All items from A Texas Bankruptcy Lawyer's Blog

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 6 days 3 hours 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 6 weeks 2 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 6 weeks 3 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 8 weeks 1 day 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 8 weeks 6 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 9 weeks 6 days ago

Most Americans don’t save enough money for retirement.   However, the Supreme Court recently dealt with the opposite situation—what happens when someone saves more than they need and their heirs receive the money (and then file bankruptcy).   

Posted 10 weeks 6 days ago

In the follow-up to Stern v. Marshall, the Supreme Court concluded that it didn’t need to answer the primary questions addressed to it, leaving open (on the surface at least) the issue of whether parties can consent to final adjudication by a bankruptcy court in situations where the court could not otherwise issue a final decision.   The Court also assumed but did not decide the question of whether a fraudulent conveyance action would violate Stern.   In fact, the only issue the Court did decide was that bankruptcy courts may issue reports and recommendations in core proceedings where they lack authority to make a final ruling.   While the decision is not as expansive as many practitioners would have liked, it doesn’t do any violence to the bankruptcy system and has some helpful subtext.  The case is Executive Benefits Insurance Agency v. Arkison (In re Bellingham Insurance Agency, Inc.), No. 12-1200 (June 9, 2014).   You can find the opinion here.

Posted 11 weeks 3 days ago

The Fifth Circuit has reversed a Bankruptcy Court's decision to impose death penalty sanctions against a creditor where the lower court found that "the very temple of justice has been defiled." The Bankruptcy Court had found that the actions of an attorney who was the Cadle Company's long-time lawyer and was representing the Trustee as special counsel could be imputed to Cadle.   The Fifth Circuit, on the other hand, found that the attorney was not acting as Cadle's attorney and that the Bankruptcy Court had acted without clear and convincing evidence of bad faith. No. 13-10325, The Cadle Company v. Moore (5th Cir. 1/9/14). The Fifth Circuit opinion can be found here, while my prior post can be found here.

Posted 13 weeks 6 days ago

Several hundred people, including many members of the bankruptcy bar, judges and former judges gathered to remember the life of Larry Kelly at First United Methodist Church on March 22, 2014.  I counted at least ten current or former bankruptcy judges in attendance as well as many of his former law clerks and law partners.    
Just the Facts

Posted 16 weeks 3 days ago