Articles Posted in Bankruptcy Caselaw

Disputes over financial transfers frequently arise in bankruptcy cases, particularly when a trustee seeks to recover funds the debtor allegedly disbursed without authorization. A recent California decision addresses how courts evaluate factual findings, interest awards, and requests for new trials in contested turnover actions. If you have questions about bankruptcy litigation in California, you should consult a knowledgeable California bankruptcy attorney to protect your interests.

Facts and Procedural History

Allegedly, the appellant received a total of $137,000 from the debtor during the period preceding the bankruptcy filing. It is alleged that the appellant characterized these funds as partial repayment for more than $400,000 he had previously advanced to the debtor. Reportedly, the trustee disputed this characterization, asserting that the appellant never loaned funds to the debtor and that the transfers instead constituted loans the appellant was obligated to repay.

It is reported that the trustee initiated a turnover action seeking the return of the $137,000. Allegedly, the bankruptcy court evaluated the parties’ testimony and documentary evidence, including tax filings, checks prepared by the appellant, and the absence of corroborating documentation for the alleged earlier loans. Reportedly, the bankruptcy court found the trustee’s testimony credible, found the appellant not credible, and concluded that the debtor had loaned the appellant the $137,000. The court entered judgment for the trustee and awarded prejudgment interest beginning in late 2016. Continue reading

When a debtor sues a municipality for property damage, overlapping legal deadlines can complicate even the strongest claims. A recent California decision in a case involving a fallen tree limb and extensive home damage illustrates how strictly courts enforce statutes of limitation even when bankruptcy and emergency tolling rules come into play. If you have questions with regard to how filing for bankruptcy may impact your rights,  it is essential to consult a knowledgeable Sacramento bankruptcy attorney immediately.

Facts of the Case and Procedural History

It is reported that the plaintiff filed a claim against the defendant city after a tree branch allegedly owned by the municipality fell on her home in January 2018, rendering the property uninhabitable and causing extensive damage. Allegedly, within days of the incident, the plaintiff filed a claim for damages under California’s Government Claims Act. The city acknowledged receipt and informed her that if the claim were denied, she would have six months from the denial date to initiate litigation.

Bankruptcy courts overseeing mass tort reorganizations involving institutions accused of systemic abuse must balance transparency with privacy. In a recent decision, a California bankruptcy court permitted the release of anonymized abuse claims data and internal board minutes in the Chapter 11 proceedings involving a major religious institution. The ruling reflects how bankruptcy courts weigh public interest, survivor participation, and institutional accountability. If you are navigating a complex Chapter 11 matter, especially one involving sensitive claims or mass tort liabilities, it is vital to consult with an experienced California bankruptcy attorney.

History of the Case

It is reported that the Official Committee of Unsecured Creditors filed a motion seeking court authorization to disclose two categories of information gathered during the bankruptcy proceedings: the minutes of the Debtor’s Independent Review Board and aggregated, anonymized Claims Data extracted from hundreds of confidential sexual abuse claims filed by survivor claimants. The Committee argued that disclosure of both categories of information would promote transparency, advance public safety, and help build trust in the Chapter 11 process.

It is further reported that the Debtor opposed the motion, arguing that the materials were protected under prior court orders and that their release served no legitimate bankruptcy purpose. The Debtor specifically claimed that the information was “scandalous” under 11 U.S.C. § 107(b) and should remain confidential to protect the privacy interests of the church, its clergy, and its administrative personnel. The Debtor also argued that the disclosure could undermine mediation efforts and damage its reputation. Continue reading

Default judgments are disfavored in bankruptcy litigation, particularly when they prevent a party from presenting defenses to serious financial allegations. The strong policy preference for adjudicating cases on the merits rather than on procedural missteps was demonstrated in a recent California ruling in which a creditor successfully challenged a bankruptcy court’s refusal to set aside default in an adversary proceeding. If you are navigating a bankruptcy adversary proceeding, it is crucial to consult a knowledgeable California bankruptcy attorney to protect your rights.

Case Setting

It is reported that the debtor filed for Chapter 11 bankruptcy in August 2021. In 2022, a creditor affiliate asserted a claim against the debtor for unpaid contract obligations. The debtor then reportedly initiated adversary proceedings against that creditor and others, alleging claims such as unjust enrichment and preferential transfers. The creditor and its affiliates retained the same attorney, who allegedly failed to comply with discovery rules, missed filing deadlines, and failed to appear at hearings. Despite these issues, the same attorney was later retained to represent another related entity in a new complaint filed by the debtor in August 2023.

It is alleged that when the debtor initiated a second adversary proceeding against this related entity, the same attorney failed to file a timely answer, resulting in the entry of default in October 2023. Although the attorney filed a motion to set aside the default, it was rejected after the bankruptcy court found his conduct to be part of a broader pattern of gamesmanship. Allegedly, the attorney later filed additional motions, offering explanations including misfiling, travel-related delays, and clerical errors. Despite these submissions and the retention of new counsel, the bankruptcy court repeatedly denied all motions to set aside default. Continue reading

Financial disputes between business partners can quickly escalate, especially when one party seeks to hold the other personally liable for alleged misconduct. It is not uncommon for one party in a business lawsuit to attempt to avoid liability by filing for bankruptcy, but whether discharge is granted depends on numerous factors, as discussed in a recent California bankruptcy case. If you are involved in a bankruptcy case with complex financial disputes, you should confer with an experienced California bankruptcy attorney who can help protect your rights.

Facts of the Case and Procedural History

It is reported that the debtor and the creditor were former law partners who also had a personal relationship. They co-founded a law firm but never formalized their business agreement in writing. Allegedly, after the firm dissolved, disputes arose over financial matters, particularly a settlement receivable. The creditor claimed the debtor improperly retained the funds instead of paying firm debts.

The creditor reportedly sued the debtor in state court for fraud, conversion, and conspiracy related to the disputed funds. However, the state court dismissed the claims. Allegedly, after the state court case concluded, the debtor filed for Chapter 7 bankruptcy. The creditor then initiated an adversary proceeding, seeking to have the debt deemed nondischargeable under 11 U.S.C. § 523(a)(2) (fraud), § 523(a)(4) (fiduciary defalcation), and § 523(a)(6) (willful and malicious injury). After a trial, the bankruptcy court ruled in favor of the debtor, finding that the creditor failed to meet the burden of proof. The creditor then filed an appeal. Continue reading

In bankruptcy proceedings, the automatic stay and discharge injunction provides critical protections for debtors by preventing creditors from collecting on debts outside the bankruptcy process. These protections have limitations, however, particularly when a debtor’s assets have been exempted from the bankruptcy estate, as demonstrated in a recent California case. If you have debts you cannot pay, you may be eligible for bankruptcy relief, and you should talk to a California bankruptcy attorney as soon as possible.

History of the Case

It is reported that the debtors, a married couple, filed for Chapter 7 bankruptcy in 2010 in the United States Bankruptcy Court for the Central District of California. At the time of the filing, the debtor held an interest in a Delaware limited liability company. The debtors disclosed this interest in their bankruptcy schedules and claimed an exemption for its value under California law. The bankruptcy trustee did not object to the exemption, effectively removing the asset from the bankruptcy estate. The bankruptcy court later granted the debtors a discharge, and the case was closed.

It is alleged that several years after the bankruptcy case was closed, the debtor became involved in litigation in the Delaware Court of Chancery concerning his interest in the LLC. The litigation involved claims against a co-owner, including allegations of breach of fiduciary duty. The LLC intervened in the case and filed counterclaims against the debtor, alleging conversion and tortious interference with contractual rights. The Delaware court ultimately ruled that, under Delaware law, the debtor’s membership interest in the LLC had been automatically terminated upon the bankruptcy filing, leaving him with only an economic interest in the company. The Delaware Supreme Court later affirmed this ruling. Continue reading