Articles Posted in Chapter 13 Bankruptcy

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

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

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

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

Not all bankruptcy petitions that are filed are granted. Instead, in some cases, the court will deny a petition or dismiss a case. Fortunately, however, the law allows for appeals, and in many instances, a petitioner can persuade a court to reverse its ruling and allow a bankruptcy action to proceed. In a recent California bankruptcy case, a court discussed the process of reopening a bankruptcy proceeding, highlighting the importance of following the proper procedure.  If you live in California and wish to seek relief from your debts, you should speak to a trusted California bankruptcy attorney regarding your options.

Procedural History of the Case

It is reported that the petitioner filed a motion to reopen his bankruptcy case, which was filed in 2010. The bankruptcy court denied his motion, and he appealed. He had difficulties complying with the deadlines set forth under the scheduling order for the appellate process, and the bankruptcy court’s decision was affirmed without consideration of the petitioner’s brief. He then filed a motion to reinstate his appeal so that the court could consider his brief. The court granted his motion to reinstate the appeal but, upon reviewing the materials submitted by the petitioner, the court nonetheless denied his appeal.

Reopening a Bankruptcy Case

A bankruptcy court’s denial of a motion to reopen a bankruptcy case will be reviewed by an appellate court for abuse of discretion. In assessing whether an abuse of discretion has occurred, the appellate court will conduct a two-part inquiry. First, it will review whether the bankruptcy court applied the proper legal rule to the question presented. If so, the appellate court will then consider whether the bankruptcy court applied the legal standard in a manner that is illogical, implausible, or without support, based on inferences that can be drawn from the facts of record. Continue reading

Generally, when a person files a petition for bankruptcy, an automatic stay will be entered that bars anyone from filing claims seeking damages from the party in state or federal court. In some instances, however, a bankruptcy court can lift the automatic stay, allowing litigation to proceed. Recently, a California bankruptcy court discussed what constitutes just cause for lifting a stay, in a case in which the debtor appealed a retroactive annulling of an automatic stay. If you are a California resident seeking a reprieve from your debts, it is prudent to confer with a capable California bankruptcy attorney to assess whether bankruptcy may be an option for you.

Facts of the Case

It is reported that the debtor filed a petition for Chapter 13 bankruptcy, after which the bankruptcy court issued an automatic stay. Subsequently, the defendants, who were unaware of the claimant’s bankruptcy proceedings, filed a wrongful death lawsuit against the claimant in state court. After the defendants were advised of the debtor’s bankruptcy, they moved to annul the stay in order to validate the filing of their complaint in state court and to liquidate their claims against the debtor. The bankruptcy court granted the motion and retroactively lifted the stay, after which the debtor appealed.

Grounds for Lifting an Automatic Stay in a Bankruptcy Case

Pursuant to the bankruptcy code, when a party in interest moves to lift an automatic stay and a hearing is held, a bankruptcy court must grant relief from an automatic stay upon showing of cause. Cause is not specifically defined by the bankruptcy code; rather, whether cause exists must be determined on a case by case basis. In determining whether a stay should be lifted to allow a case filed in state court to proceed, the court should assess the judicial economy, potential for prejudice, the expertise of the state court, and whether only bankruptcy issues are involved. Continue reading

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