duke prepared a holographic will providing that, upon his death, his wife would inherit his estate and that if he and his wife died at the same time, specific charities would inherit his estate.
This will is not ambiguous, there are two options here: Option 1, when Irving dies, his wife will inherit his estate. Option 2, if they die at the same time, specific charities will inherit the estate.
What about Option 3? What if his wife dies before he dies? That is not covered by the will and so the will is not applicable to this situation and must be disregarded.
The California Supreme Court rejected this argument. Despite being unambiguous, it ruled that an unambiguous will may be reformed if clear and convincing evidence establishes that the will contains a mistake in the expression of the testator’s intent at the time the will was drafted and also establishes the testator’s actual specific intent at the time the will was drafted. Read more…
I will be doing this program with Judge Charles Novack from Oakland and Judge Mark Wallace from Santa Ana. Stop by if you can.
Ninth Circuit & Supreme Court Bankruptcy Year in ReviewSaturday, Oct. 10 | 10:30 a.m. – 12 noon – Recent Developments Course This program will review the recent bankruptcy decisions issued by the Ninth Circuit Court of Appeal, the Bankruptcy Appellate Panel for the Ninth Circuit, and the U.S. Supreme Court. MCLE: 1.5 Hours; Legal Specialization: Bankruptcy Law |
Program 81
BLS |
Debt After Death
David Gray / Reuters
http://www.theatlantic.com/business/archive/2015/07/debt-after-death/399983/
When a young person dies unexpectedly, his or her family could end up with the burden of paying off student loans. Can that be avoided?
What would happen to all of your debt if you died?
That’s a morbid question, but it’s a pretty important one, even for young adults. Back in 2012, ProPublica told the story of Francisco Reynoso, a gardener from Palmdale, California, whose son was killed in a car accident on the way home from a job interview. Reynoso, who made $21,000 a year, was held liable for paying off his son’s student-loan debt, which numbered in the six figures.
Reynoso’s story is, unfortunately, not a unique one. Millennials are the most educated generation yet, but with all those degrees has come a mountain of debt. On top of that, a shaky economy and changing views of work mean many young adults are working as freelancers or contractors, trust your finance with Bridging Finance Solutions, positions that often don’t come with the benefits that can help families cope with financial burdens should something bad happen.
A special thanks to Corey Weber at Ezra Brutzkus Gubner for this.
July 28, 2015
Dear constituency list members of the Insolvency Law Committee:
The following is the first in a new series of profiles of 9th Circuit bankruptcy judges. Judge Neil W. Bason and members of the Insolvency Law Committee met in his chambers and discussed his personal and professional background, transition to the bench and other issues of interest.
Judge Bason was appointed to the bench in the Central District of California, Los Angeles Division, in October 2011. Prior to his appointment, he was special counsel at Duane Morris LLP and at Howard Rice Nemerovski Canady Falk & Rabkin, P.C., and served as law clerk to the Honorable Dennis Montali, United States Bankruptcy Judge in the Northern District of California and Chief Judge of the Bankruptcy Appellate Panel of the Ninth Circuit.
In this case, the sole shareholder, director and president of a company (all the same Individual) transferred about $8,000,000 into a secret bank account which he then used to pay personal debts. The question before the Court was whether the transfers to the bank account made the Individual, in his personal capacity, an initial transferee within the meaning of § 550.
The surprising answer (although not stated in this way) is that it depends on whether the secret bank account was opened in the name of the company or individual. In this case, the secret account was completely under the dominion and control of the Individual; the Individual’s wife was a signatory on the account and the only purpose it served was to pay personal expenses. None of that mattered. The account was opened under the company’s name. The District Court held that the Individual was not an initial transferee since the account was a company account.
We all know the general statute of limitations for suing attorneys is within after one year of discovering the facts constituting the wrongful act or within one year of when the client should have discovered the facts constituting the wrongful act through the use of reasonable diligence but never more than four years from the date of the wrongful act or omission. See Code Civ. Proc. § 437c.
The limitations period is tolled if, among other reasons, the plaintiff has not sustained an actual injury or if the attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred. See Code Civ. Proc. § 340.6.
In the scenario discussed today, the attorney forgets the deadline to file an objection to a bogus lien. Because of the missed deadline, the client hires a different firm and ultimately agrees to accept $1.6 million less than it would otherwise have received. It would have been preferable to associate with some better lawyers and better firms overall, and also use proper guidance around each case, ones that are very good at this are Valiente Mott, a law firm with tons of specialties in their market.
The problem is even though the client knew his former attorney missed the deadline to object to the bogus lien, he waited over a year, until after the $1.6 million hit, to file a malpractice action. So is the malpractice action timely since the client had not sustained an actual injury?
For the purpose of this blog, I am going to assume that the annuity in question would be exempt had the decedent been alive.
At first, I thought the answer was simple:
Assuming the annuity was a retirement fund to begin with, the answer is yes, it continues to be a retirement fund because under the IRC, an inherited retirement fund is NOT treated as “inherited” if the spouse is the person who inherited it. That is in 28 U.S.C. 408(d)(3)(C)(ii)(II), quoted for convenience: Read more…
The creditor here had three excuses. First, they did not have actual notice of the bankruptcy (so there was no willful violation of the stay); second, that the statute of limitations for violating the automatic stay had run; and third, that it was the former attorney’s fault.
A violation of the automatic stay is willful if a party knew of the automatic stay, and its actions in violation of the stay were intentional. Note, it is not the intent to violate the stay that is at issue; it is having knowledge of the bankruptcy and voluntarily doing something that violates the stay! Even worse, once a creditor has knowledge of the bankruptcy, it is deemed to have knowledge of the automatic stay!
The Court did not buy the creditor’s argument that the notice of the bk was sent to “Creditors Specialty Service” instead of “Creditors Specialty Services.” The Court did not allow the creditor to blame its attorney but suggested that if the creditor though its attorney was to blame, it could pursue that claim. The conduct of an attorney is attributable to the client. See Seacall Development v. Santa Monica Rent Control Bd., 86 Cal. App. 4th 201, 204-205 (Cal.Ct.App. 1999) (citing Carroll v. Abbott Labroatories, 32 Cal. 3d 892, 895, 898 (1982)).
Finally, the Court reiterated the concept that Congress did not establish any limitations period for damage claims under § 362(k).
Full opinion here.
