Articles Posted in Bankruptcy Caselaw

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One of the benefits of bankruptcy is that it allows parties to discharge their debts so that they can regain financial security and move forward with their lives. Certain debts cannot be discharged in bankruptcy, however, such as those that arise out of the malicious or willful injury to another party. Recently, a California court explained what conduct constitutes willful and malicious behavior so as to render a debt nondischargeable in a case in which it ultimately rejected the debtor’s appeal. If you have significant debts, you could qualify for relief via bankruptcy, and it is smart to talk to a California bankruptcy attorney about your options.

Procedural History of the Case

It is alleged that the debtor filed for Chapter 7 bankruptcy relief. One of the debts he sought to have discharged was a subrogation claim from an insurance company. The insurance company moved to have the debt deemed nondischargeable on the grounds that it arose out of the debtor’s willful and malicious acts. The bankruptcy court ruled in favor of the insurance company, deeming the debt nondischargeable, and the debtor appealed. The bankruptcy appellant panel affirmed the bankruptcy court’s decision, and the debtor filed an appeal to the Ninth Circuit Court of Appeals.

Grounds for Deeming a Debt Nondischargeable

Upon review, the court affirmed the bankruptcy court’s ruling. In doing so, it explained that the court did not make a clear mistake in finding that the debtor’s conduct was tortious as required for reversal. Specifically, the court explained that the defendant illegally converted another person’s vehicle without her permission, depriving her of her property and causing her to suffer damages.

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One of the many benefits of filing for bankruptcy is that a stay is automatically entered upon filing, preventing any creditors from taking legal action against the debtor. If an automatic stay is violated, a debtor can seek relief from the court. Issues can arise, however, when it is unclear when a bankruptcy action was filed. In such instances, the court may be unable to determine if a stay was violated and whether the debtor is entitled to the relief sought, as demonstrated in a recent California ruling issued in a bankruptcy action. If you are overwhelmed with debts, it is wise to talk to a California bankruptcy lawyer want to determine if bankruptcy is a suitable option for you.

Procedural and Factual History of the Case

It is alleged that the parties agreed that the debtor filed a chapter 13 bankruptcy petition in October 2017. The time the petition was filed is disputed, however, as it contains two timestamps that are 32 seconds apart, with the later time stamp indicating the petition was filed at 2:00 pm. At the same time that day, the creditor conducted a foreclosure sale of the debtor’s property. The debtor did not learn of the foreclosure sale until after it occurred.

It is reported that the debtor’s bankruptcy petition was dismissed for the failure to pay filing fees. He reinstituted the bankruptcy action, however, and filed a motion for summary judgment, asking the court to find that the creditor violated the automatic stay and to determine that the foreclosure sale and all actions related to it were void.

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It is not uncommon in Chapter 7 bankruptcy proceedings for the courts to permit the Trustee to sell the property of the bankruptcy estate. While it is within the courts’ authority to allow such sales to occur, they must ensure that any property is sold for its optimal value in consideration of the circumstances. Recently, a California court addressed the issue of how a property’s optimal value is determined in a matter in which a party with a lien against the debtor’s estate argued that an asset was sold for less than it was worth. If you have questions about how filing for bankruptcy may impact your property rights, it is wise to talk to a California bankruptcy lawyer promptly.

Facts of the Case

It is reported that the debtor and the claimant were business partners who engaged in a series of real estate investments in the late 1990s. Their relationship deteriorated over time, and the claimant divested himself of his interests in their joint assets. The debtor agreed to pay him for said interests but failed to do so, and the claimant ultimately obtained a $34 million judgment against him.

Allegedly, the debtor filed for Chapter 7 bankruptcy and an adversary proceeding seeking relief, including the mandatory subordination of the claimant’s judgment. The court granted the motion. At the same time, the Trustee filed a motion asking the court to authorize the sale of one of the debtor’s properties free and clear of liens for $18 million, even though the claimant assessed its value at $25 million. The property ultimately sold at auction for $20 million, and the claimant appealed the sale order.

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In bankruptcy matters, the debtor must set forth schedules that include all of their property, assets, income, sources of money, and debts. Among other things, this includes any pending or potential claims or lawsuits. If they fail to properly disclose such information, they may be barred from pursuing such claims after they obtain a discharge from the bankruptcy courts. Recently, a California court discussed the measures available for a party that failed to disclose a potential lawsuit in a bankruptcy proceeding. If you have questions regarding the intersection of bankruptcy and civil claims, it is smart to speak to a skilled California bankruptcy lawyer as soon as possible.

Procedural History of the Case

It is reported that the debtor filed a civil lawsuit in the United States District Court for the Central District of California. After pleadings closed, the defendant moved for judgment on the pleadings arguing that the debtor could not proceed with his claims because he failed to disclose them in a recent bankruptcy proceeding. The debtor filed a response in opposition to the motion.

The Intersection of Bankruptcy and Civil Claims

The court ultimately denied the defendant’s motion without prejudice, granting it the right to renew its motion after the facts had been further developed. The court explained that, in the context of bankruptcy, the federal courts adhere to a basic default rule: if a debtor omits a lawsuit or potential claim from its bankruptcy schedules and obtains a plan confirmation or discharge, they will be barred from pursuing their lawsuit or claim via judicial estoppel.

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In most bankruptcy cases, creditors will submit proofs of claims. If parties object to such proofs, the courts will typically assess whether the objections are valid and, in some instances, may reduce a creditor’s claim. This was illustrated recently in a ruling issued in a California bankruptcy case in which the court reduced a claim by almost $30 million due to a finding that the debtor was not unjustly enriched in that amount as the creditor claimed. If you have questions about proofs of claims or unjust enrichment in a bankruptcy case, it is in your best interest to meet with a trusted California bankruptcy lawyer.

History of the Case

It is alleged that the debtor filed a Chapter 11 bankruptcy petition in 2016. The creditor filed four proofs of claim, one of which totaled close to $50 million. Other claimants moved to reduce the claim, and following a series of hearings, the court granted the motion, reducing the claim by close to $30 million on the grounds that the debtor was not unjustly enriched by that amount as claimed by the creditor. The creditor appealed, arguing that the bankruptcy court improperly applied the facts.

Unjust Enrichment and Proofs of Claims

The appellate court declined to adopt the creditor’s reasoning and affirmed the bankruptcy court’s ruling. The court explained that, under California law, if one party is unjustly enriched or receives a benefit at another party’s expense, they must make restitution. It noted, however, that simply because one person obtains benefits from another does not necessarily mean that restitution is required. Specifically, restitution is only necessary when the circumstances dictate that it would be unjust for the party to retain the benefit.

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In bankruptcy cases, creditors have the right to file appeals. If the court finds that they failed to adequately preserve their rights, though, it may dismiss the appeal as equitably moot. Specifically, if a creditor neglected to seek a stay of bankruptcy proceedings before filing an appeal, their appeal will most likely be dismissed. The grounds for dismissal due to equitable mootness were the topic of a recent ruling issued in a California bankruptcy case. If you have questions or concerns regarding creditor and debtor rights in bankruptcy proceedings, it is advisable to speak to a knowledgeable California bankruptcy lawyer as soon as possible.

History of the Case

It is reported that a number of creditors filed an appeal in a bankruptcy case. The district court dismissed their appeal as equitably moot. They subsequently filed an appeal from the dismissal of their appeal. After reviewing the evidence of record, the court of appeals found that the district court properly dismissed the underlying appeal as moot. Thus, it affirmed the trial court ruling.

Equitable Mootness in Bankruptcy Proceedings

The appellate courts will weigh four factors in assessing whether a bankruptcy appeal is moot. Specifically, the courts will look at whether the appealing party sought and received a stay, whether the plan in question has been substantially consummated, what impact, if any, a remedy could have on innocent third parties, and whether the bankruptcy court could devise equitable relief without totally undermining the plan.

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Under California law, it is well-established that parties only get “one bite of the apple.” In other words, they only have one chance to assert a claim, and if they receive an unfavorable verdict, they cannot attempt to relitigate the claim before another court. This was demonstrated in a recent bankruptcy ruling, in which the court affirmed the dismissal of a debtor’s adversary proceeding. If you are interested in seeking debt relief, it is in your best interest to contact a trusted California bankruptcy lawyer to evaluate your options.

The Procedural History of the Case

It is alleged that the debtor filed a pro se adversary proceeding against the defendant. The details regarding her filing were not reported by the court. Regardless, the defendant filed a motion to dismiss, arguing that the claims asserted had previously been litigated. The bankruptcy court granted the motion and dismissed the debtor’s proceeding. She appealed, and the bankruptcy appellate panel affirmed the bankruptcy court’s decision. The debtor then appealed to the United States Court of Appeals for the Ninth Circuit. The Court of Appeals ultimately affirmed the bankruptcy appellate panel’s decision.

The Law of the Case

In its opinion, the Court of Appeals explained that it reviewed bankruptcy appellate panel decisions de novo and applied the same standard of review that the panel applied to the bankruptcy court’s opinion. In doing so, the Court of Appeals ultimately determined that the bankruptcy court and panel ruled correctly. Continue reading

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Bankruptcy proceedings have allowed millions of parties to escape overwhelming debts, regain financial stability, and move forward with their lives. While a broad array of people are eligible for bankruptcy relief, there are certain rules and guidelines that people filing bankruptcy petitions must adhere to, and if they do not, they may face significant penalties. For example, in a recent California bankruptcy matter, an appellate court upheld the bankruptcy court’s imposition of sanctions against a petitioner due to a finding that he acted in bad faith. If you struggle to pay your bills, you may be eligible for debt relief, and it is smart to consult a knowledgeable California bankruptcy lawyer to evaluate your options.

The Facts of the Case

The facts of the subject case are sparse. It is reported, though, that the claimant filed a pro se bankruptcy petition. The bankruptcy court ultimately determined that the claimant was motivated by an improper purpose and acted in bad faith when he filed his petition. As such, it imposed sanctions on him pursuant to Bankruptcy Rule 9011. The claimant then appealed, and the bankruptcy court’s decision was affirmed by the Bankruptcy Appellate Panel. Thus, he appealed to the United States Court of Appeals, Ninth Circuit.

Sanctions Imposed in Bankruptcy Actions

The Court of Appeals declined to rule in favor of the claimant but affirmed the bankruptcy court’s decision. The Court explained that it reviewed the Bankruptcy Appellate Panel’s decisions de novo, and further, that it applied the same standard of review that the Bankruptcy Appellate Panel applied to the bankruptcy court’s decision. Continue reading

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It is not uncommon for a creditor to assign a debt or the right to collect money owed from a debtor to another party. In such instances, the assignee enjoys the same rights and privileges as the creditor did prior to assigning the debt. Thus, if a creditor’s debt was deemed non-dischargeable, it will likely remain so after it is assigned under the doctrine of issue preclusion. A California court recently explained issue preclusion in a case in which it affirmed the bankruptcy court’s ruling that the debt in question was non-dischargeable. If you wish to pursue legal relief from your debts, you should meet with a knowledgeable California bankruptcy lawyer to discuss your options.

History of the Case

It is reported that the plaintiff filed a bankruptcy action. During the course of proceedings, the bankruptcy court deemed a debt owed to the defendant non-dischargeable on the basis of issue preclusion. The debt was assigned to the defendant by the plaintiff’s former employer and represented a judgment in state court for punitive and compensatory damages. The plaintiff appealed, arguing that the court incorrectly applied issue preclusion to the judgment. The bankruptcy appellate panel affirmed the lower court’s ruling, and the plaintiff appealed to the Court of Appeals.

Issue Preclusion in Bankruptcy Matters

The doctrine of issue preclusion applies to matters in which a party seeks exceptions from discharge pursuant to the bankruptcy code. Issue preclusion, which is also referred to as collateral estoppel, bars a party from re-litigating factual issues that have been determined in a prior action. Pursuant to the full faith and credit act, the preclusive effect of a state court ruling in a subsequent bankruptcy matter is determined by the laws regarding preclusion in the state in which the judgment was granted. Continue reading

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In many bankruptcy cases, there are insufficient funds to fulfill the debtor’s obligations. Thus, the creditors may enter into a stipulation regarding how any available money should be distributed. Such stipulations do not necessarily mean that a creditor cannot pursue any other claims against a debtor, however. The implication of a stipulation entered into by a creditor in a bankruptcy action on future claims was the topic of an opinion recently issued by a California court, in a case in which the debtor argued the IRS was barred from recovering taxes from the debtor. If you are unable to pay your debts, you could be eligible to file for bankruptcy, and you should meet with a trusted California bankruptcy attorney as soon as possible.

The Stipulation

It is reported that the plaintiff filed a Chapter 7 bankruptcy proceeding in May 2013 and received a discharge two years later. In March 2018, the IRS filed an amended proof of claim for unpaid taxes the plaintiff owed for 2007, 2008, 2009, and 2011. The franchise tax board (FTB) filed a proof of claim as well. The bankruptcy estate did not have enough funds to pay the IRS and FTB, and so they entered into a stipulation with the bankruptcy trustee regarding the division of the funds that were available.

Allegedly, the stipulation was approved by the bankruptcy court, and funds were distributed to the parties. The IRS then advised the plaintiff that he owed close to $500,000 for the 2009 tax year. The plaintiff filed an action with the bankruptcy court, arguing that the stipulation barred the IRS from recovering any additional funds from him for the 2009 tax year, and filed a motion for judgment on the pleadings. The bankruptcy court denied the motion, and the plaintiff appealed. Continue reading

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