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Showing 29 posts in 6th Circuit Court of Appeals.

Act in Good Faith or Else: The Limits of the Automatic Stay

Upon the filing of a bankruptcy petition, an automatic stay goes into effect which provides a debtor with immediate protection from collection efforts by creditors. But the automatic stay is not without limitations.

In a recent opinion, the U.S. Court of Appeals for the Sixth Circuit recently considered whether the automatic stay should apply to prevent a foreclosure sale in a case in which the debtor’s good faith, actions and credibility in filing for Chapter 13 were called into question.[1] The Sixth Circuit ruled against the debtor, affirming the bankruptcy court’s earlier findings that the debtor’s actions were “outrageous.” Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 13

Sixth Circuit Reverses Bankruptcy Court Decision to Disallow Chapter 7 Debtor's Amendment to Exemptions

While Chapter 7 bankruptcy offers individuals a fresh start and discharge from many debts, it doesn't come without a price. Property of the debtor becomes property of the estate and is used to pay creditors.

But not all of it. Section 522 of the Bankruptcy Code lists exemptions that debtors can use to exempt property - up to a certain dollar amount in value - from the estate. The purpose of exemptions is to ensure that the individual debtor is able to maintain a basic standard of living post-bankruptcy. But because there are very few assets available for creditor recovery beyond exempt property in many bankruptcy cases, the propriety of a debtor's claimed exemptions is an issue that is oft-litigated.

Such was the case in an appeal to the U.S. Court of Appeals for the Sixth Circuit (the "Sixth Circuit") arising from a Chapter 7 bankruptcy case that was filed in the U.S. Bankruptcy Court for the Eastern District of Michigan. Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 7

Sixth Circuit Rules that In Pari Delicto May Not Bar Trustee’s Conversion Claim

From Ponzi schemes to fraudulent transfers, many Chapter 7 bankruptcy cases involve allegations of wrongdoing. Bankruptcy trustees, who stand in the shoes of the bankrupt entity in asserting claims, often bring actions against third parties alleging participation in, and orchestration of, fraudulent schemes. Because the alleged wrongdoing many times involves actions or transactions in which the debtor took part, defendants in such lawsuits frequently raise a defense based on the doctrine of in pari delictoRead More ›

Categories: 6th Circuit Court of Appeals, Chapter 7, Western District of Michigan

Sixth Circuit Sorts Out Bankruptcy Slugfest Between Friends

It has often been said that you should never do business with friends or family. A bankruptcy court decision that was recently affirmed by the U.S. Court of Appeals for the Sixth Circuit is further evidence of this proposition.  Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 11

Foreclosure Without Closure: Sixth Circuit Analyzes Claims Asserted by Borrower Following State Court Foreclosure Proceedings

The financial and housing crisis that began in 2008 led to a huge wave of foreclosures and foreclosure-related litigation. While foreclosure is rooted in state law, the initiation of a foreclosure proceeding by a lender often leads to federal bankruptcy proceedings initiated by a borrower, giving rise to interesting legal issues involving the interplay of state foreclosure law and federal bankruptcy law. Recently, the U.S. Court of Appeals for the Sixth Circuit (the "Sixth Circuit") considered the implications of a foreclosure on a residence following the borrowers' Chapter 7 bankruptcy proceeding.[1] Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 7, Eastern District of Michigan

Timing is Everything: Sixth Circuit Reverses Bankruptcy Court and Rules that Lawsuit Settlement is Not Property of the Debtor's Estate

When someone files for bankruptcy, an estate is created that consists of, among other things, any and all assets owned by, or to which the debtor filing the bankruptcy case has a right to or interest in. This includes tangible things such as real estate, vehicles, money, clothing, and jewelry, as well as rights to property such as litigation claims.

In a Chapter 7 case, all assets belong to the trustee on the date a case is filed unless an exemption is claimed, and the trustee gets to keep, sell or otherwise administer assets for the benefit of creditors.

When it comes to determining "property of the estate," timing is important. Generally speaking, a debtor gets to retain property acquired after the bankruptcy filing occurs. Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 7

Sixth Circuit Rules that Individual Chapter 11 Debtors are Subject to the Absolute Priority Rule

One of the fundamental tenets of a business bankruptcy reorganization plan under Chapter 11 of the Bankruptcy Code is the "absolute priority rule." This rule, codified in section 1129(b)(2)(B)(ii) of the Bankruptcy Code, provides that every unsecured creditor must be paid in full before the debtor can retain any property under a reorganization plan. Chapter 11, however, is not solely the domain of business debtors. Individuals (who more commonly seek protection under Chapters 7 and 13) may also file for Chapter 11. So how does the absolute priority rule affect individual debtors? That issue is analyzed in a recent opinion, Ice House America, LLC v. Cardin, issued by the U.S. Court of Appeals for the Sixth Circuit. Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 11

The Aftermath of Stern v. Marshall: Sixth Circuit Ruling Addresses Bankruptcy Court’s Jurisdiction

One of the most interesting, and at times vexing, issues that arises in bankruptcy proceedings involves the jurisdiction of the bankruptcy courts. In 2011, the U.S. Supreme Court weighed in with its noteworthy decision in Stern v. Marshall, 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 level - where Stern jurisdictional issues have been raised and adjudicated. Read More ›

Categories: 6th Circuit Court of Appeals

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

Sixth Circuit: Rejection of Chapter 11 Plan not a “Final Appealable Order” for Purposes of Appellate Jurisdiction

Lindsey v. Pinnacle Nat’l Bank (In re Lindsey), Appeal No. 12-6362 (6th Cir., Aug. 13, 2013)

The Sixth Circuit held this week in a published opinion that a bankruptcy court’s denial of confirmation of a Chapter 11 plan is not a final appealable order. In so holding, the Sixth Circuit joins four other circuits, while three other circuits have held to the contrary. Read More ›

Categories: 6th Circuit Court of Appeals, Chapter 11