Articles Posted in Bankruptcy

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After Process Technologies obtained a judgment in state court against debtor for violations of state securities laws, debtor filed for bankruptcy. Process Technologies then filed an adversary proceeding, arguing that 11 U.S.C. 523(a)(19)(A) barred debtor from discharging the debt. The court concluded that debtor cannot discharge his debt because the bankruptcy court made a finding of fact that debtor violated securities laws and, in the alternative, section 523(a)(19)(A) applies irrespective of whether debtor violated securities laws. The court also concluded that debtor is not entitled to leave to amend his complaint. Accordingly, the court affirmed the bankruptcy court's order that excepted the debt from discharge and denied leave to amend. View "Lunsford, Sr. v. Process Technologies Services" on Justia Law

Posted in: Bankruptcy

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Debtor made false oral statements to his lawyers, Lamar, Archer & Cofrin, LLP, that he expected a large tax refund that he would use to pay his debt to the firm. Debtor filed for bankruptcy after Lamar obtained a judgment for the debt. Lamar then initiated an adversary proceeding to have the debt ruled nondischargeable. The bankruptcy court and the district court determined that the debt could not be discharged under 11 U.S.C. 523(a)(2)(A) because it was incurred by fraud. The court reversed and remanded, concluding that debtor's debt to Lamar can be discharged in bankruptcy. In this case, because a statement about a single asset can be a "statement respecting the debtor's . . . financial condition," and because debtor's statements were not in writing, his debt can be discharged under section 523(a)(2)(B). View "Appling v. Lamar, Archer & Cofrin, LLP" on Justia Law

Posted in: Bankruptcy

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Debtor filed a petition for Chapter 7 bankruptcy and claimed the assets in her health savings account (HSA) as property exempt from the bankruptcy estate. On appeal, the court certified the following questions to the Supreme Court of Georgia: 1. Does a debtor’s health savings account constitute a right to receive a “disability, illness, or unemployment benefit” for the purposes of O.C.G.A. 44–13–100(a)(2)(C)? 2. Does a debtor’s health savings account constitute a right to receive a “payment under a pension, annuity, or similar plan or contract” for the purposes of O.C.G.A. 44–13–100(a)(2)(E)? Because the Supreme Court of Georgia answered both questions in the negative, debtor's arguments on appeal are foreclosed. The court concluded that, under Georgia law, debtor was not entitled to claim the assets in her HSA as property exempt from the bankruptcy estate. The court affirmed the judgment. View "Mooney v. Webster" on Justia Law

Posted in: Bankruptcy

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Barbara Wortley, Trafford's president and shareholder, filed a Chapter 7 petition for bankruptcy on Trafford's behalf and the case was assigned to Bankruptcy Judge John Olson. Judge Olson appointed Michael Bakst as a trustee. While Bakst was litigating the Trafford adversary cases, his law firm, Ruden McClosky, hired Judge Olson's fiance, Steven Fender, to join its bankruptcy group. Judge Olson eventually ordered the Wortley parties to pay over $2.5 million to Trafford's bankruptcy estate. The Wortley parties then filed suit in state court alleging that Bakst hired Fender as part of a scheme to improperly influence Judge Olson and to secure favorable rulings. The state court action was removed to federal bankruptcy court, where it was dismissed. The court concluded that it does not have appellate jurisdiction to consider the merits of the Wortley parties' appeal. The court explained that the bankruptcy court had only "related to" jurisdiction over the claims asserted against Bakst and Fender by the Wortley parties, and as a result it did not have authority to enter a final order of dismissal. The bankruptcy court should have submitted a report with proposed conclusions of law recommending dismissal of the complaint to the district court. Because the case should have gone there first, the court transferred the unauthorized order to the district court for review as a report with proposed conclusions of law under 28 U.S.C. 157(c)(1). View "Wortley v. Bakst" on Justia Law

Posted in: Bankruptcy

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The government appeals the bankruptcy court's decision regarding the interest due from defendant for the taxable year 1998. In this case, the tax court never reached the issue of defendant's interest owed on the 1998 tax deficiency. Therefore, the bankruptcy court erred in deferring to the tax court for its calculation of the interest on defendant's underpayment for 1998. Accordingly, the court reversed the district court's judgment affirming the bankruptcy court. The court remanded for further proceedings. View "United States v. Beane" on Justia Law

Posted in: Bankruptcy, Tax Law

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Plaintiffs filed for bankruptcy in 2011 and agreed that they would surrender their house to discharge their mortgage debt. At issue is whether a person who agrees to “surrender” his house in bankruptcy may oppose a foreclosure action in state court. The court affirmed the bankruptcy court's grant of Citibank's motion to compel surrender in the bankruptcy court because the word “surrender” in the bankruptcy code, 11 U.S.C. 521(a)(2), requires that debtors relinquish their right to possess the property. Therefore, the bankruptcy court had the authority to compel plaintiffs to fulfill their mandatory duty under section 521(a)(2) not to oppose the foreclosure action in state court. The court denied as moot the motion to strike. View "Failla v. Citibank, N.A." on Justia Law

Posted in: Bankruptcy

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Plaintiff appealed the district court's order affirming eight rulings of the bankruptcy court. The court concluded that the bankruptcy court did not err in holding an evidentiary show-cause hearing where plaintiff received notice of the civil contempt allegations against him and the bankruptcy court gave plaintiff the opportunity to testify, submit evidence, and rebut the allegations of civil contempt at his show-cause hearing; plaintiff's due process rights were not violated when the bankruptcy court conducted a show-cause hearing on his civil contempt without appointing plaintiff an attorney; the bankruptcy court did not err by imposing coercive and compensatory civil contempt sanctions; and the bankruptcy court had subject matter jurisdiction over the allegations of civil contempt against plaintiff and the authority to enter a final order, not merely a proposed judgment, finding plaintiff in civil contempt. The court affirmed the judgment of the district court in all respects except as to the amount of the fee award. The court remanded for the bankruptcy court to award a fee based on the work the Trustee performed pursuant to Appellee Mitchell’s motion for contempt, and to determine whether the Trustee may pursue its adversary claim at this late date. View "Gowdy v. Mitchell" on Justia Law

Posted in: Bankruptcy

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After confirmation of debtor's Chapter 13 bankruptcy plan, he received notice that his work-related travel reimbursement would be withheld at the request of the DOR for the payment of a domestic support obligation (DSO). Because the DOR attempted to intercept a payment to debtor after confirmation of his plan, the bankruptcy court found the DOR in contempt for violating the bankruptcy court’s confirmation order and awarded attorney’s fees to debtor as a result. The district court affirmed the bankruptcy court’s order of contempt and award of attorney’s fees. This case involves the interplay between two sections of the Bankruptcy Code: 11 U.S.C. 362 and 1327. The court concluded that, while the text of section 326(b)(2)(C) appears to permit DSO collection efforts post-petition, the legislative history lacks any suggestion that Congress intended the exception to abrogate the binding effect of section 1327(a). Rather, a plain reading of section 1327(a) makes clear that the binding effect of a confirmed plan encompasses all issues that could have been litigated in debtor's case - including whether the DOR could intercept debtor's reimbursement payment. Accordingly, because debtor's plan fell silent on the issue of whether the DOR could intercept debtor's reimbursement payment, the DOR was prohibited from taking such action. Therefore, the court affirmed the judgment. View "FL Dep't of Revenue v. Gonzalez" on Justia Law

Posted in: Bankruptcy

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In Crawford v. LVNV Funding, LLC, the court held that a debt collector violates the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692e, when it files a proof of claim in a bankruptcy case on a debt that it knows to be time-barred. The district court in these cases interpreted the Crawford ruling as having placed the FDCPA and the Bankruptcy Code in irreconcilable conflict. The court concluded that, although the Code allows all creditors to file proofs of claim in bankruptcy cases, the Code does not at the same time protect those creditors from all liability. A particular subset of creditors - debt collectors - may be liable under the FDCPA for bankruptcy filings they know to be time-barred. Therefore, the court found no irreconcilable conflict between the FDCPA and the Code. The court reversed and remanded. View "Johnson v. Midland Funding, LLC" on Justia Law

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Plaintiff filed suit alleging that the Florida Supreme Court unlawfully denied her application to become a member of the Florida Bar in violation of federal bankruptcy law and her right to due process. The district court dismissed the complaint. The Florida Supreme Court denied plaintiff admission to the Bar based on her lack of candor and refusal to repay her financial obligations. The court concluded that the district court lacks subject matter jurisdiction over plaintiff's 11 U.S.C. 525(a) claim; sovereign immunity bars plaintiff's due process claim because the Florida Supreme Court is a department of the State of Florida; and the Ex Parte Young exception is not applicable in this case. Accordingly, the court affirmed the judgment. View "Uberoi v. Supreme Court of Florida" on Justia Law