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Showing 14 posts from 2014.

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

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