Chapter 11 Bankruptcy

September 25, 2025

California Court Discusses Discretionary Bankruptcy Stays

When a defendant in a civil lawsuit files for bankruptcy, the automatic stay can halt proceedings against that party. However, the question of whether litigation continues against other defendants often remains contested. A recent decision issued in California highlights how bankruptcy stays intersect with multi-party civil rights litigation, and how courts address attempts by non-bankrupt defendants to delay proceedings through discretionary stays. If you are navigating litigation that overlaps with bankruptcy, consulting with a skilled California bankruptcy attorney is essential to protect your rights.

Facts of the Case and Procedural History

It is reported that the plaintiffs filed civil rights claims against multiple defendants, including municipalities, law enforcement officers, and a contracted medical provider. Allegedly, during the pendency of the action, certain defendants became subject to an automatic stay imposed by the Bankruptcy Court for the Southern District of Texas. The stay prevented further litigation against those defendants while their bankruptcy proceeded.

Allegedly, the district court instructed the remaining defendants not subject to the bankruptcy stay to renew any pending summary judgment motions, request additional briefing, or move for a discretionary stay if they believed litigation should be paused. Reportedly, the defendant City of Farmersville renewed its summary judgment motion, while the defendant County of Tulare filed a motion it styled as “administrative relief,” seeking to place the case on hold until all defendants could proceed together. Plaintiffs opposed the request, noting that the bankruptcy court had already clarified the scope of the automatic stay, making further delay unnecessary. Continue reading

June 26, 2025

California Court Rules on Property Ownership and Turnover in Bankruptcy

by Matthew D. Roy

Bankruptcy proceedings often involve not just questions of debt relief but also serious disputes over property rights, trust ownership, and trustee powers. When a debtor attempts to shield property by placing it in trust or disputes the trustee’s control over valuable real estate, the court must step in to determine what belongs to the estate and what does not. A recent California bankruptcy ruling illustrates how these conflicts are resolved in Chapter 11 and illustrates how the law of the case doctrine can prevent re-litigation of issues already decided. If you are considering bankruptcy or are already involved in proceedings where ownership of trust or jointly held property is contested, it is critical to speak with a California bankruptcy attorney as soon as possible.

Case Setting

It is reported that the debtor filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Central District of California and disclosed an interest in real property located on June Street in Beverly Hills, California. The debtor listed the property with an estimated value of $4.9 million and noted only a $15,000 tax lien as an encumbrance. The filing also disclosed roughly $32 million in liabilities.

It is alleged that although the debtor originally included the June Street property as part of his bankruptcy estate, he and other affiliated parties, including his wife and several family trusts—later claimed that the property was not his and was instead held by various trusts. In response, the Chapter 11 trustee filed a quiet title action seeking a declaration that the property belonged to the estate. Continue reading

June 28, 2024

Supreme Court Discusses Discharge of Non-Debtor Parties in Bankruptcy Claims

by Matthew D. Roy

Bankruptcy is an important tool that allows people to regain control of their finances and alleviate overwhelming debt obligations that they are unable to pay. Not all claims are dischargeable in bankruptcy, however. For example, the United States Supreme Court recently held that judgments against non-debtor cannot be discharged. If you are mired in debt, you may be able to seek relief by filing for bankruptcy, and it is smart to confer with a California bankruptcy lawyer.

Factual and Procedural History

It is alleged that the owner-family, known for their ownership of the debtor drug company, significantly influenced the company’s strategy and the development of OxyContin, a drug initially touted as having a low risk of addiction. However, mounting evidence of widespread abuse led to extensive legal battles involving individuals, state governments, and federal agencies suing the debtor. In 2004, the debtor board entered into a sweeping Indemnity Agreement to shield its directors and officers from financial liabilities arising from these lawsuits, providing broad protection even beyond their tenure, albeit with exceptions for bad faith actions. Beginning in 2007, the owner-family preemptively shielded assets in anticipation of personal litigation. By 2019, the debtors faced severe financial strain, prompting the debtor family to resign from the company’s board.

Reportedly, simultaneously, the Department of Justice (DOJ) filed criminal and civil charges against the debtor, resulting in a 2020 plea agreement that prioritized DOJ claims in the debtor’s bankruptcy proceedings. The agreement included a $2 billion forfeiture judgment, with $1.775 billion potentially released if certain conditions were met. While the debtors declared bankruptcy in 2019, the owner-family did not, temporarily halting litigation against both parties. The debtor’s estate was valued at approximately $1.8 billion, yet claims against the debtor and the owner-family exceeded $40 trillion. Continue reading

April 29, 2024

California Court Discusses Grounds for Vacating a Default Judgment in Bankruptcy Actions

by Matthew D. Roy

People with all-consuming debt will often seek financial relief by filing for bankruptcy. Bankruptcy can help many people regain control of their finances, but if they do not proceed carefully, they may incur additional debt. This was demonstrated in a recent California bankruptcy case in which the court sanctioned debtors for filing an inappropriate pleading. If you have debts you are unable to pay, it is wise to talk to a California bankruptcy lawyer about whether bankruptcy may be right for you.

Factual and Procedural Background

It is reported that the petitioner filed an adversary proceeding and was awarded a default judgment against the debtors by the Bankruptcy Court. Over a year later, the debtors filed a motion with the Bankruptcy Court under Rule 60(b) of the Federal Rules of Civil Procedure seeking relief from the default judgment. Their motion was based on Rule 60(b)(4) (relief from a void judgment) and Rule 60(b)(1) (relief from judgment due to mistake).

Allegedly, in response, the petitioner moved for sanctions under. The Bankruptcy Court denied the debtors’ motion to vacate and granted the petitioner’s motion for sanctions. The Bankruptcy Appellant Panel affirmed the decision. The debtors, representing themselves, appealed.

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.

February 28, 2024

California Court Discusses Grounds for Dismissing Bankruptcy Cases

by Matthew D. Roy

People saddled with unbearable debts are often able to take advantage of the United States bankruptcy laws and seek relief by filing a petition for bankruptcy. If they do, however, they must be cognizant of any procedural rules; otherwise, their bankruptcy petitions may be dismissed. For example, the Bankruptcy Code provides, among other things, that people cannot seek simultaneous relief for the same debt in different courts by filing multiple bankruptcy petitions. This principle was highlighted in a recent ruling issued by a California court in a bankruptcy case, in which the court ultimately affirmed the dismissal of the debtor’s bankruptcy petition filed in California court. If you have substantial debt and you have questions about what relief may be available, it is in your best interest to contact a California bankruptcy lawyer to discuss your options.

History of the Case

It is reported that the debtor initiated a voluntary Chapter 11 petition in the United States Bankruptcy Court for the Central District of California in June 2023. Five days later, the Bankruptcy court issued an order dismissing the case on the grounds that the debtor had another bankruptcy action pending in Oregon. The debtor then appealed.

Grounds for Dismissing Bankruptcy Cases

On appeal, the court considered the Supreme Court ruling in Freshman v. Atkins, which established that a debtor cannot have concurrent bankruptcy cases involving the same debts. The court cited precedent supporting this principle, emphasizing that only one bankruptcy case may be pending for a debtor at a given time. Consequently, the court found that the Bankruptcy court properly dismissed the case because the debtor already had an open Chapter 7 bankruptcy proceeding in the United States Bankruptcy Court for the District of Oregon.

January 30, 2024

California Court Discusses Demonstrating a Legal Error in a Bankruptcy Case

by Matthew D. Roy

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.

September 29, 2023

California Court Discusses Standing to Challenge Fee Awards in Bankruptcy Cases

by Matthew D. Roy

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.

July 21, 2023

California Court Explains Bankruptcy Court’s Jurisdiction Over Related Claims

by Matthew D. Roy

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.

May 30, 2023

California Court Discusses Claims Involving Partnership Interests in the Context of Bankruptcy Actions

by Matthew D. Roy

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.