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Bankruptcy Court Upholds Contemporaneous Exchange for New Value Defense in Preference Action

The Bankruptcy Code grants a trustee (or a debtor in possession) certain “avoidance” powers to recover payments to creditors made shortly before a bankruptcy filing where the payment gave the creditor more than other, similarly situated, creditors would receive through the bankruptcy process. 

In a recent case in the United States Bankruptcy Court for the Western District of Michigan (the “Court”), the Court considered whether a payment made by a Chapter 7 debtor to her son in advance of the debtor’s bankruptcy filing was “preferential” and thus subject to recovery by the Chapter 7 trustee. Read More ›

Categories: Chapter 7, Western District of Michigan

Chapter 7 Debtor’s Case Dismissed After Court Finds that She is Judicially Estopped from Arguing that Student Loan Debts are Non-Consumer in Nature

While bankruptcy relief is available as a tool for individuals to discharge debts, it is not available to everyone, under all circumstances. Before a debtor can, for example, discharge debts in a Chapter 7 bankruptcy, he or she must prove that debts and income are within certain statutory thresholds. When determining whether an individual is eligible for relief, the nature of the debts at issue is also relevant. Read More ›

Categories: Chapter 13, Chapter 7, Eastern District of Michigan

Fraudulently Obtained Unemployment Benefits are not Dischargeable in Bankruptcy

State unemployment benefits are paid pursuant to a system that relies on trust. Benefits are paid based on representations made by claimants that they are out of work and that they continue to seek out full-time work. If a claimant finds part-time work, then benefits are reduced accordingly.

A recent opinion from the United States Bankruptcy Court for the Western District of Michigan (the “Court”) addresses a Chapter 7 debtor’s attempt to discharge a debt owed to the State of Michigan for overpaid unemployment benefits, and penalties and interest stemming from the overpayment.  Read More ›

Categories: Chapter 7, Western District of Michigan

Chapter 13 Trustee Must Return Funds to Debtor Following Dismissal of Case

What happens to funds held by a Chapter 13 trustee (the “Trustee”) in the event that a Chapter 13 debtor dismisses her case voluntarily? That’s the question that was addressed by the United States Bankruptcy Court for the Eastern District of Michigan (the “Court”) in a recent opinion.[i] Read More ›

Categories: Chapter 13

The Provisional Nature of Discharge: Trustee's Knowledge of Fraud May Not Be Imputed to United States Trustee

The purpose of filing for Chapter 7 bankruptcy is to discharge debts. But even after obtaining a discharge, a debtor is not totally in the clear. A recent case in the United States Bankruptcy Court for the Western District of Michigan involves an adversary proceeding in which the United States Trustee sought to revoke a Chapter 7 debtor’s (the “Debtor”) discharge.[i] Read More ›

Categories: Chapter 7, Fraud & Abuse

Supreme Court Adopts a Broad Reading of “Actual Fraud” Under the Bankruptcy Code

On May 16, the U.S. Supreme Court decided Husky International Electronics, Inc. v. Ritz[1], ruling that the term “actual fraud” in section 523(a)(2)(A) of the Bankruptcy Code includes forms of fraud that do not involve a fraudulent misrepresentation.

In this case, Husky International Electronics, Inc. sold products to and was owed money by Chrysalis Manufacturing Corporation. Daniel Ritz, one of the owners of Chrysalis, transferred money from Chrysalis to other entities that he owned, draining Chrysalis of its assets and making it impossible for Chrysalis to pay its debts owed to Husky and other creditors. Read More ›

Categories: Chapter 7, U.S. Supreme Court

Bankruptcy Court Decision to Allow Late-Filed Claim in Chapter 13 Case Reversed on Appeal

Chapter 13 bankruptcy allows debtors to confirm plans that provide for the payment of their debts through future earnings while, at the same time, retaining their assets. If a creditor wishes to receive payments pursuant to a debtor’s plan, the creditor must file a proof of claim. And it must do so timely. Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 13

Bankruptcy Court Considers Whether Chapter 7 Trustee May Bring Private Cause of Action For Alleged Breach of Debtor’s Duties

The U.S. Bankruptcy Court for the Eastern District of Michigan recently considered the issue of whether a Chapter 7 trustee may bring a cause of action against a debtor for damages caused to the bankruptcy estate by the debtor’s alleged failure to comply with the debtor’s duties under section 521 of the Bankruptcy Code. Under the circumstances, the court held that no private cause of action existed and thus ruled in favor of the debtor on the issue.[1] Read More ›

Categories: Chapter 7, Eastern District of Michigan

Confirmation of Chapter 13 Plan that Favors Debtor's Attorney Over Homestead Mortgage Reversed on Appeal

Bankruptcy is all about the debtor’s assets, specifically how many and who gets them. The reason that many bankruptcy cases are contentious is that the parties often disagree about the amount of assets available for distribution to creditors, as well as how the assets should be divvied up. Read More ›

Categories: Chapter 13, Eastern District of Michigan

Bankruptcy Court Sanctions Lawyer, But Appeals Court Reverses and Rules that Lawyer’s Aggressive Advocacy Did Not Cross the Line

In a recent case, a lawyer was sanctioned by an Ohio bankruptcy judge for his conduct in connection with an adversary proceeding he brought on behalf of a client against a Chapter 7 debtor. The lawyer was vindicated, though, after the Bankruptcy Appellate Panel of the Sixth Circuit (the “BAP”) reversed the bankruptcy court on appeal. Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 7