Michigan Bankruptcy Blog

Can Filing a Claim in a Debtor’s Bankruptcy be a Violation of the Fair Debt Collection Practices Act? Maybe, But in this Case the Bankruptcy Court Rules in Creditor’s Favor

The Bankruptcy Code is federal law. It affords debtors protections - including the automatic stay and debt discharge injunction - that hold creditors at bay.

The Fair Debt Collection Practices Act (“FDCPA”) is also federal law. It contains limitations on what a debt collector can do when attempting to collect a debt.

Because debts - and more particularly attempts to collect those debts - drive people into bankruptcy, bankruptcy courts are sometimes forced to grapple with questions of how the Bankruptcy Code and FDCPA interact and impact each other. Read More ›

Categories: Chapter 13, Western District of Michigan

Open Case or Re-Opened Case: A Distinction Without a Difference

Sixth Circuit Affirms Bankruptcy Court Order Allowing Amended Exemptions Following Re-Opening of Case

In a Chapter 7 bankruptcy case, a debtor is required to file a schedule listing all of the debtor’s property. This includes cash, hard assets such as furniture and cars, as well as intangibles such as causes of action or potential causes of action. The Bankruptcy Code allows debtors to “exempt” certain types of property from the estate, enabling them to retain exempted assets post-bankruptcy.

In a recent opinion, the U.S. Court of Appeals for the Sixth Circuit analyzed the limits of a bankruptcy court’s authority to disallow claimed exemptions.  Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 13, Chapter 7

No Stripping Allowed: Supreme Court Rules that Chapter 7 Debtor Cannot Strip Off a Junior Lien

On June 1, 2015, the United States Supreme Court decided Bank of America v. Caulkett, No. 13-1421, together with Bank of America v. Toledo-Cardona, No. 14-163, holding unanimously that a Chapter 7 bankruptcy debtor cannot “strip off” a junior lien.

Lien stripping takes place when there are two or more liens on a property, and the senior lien is “underwater” in that the amount owed on the senior lien is greater than the value of the property. In a Chapter 13 case a property owner can strip off the junior lien, resulting in it being treated as unsecured debt in the bankruptcy.

In these cases, the Court held that a Chapter 7 debtor may not void a junior lien under 11 U.S.C. § 506(d) when the debt owed on a senior lien exceeds the current value of the collateral if the junior creditor’s claim is both secured by a lien and allowed under § 502 of the Bankruptcy Code. Read More ›

Categories: Chapter 13, Chapter 7, U.S. Supreme Court

Supreme Court Decides Bullard v. Blue Hills Bank and Rules That an Order Denying a Chapter 13 Plan is not Appealable

On May 4, 2015, the U.S. Supreme Court decided Bullard v. Blue Hills Bank, No. 14-116, a case which deals with issues of finality and appealability of orders in bankruptcy proceedings. In a unanimous opinion written by Chief Justice Roberts, the Court held that a bankruptcy court’s order denying confirmation of a Chapter 13 debtor’s proposed repayment plan is not a final order and thus is not immediately appealable. Read More ›

Categories: Chapter 13, U.S. Supreme Court

Whose Money Is It? Supreme Court Rules for Debtor in Dispute Over Postpetition Wages

When an individual contemplates filing for bankruptcy protection, he or she has a few options. One is to file a Chapter 7 case, and another is to file a Chapter 13 case. In a Chapter 7, all of a debtor’s non-exempt assets are transferred to a bankruptcy estate to be liquidated and distributed to creditors. In a Chapter 13, the debtor retains assets and makes payments to creditors according to a court-approved plan. Read More ›

Categories: Chapter 13, Chapter 7, U.S. Supreme Court

The Borrower in Bankruptcy: Top 10 Mistakes Banks & Lenders Make in Consumer Bankruptcy Cases

Check out this webinar on our YouTube channel to identify common mistakes that lenders make before and during consumer bankruptcy cases – and how to avoid those mistakes to better protect the lender's rights and collateral.

Categories: Chapter 13, Chapter 7, Did you Know?

Act in Good Faith or Else: The Limits of the Automatic Stay

Upon the filing of a bankruptcy petition, an automatic stay goes into effect which provides a debtor with immediate protection from collection efforts by creditors. But the automatic stay is not without limitations.

In a recent opinion, the U.S. Court of Appeals for the Sixth Circuit recently considered whether the automatic stay should apply to prevent a foreclosure sale in a case in which the debtor’s good faith, actions and credibility in filing for Chapter 13 were called into question.[1] The Sixth Circuit ruled against the debtor, affirming the bankruptcy court’s earlier findings that the debtor’s actions were “outrageous.” Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 13

The Right Way to Execute a Writ: Bankruptcy Court Decision Explains the Mechanics of Collecting a Judgment in the Western District of Michigan

In litigation, obtaining a judgment is step one. Step two – often as, if not more, difficult than winning a lawsuit – is collection. In a short, interesting Memorandum of Decision and Order (the “Decision”), Judge Dales of the United States Bankruptcy Court for the Western District of Michigan (the “Bankruptcy Court”), writes about some of the practical and legal considerations involved with pursuing collection of a bankruptcy court judgment. Read More ›

Categories: Chapter 7, Western District of Michigan

Bankruptcy Court Rules that "One-Size-Fits-All" is Wrong Approach for Evaluating Request for Payment of Attorney's Fees

There has been much discussion in the media in the past year about the massive amount of professional fees that have been wracked up during the City of Detroit's Chapter 9 bankruptcy. There is always great interest - and debate - about such fees due to the nature of the process: insolvent individuals or companies with no place left to turn file for bankruptcy, creditors take a "haircut" on their claims, and the lawyers get paid. Or so the story goes. As with any complex process, though, there is plenty of nuance that gets lost in the wash, and often is more to the story. Read More ›

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

Sixth Circuit Reverses Bankruptcy Court Decision to Disallow Chapter 7 Debtor's Amendment to Exemptions

While Chapter 7 bankruptcy offers individuals a fresh start and discharge from many debts, it doesn't come without a price. Property of the debtor becomes property of the estate and is used to pay creditors.

But not all of it. Section 522 of the Bankruptcy Code lists exemptions that debtors can use to exempt property - up to a certain dollar amount in value - from the estate. The purpose of exemptions is to ensure that the individual debtor is able to maintain a basic standard of living post-bankruptcy. But because there are very few assets available for creditor recovery beyond exempt property in many bankruptcy cases, the propriety of a debtor's claimed exemptions is an issue that is oft-litigated.

Such was the case in an appeal to the U.S. Court of Appeals for the Sixth Circuit (the "Sixth Circuit") arising from a Chapter 7 bankruptcy case that was filed in the U.S. Bankruptcy Court for the Eastern District of Michigan. Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 7