All items from Michigan Bankruptcy Blog

In 2011, the U.S. Supreme Court (the “Court”) issued
its noteworthy decision in Stern v. Marshall,1 in which it held
that bankruptcy courts lack the constitutional authority to enter a final
judgment on a state law counterclaim that is not related to the bankruptcy
proceeding. Since Stern, a number of cases have been published - at both
the bankruptcy court and court of appeals levels - where Stern
jurisdictional issues have been raised and adjudicated. We recently wrote about
one on this blog.
The Court, itself, had a chance to consider the
implications of Stern in the case of Executive Benefits Ins. Agency
v. Arkinson
.2 In a unanimous decision
written by Justice Clarence Thomas, the Court ruled that where Article III of
the U.S. Constitution does not permit a bankruptcy court to enter final
judgment on a bankruptcy related claim, the bankruptcy court may issue proposed
findings of fact and conclusions of law with respect to the claim, to be
reviewed de novo by a federal district court.



Posted 2 weeks 1 day ago

When a debtor files for bankruptcy, it is principally to obtain a fresh start and
discharge of debts from creditors. But not all debts are dischargeable. The
Bankruptcy Code lists 19 categories of nondischargeable debts, which Congress
has determined are not dischargeable for public policy reasons.
Some debts are always nondischargeable, including certain taxes, child support, and
court fines and penalties, to name a few. Others are not deemed automatically
excepted from discharge, but can be when challenged by creditors. When a case
is filed, bankruptcy courts set a deadline for creditors to raise
nondischargeability issues, and creditors who wish to except a debt from
discharge must initiate an adversary proceeding (by filing a complaint) setting
forth the basis for the discharge objection. These types of debts include those
obtained by fraud or false pretenses and those resulting from a tort, among
others.



Posted 5 weeks 6 days ago

One of the fundamental tenets of a business bankruptcy reorganization plan under
Chapter 11 of the Bankruptcy Code is the "absolute priority rule."
This rule, codified in section 1129(b)(2)(B)(ii) of the Bankruptcy Code,
provides that every unsecured creditor must be paid in full before the debtor
can retain any property under a reorganization plan. Chapter 11, however, is
not solely the domain of business debtors. Individuals (who more commonly seek
protection under Chapters 7 and 13) may also file for Chapter 11. So how does
the absolute priority rule affect individual debtors? That issue is analyzed in
a recent opinion, Ice House America, LLC v. Cardin, issued by the U.S.
Court of Appeals for the Sixth Circuit. Read More ›
Tags: 6th Circuit Court of Appeals, Chapter 11



Posted 9 weeks 1 day ago

One of the most interesting, and at times vexing, issues that arises in bankruptcy proceedings involves the jurisdiction of the bankruptcy courts. In 2011, the U.S. Supreme Court weighed in with its noteworthy decision in Stern v. Marshall, in which it held that bankruptcy courts lack the constitutional authority to enter a final judgment on a state law counterclaim that is not related to the bankruptcy proceeding. Since Stern, a number of cases have been published - at both the bankruptcy court and court of appeals level - where Stern jurisdictional issues have been raised and adjudicated. Read More ›
Tags: 6th Circuit Court of Appeals



Posted 10 weeks 16 hours ago

In Law v. Siegel, a case decided by the U.S. Supreme Court in March, the Court unanimously ruled that the bankruptcy court exceeded its authority when it surcharged the debtor’s homestead exemption to pay the Chapter 7 Trustee’s attorney fees, despite the debtor’s misconduct.
The case involved Stephen Law, a consumer debtor who filed for Chapter 7 bankruptcy in California. Law's only significant asset was his house, worth approximately $360,000. Law exempted $75,000 of the home equity under the state homestead exemption. Law further claimed that there was no additional equity in the house because it was subject to two mortgages totaling up to more than $300,000 — more than the nonexempt value of the house. The first mortgage was real. The second mortgage, allegedly in favor of "Lin's Mortgage & Associates,” was fake. Law was perpetrating a fraud. Alfred Siegel, the Chapter 7 Trustee, uncovered the mortgage scam. Unfortunately, in the process, the trustee incurred approximately $500,000 in legal fees. Read More ›
Tags: Chapter 7, U.S. Supreme Court



Posted 11 weeks 6 days ago

A recent decision in the U.S. Bankruptcy Court for the Western District of Michigan[1] granted a Motion filed by the Chapter 7 Trustee requesting turnover by the debtor of proceeds of a life insurance policy that were used by the debtor to pay the burial expenses of her father.
In the case, the Chapter 7 Trustee filed a Motion to Compel Turnover of Non-Exempt Assets seeking $9,698.90 from the debtor, including non-exempt cash, jewelry, a whole life insurance policy, and the proceeds from an insurance policy on her father's life. The debtor disputed that she was required to turn over the $7,208.84 in life insurance on her father's life, who died two days after her bankruptcy filing. The debtor argued that she used the proceeds to pay for her father's burial, and that she was not a beneficiary of the policy, but rather the owner. Read More ›
Tags: Chapter 7, Western District of Michigan



Posted 16 weeks 6 days ago

Baldridge v. Douglas Stanley Ellmann (In re Baldridge), Appeal No. 13-1700 (6th Cir., Feb. 3, 2014).
On appeal from the District Court for the Eastern District of Michigan, the Sixth Circuit held that a $28,000 “carve out” recovered by the Chapter 7 Trustee pursuant to 11 U.S.C. § 506(c) after closing a sale on the debtors’ property was not property of the estate that could be subject to the debtors’ exemption because the property was over encumbered by two mortgages, leaving no equity for the debtors to exempt. Read More ›
Tags: 6th Circuit Court of Appeals, Chapter 7



Posted 18 weeks 6 days ago

Section 110 of the United States Bankruptcy Code provides that a non-attorney can assist in the preparation of the bankruptcy petition. However, as an Inkster, Michigan man just learned (the hard way), the Bankruptcy Code places numerous requirements on bankruptcy petition preparers and subjects those who do not comply to substantial penalties.
On Tuesday, February 25, Derrick Hills of Inkster was sentenced by U.S. District Court Judge Sean F. Cox to 46 months in prison after being convicted by a jury in September of five counts of criminal contempt. The contempt proceedings stemmed from repeated violations of orders issued by U.S. Bankruptcy Judge Steven Rhodes from 2007 to 2009. According to a press release issued by the U.S. Attorney's Office following Hills' conviction at trial:



Posted 20 weeks 1 day ago

In re Newcomb Print Communications, Inc., Case No. 12-08042 (Bankr. W.D. Mich., Sept. 6, 2013).
When a debtor files a case under Chapter 11 and retains legal counsel, another person or entity may fund the debtor’s retainer. But even when the debtor is not the source of the funds, the retainer is property of the bankruptcy estate – which is particularly important if the case later converts to Chapter 7. Read More ›
Tags: Chapter 11, Chapter 7



Posted 41 weeks 3 days ago

Lindsey v. Pinnacle Nat’l Bank (In re Lindsey), Appeal No. 12-6362 (6th Cir., Aug. 13, 2013)
The Sixth Circuit held this week in a published opinion that a bankruptcy court’s denial of confirmation of a Chapter 11 plan is not a final appealable order. In so holding, the Sixth Circuit joins four other circuits, while three other circuits have held to the contrary. Read More ›
Tags: 6th Circuit Court of Appeals, Chapter 11



Posted 48 weeks 2 days ago