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Bankruptcy


No excuse not to have credit counseling course

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In re Houston; Case No. 08-11848; April 11th, 2008 The debtor in this case filed a Chapter 13 without yet having the necessary credit counseling certificate. Instead of this certificate, she filed a certification of exigent circumstances stating that she will be evicted without the court’s protection. The court cites Bankruptcy Code §109(h)(3)(A) which allows the credit counseling requirement to be waived if the debtor submits to the court a certification that (1) “describes exigent circumstances that merit a waiver” of the credit counseling requirement; (2) “states that the debtor requested credit counseling services from an approved nonprofit budget and credit counseling agency, but was unable to obtain the services . . . during the 5-day period beginning on the date on which the debtor made that request,” and (3)”is satisfactory to the court.” Id. The court reasons that though an impending eviction would generally qualify as an exigent circumstance,…Read More

Bankruptcy and Virginia Corporate Law

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In re Cummings; Case No. 07-13758-SSM; April 10th, 2008 Lawsuit brought in bankruptcy case highlights core aspects of Virginia corporate law Individual debtor filed a Chapter 11 under the bankruptcy code to reorganize her debts. The debtor then brought an action for breach of contract arising from the sale of a business, a declaratory judgment that salary repayment and non-compete provisions in an employment agreement she signed are unenforceable, and damages for breach of fiduciary duty. The court restated the standard for summary judgment that it was going to use. Importantly, the court noted that “the Supreme Court has held that a plaintiff need not plead evidence sufficient to establish a prima facia case in order to survive a motion to dismiss, but under Rule 8(a), need only give the defendant fair notice of what the plaintiff’s claim is and the grounds upon which it rests.” Swierkiewicz v. Sorena NA,…Read More

Notice of Bankruptcy Case

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In re US Airways, Inc.; Case No. 04-13819-SSM; March 27th, 2008 In a chapter 11 case, a debtor that continues in business following confirmation of a plan or reorganization is discharged from all debts arising prior to confirmation. 11 U.S.C. § 1141(d). However, before such a claim can be discharged, creditors must be afforded adequate notice of the bankruptcy case, as well as of the deadline set for filing claims against the debtor. Zurich American Ins. Co. v. Tessler (In re J.A. Jones, Inc.), 492 F.3d 242, 249(4th Cir. 2007). They type of notice that is required depends on whether a creditor is “known” or “unknown.” Creditors whose identities are actually known to the debtor or are reasonably ascertainable by the debtor are deemed to be “known creditors” and are entitled to actual notice of the bankruptcy filing. An “unknown creditor,” by contrast, is one whose identity or claim is…Read More

Who Can File Pleadings for Debtor?

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In re Carr; Case No. 05-11697-RGM; March 19th, 2008 When a party to a case is represented by counsel, counsel and counsel alone should be filing the pleadings. In addition to this error, the motion alleged that Wachovia Bank, the trustee of a trust established under the will of Robert A. Geary. The question at issue was whether the trustee ought to be compelled to make a distribution. The court notes that the will is probated in the Circuit Court for the City of Chesapeake and that this is a matter of state law; therefore, the court declined to exercise jurisdiction over the matter.

Time For Filing Dischargeability Complaint

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In re Nwoke; Case No. 07-10324-SSM; March 18th, 2008 This case was before the court on the motion of Tenacity Settlements, LLC (“Tenacity”) for leave to file a complaint to determine the dischargeability of Tenacity’s claim against the debtor to recover a payment made by mistake. Tenacity was not listed as a creditor and not given notice of the bankruptcy case. This complaint to determine dischargeability was filed after the date to file complaints to determine dischargeability. However, “a complaint to determine dischargeability of an unlisted debt under § 523 (a)(3), Bankruptcy Code, may be filed ‘at any time.’” FRBP 4007(b). However, a complaint to determine the dischargeability of a debt for embezzlement or larceny under §523(a)(4) is governed by §523(c) and must be filed no later than 60 days after the first date set for the meeting of creditors. FRBP 4007(c). Although the court is empowered to extend the…Read More

Relationship Between Fiduciary Duty In and Out of Bankruptcy and Non-Dischargeability

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In re Stewart; Case No. 07-10860-RGM; March 7th, 2008 This case was before Judge Mayer on a motion for summary judgment filed by the debtor. The Plaintiff in this case filed an adversary proceeding asserting that a judgment it had obtained in District Court in Oregon was nondischargeable under §§523(a)(4) and (a)(6) of the Bankruptcy Code. Secton 523(a)(4) and its predecessors have long narrowly construed the scope of fiduciary relationships encompassed by them. There must be a technical or express trust which predates and exists apart from the act creating the liability. Agents, bailees, brokers, factors, partners and similarly situated persons are generally excluded. 4 Collier on Bankruptcy ¶523.10[1][d]. See KMK Factoring, LLC v. McKnew(In re McKnew), 270 B.R. 593, 624 (Bankr.E.D.Va. 2001). The court determined that the debtor’s duty in this case was akin to the fiduciary duty partners owe each other and does not fall within the parameters…Read More

Proceeding with Divorce When in Bankruptcy

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In re Exum; Case No. 08-10079-RGM; February 21st, 2008 Debtor’s spouse filed a Motion for Relief from the Automatic Stay to Proceed with divorce proceedings. Court noted that the automatic stay, does not operate as a stay of the commencement or continuation of a civil action “(ii) for the establishment or modification of an order for domestic support or obligations” or “(iv) for the dissolution of a marriage, except to the extent that such proceeding seeks to determine the division of property of the estate.” Bankruptcy Code §362(b)(2)(A). The court does have a problem, however, with allowing the equitable distribution hearing to go forward. The court notes that because the Trustee and the creditors are not proper parties before the circuit court in the divorce proceeding and they may be adversely affected by any division of property. Ms Exum argued, that she will be adversely prejudiced because it is the…Read More

Joint Owner’s Agreement to Settle Home and Approval by Court

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In re Pertis; Case No. 04-14471-RGM; March 6th, 2008 This case was before Judge Mayer on a motion to approve a settlement between the debtor and herself relating to the division of the proceeds of sale of their former marital home. The non-debtor party, Ms. Herrick, asserts that the debtors failure to make post-petition payments should be taken into account in the distribution of the proceeds of the sale. While the debtor’s attorney agreed to this, the judge had a problem with the distribution of the proceeds. In Virginia, when adjusting accounts between joint tenants, the party who makes the mortgage payment is credited with one-half of the mortgage payments and the party that is not in possession is credited with one-half the fair rental value of the property. In this case, there was an agreement for possession in return for certain compensation, so the aforementioned principal is not applicable.…Read More

Motion to Extend Stay and Third Party Injunction

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In re Shea; Case No. 08-10350-RGM; February 27th, 2008 The debtor in this case previously had a case dismissed within the last year. Because of this, according to Bankruptcy Code §362(c)(3)(B), a hearing to extend the automatic stay beyond this 30 day period must be “completed before the expiration of the 30-day period.” That court rules that because the motion for an expedited hearing to extend the stay was not filed until one day after the 30-day period, it is futile to set the hearing and therefore the motion was denied. Interestingly, the court also commented on the purported reason the debtor was seeking the stay (to prevent foreclosure of home she didn’t own, but lived in). The court noted that the automatic stay does not extend to the lender of the debtor’s landlord. Judge Mayer noted that, “at best, the debtor could seek an injunction premised on Bankruptcy Code…Read More