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When a defendant in a civil lawsuit files for bankruptcy, the automatic stay can halt proceedings against that party. However, the question of whether litigation continues against other defendants often remains contested. A recent decision issued in California highlights how bankruptcy stays intersect with multi-party civil rights litigation, and how courts address attempts by non-bankrupt defendants to delay proceedings through discretionary stays. If you are navigating litigation that overlaps with bankruptcy, consulting with a skilled California bankruptcy attorney is essential to protect your rights.

Facts of the Case and Procedural History

It is reported that the plaintiffs filed civil rights claims against multiple defendants, including municipalities, law enforcement officers, and a contracted medical provider. Allegedly, during the pendency of the action, certain defendants became subject to an automatic stay imposed by the Bankruptcy Court for the Southern District of Texas. The stay prevented further litigation against those defendants while their bankruptcy proceeded.

Allegedly, the district court instructed the remaining defendants not subject to the bankruptcy stay to renew any pending summary judgment motions, request additional briefing, or move for a discretionary stay if they believed litigation should be paused. Reportedly, the defendant City of Farmersville renewed its summary judgment motion, while the defendant County of Tulare filed a motion it styled as “administrative relief,” seeking to place the case on hold until all defendants could proceed together. Plaintiffs opposed the request, noting that the bankruptcy court had already clarified the scope of the automatic stay, making further delay unnecessary. Continue reading

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Bankruptcy cases often involve overlapping legal proceedings in state court and federal bankruptcy court, and debtors must take care that their actions do not run afoul of the confirmed Chapter 13 plan. A recent decision by a California court highlights that even when post-confirmation developments raise questions about debtor conduct, a bankruptcy court retains discretion to determine whether those actions warrant dismissal. If you are considering seeking debt relief and you have questions about your rights before, during, and after bankruptcy proceedings, you should speak with a Sacramento bankruptcy attorney as soon as possible.

Factual and Procedural Background

It is reported that the debtor filed a Chapter 13 petition in October 2022 while her residence remained encumbered by a deed of trust in favor of a secured lender. The debtor had previously lived in the property with her then-husband, who was the son of the creditor seeking dismissal. It is alleged that the creditor, who continued residing at the property after the debtor’s divorce, had acquired a judicial lien on the property and was listed in the bankruptcy schedules as holding a secured claim of approximately $185,000. The debtor proposed an initial plan that included efforts to cure mortgage arrears and strip judicial liens, including the creditor’s, as impairing the homestead exemption.

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Bankruptcy law permits debtors to protect certain property from liquidation through state and federal exemptions. However, when exemptions are improperly claimed or unsupported by law, trustees may object, and courts must determine the legitimacy of those claims. A recent decision from a California court demonstrates how a debtor’s exemptions may be denied when the claimed property is no longer legally owned at the time of the bankruptcy filing and when the debtor fails to substantiate the exemption under applicable law. If you are involved in a bankruptcy proceeding in California, it is essential to consult with a qualified attorney before taking action.

Factual Setting and Procedural Background

It is reported that the debtor filed a Chapter 7 bankruptcy petition in December 2021, several months after a state court judgment had been entered against her. The judgment required her to transfer her interest in a residential property to her daughter. It is alleged that pursuant to this judgment, a quitclaim deed transferring the property was recorded on December 10, 2021, five days before the bankruptcy petition was filed.

It is further reported that despite this transfer, the debtor claimed a homestead exemption in the property. The Chapter 7 trustee objected, asserting that the debtor no longer owned the property at the time of the petition and therefore could not claim it as exempt. The bankruptcy court agreed, sustaining the objection and concluding that because the debtor lacked a legal or equitable interest in the property as of the petition date, it never became part of the estate under 11 U.S.C. § 541(a)(1). Continue reading

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Bankruptcy proceedings often involve not just questions of debt relief but also serious disputes over property rights, trust ownership, and trustee powers. When a debtor attempts to shield property by placing it in trust or disputes the trustee’s control over valuable real estate, the court must step in to determine what belongs to the estate and what does not. A recent California bankruptcy ruling illustrates how these conflicts are resolved in Chapter 11 and illustrates how the law of the case doctrine can prevent re-litigation of issues already decided. If you are considering bankruptcy or are already involved in proceedings where ownership of trust or jointly held property is contested, it is critical to speak with a California bankruptcy attorney as soon as possible.

Case Setting

It is reported that the debtor filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Central District of California and disclosed an interest in real property located on June Street in Beverly Hills, California. The debtor listed the property with an estimated value of $4.9 million and noted only a $15,000 tax lien as an encumbrance. The filing also disclosed roughly $32 million in liabilities.

It is alleged that although the debtor originally included the June Street property as part of his bankruptcy estate, he and other affiliated parties, including his wife and several family trusts—later claimed that the property was not his and was instead held by various trusts. In response, the Chapter 11 trustee filed a quiet title action seeking a declaration that the property belonged to the estate. Continue reading

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California bankruptcy law offers certain protections to debtors through the homestead exemption, which allows individuals to shield a portion of their home equity from creditors. However, these protections are not absolute. A recent California bankruptcy decision highlights the limitations of the exemption when a debtor fails to meet the required residency and procedural requirements. If you need assistance with a bankruptcy issue, it is in your best interest to seek the counsel of a Sacramento bankruptcy attorney as soon as possible.

Procedural History and Factual Background

It is reported that the debtor filed a Chapter 7 petition in the United States Bankruptcy Court for the Eastern District of California, seeking to exempt a residential property located in Shingle Springs under California’s homestead exemption. The property was held in the name of a family trust in which the debtor held an interest. The Chapter 7 trustee objected to the claimed exemption, arguing that the debtor had not resided at the property during the relevant period and that the trust ownership did not qualify for exemption under applicable law.

It is further reported that the bankruptcy court held an evidentiary hearing, during which the debtor testified regarding her living arrangements and her intent to reside at the Shingle Springs property. The court reviewed testimony, documents, and the procedural history, including the timing of the debtor’s relocation to the property and the date of her bankruptcy filing. Following the hearing, the bankruptcy court denied the exemption on the grounds that the debtor had not established that the property was her principal residence as of the petition date. Continue reading

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Bankruptcy courts overseeing mass tort reorganizations involving institutions accused of systemic abuse must balance transparency with privacy. In a recent decision, a California bankruptcy court permitted the release of anonymized abuse claims data and internal board minutes in the Chapter 11 proceedings involving a major religious institution. The ruling reflects how bankruptcy courts weigh public interest, survivor participation, and institutional accountability. If you are navigating a complex Chapter 11 matter, especially one involving sensitive claims or mass tort liabilities, it is vital to consult with an experienced California bankruptcy attorney.

History of the Case

It is reported that the Official Committee of Unsecured Creditors filed a motion seeking court authorization to disclose two categories of information gathered during the bankruptcy proceedings: the minutes of the Debtor’s Independent Review Board and aggregated, anonymized Claims Data extracted from hundreds of confidential sexual abuse claims filed by survivor claimants. The Committee argued that disclosure of both categories of information would promote transparency, advance public safety, and help build trust in the Chapter 11 process.

It is further reported that the Debtor opposed the motion, arguing that the materials were protected under prior court orders and that their release served no legitimate bankruptcy purpose. The Debtor specifically claimed that the information was “scandalous” under 11 U.S.C. § 107(b) and should remain confidential to protect the privacy interests of the church, its clergy, and its administrative personnel. The Debtor also argued that the disclosure could undermine mediation efforts and damage its reputation. Continue reading

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Default judgments are disfavored in bankruptcy litigation, particularly when they prevent a party from presenting defenses to serious financial allegations. The strong policy preference for adjudicating cases on the merits rather than on procedural missteps was demonstrated in a recent California ruling in which a creditor successfully challenged a bankruptcy court’s refusal to set aside default in an adversary proceeding. If you are navigating a bankruptcy adversary proceeding, it is crucial to consult a knowledgeable California bankruptcy attorney to protect your rights.

Case Setting

It is reported that the debtor filed for Chapter 11 bankruptcy in August 2021. In 2022, a creditor affiliate asserted a claim against the debtor for unpaid contract obligations. The debtor then reportedly initiated adversary proceedings against that creditor and others, alleging claims such as unjust enrichment and preferential transfers. The creditor and its affiliates retained the same attorney, who allegedly failed to comply with discovery rules, missed filing deadlines, and failed to appear at hearings. Despite these issues, the same attorney was later retained to represent another related entity in a new complaint filed by the debtor in August 2023.

It is alleged that when the debtor initiated a second adversary proceeding against this related entity, the same attorney failed to file a timely answer, resulting in the entry of default in October 2023. Although the attorney filed a motion to set aside the default, it was rejected after the bankruptcy court found his conduct to be part of a broader pattern of gamesmanship. Allegedly, the attorney later filed additional motions, offering explanations including misfiling, travel-related delays, and clerical errors. Despite these submissions and the retention of new counsel, the bankruptcy court repeatedly denied all motions to set aside default. Continue reading

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Financial disputes between business partners can quickly escalate, especially when one party seeks to hold the other personally liable for alleged misconduct. It is not uncommon for one party in a business lawsuit to attempt to avoid liability by filing for bankruptcy, but whether discharge is granted depends on numerous factors, as discussed in a recent California bankruptcy case. If you are involved in a bankruptcy case with complex financial disputes, you should confer with an experienced California bankruptcy attorney who can help protect your rights.

Facts of the Case and Procedural History

It is reported that the debtor and the creditor were former law partners who also had a personal relationship. They co-founded a law firm but never formalized their business agreement in writing. Allegedly, after the firm dissolved, disputes arose over financial matters, particularly a settlement receivable. The creditor claimed the debtor improperly retained the funds instead of paying firm debts.

The creditor reportedly sued the debtor in state court for fraud, conversion, and conspiracy related to the disputed funds. However, the state court dismissed the claims. Allegedly, after the state court case concluded, the debtor filed for Chapter 7 bankruptcy. The creditor then initiated an adversary proceeding, seeking to have the debt deemed nondischargeable under 11 U.S.C. § 523(a)(2) (fraud), § 523(a)(4) (fiduciary defalcation), and § 523(a)(6) (willful and malicious injury). After a trial, the bankruptcy court ruled in favor of the debtor, finding that the creditor failed to meet the burden of proof. The creditor then filed an appeal. Continue reading

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In bankruptcy proceedings, the automatic stay and discharge injunction provides critical protections for debtors by preventing creditors from collecting on debts outside the bankruptcy process. These protections have limitations, however, particularly when a debtor’s assets have been exempted from the bankruptcy estate, as demonstrated in a recent California case. If you have debts you cannot pay, you may be eligible for bankruptcy relief, and you should talk to a California bankruptcy attorney as soon as possible.

History of the Case

It is reported that the debtors, a married couple, filed for Chapter 7 bankruptcy in 2010 in the United States Bankruptcy Court for the Central District of California. At the time of the filing, the debtor held an interest in a Delaware limited liability company. The debtors disclosed this interest in their bankruptcy schedules and claimed an exemption for its value under California law. The bankruptcy trustee did not object to the exemption, effectively removing the asset from the bankruptcy estate. The bankruptcy court later granted the debtors a discharge, and the case was closed.

It is alleged that several years after the bankruptcy case was closed, the debtor became involved in litigation in the Delaware Court of Chancery concerning his interest in the LLC. The litigation involved claims against a co-owner, including allegations of breach of fiduciary duty. The LLC intervened in the case and filed counterclaims against the debtor, alleging conversion and tortious interference with contractual rights. The Delaware court ultimately ruled that, under Delaware law, the debtor’s membership interest in the LLC had been automatically terminated upon the bankruptcy filing, leaving him with only an economic interest in the company. The Delaware Supreme Court later affirmed this ruling. Continue reading

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In civil litigation involving defendants who file for bankruptcy, automatic stays under the Bankruptcy Code can complicate the proceedings. A recent California decision illustrates how courts handle the interplay between bankruptcy stays and ongoing civil cases. If you are navigating a case involving bankruptcy, it is crucial to consult a knowledgeable California bankruptcy attorney to assess your legal options.

History of the Case

It is reported that the plaintiffs, acting as successors in interest to the decedent, filed a wrongful death action in federal court against the defendant and other parties. Allegedly, the claims arose from the decedent’s death while in custody, which the plaintiffs attributed to negligence and deliberate indifference by the defendants. The first amended complaint sought damages for violations of constitutional rights, wrongful death, and medical malpractice.

Reportedly, in November 2024, the defendant filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of Texas. Shortly thereafter, the defendant filed a suggestion of bankruptcy and notice of stay, prompting the federal court in California to vacate a scheduling conference and consider the applicability of the automatic stay under 11 U.S.C. § 362(a). The court initially directed the plaintiffs to file a status report within ten days of any modifications to the bankruptcy stay. Continue reading

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