Chapter 7

News & Analysis as of

Settlement Proceeds: When Does Cash Become Quasi Real Estate?

Farmer v. Citizens Nat’l Bank of Athens (In re Davis), 528 B.R. 757 (Bankr. E.D. Tenn. 2015) – A chapter 7 trustee sought a court determination that the trustee had a superior claim to settlement proceeds arising from...more

Growing Medical Marijuana, Problematic in Bankruptcy, and Out

Frank Arenas is licensed in Colorado to grow and dispense medical marijuana. He and his wife own a building, half of which is used for the cultivation and the other half of which is leased to a marijuana dispensary. These...more

Debtors May Want To Take It All Off, But The Supreme Court Says Junior Liens Can’t Be Stripped

It’s not an uncommon sight, especially in light of the burst of the housing bubble in recent years: a debtor in bankruptcy has two mortgages on a property with a fair market value of less than the amount of the senior...more

Chapter 11 Sales: Believe It Or Not, There Really Are Limits

In re P.D.M. Co., 523 B.R. 558 (Bankr. W.D. Mich. 2015) – Two affiliated chapter 11 debtors sought court approval of a sale of all of their assets out of the ordinary course of business free and clear of claims.  The...more

The ABI Commission on Business Bankruptcy Reform: The Sale of All or Substantially All of the Debtor's Assets and Proposed...

This is the fifth in a series of Alerts regarding the proposals made by the American Bankruptcy Institute Commission to Reform Chapter 11 Business Bankruptcies. This alert covers the Commission’s recommendations regarding the...more

Bankruptcy Avoidance Litigation Part I — Do I Really Have to Give That Payment Back?

(Part one in a two-part series on avoidance litigation in bankruptcy cases) While initial consumer and commercial bankruptcy filings have, in recent years, ebbed in the wake of the historic highs of the Great Recession,...more

What General Counsel Should Know When a Company's Tenant Files for Bankruptcy

Your tenant files for bankruptcy-what’s your move? Debtors who are lessees under real property leases have certain rights regarding their lease under § 365 of the Bankruptcy Code. Essentially, the debtor has two options: 1)...more

Credit Bidding: Not An Absolute Right (And What Does That Mean?)

In re RML Dev., Inc., 528 B.R. 150 (Bankr. W.D. Tenn. 2014) – A mortgagee sought to modify a sale order to (1) modify the bid procedures and (2) confirm that it had a right to credit bid. The debtor obtained a court...more

New York Appellate Court Confers Standing on Assignee of Note Previously Discharged in Bankruptcy

A mortgage lender has standing to foreclose even when it obtains assignment of the underlying promissory note after the note has been discharged in bankruptcy, a New York appellate court has ruled. The case arose after the...more

Naked Liens – Stripping Prohibited

In June, the US Supreme Court decided the case of debtors in bankruptcy desirous of stripping off a lender’s real estate lien that was fully in excess of the fair market value of the real estate. The Supreme Court unanimously...more

Reversing the Trend: Will Congress Act to Except College Tuition Payments from Clawback in Bankruptcy? - Congress Weighs...

A trend emerging in consumer bankruptcy cases around the U.S. is causing concern for many parents, students and undergraduate schools. As was reported by The Wall Street Journal in an article published on May 5, 2015, an...more

Florida Court Rules Borrowers Who Surrender Property in Bankruptcy Can't Later Take it Back

Thanks to several recent United States Bankruptcy Court decisions in Florida, mortgage servicers should now expect borrowers who surrender their real property in bankruptcy to not contest foreclosure later. Since the...more

Good Faith Deposit: Who Gets To Keep the Cash?

Lawrence v. Commonwealth of Ky. Transportation Cabinet (In re Shelbyville Road Shoppes, LLC), 775 F.3d 789 (6th Cir. 2015) – A chapter 7 trustee sought return of a “good faith” deposit made prior to bankruptcy in connection...more

U.S. Supreme Court Resolves Uncertainty Regarding Junior Mortgage Liens in Chapter 7 Proceedings

A recent U.S. Supreme Court case resolves uncertainty as to whether Bankruptcy Code Section 506(d) allows Chapter 7 Bankruptcy debtors to "strip off" (void) junior mortgage liens that are wholly underwater. That uncertainty...more

US Supreme Court Decision in Bank of America, N.A. v. Caulkett

In a 9-0 decision released on June 1, 2015, the US Supreme Court ruled, in Bank of America, N.A. v. Caulkett, 135 S. Ct. 1995 (2015), that a debtor in a Chapter 7 bankruptcy proceeding may not void a junior mortgage lien...more

Third Circuit Approves Use Of Structured Dismissals Of Chapter 11 Bankruptcies, but Rarely

On May 21, 2015, the United States Court of Appeals for the Third Circuit approved the settlement and dismissal of chapter 11 bankruptcy cases through a structured dismissal in rare instances. See Official Committee of...more

Bankruptcy Beat: Bankruptcy Court Finds Debt To Third Party To Be A Non-Dischargable Debt Incurred In Connection With a Divorce

Bankruptcy Judge Albert Dabrowski was faced with a unique set of circumstances arising as a result of the intersection of a state court divorce action and a Chapter 7 bankruptcy case. In the matter of Corrine Sawyer v. Scott...more

Debt Free in 2016? Now is the Time to File Your Bankruptcy

It is hard to believe we are getting ready to head into the July 4th weekend! 2015 is almost half-way over and I have started to plan out the remainder of the year andit is crazy to think if you are thinking of filing...more

Recent Unanimous Supreme Court Decision Holds That Underwater Mortgages in a Chapter 7 Cannot be “Stripped off"

The Issue and Background - Debtors David Caulkett and Edelmiro Toledo-Cardona (“Debtors”) each filed for Chapter 7 bankruptcy relief with “underwater” junior mortgages held by Bank of America, N.A. (“Bank”). In other...more

Becoming a Creditor in a Bankruptcy Case Triggers a Duty to Preserve Documents

A litigator in bankruptcy court is challenged with mastery of a trial lawyer’s skills as well as the developing substantive law, jurisdictional and otherwise, governed by the Bankruptcy Code. Who hasn’t heard of Stern v....more

The Road Ahead for TransVantage Solutions, Inc.

The Chapter 7 Trustee appointed in the TransVantage Solutions, Inc. bankruptcy case ground the gears of the nation’s trucking industry this past April when he filed over 500 adversary complaints against common carriers,...more

Bankruptcy Beat: Former NFL Player Defeats Fraud Allegations Which Results In Discharge Of Debt

On March 31, 2015, the Honorable Albert S. Dabrowski issued a decision in Hamrah v. Coulette (In re Coulette), Adv. Pro. No. 13-2039, concerning the issue of whether an obligation created by a failed business investment gives...more

Seventh Circuit Says Violations of Wisconsin’s Theft-by-Contractor Statute Are Not Dischargeable in Bankruptcy

The Bankruptcy Code prevents an individual debtor from discharging certain debts, including, upon request of the creditor, debts for “fraud or defalcation while acting in a fiduciary capacity.” 11 U.S.C. § 523(a)(4). The...more

"Strip, Strip Hooray!" - Supreme Court Settles Chapter 7 Lien-Stripping Debate

Twenty-three years after initially visiting the issue, the United States Supreme Court has recently settled what some would call “the single most important unresolved issue in consumer bankruptcy” - whether Chapter 7 permits...more

4 Reasons Bankruptcy Might Be a Very Bad Idea

For some filing for bankruptcy will not only bring a lot of much needed relief it is actually a smart financial step. Bankruptcy can clear away a lot of debt and truly provide a fresh start. However there are situations where...more

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