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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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While bankruptcy grants many people relief from overwhelming debts, not all bankruptcy proceedings are resolved in a straightforward manner. Instead, in some cases, one or more parties will file an adversary proceeding objecting to the discharge of the debtor’s debts. While there are pleading and procedural rules that parties filing adversary proceedings must comply with, they are granting substantial leeway with regard to amendments. The right to amend an adversary complaint was the topic of a recent ruling issued in a California bankruptcy case. If you are interested in pursuing debt relief through bankruptcy, it is wise to contact a trusted California bankruptcy lawyer to assess your options.

The History of the Case

It is reported that the debtors filed a Chapter 7 bankruptcy petition. Subsequently, one of their creditors filed an adversarial complaint. The allegations in the adversarial complaint were not offered in the court’s opinion; however, the creditor later sought leave to amend the complaint. The bankruptcy court issued an order granting leave to amend, and the debtors appealed. On appeal, the bankruptcy appellate panel (BAP) affirmed the bankruptcy court ruling. The debtors then appealed to the United States Court of Appeals, Ninth Circuit.

Amendments of Bankruptcy Adversary Proceedings

The Court of Appeals explained that it reviews decisions de novo, using the same standard of review that the BAP applied to the ruling issued by the bankruptcy court. Similarly, the bankruptcy court’s conclusions of law are reviewed de novo, and its factual findings are examined for clear error. Continue reading

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Bankruptcy proceedings typically involve a substantial number of documents. Specifically, debtors must provide all available information that demonstrates their financial status and transactions. If a debtor fails to provide such information and does not have a valid reason for the lack of such documentation, their claim may be dismissed. This was demonstrated in a recent opinion issued in a California bankruptcy case, in which the court affirmed the dismissal of the debtor’s claim. If you have debts you are struggling to pay, you may be able to seek reprieve via bankruptcy, and it is smart to speak to a knowledgeable California bankruptcy lawyer regarding what measures you may be able to take to regain financial security.

Procedural History of the Case

It is reported that the debtor filed a bankruptcy petition. The bankruptcy court ultimately dismissed his petition on the grounds that he lacked adequate records demonstrating his business transactions or financial condition. Specifically, he neglected to provide documents through which the court could define his ownership interest in a cattle ranch and instead provided bank borrowing certificates that were rife with inconsistencies. Thus, the court barred his discharge.  The debtor appealed. Upon review, the district court affirmed the bankruptcy court decision. The debtor then filed a second appeal to the United States Court of Appeals, Ninth Circuit.

Dismissal of a Bankruptcy Case Due to Lack of Information

Section 11 U.S.C. 727(a)(3) of the bankruptcy code prohibits a debtor’s discharge if they have failed to preserve any recorded information from which their business dealings may be ascertained unless their actions or failure to act was justified under the circumstances. In other words, a debtor must prevent adequate written evidence to allow their creditors to reasonably determine their present financial condition and to trace their business transactions for a reasonable period in the past. Continue reading

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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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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

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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

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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

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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

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