Sacramento Bankruptcy and Divorce Attorneys Blog

The filing of a bankruptcy action triggers an automatic stay in litigation against the debtor, which, in many instances, helps them protect their assets. If a bankruptcy action is dismissed, the stay will be lifted, though, leaving property vulnerable to credits. A debtor can argue that an action was dismissed in error, but they must do so in a timely manner; otherwise, they may waive their right appeal, as demonstrated in a recent California bankruptcy case. If you have unmanageable debts and are interested in learning more about what relief you may be able to obtain by filing for bankruptcy, it is prudent to speak to a California bankruptcy lawyer as soon as possible.

Case Setting

It is reported that the plaintiff deemed a vexatious litigant, filed multiple bankruptcy cases between 2011 and 2020. The focal point of the cases was a property co-owned by the plaintiff’s business partner. The defendant held a deed of trust on the property. Fractional interests in the property were granted to the plaintiff and his wife, who then participated in the aforementioned filing scheme to trigger the automatic stay and prevent foreclosure.

Allegedly, despite an in rem order favoring the defendant until July 2021, the plaintiff’s Chapter 11 case was dismissed in February 2021. Subsequently, the defendant foreclosed on the property, obtained an unlawful detainer judgment, and evicted the plaintiff. The plaintiff filed an adversary complaint alleging a violation of the automatic stay and fraudulent transfer, seeking damages and a restraining order. The bankruptcy court issued an order to show cause and later dismissed the plaintiff’s complaint, citing insufficient service, lack of jurisdiction, and untimeliness. The plaintiff moved to vacate the dismissal order under Civil Rule 60(b), asserting hospitalization during the order to show cause hearing. The court denied the motion, prompting the plaintiff’s appeal.

In Chapter 11 bankruptcy cases, trustees are typically entitled to receive compensation for their services, which is subject to approval by the bankruptcy court. These fees can vary but are typically determined based on the complexity of the case and the extent of the trustee’s responsibilities. To ensure fairness and transparency, the Bankruptcy Code sets certain guidelines and fee caps to prevent excessive compensation. If a party involved in the case feels the fees are excessive, however, they can object. Their objection will only be considered if they have standing, however, as demonstrated in a recent California case.  If you cannot pay your debts and are considering filing for bankruptcy, it is smart to talk to a California bankruptcy lawyer.

Factual and Procedural Background

It is reported that the debtor, a renowned Los Angeles restaurant chain known for its historic menu and celebrity endorsements, filed for Chapter 11 bankruptcy in 2016 when faced with a $3.2 million judgment in a racial discrimination lawsuit. A committee of unsecured creditors, chaired by the Creditor, was appointed to oversee ECF’s activities. The bankruptcy court later appointed the Trustee for ECF. A Chapter 11 bankruptcy plan was approved, guaranteeing full payment to creditors, including the Creditor, with interest secured by ECF’s assets and contributions from its founder.

Allegedly, the Trustee filed a final fee application seeking the maximum allowable fee in excess of $1 million under the Bankruptcy Code’s fee cap. This amount included the lodestar plus a 65% enhancement for exceptional services. The Creditor objected to this fee request. The bankruptcy court awarded the trustee the statutory maximum fees, which the Creditor appealed. The district court upheld the bankruptcy court’s decision, and the Creditor appealed again.

Bankruptcy courts are courts of limited jurisdiction; generally, they only handle bankruptcy matters. While they can exercise jurisdiction over other claims, their authority is limited to claims that are related to or arise under or in bankruptcy. Thus, if a party attempts to bring a claim before a bankruptcy court and the court lacks jurisdiction, the claim will be dismissed, as demonstrated in a recent California case. If you have questions about what relief is available via bankruptcy, it is wise to talk to a California bankruptcy lawyer at your earliest opportunity.

Factual and Procedural Background

It is reported that in May 2016, the debtor filed for voluntary Chapter 11 bankruptcy. Almost a year later, the Bankruptcy Court converted the case to a Chapter 7 bankruptcy. Subsequently, the Bankruptcy Court approved the sale of most of the debtor’s assets to a second party for $78,000, along with a settlement and mutual releases. Before the asset sale, a third party raised various challenges to the sale and initiated an adversary proceeding against the second party in July 2020.

It is alleged that in July 2020, the third party began the adversary case. However, in December 2021, a bankruptcy judge ruled that even though the third party might have potential claims against the second party, the court lacked jurisdiction over the claims. The judge clarified that the claims did not fall under the categories of “arising under,” “arising in,” or “related to” the Bankruptcy Code. Consequently, the judge denied the third party’s request to amend the complaint and dismissed the adversary case due to lack of jurisdiction. The third party appealed.

People seeking debt relief via bankruptcy actions must file legal pleadings with the court and verify that the information contained in those pleadings is accurate. If they take a certain position in a bankruptcy action, they cannot, at a later date, take a contrary position to suit their changed needs. This tenet, known as the doctrine of estoppel, was explained in a recent California bankruptcy action where a debtor who originally asserted he was an employee of a company later attempted to argue he was a sole proprietor in an adversary proceeding. If you are interested in learning how you may benefit from filing for bankruptcy, it is smart to meet with a California bankruptcy lawyer as soon as possible.

Background of the Case

It is reported that the debtor filed an adversary proceeding against the defendant, asking the court to reinstate an office lease and grant him damages for the defendant’s violation of the automatic stay, after the defendant took possession of property rented by a business. The defendant moved for judgment in its favor on the grounds of estoppel. The court, finding inconsistencies between the debtor’s bankruptcy filings and the allegations in his adversary complaint regarding the lease and other business-related property, granted the motion. The debtor appealed.

Estoppel in Bankruptcy Cases

On appeal, the court upheld the lower court ruling. The court explained that judicial estoppel prevents a debtor from asserting a claim in the current proceeding that is inconsistent with a claim they made in a previous proceeding. In the subject case, the position the debtor asserted in his adversary proceeding regarding ownership and operation of a business and its assets were clearly inconsistent with his bankruptcy schedules, amendments, and Chapter 13 plan.

In bankruptcy actions, debtors are typically protected from claims from creditors. The bankruptcy code only protects debtors from personal liability, however, not claims to property interests in a partnership, as demonstrated in a recent California ruling issued in a bankruptcy case. If you need assistance managing your debts, it is in your best interest to talk to a California bankruptcy lawyer to determine what relief may be available.

Factual and Procedural History of the Case

It is reported that the subject claim arises out of a dispute regarding ownership rights to a commercial property in Oceanside, California. The owners did not have a written partnership agreement. The debtor asserts an 85% interest in the property, based on the recorded title in 1996. The claimant asserted that there was an oral agreement in 1995 to reduce Keenan’s partnership interest to 55%.

Allegedly, the debtor filed for Chapter 11 bankruptcy. During his bankruptcy proceedings, he consistently treated his interest as 55%. After his Chapter 11 plan was confirmed, however, he filed an amended property schedule asserting the larger interest. The bankruptcy court rejected the debtor’s post-confirmation assertions. Subsequently, the claimant filed a state court action seeking to amend the recorded deed to reflect the adjusted interest. The state court ruled in favor of the claimant in 2017, and the debtor’s appeal was dismissed.