Business Law Insolvency Law Committee

Joining a list of competing opinions on the issue, the District Court for the Eastern District of New York (the Court) recently held that a debtor may assert a homestead exemption as provided by New York law against the proceeds from a “give-up” transaction (often referred to as a carve-out) whereby a bankruptcy trustee sought to sell an over encumbered residence. Read more

The Second Circuit Court of Appeals (the Court) recently ruled that a foreclosure of a tax lien under the strict foreclosure standard established by New York law may be set aside as a fraudulent transfer in a bankruptcy proceeding, rejecting the application of BFP v Resolution Trust Corp, 511 U.S. 531 (1994) to this procedure. Gunsalus v County of Ontario, New York (In re Gunsalus), 2022 WL 2296945 (2nd Cir. June 27, 2022). Read more

In Cantwell-Cleary Co., Inc. v. Cleary Packaging, LLC (In e Cleary Packaging, LLC),___ F.3d ___, 2022 WL 2032296 (4th Cir. June 7, 2022, No. 21-1981) (“Cleary”), reversing the Bankruptcy Court, the United States Fourth Circuit Court of Appeals (the “Fourth Circuit”) held that Bankruptcy Code (the “Code”) section 523(a)’s discharge exceptions as incorporated into Subchapter V by code section 1192(2) apply not to just individuals, but to entities as well. Read more

In a published opinion, the Seventh Circuit Court of Appeals (the Court) recently ruled that a tax sale purchaser which had not been formally served with notices of chapter 11 proceedings, including plan confirmation, but admitted in court that it was a “party” to the proceedings, was bound by the terms of the confirmed plan. Wheeler Financial, Inc., v. JPMorgan Chase Bank (In re Aguirre), 2022 WL 2166885 (7th Cir. June 16, 2022). Read more

The U.S. Bankruptcy Appellate Panel for the Ninth Circuit (the “BAP”) recently published an opinion “to clarify that bankruptcy courts do not always need to examine a compromise as a sale under [Bankruptcy Code] § 363.” Spark Factor Design, Inc. v. Hjelmeset (In re Open Medicine Institute, Inc.), 639 B.R. 169 (9th Cir. BAP 2022). Read more

In a unanimous opinion authored by Justice Sonia Sotomayor, the United States Supreme Court held that a 2017 congressional attempt to temporarily increase quarterly fees charged in large Chapter 11 bankruptcy cases is subject to the United States Constitution Bankruptcy Clause’s uniformity requirement and that the act violated the Constitution’s uniformity mandate. Read more

In a recent published opinion, the Ninth Circuit Court of Appeals (the Court) affirmed the bankruptcy court’s order converting a chapter 11 case to chapter 7 and further ruled that even though property of the estate had revested in the debtor upon plan confirmation, the debtor was required to turn over the rent and sale proceeds from her rental properties to the chapter 7 trustee because an explicit plan provision required the distribution of future proceeds from those assets to the creditors. Read more

In a recent unpublished but instructive opinion from the Third Circuit Court of Appeals (“the Court”), the Court explained why the issuance of Internal Revenue Service (“IRS”) Form 1099-C does not mean a debt has been cancelled or forgiven and further collection efforts regarding the unpaid debt are not a violation of consumer protection laws. Read more

Over a strident dissent, in a case of first impression for the circuit, the Eleventh Circuit Court of Appeals (the Court) recently held that a series of monthly mortgage statements sent by a loan servicer to comply with the requirements of the Truth in Lending Act (TILA) were potentially communications in connection with the collection of a debt under the Federal Debt Collection Practice Act (FDCPA), reversing the district court’s dismissal with prejudice of a complaint alleging FDCPA violations. Daniels v Select Portfolio Servicing, Inc., 2022 WL 1639012 (11th Cir. May 24, 2022). Read more

The Bankruptcy Appellate Panel for the Tenth Circuit (the BAP) rejected the bankruptcy court’s acceptance of the earmarking doctrine as a defense to a preference and fraudulent transfer action brought by a chapter 7 trustee against insiders of the corporate debtor. Read more