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

Bankruptcy debtors are granted relief from debt collection efforts via an automatic stay. In some instances, though, the courts will find it appropriate to lift the stay and allow creditors to pursue claims during the pendency of a bankruptcy proceeding. While debtors can argue that a stay should not be lifted, non-debtors do not have the same rights. This was demonstrated in a recent California ruling in which the court dismissed a party’s appeal of an order denying a motion for reconsideration of relief from an automatic stay on the grounds the party lacked standing. If you need assistance pursuing debt relief, it is in your best interest to speak to a dedicated California bankruptcy lawyer regarding your options.

History of the Case

It is reported that the debtor filed a Chapter 13 bankruptcy petition in February 2015. The court approved her plan in April 2015. Neither the appellant nor the defendant were listed as creditors in the debtor’s debt schedules or involved in the bankruptcy in any way. Later that year, the appellate obtained a loan from the defendant that was secured by a deed of trust. The appellant defaulted on the loan in 2017, after which the appellant recorded a deed of trust with a value of $2 million in favor of the debtor to secure a debt it owed the debtor for legal fees.

Allegedly, the debtor did not amend her schedules to include the deed or the obligation it secured or report the deed to the bankruptcy court. The defendant held a foreclosure sale on the property in December 2017 and gave notice of the sale to the debtor. It then purchased the property via a credit bid and later sold it to an unrelated third party. Litigation ensued between the defendant and the appellant, and at one point, the appellant’s principal testified that the foreclosure violated the debtor’s automatic stay and impacted the sale. The defendant then filed a motion to annul the stay, which was unopposed. The bankruptcy court granted the motion, after which the appellant moved for reconsideration. The bankruptcy court denied the motion, and the appellant appealed. Continue reading

A party in a bankruptcy matter has the right to file an appeal if they believe the court’s order demonstrates an error in judgment. It is critical for a party seeking an appeal to comply with the proper procedure, though otherwise, their arguments may be disregarded regardless of whether they have merit. This was demonstrated in a recent opinion issued by a California court, in a matter in which the court affirmed the dismissal of the debtor’s bankruptcy case, in part, due to his failure to abide by the procedural rules. If you are interested in seeking debt relief via bankruptcy, it is smart to meet with a seasoned California bankruptcy lawyer to discuss your rights.

The History of the Case

It is reported that the debtor filed a voluntary petition for Chapter 13 bankruptcy in January 2019. A Chapter 13 trustee was appointed in his case, and two financial institutions were named as creditors. Two years later, the trustee filed a motion to dismiss the debtor’s bankruptcy case. The creditors filed a joint reply, and the debtor filed a response in opposition to the motion. Prior to the hearing on the matter, the court issued a tentative ruling granting the motion and advising the parties that their appearances were required at the hearing. Allegedly, however, the debtor failed to appear. The court granted the motion, dismissing the debtor’s case. The debtor then appealed.

Consequences of Failing to Comply with the Rules of Bankruptcy Procedure

On appeal, the court affirmed the bankruptcy court ruling due to the debtor’s failure to provide an adequate record. The court explained that the Federal Rules of Bankruptcy Procedure (Bankruptcy Rules) dictate the procedure parties must follow on appeal from an order, decree, or judgment of a bankruptcy court or in a United States district court. Continue reading

People who have excessive debts often have the option of seeking relief via bankruptcy. There are numerous factors that weigh into whether Chapter 7 or 13 bankruptcy is appropriate, and parties generally determine under which Chapter they will seek relief from their debts based on such factors. Parties can convert their bankruptcy from one Chapter to another, but only if they can demonstrate their eligibility under the new Chapter. The eligibility requirements for a Chapter 13 bankruptcy were the topic of a recent opinion issued in a California case in which the court denied the debtor’s petition to convert his bankruptcy from a Chapter 7 to a Chapter 13. If you need assistance managing your debts, it is advisable to speak to a trusted California bankruptcy lawyer about your options.

The History of the Case

It is reported that the creditors sued the debtor, alleging he defrauded them with regards to a real estate investment in China. Following a bench trial, a California court issued a Statement of Decision in which it found in favor of the creditors and entered a judgment in their favor. The debtor filed a Chapter 7 bankruptcy petition the day after the Statement of Decision was filed. He later moved to convert to a Chapter 13 bankruptcy. The bankruptcy court denied his petition, and he appealed.

Converting a Chapter 7 Bankruptcy to a Chapter 13

Pursuant to the Bankruptcy Code, a Chapter 7 debtor may move to convert his or her bankruptcy to a Chapter 13 at any time, as long as the case was not previously changed to a Chapter 7 bankruptcy. The debtor must be eligible for Chapter 13 debt relief under the provisions of the Bankruptcy Code in order to convert to Chapter 13, however. Bankruptcy Code 109(e) defines who is eligible for relief under Chapter 13, and the debt limits set forth under that provision are strictly construed. Continue reading

It is not uncommon for trustees to file adversarial pleadings in bankruptcy matters, arguing that debtors fraudulently transferred assets or funds in an attempt to avoid obligations. While federal law prohibits such transfers within the United States, the applicable statute does not operate to allow for the avoidance of transfers that occur in other countries. This was demonstrated in a recent opinion issued in a California bankruptcy case, in which the court dismissed the creditor’s complaint. If you have questions regarding your obligations to creditors after you seek debt relief, it is smart to meet with a knowledgeable California bankruptcy lawyer to determine your rights.

The Facts of the Case

Allegedly, involuntary Chapter 7 bankruptcy petitions were filed against the debtor company and the debtor principals, after which the court consolidated the debtor estates. The court then appointed a trustee, and proof of claims totaling more than $100 million were filed against the debtors, most of which involved money owed to investors.

Reportedly, the trustee filed an adversary pleading asking to set aside and recover transfers he alleged were fraudulent. The transfers, which were fees and commissions totaling close to $900,000, were paid by the debtors to a foreign exchange brokerage. The debtors moved to dismiss the trustee’s complaint, arguing in part that the fraudulent transfer law did not apply to extraterritorial transfers. Continue reading

One of the many benefits of filing bankruptcy is that, once a petition is filed, an automatic stay is entered that prevents any creditors from pursuing claims against the debtor. While the courts have the authority to lift stays in certain circumstances, their right is not absolute, and if a stay is erroneously lifted, it may constitute an abuse of discretion. This was demonstrated in a recent California opinion in which the court reversed an order lifting an automatic stay. If you owe debts that you are unable to pay, it is advisable to speak to a skillful California bankruptcy lawyer to discuss whether you may be eligible for debt relief.

The Facts of the Case

It is reported that the debtor filed a petition for Chapter 7 bankruptcy relief, which accordingly resulted in an automatic stay of any pending claims. After he filed the petition, he created a company. The creditor then filed a motion to lift the automatic stay so that she could amend the state court judgment issued against the debtor to add the debtor’s company as an additional debtor and to enforce the judgment against the debtor.

Allegedly, the defendant opposed the motion, arguing that his company was not liable for his debts and that any claims against the company would be akin to seeking unlawful enforcement of the judgment against him and his post-petition assets. The court entered an order granting the debtor a Chapter 7 discharge and subsequently entered an order granting the creditor’s motion for relief from the stay. The debtor then appealed. Continue reading

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

Generally, individuals who file for bankruptcy will do so under either Chapter 7 or Chapter 13 of the bankruptcy code. Both Chapters impose eligibility requirements, and parties that do not meet the conditions set forth under the law may not be able to obtain relief for some or all of their debts. A key factor in establishing whether a person is eligible for chapter 13 bankruptcy is the type of debts they owe and how the debts are evaluated. Recently, a California court discussed debt calculations in chapter 13 bankruptcy matters in a case in which a creditor appealed the court’s approval of the debtor’s chapter 13 plan. If you have debts that you cannot pay, you may be eligible for relief, and it is in your best interest to speak with a seasoned California bankruptcy attorney regarding your rights.

The Underlying Facts

Reportedly, the debtor commenced a chapter 13 bankruptcy proceeding in February 2020. In her statement of financial affairs and schedules, she stated she was the principal of two companies. She listed approximately $48,000 in priority unsecured debt and $127,000 in non-priority unsecured debt, none of which was liquidated or contingent or owed to the creditor.  She listed the creditor in three different places in one of her schedules but did not indicate she owed them any specific debt amount but indicated the debts she owed the creditor was unknown.

Allegedly, she then filed her initial chapter 13 plan. The creditor filed a motion for relief of automatic stay, which the court granted, and filed a proof of claim. The chapter 13 trustee objected to the debtor’s plan, but it was confirmed. The creditor appealed, arguing that the debtor was not eligible for chapter 13 bankruptcy because the debt she owed the creditor put her over the statutory limit. Continue reading

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

One of the many benefits of bankruptcy is that it stays parties from litigating claims against the debtor. The stay is not limited to actions involving creditors attempting to recover debts but also precludes any claim that may result in a judgment against the debtor. Notably, though, the stay only applies to causes of action that arise prior to the filing of a bankruptcy petition and does not bar post-petition proceedings. Recently, a California court issued an opinion discussing how courts determine when a cause of action accrues in a matter in which the debtor sought to vacate a judgment obtained by his landlord. If you can no longer manage your debts, you may be able to seek relief via bankruptcy, and it is in your best interest to speak to a knowledgeable California bankruptcy attorney regarding your options.

Facts of the Case

It is reported that in 1986, the debtor entered into a residential lease for an apartment. From 2005 through 2015, the apartment was owned by the landlord. The lease agreement permitted the debtor to approve or reject any improvements or repairs to the apartment. The debtor repeatedly exercised this option, which ultimately led to the landlord filing a lawsuit for declaratory relief against the debtor.

Allegedly, one year prior to the landlord’s lawsuit, the debtor had filed for Chapter 13 bankruptcy. He did not notify the landlord of the proceedings or seek a stay of the landlord’s claim, however, but merely requested that he wait until after the bankruptcy case had closed to seek any judgment. The debtor then filed a contempt action against the landlord for continuing to litigate the action for declaratory relief after learning of the bankruptcy matter. The court granted the request to hold the declaratory relief judgment void, but the debtor nonetheless appealed, arguing it should be vacated. Continue reading

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