Chapter 7

October 30, 2024

California Court Upholds Limitations on Homestead Exemptions in Bankruptcy

In bankruptcy cases, debtors are required to follow strict procedural guidelines to avoid dismissal of their appeals. Recently, a California district court reinforced this requirement by dismissing a pro se debtor’s bankruptcy appeal due to procedural lapses, serving as a reminder of the importance of adhering to court-imposed deadlines in bankruptcy matters. If you are facing bankruptcy or an appeal, it is crucial to consult a California bankruptcy attorney who can help ensure compliance with legal requirements.

Factual and Procedural Background

It is reported that the debtor filed a notice of appeal in a bankruptcy case originating in the Eastern District of California. Allegedly, the debtor, proceeding without an attorney, was required to designate the appellate record and submit a statement of issues as outlined by Federal Rule of Bankruptcy Procedure 8006. The debtor, however, reportedly failed to meet these obligations, which led to delays in the proceedings.

After her initial filing, the debtor sought the appointment of counsel and requested an extension of time to file her appellate brief. The Bankruptcy Appellate Panel (BAP) denied the appointment of counsel, reasoning that Nicole had not demonstrated exceptional circumstances or a strong likelihood of success on appeal, both of which are required for appointing counsel in civil matters. The BAP then transferred her appeal to the District Court for further handling. Continue reading

August 28, 2024

California Court Discusses Stays in Bankruptcy Cases

by Matthew D. Roy

One of the benefits of bankruptcy is that it prohibits creditors from pursuing claims while the bankruptcy is pending. The automatic stay does not bar all non-bankruptcy-related activities, though, as discussed in a recent California case. If you are overwhelmed with debt, you should meet with a California bankruptcy lawyer to discuss whether bankruptcy may be an option for you.

Facts and Procedure of the Case

Reportedly, in January 2022, the Superior Court appointed a receiver, managed by its president, to oversee a property located in Perris, California, which was owned by the debtor. By March 2023, the court approved the sale of this property. Shortly after, the debtor filed for Chapter 7 bankruptcy in early March 2023, initiating a bankruptcy case. In the following weeks, the receiver requested court approval to retain legal counsel for the bankruptcy case, which the court granted.

It is alleged that a motion to lift the automatic stay on the property was filed in April 2023 and granted shortly thereafter. In June 2023, the debtor filed a motion for sanctions, alleging that the receiver and an in-house attorney violated the automatic stay by filing various documents in the receivership action before the stay was lifted. The bankruptcy court heard and denied this motion in July 2023. The debtor appealed the denial, and the appeal was transferred to the appellate court in August 2023. Continue reading

March 23, 2024

California Court Discusses Grounds for Vacating a Bankruptcy Conversion Order

by Matthew D. Roy

Businesses grappling with debts they are unable to pay can often seek relief via bankruptcy. The United States Bankruptcy Code sets forth the requirements and relief available for debtors under various chapters. Many businesses choose to file Chapter 11 bankruptcy actions, as it allows them to maintain operations and assets. In some instances, though, the court will convert a Chapter 11 bankruptcy case to a Chapter 7 case despite the debtor’s protests. In a recent California opinion issued in a bankruptcy matter, the court discussed the grounds for entering and vacating a conversion order. If you need assistance seeking bankruptcy relief, it is advisable to speak with a California bankruptcy lawyer as soon as you can.

Procedural History of the Case and Factual Setting

It is alleged that the debtor filed a Chapter 11 bankruptcy action. The bankruptcy court subsequently entered a Conversion Order, which converted the case from Chapter 11 to Chapter 7 bankruptcy. At the hearing on the matter, the debtor contends that it was not provided with sufficient notice of the hearing on the motion to convert and that it was not timely served with notice of the motion.

November 29, 2023

California Court Discusses Grounds for Dismissing an Adversary Complaint in a Bankruptcy Case

by Matthew D. Roy

In bankruptcy actions, there is an automatic stay preventing parties from pursuing any claims against the debtor. If a person violates the automatic stay, the debtor may be able to pursue an adversary complaint against the person. Such complaints must be adequately specific, however, otherwise, they will most likely be dismissed, as illustrated in a recent California bankruptcy case. If you have questions about whether bankruptcy is right for you, it is advisable to contact a California bankruptcy lawyer as soon as possible.

Facts of the Case

It is alleged that in 2017, the debtor filed a suit against her neighbors regarding a property line dispute, which was later dismissed. In 2019, she filed a second suit, adding additional defendants. After several legal actions in both federal and state courts, the debtor filed for Chapter 7 bankruptcy on the eve of a libel action filed against her by one of the defendants. The debtor did not inform the state court of her bankruptcy during the proceedings.

Reportedly, the debtor later filed an adversary complaint in the bankruptcy court, asserting various claims, including willful violations of the automatic stay, fraud, RICO violations, and quiet title. The bankruptcy court denied the debtor’s motion for contempt against the neighbor, and subsequently, Appellees filed a motion to dismiss the adversary complaint with prejudice, arguing insufficiency of factual allegations. The court granted the motion, stating that the debtor failed to state a claim and that any amendment would be futile. The debtor appealed.

March 30, 2023

California Court Discusses Anti-SLAPP Law in the Context of Bankruptcy Claims

by Matthew D. Roy

Bankruptcy actions generally offer people relief from significant financial burdens, as most debts are discharged in bankruptcy. There are exceptions to the general discharge rule, however. For example, claims arising out of willful misconduct, such as fraud or intentional injury, will often be deemed non-dischargeable. Recently, a California court analyzed a debtor’s counterclaims to a creditor’s action to deem debts nondischargeable, in a case in which it was disputed whether California’s Anti-SLAPP law applied in bankruptcy matters. If you need help dealing with overwhelming debts, it is smart to confer with a California bankruptcy lawyer about your options.

Procedural History of the Case

It is alleged that the debtor filed a petition for Chapter 13 bankruptcy in February 2021; it was later converted into Chapter 7 petition. The creditor subsequently filed a complaint against the debtor in June 2021, asking the court to determine the creditor’s claims were nondischargeable because they arose out of the debtor’s willful and malicious conduct. The creditor then amended its complaint on July 1, 2021, to include an objection of discharge on the grounds the debtor made false oaths.

It is reported that, in response, the debtor filed an answer to the amended complaint and a cross-complaint that contained various claims for relief under California law. The creditor then filed a motion to strike the cross-complaint under California’s anti-SLAPP statute. The court granted the creditor’s motion to strike the debtor’s cross-complaint, and the debtor appealed.

December 24, 2022

California Court Discusses Grounds for Deeming a Debt Nondischargeable

by Matthew D. Roy

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.

November 26, 2022

California Court Discusses Debts Dischargeable in Bankruptcy

by Matthew D. Roy

Filing for bankruptcy is an option for many people struggling to pay their debts. While many debts are dischargeable via bankruptcy, not all are. For example, people cannot seek relief from certain tax obligations by filing bankruptcy actions, as clarified by a California court in a recent ruling issued in a bankruptcy matter. If you have debts that you are unable to pay, you may be eligible to file for bankruptcy, and you should speak to a California bankruptcy attorney as soon as possible.

Procedural Background of the Case

It is alleged that the debtor filed for Chapter 11 bankruptcy in November 2015. The action was converted to a Chapter 7 bankruptcy, and the court ultimately ordered a discharge. In August 2021, the debtor received a notice from the IRS informing him that he owed approximately $10,000 in taxes for the 2012 and 2013 fiscal years. He subsequently moved to open his bankruptcy case.

Reportedly, after the court granted his motion, he filed an adversary complaint against the IRS, asking the court to issue a declaratory judgment that his 2012 and 2013 tax obligations were discharged by his Chapter 7 bankruptcy proceeding. The IRS filed a motion to dismiss, which the court granted. The debtor then appealed.

September 30, 2022

California Court Discusses Valuing Assets of Bankruptcy Estates

by Matthew D. Roy

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.

August 29, 2022

California Court Dismisses Adversary Complaint as Untimely

by Matthew D. Roy

Bankruptcy trustees often handle multiple cases at one time and are expected to keep track of the unique facts and pleadings of each case. If a trustee hastily files a pleading in the wrong case, it may negatively affect their rights, as demonstrated in a recent ruling issued by a California court. If you need assistance managing your debts and are interested in learning more about bankruptcy, it is in your best interest to meet with a California bankruptcy lawyer as soon as possible.

Procedural Background of the Case

It is alleged that the debtor filed a chapter 7 bankruptcy petition in July 2019, and a chapter 7 trustee was appointed shortly after. Two years later, on the last day to institute section 108(a) and 546(a) actions, the trustee filed multiple complaints in which he set forth both bankruptcy and non-bankruptcy claims against third parties. One of the claims he filed was an adversary complaint against the appellant to avoid transfers and seek damages for breach of contract and unjust enrichment; however, he filed it under the wrong docket number,

Reportedly, the trustee did not take any action to remedy his mistake for three months. Specifically, he dismissed the incorrectly filed complaint and filed an amended complaint under the correct docket number. The appellant moved to dismiss the adversary proceeding on the grounds that it was time-barred. The court granted the appellant’s motion, and the trustee appealed.

July 22, 2022

California Court Discusses Factors Considered When Evaluating Whether to Convert a Chapter 7 Bankruptcy Case to Chapter 11

by Matthew D. Roy

There are key differences between Chapter 7 and Chapter 11 bankruptcy, and which one is appropriate depends on a debtor’s unique circumstances. While debtors must pass a means test in order to pursue Chapter 7 bankruptcy, that does not mean that their decision to seek debt relief under that Chapter cannot be challenged by their creditors. Recently, a California ruling discussed what factors the courts consider when weighing whether to grant a creditor’s motion to convert a Chapter 7 bankruptcy to Chapter 11. If you have debts that you are unable to pay, you may be able to obtain relief through bankruptcy, and you should speak to a California bankruptcy lawyer about your options.

History of the Case

It is reported that the debtor, who is a professional hockey player, filed a Chapter 7 petition for bankruptcy. One of his creditors subsequently filed a motion to convert his Chapter 7 case to Chapter 11 and asked the court to appoint a Chapter 11 trustee. The court noted that the creditors’ chances of recovering on their claims would be greatly improved if the case was transferred to Chapter 11, explaining that in Chapter 11, any income the debtor earns after filing the petition belongs to the estate, while in Chapter 7, the debtor retains any such income. The court nonetheless denied the creditor’s motion. The creditor subsequently appealed.

Factors Considered When Evaluating Whether to Convert a Chapter 7 Case to Chapter 11

The trial court’s decision was upheld on appeal. The court explained that section 706(b) of the Bankruptcy Code allows a court to convert a Chapter 7 bankruptcy case to Chapter 11 upon the request of a creditor, even if the debtor does not consent to the conversion. The court noted, though, that Section 706(b) does not offer any guidance as to what a court should or should not consider when evaluating whether to grant such a request.