Articles Posted in Bankruptcy

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The Fifth Circuit granted debtors' petition for panel rehearing and withdrew the previously filed opinion. The court denied debtors' petition for rehearing en banc. The court held that the bankruptcy court erred in ordering debtors to turn over the liquidated funds from an IRA to the trustee. In this case, the property interest was "withdrawn from the estate" when the exemptions were allowed, and there was no provision under which debtors' subsequently acquired interests in amounts distributed from the IRA could become part of the estate. Accordingly, the court reversed the bankruptcy court's order requiring debtors' to turn over the liquidated funds to the trustee and remanded for further proceedings. View "Hawk v. Engelhart" on Justia Law

Posted in: Bankruptcy

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The Fifth Circuit affirmed the district court's determination that it lacked jurisdiction to consider debtor's appeal of the bankruptcy court's decision in debtor's adversary proceeding. The court also affirmed the bankruptcy court's decision to reopen his main bankruptcy proceeding to allow the DOE and ECMC to file proofs of claim. In this case, the amended statement of issues and designation of record could not fairly be called a notice of appeal within the meaning of Federal Rule of Bankruptcy Procedure 8003(3). Furthermore, allowing DOE and ECMC to reopen the main bankruptcy proceeding served to establish their standing in the adversary proceeding and enabled debtor, should he have prevailed, to obtain a discharge against the correct entities. Likewise, the bankruptcy court did not err by allowing DOE and ECMC to file proofs of claim. View "Dorsey v. US Department of Education" on Justia Law

Posted in: Bankruptcy

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Debtors claimed an exemption for funds held in an individual retirement account (IRA). The Fifth Circuit upheld the bankruptcy court's holding that the funds had lost their exempt status because Texas law provides that funds withdrawn from a retirement account remain exempt only if rolled over into another retirement account within sixty days. In this case, debtors subsequently withdrew the funds from the IRA and did not roll them over into another IRA. Accordingly, the court affirmed the judgment. View "Hawk v. Engelhart" on Justia Law

Posted in: Bankruptcy

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The Fifth Circuit affirmed the bankruptcy courts' findings that debtor was involved in a scheme designed to deprive mortgage holders of foreclosure sale proceeds, and that the damages flowing from this scheme were nondischargeable debts pursuant to 11 U.S.C. 523(a)(4) and 523(a)(6). The court held that debtor's debts to the Countrywide Plaintiffs (and Bank of America) "arise" from larceny and were nondischargeable in bankruptcy. The court also held that debtor failed to demonstrate that he was prejudiced by the bankruptcy court entering the Countrywide Adversary Judgment without lifting the automatic stay in his Chapter 7 case. View "Cowin v. Countrywide Home Loans, Inc." on Justia Law

Posted in: Bankruptcy

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ASARCO filed suit against MRI, challenging MRI's refusal to bring ASARCO back into a partnership in a Montana copper mine. MRI argued that ASARCO's decisions during its Chapter 11 bankruptcy filing prevent it from suing for reinstatement. The Fifth Circuit affirmed the district court's denial of MRI's motion for summary judgment on preclusion and estoppel grounds. The court held that the district court correctly determined that ASARCO was not precluded from bringing its breach of contract claim and the claim was not barred by res judicata. The court explained that the claim was contingent on future events and thus ASARCO could not have brought it during the adversary proceeding. The court also held that ASARCO's disclosure of the right to reinstate, though scant, was sufficient. Finally, the court left it to the district court to decide in the first instance the nature of the provision and whether, if it is executory, the ride-through doctrine applies. View "ASARCO v. Montana Resources" on Justia Law

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The Fifth Circuit affirmed the bankruptcy court's holding that a promissory note debtor gave to appellee was a nondischargeable debt under 11 U.S.C. 523(a)(2)(A). Appellee had retained debtor to represent her in bringing a malpractice claim against another attorney. Debtor failed to properly file the malpractice suit and the case was ultimately dismissed. The Fifth Circuit held that the promissory note that debtor executed had its intended effect of giving him more time to pay back appellee, and therefore debtor received an extension of credit from appellee when she agreed to accept the promissory note. The Fifth Circuit also held that debtor obtained the extension of credit from appellee by actual fraud because debtor made a false representation, intended to deceive appellee, and appellee sustained loss as a proximate result of debtor's false representation. View "Selenberg v. Bates" on Justia Law

Posted in: Bankruptcy

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The Trustee filed suit against Officers of NRMC alleging that the Officers breached their fiduciary duty of care, loyalty, and good faith. The district court has not been able to identify clear controlling precedents from the Supreme Court of Mississippi that would resolve this case. Therefore, the court certified the following questions of law to the Supreme Court of Mississippi regarding the Mississippi Tort Claims Act (MTCA), Miss. Code Ann. 11-46-1, et seq. 1) Does the MTCA furnish the exclusive remedy for a bankruptcy trustee standing in the shoes of a public hospital corporation against the employees or directors of that public corporation? 2) If the answer to the foregoing question is affirmative, does the MTCA permit the trustee to pursue any of the claims identified in his complaint against the officers and directors of NRMC in their personal capacity? View "Lefoldt, Jr. v. Rentfro" on Justia Law

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After KFA filed suit against Hallmark for copyright infringement, Hallmark commenced a "no asset" bankruptcy case. KFA, relying on its "deemed allowed" claim, 11 U.S.C. 502(a), as a final judgment, subsequently filed suit against Mid-Continent, debtor's liability insurer, arguing that the unobjected-to claim constituted a final judgment and was res judicata as to Mid-Continent. The court concluded that the text and structure of the Bankruptcy Code, Rules and Official Forms, and relevant case law all support affirming the district court's grant of summary judgment to KFA. The court held that KFA did not have a "deemed allowed" claim that constituted res judicata against Mid-Continent because in this no asset bankruptcy case, nothing in the court proceedings required claims allowance, no notice was provided to parties in interest to object to claims, and no bankruptcy purpose would have been served by the bankruptcy court's adjudicating KFA's claim. Accordingly, the court affirmed the judgment. View "Kipp Flores Architects, LLC v. Mid-Continent Casualty Co." on Justia Law

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After William Douglas Carroll and Carolyn K. Carroll filed for bankruptcy in 2008, RedPen Properties, whose membership consisted solely of the Carrolls, filed for bankruptcy in the same year. The trustee in both these bankruptcy cases sought relief against the Carrolls and their daughters based on their conduct in the bankruptcy case. The bankruptcy court granted the trustee's motion in part and detailed a series of notable actions taken by the Carrolls in bad faith, including seeking to frustrate the sale of property, filings related to movables adversary brought by the Carroll daughters, orders of contempt, attempts to frustrate the sale of the Carrolls' residence and movables, and two attempts to remove the trustee that were wholly unsupported by evidence. The court concluded that the record fully supported the bankruptcy court's determination of bad faith, and the Carrolls have not established that any of the bankruptcy court's findings were clearly erroneous. Therefore, the court affirmed the judgment as well as the attorney fee award. View "Carroll v. RedPen Properties" on Justia Law

Posted in: Bankruptcy

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After debtor filed for Chapter 7 bankruptcy in 2012, the bankruptcy court appointed a trustee to debtor's estate. In 2014, the trustee initiated this adversary proceeding, seeking to void the garnishments collected by Tower Credit within ninety days prior to debtor's filing for bankruptcy as preferential transfers pursuant to 11 U.S.C. 547(b). The bankruptcy court ultimately granted summary judgment to the trustee and the district court affirmed. The court explained that the combination of Supreme Court precedent and the overwhelming weight of persuasive authority applying section 547(e)(3) make clear that a debtor's wages cannot be transferred until they are earned. Therefore, the court held that a creditor's collection of garnished wages earned during the preference period was an avoidable transfer made during the preference period even if the garnishment was served prior to that period. Accordingly, the court affirmed the judgment. View "Tower Credit v. Schott" on Justia Law

Posted in: Bankruptcy