Avoidance Actions Are Not Property of Estate That the Trustee Can Sell Pursuant to § 363(b)

The Bankruptcy Court of the Western District of Michigan recently denied a Trustee’s Motion to Sell Avoidance Actions pursuant to 11 U.S.C. 363(b).¹ The Trustee’s Motion sought authority to sell potential causes of actions under Chapter 5 of the Bankruptcy Code, as the estate had limited resources to pursue the actions. The Court noted that the Sixth Circuit has not decided the issue of whether a Bankruptcy Trustee has authority to sell avoidance actions.

The real issue before the Court was whether an avoidance action is “property of the estate” given a Trustee has authority to sell property of the estate pursuant to § 363(b). The Court rejected the Trustee’s argument that avoidance actions are included within property of the estate. Read More ›

Categories: Western District of Michigan

New Claims Transfer Fee Takes Effect May 1, 2013

Effective May 1, 2013, the Bankruptcy Courts for the Western and Eastern Districts of Michigan will begin charging a new fee of $25 for each claim transferred. The purpose of the fee, as stated by the Judicial Conference Committee, relates to the number of claims transferred and the impact they have on the workload of the Bankruptcy Courts, including Court time and resources.

The fee will be assessed upon the filing of the claim transfer, regardless of who files the claim transfer. The $25 fee will be charged for each individual claim transfer, and it will also apply to partial claims transfers.

Categories: Eastern District of Michigan, Western District of Michigan

Foster Swift Represents Prevailing Party: Chapter 13 Debtors May Not Exclude Voluntary Post-Petition Retirement Contributions From Disposable Income

In a recent Opinion, Judge Opperman from the Eastern District of Michigan Bankruptcy Court held that a Chapter 13 debtor cannot exclude voluntary post-petition retirement contributions from disposable income.  This Opinion is significant for debtors, trustees, and creditors as it systematically changes the way the Eastern District of Michigan will treat post-petition voluntary retirement contributions in a Chapter 13. Read More ›

Categories: Chapter 13, Eastern District of Michigan

Sixth Circuit Holds That Right to Article III “Judicial Power” is Not a Waivable Right

In a recent opinion, the Sixth Circuit has provided clarification of Stern v. Marshall's¹ holding by analyzing Article III “judicial power,” the pubic rights doctrine, and the bankruptcy court's authority.

In Waldman, the Western District of Kentucky Bankruptcy Court entered a judgment against the principal creditor after finding that the creditor had defrauded the debtor and had acquired nearly all of the debtor’s assets by means of fraud.  The Bankruptcy Court entered a judgment discharging the debts the debtor owed the creditor and awarded the debtor a judgment of more than $3 million in compensatory and punitive damages.  The creditor appealed the Bankruptcy Court’s entry of a final judgment based upon three challenges:  (1) the debtor’s state law fraud claims are beyond the jurisdiction of the federal court; (2) the judgment entered was beyond the statutory authority of the bankruptcy court; and (3) the judgment was beyond the bankruptcy court’s power pursuant to Article III of the Constitution. Read More ›

Categories: 6th Circuit Court of Appeals, U.S. Supreme Court

6th Circuit: Michigan Bankruptcy-Specific Exemption Statute is Constitutional

The Sixth Circuit Court of Appeals recently held that Michigan's bankruptcy-specific exemption statute is constitutional under the Bankruptcy Clause and Supremacy Clause of the United States Constitution.

Historically, Michigan has allowed bankruptcy debtors to use the federal exemptions under 11 U.S.C. § 522(d), the general state exemptions under M.C.L. § 600.6023, or the state exemptions pursuant to M.C.L. § 600.5451 that are specific to debtors in bankruptcy (prior to it being declared unconstitutional).

Michigan is one of a few states that has a bankruptcy-specific exemption statute available to bankruptcy debtors only.  In the Western District of Michigan, the constitutionality of the bankruptcy-specific scheme was called into doubt by the Hon. James D. Gregg in In re Pontius, 421 B.R. 814 (Bankr. W.D. Mich. 2009) and the Hon. Jeffrey R. Hughes in In re Wallace, 347 B.R. 626 (Bankr. W.D. Mich. 2006).  Contrarily, the Hon. Scott W. Dales, held that the bankruptcy-scheme was constitutional in In re Schafer, 428 B.R. 720 (Bankr. W.D. Mich. 2010), pursuant to Sixth Circuit precedent and Congress' delegation of power to the states pursuant to 11 U.S.C. § 522(b) to create bankruptcy exemptions. Read More ›

Categories: 6th Circuit Court of Appeals

Automatic Stay Does Not Bar Injunctive Relief Relative to Debtors' Commission of a Tort

The Sixth Circuit Court of Appeals recently affirmed a decision of the United States District Court for the Southern District of Ohio based upon the District Court's holding that the automatic stay does not prevent the issuance of injunctive relief. Read More ›

Categories: 6th Circuit Court of Appeals

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

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

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

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