All items from A Texas Bankruptcy Lawyer's Blog

The Supreme Court may add another bankruptcy case to its agenda this term in a case where both the Petitioner and the Respondent support the grant of cert.    No. 13-1416, Gordon v. Bank of America.   The Petition can be found here and the Response in Support is here.   Of course, the parties want to reverse the Tenth Circuit for very different reasons.

Posted 1 week 15 hours ago

This has not been a good year for Texas homesteads involved in bankruptcy proceedings.    In April, the Fifth Circuit ruled (after nearly two years under advisement) that the non-filing spouse does not have a separate homestead estate entitled to protection when the other spouse files bankruptcy, or, as happened in this case, has an involuntary petition brought against him.    Kim v. Dome Entertainment, Inc. (In re Kim), No. 10-10882 (5th Cir. 4/9/14), which can be found here.   While the legal reasoning of the decision is solid, it is a blow to those of us who consider the Texas homestead to be sacrosanct.
What Happened

Posted 1 week 1 day ago

There are more bankruptcy decisions that come out of the Fifth Circuit each month than I could ever write about.   I am going to try to provide at least a brief blurb for each one.  Here are five cases from the Fifth Circuit that came out during August.   They deal with discharge, dischargeability, jurisdiction and Stern issues, lien claims and preferences.
Graham Mortgage Company v. Goff (In re Goff),No. 13-41148 (5th Cir. 8/22/14)(unpublished).   Fifth Circuit affirmed denial of discharge for failure to keep records under § 727(a)(3).  Opinion here.
Galaz v. Galaz (In re Galaz), No. 13-50781 (5th Cir. 8/25/14).   Court found no jurisdiction over claims brought by non-debtor against non-debtor.   Debtor's fraudulent transfer claims against non-debtor were non-core claims for which Bankruptcy Court could not enter final judgment but could submit proposed findings and conclusions here.   Opinion here.

Posted 2 weeks 2 days ago

Many cases deal with debtors who fraudulently convey away their assets before filing bankruptcy.   But what about the situation where the debtor is the victim of a fraudulent conveyance rather than the perpetrator?    In Galaz v. Galaz (In re Galaz), No. 13-50781 (5th Cir. 8/25/14), which can be found here, the Fifth Circuit answers important jurisdictional and Stern questions about the debtor's quest to recover wayward assets.   
What Happened
Lisa and Raul Galaz were once married to each other.   One of their assets was an interest held by Raul in Artist Rights Foundation, LLC ("ARF"), a company which owned the rights to the Ohio Players music catalog.    The other owner of ARF was Julian Jackson.   When Lisa and Raul were divorced in 2002, Raul assigned Lisa 50% of his 50% interest in ARF.   Because the transfer was made without Julian's consent, Lisa received a 25% economic interest in the company but was not a member.    While it is not really relevant to the opinion, another significant occurrence in 2002 was that Raul pled guilty to mail fraud and surrendered his California law license.    

Posted 2 weeks 2 days ago

Texas bankruptcy judge Jeff Bohm has ruled that a chapter 7 debtor who sold his homestead over a year after filing bankruptcy could not keep the portion of the proceeds when he failed to reinvest them within six months.  In re Smith, 2014 Bankr. LEXIS 3344 (Bankr. S.D. Tex. 8/4/14).    The case concerns the intersection between bankruptcy law, which determines exemptions as of the petition date, and Texas law, which requires reinvestment to maintain the exemption and is part of a continued trend of homestead proceeds at risk
What Happened

 The Debtor filed a chapter 7 petition on March 20, 2012 and claimed his homestead as exempt.   No party objected to the exemption.   The Trustee did not close the case.   On June 21, 2013, the Debtor sold his homestead and received net proceeds of $813,935.77.    The Debtor did not reinvest the proceeds within six months.   On April 11, 2014, the Trustee filed an adversary proceeding seeking to recover the remaining homestead proceeds in the amount of $700,349.09 from the Debtor.   The Debtor filed a Motion to Dismiss.  

The Fifth Circuit and the Vanishing Exemption

Posted 3 weeks 2 days ago

The Weil Bankruptcy Blog has a good posting on Goldsby v. 804 Congress, LLC, No. 12-50382 (5th Cir. 6/23/14).    In short, this was a case where the Court lifted the automatic stay and a third party bid in more than the amount of the debt.  The bank and the substitute trustee argued that they should be allowed to distribute the funds as provided by the deed of trust, while the Debtor contended that the Bankruptcy Court had authority over the funds.    The Fifth Circuit ruled that Section 506(b) controlled over the deed of trust.   However, the Court remanded for a determination of whether unreasonable fees and charges could be recovered as unsecured claims under Section 502.     You can read Debra McElligott's posting here.   I represented the Debtor.

Posted 8 weeks 5 days ago

The Fifth Circuit ruled today that a bankruptcy court following Matter of Pro-Snax Distributors, Inc., 157 F.3d 414 (5th Cir. 1997) did not abuse its discretion in substantially reducing fees requested by counsel in a failed chapter 11 case.   The Debtor's counsel argued that Pro-Snax was subject to multiple interpretations such that a pure results test was not mandated.   The Court did not accept this argument.   Nevertheless, the interesting part of the opinion was the special concurrence written by Judge Prado and joined in by the other members of the panel, which stated, "I write separately to note that the Pro-Snax standard may be misguided."   Barron & Newburger, P.C. v. Texas Skyline Limited, No. 13-50075 (5th Cir. 7/15/14), p. 15.   The opinion can be found here.  
This is my firm's case and there will be additional proceedings.   As a result, I am not going to offer any commentary on the ruling at this time.   As a result, I quote the special concurrence in its entirety.

Posted 8 weeks 6 days ago

When the Supreme Court struck down the Bankruptcy Reform Act's grant of authority to bankruptcy judges in 1982, it took it took them 29 years to return to the issue.    This allowed bankruptcy law to develop and mature without constantly fretting about whether the whole system would collapse.   However, since Stern v. Marshall, 131 S.Ct. 2594 (2011), the high court has shown renewed concern with how our nation's courts of financial last resort function.   While this term's unanimous decision in Executive Benefits Insurance Agency v. Arkison, No. 12-1200 (6/9/14) was notable for what it didn't decide (see my prior post here), the Supreme Court is going to try again.   On July 1, 2014, the court granted cert in Wellness International Network Limited v. Sharif, 727 F.3d 751 (7th Cir. 2013).   
What Happened

Posted 10 weeks 4 days ago

Recently I attended a CLE seminar in which the learned professor discoursed on the difference between a metaphor and a simile.   A metaphor is a statement which is not literally true but (for example, you never see a wolf actually wearing sheep's clothing) but conveys a truth through comparison.     This discussion came in handy when I came across the following pleading filed by Western District of Texas Trustee John Patrick Lowe who used Whistler's first nocturne as an extended metaphor for the disclosure provided to him in the case.  I provide the pleading for you in its entirety.

Case Summary

Posted 11 weeks 2 days ago

While the Fifth Circuit has yet to definitively address the quirky Pro-Snax opinion, a new decision provides some helpful guidance on recovering attorneys' fees in bankruptcy.    ASARCO, LLC v. Jordan Hyden Womble Culbreth & Holzer, P.C. (Matter of ASARCO, LLC), No. 12-40997 (5th Cir. 4/30/14).    You can read the opinion here
What Happened

Posted 12 weeks 2 days ago