Michigan Bankruptcy Blog

Showing 25 posts in Chapter 7.

Chapter 7 Debtor Required to Turnover Proceeds of Life Insurance Policy Used to Pay for Father's Burial

A recent decision in the U.S. Bankruptcy Court for the Western District of Michigan[1] granted a Motion filed by the Chapter 7 Trustee requesting turnover by the debtor of proceeds of a life insurance policy that were used by the debtor to pay the burial expenses of her father.

In the case, the Chapter 7 Trustee filed a Motion to Compel Turnover of Non-Exempt Assets seeking $9,698.90 from the debtor, including non-exempt cash, jewelry, a whole life insurance policy, and the proceeds from an insurance policy on her father's life. The debtor disputed that she was required to turn over the $7,208.84 in life insurance on her father's life, who died two days after her bankruptcy filing. The debtor argued that she used the proceeds to pay for her father's burial, and that she was not a beneficiary of the policy, but rather the owner. Read More ›

Categories: Chapter 7, Western District of Michigan

Sixth Circuit Affirms Holding That “Carve Out” Recovered By Chapter 7 Trustee Did Not Constitute Equity in the Debtors’ Property Subject to Debtors’ Exemptions

Baldridge v. Douglas Stanley Ellmann (In re Baldridge), Appeal No. 13-1700 (6th Cir., Feb. 3, 2014).

On appeal from the District Court for the Eastern District of Michigan, the Sixth Circuit held that a $28,000 “carve out” recovered by the Chapter 7 Trustee pursuant to 11 U.S.C. § 506(c) after closing a sale on the debtors’ property was not property of the estate that could be subject to the debtors’ exemption because the property was over encumbered by two mortgages, leaving no equity for the debtors to exempt. Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 7

Michigan Bankruptcy Petition Preparer to Serve Jail Time for Criminal Contempt

Section 110 of the United States Bankruptcy Code provides that a non-attorney can assist in the preparation of the bankruptcy petition. However, as an Inkster, Michigan man just learned (the hard way), the Bankruptcy Code places numerous requirements on bankruptcy petition preparers and subjects those who do not comply to substantial penalties.

On Tuesday, February 25, Derrick Hills of Inkster was sentenced by U.S. District Court Judge Sean F. Cox to 46 months in prison after being convicted by a jury in September of five counts of criminal contempt. The contempt proceedings stemmed from repeated violations of orders issued by U.S. Bankruptcy Judge Steven Rhodes from 2007 to 2009. According to a press release issued by the U.S. Attorney's Office following Hills' conviction at trial:

The evidence presented at trial showed that Hills had acted as a bankruptcy petition preparer since 2007, assisting people in filing for bankruptcy. Hills continued to act as a bankruptcy petition preparer despite five bankruptcy court orders issued by Bankruptcy Judge Steven Rhodes, permanently enjoining Hills from doing so for various non-compliance with bankruptcy rules and complications caused by his acting in the capacity of a bankruptcy petition preparer. Hills assisted individuals with consumer debts in preparing and filing their Chapter 7 bankruptcy paperwork. However, his actions went well beyond what was allowed by law and clearly violated Judge Rhodes Orders.

Read More ›

Categories: Chapter 7, Did you Know?, Eastern District of Michigan

Chapter 11 Retainer is Property of Estate even if Paid by Third Party

In re Newcomb Print Communications, Inc., Case No. 12-08042 (Bankr. W.D. Mich., Sept. 6, 2013).

When a debtor files a case under Chapter 11 and retains legal counsel, another person or entity may fund the debtor’s retainer. But even when the debtor is not the source of the funds, the retainer is property of the bankruptcy estate – which is particularly important if the case later converts to Chapter 7. Read More ›

Categories: Chapter 11, Chapter 7

Fame as an asset: Will Casey Anthony’s Chapter 7 bankruptcy case preclude future book and movie deals?

In re Casey Marie Anthony, Bankr. M.D. Fla., Case No. 8:13-bk-00922-KRM

Although this blog typically focuses on Michigan bankruptcy cases, last week’s Chapter 7 filing by Casey Anthony raises interesting questions about the impact of bankruptcy on public figures.

Casey Anthony held the national spotlight for nearly three years after being charged with murdering her two-year-old daughter, Caylee.  Anthony initially alleged that Caylee was kidnapped by her nanny, then claimed that Caylee accidentally drowned in the family pool.  After a jury found her not guilty on all charges except some misdemeanors, Anthony faced a barrage of lawsuits, including claims for defamation and for reimbursement by private investigators who searched for Caylee in the months before her remains were found.

Those lawsuits ground to a halt when Anthony filed a voluntary Chapter 7 petition in the Middle District of Florida on January 25, 2013.  In her bankruptcy papers, Anthony lists few assets (comprised mostly of household goods) but discloses unsecured debts of nearly $800,000, plus numerous debts of unknown amounts.  The debts include the pending lawsuits against her and $500,000 in legal fees owed to her criminal defense attorney. Read More ›

Categories: Chapter 7

Only trustee, not debtor, can bring lawsuit on pre-petition cause of action

Auday v. Wet Seal Retail, Inc., Case No. 12-5057 (6th Cir., Oct. 25, 2012) (recommended for full-text publication). 

As most bankruptcy practitioners know, a debtor’s pre-petition cause of action – whether for personal injury, breach of contract, or other claim – is property of the bankruptcy estate.  Now, the Sixth Circuit has clarified that only the trustee can file suit in connection with a Chapter 7 debtor’s pre-petition cause of action, unless the action is abandoned. Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 7

Bankruptcy practice reminder: Complaints require “well-pleaded factual allegations,” not just legal conclusions

Moyer v Koster et al (In re Przybysz), Adv. Pro. Case No. 12-80174 (Hon. Scott W. Dales, Sept. 25, 2012).

A recent decision from the Bankruptcy Court of the Western District of Michigan serves as a lesson and reminder to attorneys that complaints must do more than recite legal conclusions – they also must allege sufficient facts to put defendants on notice of the claims and of possible defenses. Read More ›

Categories: Chapter 7, Western District of Michigan

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

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