Business Law Insolvency Law Committee

The United States Bankruptcy Court for the Western District of Missouri (“the Court”) recently ruled that non-exempt equity in a residence which appreciates in value after the petition date of a chapter 13 case but before the case is converted to chapter 7 accrues for the benefit of the estate, not the debtor, joining a slight minority of courts weighing in on the issue.  In re Goetz, 2022 Bankr. LEXIS 3188, 2022 WL 16857109 (Bankr. W.D. MO. November 10, 2022).  Read more

In In re Project Restore, LLC, 2022 Bankr. LEXIS 2868, 2022 WL 6233552 (Bankr. M.D. Tenn. 2022) (“Project Restore”), the United States Bankruptcy Court for the Middle District of Tennessee (the “Bankruptcy Court”) rejected the debtor’s claims that the involuntary petition against it had to be submitted to arbitration because a clause in each of its contracts with the petitioning creditors mandated arbitration of disputes and that in any case the Bankruptcy Court should abstain from hearing the petition in deference to the federal policy of encouraging arbitration. Read more

In Carmel Financing, LLC v. Schoenmann (In re Mayacamas Holdings LLC), 2022 WL 3599561 (N.D. Cal. Aug. 23, 2022), the district court affirmed the bankruptcy court’s ruling that the chapter 7 trustee prevailed in avoiding the interest of the holder of a first deed of trust in an insurance payout for catastrophic fire damage  to California improved real property. Read more

In Ultra Petroleum Corp. v. Ad Hoc Committee of OpCo Unsecured Creditors (In re Ultra Petroleum Corp.), 51 F. 4th 138 (5th Cir. Oct. 14, 2022), the Fifth Circuit Court of Appeals held that: Read more

In a matter of first impression, a California appellate court held that a party was entitled to a jury trial for a claim based on a board member’s alleged breach of fiduciary duty. Read more

In April 2022, the Supreme Court submitted to Congress proposed revisions to the Federal Rules of Bankruptcy Procedure (“FRBP”) and other federal rules.  Because Congress did not reject or defer the proposed amendments, the proposed revisions went into effect on December 1, 2022. Read more

In Fin. of Am. LLC v Mrtg, Windown LLC (In re Ditech Holdings Corp.), ___ F.4th ___, 2022 U.S. Dist. LEXIS 172793, 2022 WL 4448867 (S.D.N.Y. 2022) (“Ditech”), the United States District Court for the Southern District of New York (the “District Court”) overruled the decision of the Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) that a creditor’s claim for postpetition performance on a later-rejected prepetition executory contract generates only a general unsecured claim rather than an administrative expense claim.  Read more

Consistent with prior similar rulings, the United State Bankruptcy Court for the District of New Jersey (the Court) extended the automatic stay in a chapter 11 case dealing with talc-related claims to state court litigation against the debtor’s nondebtor affiliates brought by the States of New Mexico and Mississippi for alleged consumer protection violations arising from the sale of talc-containing products.  LTL Management, LLC v State of New Mexico, 2022 Bankr. Read more

In a case of first impression for the Circuit, the Ninth Circuit Court of Appeals (the Circuit Court) ruled in a 2-1 published opinion that a chapter 7 trustee could not use the provisions of Bankruptcy Code section 724(a) to avoid and recover for the benefit of the estate a lien against a debtor’s homestead based on tax penalties. Because the debtor had a valid homestead exemption on the property, the Circuit Court deemed it was no longer property of the estate and a trustee may not avoid a tax lien attached to exempt property. Read more

The Second Circuit Court of Appeals (the Second Circuit) recently held that a bankruptcy court was permitted to deviate from replacement value in deciding whether there had been any diminution in value of second-lien creditors’ collateral such that they would be entitled to an administrative priority claim for diminished value.  Read more