When a party files for bankruptcy, the party’s property and assets will typically be transferred to the bankruptcy estate. This includes not only tangible assets, like personal property, but also potential sources of recovery, like litigation claims. Recently, a California court discussed sales of litigation claims in the context of bankruptcy, in a matter in which the debtor filed an appeal challenging the validity of the sale of her claims. If you are overwhelmed by debts, you may be eligible to file for bankruptcy, and it is advisable to meet with a trusted California bankruptcy attorney to determine your rights.

The Debtor’s Claims

It is reported that the debtor filed for Chapter 7 bankruptcy. During the course of proceedings, the bankruptcy court approved the sale of her litigation claims pursuant to 11 U.S.C. section 363. The debtor then filed an appeal, challenging the validity of the sale. The Chapter 7 trustee assigned to the case argued that the sale was permitted, or alternatively, that the debtor’s appeal was moot. Upon review, the court agreed with the trustee’s latter assessment, dismissing the appeal as moot.

Appealing the Sale of Litigation Claims in Bankruptcy

Under the applicable case law, if a bankruptcy court applies section 363 for the sale of claims in accordance with a settlement agreement, all parties must comply with the requirement imposed by section 363 regarding seeking a stay. In cases in which a sale is not stayed pending appeal, as long as the sale was made in good faith and cannot be set aside under state law and is not otherwise subject to a right of redemption provided by a statute, the appeal will be deemed moot. Continue reading

Many Californians struggling to pay debts are worried that they will lose their homes if they file for bankruptcy. Fortunately, California’s bankruptcy laws allow certain properties to remain exempt from being liquidated and used to pay creditors, such as homes. A debtor must have some interest in a dwelling for the homestead exemption to apply, though. This was demonstrated in a recent California ruling in which the court denied the debtor’s attempt to apply the homestead exemption to a property owned by his company. If you own property and wish to seek debt relief, it is prudent to speak with a knowledgeable California bankruptcy attorney to discuss your options for retaining your assets.

The Debtor’s Petition for Homestead Exemption

Reportedly, the plaintiff filed for bankruptcy via a Chapter 11 petition in July 2019. In December 2019, it was converted to Chapter 7. The defendant was listed as the plaintiff’s largest creditor due to a disputed judgment obtained against the plaintiff. The plaintiff alleged the judgment was obtained via abuse of process, witness tampering, fraud, and perjury, and listed a cause of action against the defendant for the same amount as the judgment as an asset. He also listed his 50% membership interest in an LLC as an asset but did not list any real property.

It is alleged that the defendant obtained relief from the automatic stay to include the LLC as an additional judgment debtor under the theory of reverse alter ego. The plaintiff then amended his exemptions to include a property owned by the LLC. He claimed he resided there, and therefore it qualified for a homestead exemption. The court disallowed the exemption because the plaintiff did not own the property, and the plaintiff appealed. Continue reading

In many marriages, couples jointly own real estate. While couples may not consider the nature of the title of a property, in the context of bankruptcy, how a jointly owned property is characterized is a critical consideration for determining whether it will become part of the bankruptcy estate. The factors weighed in determining whether an asset is community property or is held in a joint tenancy was recently discussed by a California bankruptcy case in which the court disputed how two marital properties should be categorized. If you are married and wish to seek debt relief via bankruptcy, it is prudent to speak with a seasoned California bankruptcy attorney to discuss how the property you own with your spouse may be impacted.

Background of the Case

Allegedly, the debtor, who was married, filed for Chapter 7 bankruptcy. Prior to filing the petition, the debtor transferred properties he owned with his wife to a trust. A trustee filed an adversary proceeding, asking the court to avoid the transfer because it was a fraudulent conveyance. The court ruled in favor of the trustee and ruled that the entirety of both properties could be recovered for the bankruptcy estate, rather than just the debtor’s halves. The debtor then appealed, but the lower court ruling was affirmed. The debtor then appealed again.

Characterization of Marital Property in Bankruptcy

Under California law, if a debtor owns a property in a joint tenancy, only the debtor’s interest will become the property of the bankruptcy estate. Further, the bankruptcy code allows a trustee in a Chapter 7 bankruptcy to sell a jointly owned property and divide the proceeds between the non-debtor owners and the bankruptcy estate. If a property is considered community property, however, the entire property will become an asset of a bankruptcy estate. In such instances, the trustee can sell the property and distribute the entirety of the proceeds among the debtor’s creditors.

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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

Many bankruptcy claims are complex and involve adversary proceedings filed by creditors who believe the debtor engaged in conduct that renders their debt non-dischargeable, such as fraud. In some instances, a party alleging bankruptcy and non-bankruptcy claims in a single pleading in a case that is before a bankruptcy court, may file a motion asking a bankruptcy matter to be heard before the district court, which is referred to as a withdrawal of reference. Recently, a California court discussed grounds for granting a withdrawal of reference, in a case in which the debtor was accused of violation of fiduciary duties. If you are a California resident or business owner and you wish to file for bankruptcy, you should consult a dedicated California bankruptcy attorney to discuss your rights.

Factual and Procedural History

It is reported that the debtor individual and the debtor company, which was solely owned by the individual, both filed petitions for bankruptcy. Subsequently, adversary proceedings were filed by trustees in both cases, asserting claims of violation of fiduciary duties under ERISA and violation of the RICO act. The debtor individual’s bankruptcy was dismissed. The debtor company did not file an answer to the adversary proceeding, and a default was entered.

Allegedly, the trustees then filed a lawsuit against the debtor individual in the district court, again setting forth claims of violation of fiduciary duties under ERISA and violation of the RICO act. The trustees then filed a motion to withdraw the reference of the adversary proceeding against the debtor company, arguing that it was mandatory as it required consideration of both non-bankruptcy and bankruptcy claims, and non-bankruptcy law was substantially involved in the case. Continue reading

Typically, when people file for bankruptcy, the majority of the debts they owe will be discharged, subject to certain exceptions. In some instances, though, a party that is owed money from the debtor will file an adversary action arguing that a debt should not be discharged because it was incurred via fraudulent means. In a recent case, a California bankruptcy court analyzed whether a default judgment for fraud is sufficient to demonstrate that a debt should not be discharged as a matter of law. If you live in California and are overcome by debt, you may be able to seek relief under the bankruptcy code and should speak to a trusted California bankruptcy attorney as soon as possible.

Factual History

It is reported that the creditors made a set of loans to a company that was owned by the debtors. The company ultimately ran into financial trouble and was unable to make payments on the loans. The debtors then offered to transfer their inventory to the creditors as partial payment for the money owed and proposed a coordinated settlement. The creditors accepted the inventory but later determined it was worth over thirty thousand less than the debtors represented. Negotiations on the proposed settlement fell through, and the creditors filed a lawsuit against the debtors, alleging multiple claims, including fraud.

Allegedly, the debtors failed to file an answer, and a default judgment was entered against them. The debtors then filed a petition for bankruptcy, after which the creditors filed an adversary complaint, arguing that the default judgment should not be discharged. They filed a motion for summary judgment as well, arguing that the court was precluded from allowing the debtors to re-litigate the issue of whether they engaged in fraud. The court granted the motion, and the debtors appealed. 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

The bankruptcy code aims to provide relief to people unable to manage their debts. Thus, even if a trustee files a motion to dismiss a person’s bankruptcy petition and a court grants the petition and dismisses a bankruptcy action, the law provides a right to appeal the dismissal. While an appeal must generally be filed within the specified time frame, the court will excuse a delay in filing an appeal under certain circumstances. Recently, a California court discussed what a petitioner seeking relief from a dismissal must show in order to be granted leave to file an untimely appeal. If you live in California and are interested in seeking relief of your debts via bankruptcy, you should contact a skillful California bankruptcy attorney to discuss your case.

Facts of the Case

Allegedly, the petitioner filed a Chapter 13 bankruptcy petition. In response, the trustee filed a motion to dismiss and requested a one year bar to any refiling of a petition due to the deficiencies in the petitioner’s proposed Chapter 13 plan, and her failure to make ongoing payments to her debts. The notice for the motion was mailed to the petitioner but she did not file a response or appear at the hearing. Thus, the court granted the motion and dismissed the petition. Thirty-four days later, the petitioner filed a motion to reopen or extend the time to file an appeal, arguing that she did not receive notice of the dismissal, and her failure to file an appeal was based on excusable neglect. The court denied the motion, after which the petitioner appealed.

Demonstrating Excusable Neglect

After an order has been entered in a bankruptcy case, a party has fourteen days to appeal the order. If the party cannot meet that deadline, he or she can file a motion asking or an extension of the time to file an appeal; however, the deadline for seeking an extension is fourteen days from the entry of the order as well, unless the moving party can demonstrate that the delay in filing the motion was caused by excusable neglect.

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When a person files for bankruptcy, an automatic stay is entered, preventing creditors from taking further actions to collect debts from the person. Further, the law provides that if a creditor willfully violates a stay, anyone injured by the violation can recover actual damages, which includes attorneys’ fees and costs. As discussed in a recent bankruptcy case arising out of California, in some circumstances, however, a court may decline to grant a person an award of the true costs associated with seeking damages caused by the violation. If you are a resident of California seeking debt relief, it is advisable to speak with a trusted California bankruptcy attorney regarding your options.

Factual and Procedural History

Reportedly, the plaintiff filed for bankruptcy on October 1, 2018. At the same time, she filed a stay of proceedings in pending state court actions. Per the defendant’s admission, it became aware of the bankruptcy petition by October 2, 2018. Regardless, on October 2, 2018, the defendant sent the sheriff instructions to enforce the writ of execution. Although an attorney that worked for the defendant reportedly directed an assistant to advise the sheriff to terminate the levy on October 10, 2018, the sheriff never received notification of the termination and levied funds from the plaintiff’s bank accounts. The plaintiff attempted to withdraw funds following the levy and was charged an overdraft fee.

Allegedly, the plaintiff’s attorney then filed a motion for contempt against the defendant for violating the automatic stay. Following a hearing, the court found that the defendant clearly violated the stay and that its violation was willful. The court then ruled that the plaintiff was entitled to recover reasonable attorneys’ fees and costs, but not the full amount claimed. The plaintiff appealed. Continue reading

In many bankruptcy actions, the court will appoint officers to oversee certain aspects of the case. Any officer appointed by a court must remain neutral, and if a conflict is revealed, the officer usually must recuse his or her self from the case. When a party in a bankruptcy proceeding believes that a bankruptcy officer unjustly affected the outcome of the case due to a conflict, the party may be able to seek damages from the officer via a civil lawsuit. There are requirements the party must comply with, however, and if the party fails to file the lawsuit properly, his or her claims may be dismissed, as demonstrated in a recent case arising out of California. If you live in California and are in need of assistance with a bankruptcy matter, it is prudent to consult a skillful California bankruptcy attorney to discuss your case.

Factual and Procedural Background of the Case

It is reported that a debtor filed for bankruptcy, seeking in part to discharge a judgment from a defamation lawsuit. Creditors subsequently filed an adversary complaint, arguing that the debt was not dischargeable due to the debtor’s willful and malicious acts. Subsequently, the court-appointed a special discovery master to assist with the proceeding. After several months had passed, the creditor informed the master of a conflict of interest, namely that the master’s firm previously represented another party in a case against the creditor. The master recused herself but refused to refund the fees paid by the creditor. The creditor then filed a motion for a declaration that leave was not required to file a lawsuit against the master in State court, or alternatively, seeking leave to sue the master. The court denied the motion, and the creditor appealed.

Filing a Lawsuit Against an Officer Appointed by the Bankruptcy Court

Pursuant to the Barton doctrine, a plaintiff who wishes to institute a lawsuit against a bankruptcy officer in another forum, for actions taken by the officer in his or her official capacity, must first obtain the authorization of the bankruptcy court. The main criterion of an inquiry under the Barton doctrine is whether the suit the party seeks to file challenges the acts taken by an officer were within his or her authority as an officer of the court and were undertaken in his or her official capacity. The doctrine arose out of the fact that bankruptcy law requires that all matters that affect the administration of a bankruptcy estate must either be filed in bankruptcy court or with leave from the bankruptcy court. Continue reading

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