Notice of Bankruptcy Case
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?
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
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
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[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
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
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
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
Right to Prevent Modification of Stay Limited
In re Aime; Case No. 07-12388-SSM; February 28th, 2008 This matter was before the court on the motion of the creditor to enforce a security interest in a motor vehicle and the debtor’s motion to amend the previously entered order conditioning the automatic stay. The Debtor was in default of her payments on the vehicle by 10 months, but needed the vehicle to get to work and wanted to enter into an agreement for additional time to make payments and otherwise catch up on her payments. The court discusses the automatic stay and points out that “if the debtor is granted a discharge, the discharge acts as a permanent injunction against many kinds of creditor actions but does not prevent enforcement of a valid lien against property of the debtor, since liens, unless specifically avoided in the course of a bankruptcy, pass through and may be enforced against the collateral…Read More
Modifying a Chapter 13 Plan
In Murphy, Jr. v. O’Donnell v. Goalski, 474 F.3d 143 (4th Cir. 2007), the Fourth Circuit determined when and how a confirmed Chapter 13 plan may be modified. There were two fact patterns at issue in this matter and the Court started out by setting forth the principal that a confirmed Chapter 13 plan is “a new and binding contract, sanctioned by the court, between the debtors and their pre-confirmation creditors,” id., citing Matter of Penrod, 169 B.R. 910, 916 (Bankr.N.D.Ind. 1994). The Court continued that, “like other contracts, a confirmed Chapter 13 plan is subject to modification.” Murphy, 474 F.3d at 148 (citing In re Arnold, 869 F.2d 240, 241 (4th Cir. 1989); but see snarky comment (unlike other contracts, both parties do not need to consent to the modification). Section 1329 of the Bankruptcy Code provides that a confirmed plan may be modified at any time after confirmation…Read More
Avoiding Security Interests Without Adversary Proceeding. . . Why do I Need an Attorney?
In 1995, the Fourth Circuit decided Cen-Pen Corp. v. Hansen, 58 F.3d 89 (4th Cir. 1995), which decided the notice requirements within a Chapter 13 case to alter the security interests of a secured creditor. The facts around how the security interest arose were a little convoluted, but suffice it to say, the pre-bankruptcy security status of the lien was not at issue. However, the Hanson’s filed a Chapter 13 plan that treated Cen-Pen as an unsecured creditor. The plan further required creditors to submit proofs of claim and objections within a specified time period and provided that the plan would be automatically confirmed if no objections were received. A few years after the Hansen’s received their discharge, Cen-Pen filed a Complaint in bankruptcy court to determine the validity of its liens on the Hanson residence The Hanson’s argument rested on 11 USC § 1327(c) which reads that, “[e]xcept as…Read More