Articles Posted in Bankruptcy

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At issue was whether a provision in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 11 U.S.C. 526(a)(4), —on advice to incur debt to pay for a lawyer's bankruptcy-related representation—likewise entailed an invalid purpose requirement. The Eleventh Circuit held that a debt-relief agency (including a law firm) violates section 526(a)(4) if it advises a client to incur additional debt to pay for bankruptcy-related legal representation, without respect to whether the advice was given for some independently "invalid purpose"; plaintiff's allegation, in this case, that defendant law firm instructed him to pay his bankruptcy-related legal bills by credit card stated a viable claim under section 526(a)(4); and none of the constitutional arguments that the firm presented to the court warranted invalidating the statute on First Amendment grounds. View "Cadwell v. Kaufman, Englett & Lynd, PLLC" on Justia Law

Posted in: Bankruptcy

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The Bankruptcy Code did not forestall the automatic operation of Georgia's pawn statute. In this case, debtor entered into a pawn transaction in which he pledged his car in exchange for a loan, defaulted on the loan, and then, shortly before the expiration of the redemption period—during which he could pay off his debt (with interest) and thereby regain title to his car—filed a Chapter 13 bankruptcy petition. The Eleventh Circuit held that the car dropped out of the bankruptcy estate and vested in the pawnbroker when the prescribed redemption period lapsed. Accordingly, with respect to the car, 11 U.S.C. 1322(b)(2) had no field of operation. The court explained that following the expiration of the grace period, the pawnbroker did not have a mere "claim" on debtor's car, but rather had the car itself. View "Title Max v. Northington" on Justia Law

Posted in: Bankruptcy

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Section 362(k)(1) of the Bankruptcy Code specifically departs from the American Rule and authorizes costs and attorneys' fees incurred by the debtor in ending a willful violation of an automatic stay, prosecuting a damages violation, and defending those judgments on appeal. In this case, the Eleventh Circuit affirmed the district court's order awarding defendants attorneys' fees and costs that they incurred because of plaintiff's unsuccessful appeal of the damages award to defendants for her violation of the Bankruptcy Code's automatic stay provision. The court also granted defendants' motion for attorneys' fees incurred in this appeal. View "Mantiply v. Horne" on Justia Law

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The M/V Deep Blue purchased fuel from a supplier, the supplier purchased the fuel from an affiliate, and the affiliate subcontracted with Radcliff. Radcliff subsequently asserted a maritime lien on the Deep Blue in a bid to recover directly from the ship, giving rise to this litigation. The Fifth Circuit affirmed the district court's determination that Radcliff did not have a lien on the Deep Blue. Instead, a lien had arisen in favor of the global fuel supplier, and was duly assigned to ING Bank, an intervenor in the suit. View "Barcliff, LLC v. M/V Deep Blue" on Justia Law

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When a plaintiff takes inconsistent positions by pursuing in district court a civil claim that he failed to disclose as an asset in his bankruptcy proceedings, a district court may apply judicial estoppel to bar the plaintiff's civil claim if it finds that the plaintiff intended to make a mockery of the judicial system. When determining whether a plaintiff who failed to disclose a civil lawsuit in bankruptcy filings intended to make a mockery of the judicial system, a district court should consider all the facts and circumstances of the case. The Eleventh Circuit reasoned that the court should look to factors such as the plaintiff's level of sophistication, his explanation for the omission, whether he subsequently corrected the disclosures, and any action taken by the bankruptcy court concerning the nondisclosure. The court overruled portions of Barger v. City of Cartersville, 348 F.3d 1289 (11th Cir. 2003), and Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282 (11th Cir. 2002), that permit a district court to infer intent to misuse the courts without considering the individual plaintiff and the circumstances surrounding the nondisclosure. Accordingly, the court remanded for consideration of whether the district court abused its discretion in light of this new standard. View "Slater v. United Steel Corp." on Justia Law

Posted in: Bankruptcy

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Section 707(b) of the Bankruptcy Code, which allows a bankruptcy court to dismiss a petition filed under Chapter 7 if it determines that relief would be an "abuse" within the meaning of that section, applies to a petition that was initially filed under Chapter 13 but later converted to a petition under Chapter 7. The Eleventh Circuit explained that by excluding converted cases from section 707(b), the effect would be to read this important remedial provision out of the Code. Accordingly, the court affirmed the district court's decision to uphold the bankruptcy court's dismissal of the petition in this case. View "Pollitzer v. Gebhardt" on Justia Law

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