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Showing 15 posts in U.S. Supreme Court.

Supreme Court Rules that Debt Collector’s Attempt to Collect Time Barred Claim in Chapter 13 Bankruptcy Case Does not Violate Fair Debt Collection Practices Act

What happens in a Chapter 13 bankruptcy case when a creditor files a proof of claim involving a debt for which the statute of limitations to collect the debt has run? More specifically, does the filing of such a claim violate the Fair Debt Collection Practices Act (the “Act”)? That’s the issue considered by the U.S. Supreme Court in its recent decision in the case of Midland Funding, LLC v. Johnson. 1 Read More ›

Categories: Chapter 13, U.S. Supreme Court

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

Supreme Court Refuses to Review Student Loan Bankruptcy Case

Students have taken on more than $1 trillion in debt to pay for the relentlessly rising costs of higher education. With that much debt outstanding, it’s no surprise that there are increasing numbers of borrowers defaulting on student loan debt, and seeking to discharge that debt by filing for bankruptcy protection. But, as a Wisconsin man recently learned, discharging student loan debt in bankruptcy is no easy feat. Read More ›

Categories: Chapter 7, U.S. Supreme Court

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

Can Individuals “Strip Off” Second Mortgages on Underwater Homes in Chapter 7 Bankruptcy? The Supreme Court to Decide

On Monday, November 17, 2014, the U.S. Supreme Court agreed to hear two bankruptcy-related cases that involve issues commonly faced by banks and homeowners with underwater mortgages in Chapter 7 cases. The cases of Bank of America v. Caulkett and Bank of America v. Toledo-Cardona come from Florida, where many homeowners own homes with mortgages that exceed equity value due to the recent housing crisis. Bank of America holds the second mortgage in both cases.  Read More ›

Categories: Chapter 7, U.S. Supreme Court

Supreme Court Applies its Stern Ruling and Issues a Narrow Decision Holding that Bankruptcy Courts Can Hear, But not Decide, “Stern Claims”

In 2011, the U.S. Supreme Court (the “Court”) issued its noteworthy decision in Stern v. Marshall,1 in which it held that bankruptcy courts lack the constitutional authority to enter a final judgment on a state law counterclaim that is not related to the bankruptcy proceeding. Since Stern, a number of cases have been published - at both the bankruptcy court and court of appeals levels - where Stern jurisdictional issues have been raised and adjudicated. We recently wrote about one on this blog.

The Court, itself, had a chance to consider the implications of Stern in the case of Executive Benefits Ins. Agency v. Arkinson.2 In a unanimous decision written by Justice Clarence Thomas, the Court ruled that where Article III of the U.S. Constitution does not permit a bankruptcy court to enter final judgment on a bankruptcy related claim, the bankruptcy court may issue proposed findings of fact and conclusions of law with respect to the claim, to be reviewed de novo by a federal district court.

Read More ›

Categories: U.S. Supreme Court

Law Won

In Law v. Siegel, a case decided by the U.S. Supreme Court in March, the Court unanimously ruled that the bankruptcy court exceeded its authority when it surcharged the debtor’s homestead exemption to pay the Chapter 7 Trustee’s attorney fees, despite the debtor’s misconduct.

The case involved Stephen Law, a consumer debtor who filed for Chapter 7 bankruptcy in California. Law's only significant asset was his house, worth approximately $360,000. Law exempted $75,000 of the home equity under the state homestead exemption. Law further claimed that there was no additional equity in the house because it was subject to two mortgages totaling up to more than $300,000 — more than the nonexempt value of the house. The first mortgage was real. The second mortgage, allegedly in favor of "Lin's Mortgage & Associates,” was fake. Law was perpetrating a fraud. Alfred Siegel, the Chapter 7 Trustee, uncovered the mortgage scam. Unfortunately, in the process, the trustee incurred approximately $500,000 in legal fees. Read More ›

Categories: Chapter 7, U.S. Supreme Court

U.S. Supreme Court Clarifies Requirements of Defalcation

In a recent decision, the United States Supreme Court provided guidance relating to the term “defalcation” of the Bankruptcy Code under Section 523(a)(4).1 In a unanimous decision, the Supreme Court held that the term “defalcation” of the Bankruptcy Code includes a “culpable state of mind requirement involving knowledge of, or gross recklessness in respect to, the improper nature of the fiduciary behavior.” Read More ›

Categories: U.S. Supreme Court