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Showing 18 posts in Western District of Michigan.

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

Trust Spendthrift Provision Can be Negated by Other Trust Provisions

The Bankruptcy Court of the Western District of Michigan recently held that a spendthrift provision in a trust was negated by other trust provisions, and resulted in a debtor’s beneficial interest in the trust becoming property of the estate.1

The issue before the Court was whether the trust restrictions prevented the debtor’s beneficial interest from being included in property of the estate.2 In this case, the debtor’s mother created a trust in 2001, and the debtor was one of four named beneficiaries of the trust. Upon the settlor’s death in August, 2011, the trust became irrevocable. The trust included a spendthrift provision that prevented any beneficiary from assigning his interest in trust income or principal. The trust also included a provision authorizing the trustees, in their discretion, to distribute trust principal to a beneficiary in the event the beneficiary could not support himself. The trust further contained an “age-based restriction” on a beneficiary’s withdrawal rights (including the debtor’s rights). The “age-based restriction” specifically provided that after a beneficiary reaches age 25, the beneficiary has a “continuing right to withdraw any amount up to one half of the value of the trust assets; and after the beneficiary attains age 30, the beneficiary has a continuing right to withdraw all trust assets.” When the settlor of the trust died, the debtor was 42-years-old.  Read More ›

Categories: Western District of Michigan

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

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

Bankruptcy Court for the Western District of Michigan Adopts New Local Rules

The local rules for the Bankruptcy Court for the Western District of Michigan have been amended, effective August 1, 2012.  The new rules can be found here in their entirety.

A redline version of the rules, showing the amendments, can be found here.

Among other changes, practitioners should review the following amendments: Read More ›

Categories: 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

6th Circuit B.A.P.: Michigan's bankruptcy-specific exemption statute is unconstitutional.

In re Schafer, 6th Cir. B.A.P., Feb. 17, 2011 (2011 WL 534752, authored by Hon. Marci B. McIvor).

Under the Bankruptcy Code, debtors may choose between the federal exemptions listed in 11 U.S.C. § 522(d) or exemptions available under state law, unless their state has "opted out" of the federal exemption scheme. Michigan has not opted out, so debtors may choose between federal and state exemptions. Since 2005, Michigan law has provided two alternative state-law exemption schemes: Read More ›

Categories: 6th Circuit Court of Appeals, Western District of Michigan