Interpretations of Stern in the Western District of Michigan
This blog entry includes material originally prepared by the author for the 2012 FBA Bankruptcy Seminar.
The U.S. Supreme Court’s decision in Stern v. Marshall, 131 S. Ct. 2594 (2011), immediately cast a shadow of uncertainty on bankruptcy courts’ constitutional authority to enter final orders. But Stern leaves many questions unanswered, and the bankruptcy judges within the Western District of Michigan have differed as to whether the case should be interpreted narrowly or broadly. As a result, depending on the presiding judge in a particular case, Stern may be critically important or unworthy of mentioning. The following is a brief review of cases in this district that address the scope of Stern. Read More ›
Categories: Chapter 7, U.S. Supreme Court, Western District of Michigan
In re Seafort, Case No. 10-6248, Sixth Circuit Court of Appeals, February 15, 2012
On an issue of first impression before the Sixth Circuit, the Court held that post-petition income that becomes available after a debtor completes repayment of a 401(k) loan is projected disposable income that must be turned over to the Trustee for distribution to unsecured creditors pursuant to Section 1325(b)(1)(B) and may not be used to fund voluntary 401(k) plans.
In this case, both debtors (on consolidated appeal) were making payments to a 401(k) loan, which would be paid off during the life of the Chapter 13 plan. Neither debtor was making contributions to their 401(k) retirement accounts at the time the petitions were filed. The debtors proposed to use the income (available after full repayment of the 401(k) loan) to start making contributions to their 401(k) retirement accounts. The Trustee objected on the issue of whether the debtors must include the income resulting from the payoff of the 401(k) loans to their respective plans considering neither debtor was making 401(k) contributions at the time the petitions were filed. Read More ›
Categories: 6th Circuit Court of Appeals, Chapter 13
Bankruptcy court clarifies trustee's ability to liquidate LLC property in sole member's Chapter 7 case
In re Hopkins, Bankr. W.D. Mich., Case No. 10-13592, Hon. Scott W. Dales (Feb. 2, 2012).
When the sole member of a limited liability company files Chapter 7 bankruptcy, the membership interest is property of the bankruptcy estate that the trustee may liquidate, subject to claimed exemptions and liens. But if the LLC owns property, can the trustee also liquidate that property for the benefit of the sole member's creditors? Read More ›
Categories: Chapter 7, Western District of Michigan
Funds must be in tax exempt retirement account – not merely traceable to a retirement account – on filing date to qualify for § 522(d)(12) exemption.
In re Pellegrini, Bankr. W.D. Mich., Case No. 09-90464, Hon. James D. Gregg (Jan. 17, 2012).
When Congress adopted BAPCPA, it added an exemption for "[r]etirement funds to the extent that those funds are in a fund or account that is exempt from taxation" under certain provisions of the Internal Revenue Code. 11 U.S.C. § 522(d)(12). Although broader than the exemption previously available for retirement funds, § 522(d)(12) is not limitless – as the Bankruptcy Court for the Western District of Michigan recently emphasized. Read More ›
Categories: Chapter 7, Western District of Michigan
Changes to the Proof of Claim Form as of December 1, 2011
Effective December 1, 2011, the Federal Rules of Bankruptcy Procedure (FRBP) that govern filing a proof of claim will change dramatically.
FRBP 3001 will be amended to increase the types of information required to be attached to a proof of claim. While Rule 3001 has always required a claimant to produce a writing to support its claim, now a claimant must also attach information relative to the principal, interest, fees, and any other expenses incurred pre-petition - including arrearages. Read More ›
Categories: Chapter 11, Chapter 13, Chapter 7
BAP: Chapter 7 trustee cannot avoid erroneously discharged mortgage if discharge is rescinded pre-petition
Richardson v. Citimortgage, Inc. (In re Emerson), unpublished opinion, BAP No. 11-8015 (Oct. 7, 2011).
The Bankruptcy Appellate Panel of the Sixth Circuit ("BAP") has rejected a trustee's efforts to avoid a mortgage that was mistakenly discharged because the discharge was rescinded before the debtor's bankruptcy filing. Read More ›
Categories: 6th Circuit Court of Appeals, Chapter 7
Inherited IRAs can be exempted under § 522(d)(12)
The Eastern District of Michigan Bankruptcy Court recently held that a debtor can exempt an inherited IRA under 11 U.S.C. § 522(d)(12).
The Eastern District Bankruptcy Court denied the Trustee's objection to an exemption claimed pursuant to § 522(d)(12) by a debtor in IRAs that she had inherited from her father. The Court further rejected the Trustee's argument that inherited IRA funds cannot be considered "retirement funds" under § 522(d)(12) because the funds were not contributed to the IRA by the debtor. Rather, the Court adopted the debtor's reasoning that the explicit language of § 522(d)(12) does not make a distinction between "inherited IRAs" and IRAs to which the debtor made the contributions. Read More ›
Categories: 6th Circuit Court of Appeals, Eastern District of Michigan
In "Anna Nicole Smith" Case, U.S. Supreme Court Limits Bankruptcy Courts' Authority
Many are familiar with Anna Nicole Smith, the late television personality who married an elderly oil tycoon shortly before his death and later became embroiled in a legal battle over his estate. Recently, the bankruptcy case of Vickie Lynn Marshall – Anna Nicole Smith's legal name – made its way to the U.S. Supreme Court and resulted in an opinion that limits the authority of bankruptcy courts to enter final orders in common law actions.
Vickie married J. Howard Marshall approximately a year before his death, and although he gave her many gifts, he did not leave her anything in his will. Before J. Howard passed away, Vickie sued his son, Pierce, in state probate court for tortious interference with J. Howard's will. Vickie then filed bankruptcy. Pierce filed a nondischargeability action and a proof of claim in Vickie's bankruptcy case, asserting that Vickie had defamed him. Vickie filed a counterclaim against Pierce, essentially restating the tort allegations from her state probate court action. Read More ›
Categories: U.S. Supreme Court
Creditors Cannot Benefit from Trustee and Debtor's Stipulation to Extend Deadline for Filing a Nondischargeability Complaint
Creditors who wish to object to the dischargeability of a debt must follow strict deadlines - and as one recent case illustrates, creditors cannot rely on an extension of those deadlines that is agreed upon by the debtor and the trustee.
In Five Star Laser, Inc., the District Court for the Eastern District of Michigan upheld Judge Rhodes' decision granting a debtor's motion to dismiss a nondischargeability complaint as untimely and holding that a stipulation entered into by the debtor and the bankruptcy trustee to extend the deadline for filing a nondischargeability complaint applied to the trustee only. Read More ›
Categories: Eastern District of Michigan
District Court Affirms In Re Rahim: Chapter 7 Business Debtors' Case May Be Dismissed Under § 707(a)
In re Rahim, E.D. Mich., May 23, 2011 (Case No. 10-15123, Hon. Sean F. Cox).
Previously on this blog, we discussed In re Rahim, a case in which Judge Rhodes dismissed the Chapter 7 case of debtors with primarily non-consumer debts "for cause" under 11 U.S.C. § 707(a) because the case was not filed in good faith. The debtors, both practicing physicians, brought home an annual income of more than $500,000 and had multiple homes and luxury vehicles. Read More ›
Categories: Chapter 7, Eastern District of Michigan