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Showing 26 posts in 6th Circuit Court of Appeals.

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

Sixth Circuit Holds That Right to Article III “Judicial Power” is Not a Waivable Right

In a recent opinion, the Sixth Circuit has provided clarification of Stern v. Marshall's1 holding by analyzing Article III “judicial power,” the pubic rights doctrine, and the bankruptcy court's authority.

In Waldman, the Western District of Kentucky Bankruptcy Court entered a judgment against the principal creditor after finding that the creditor had defrauded the debtor and had acquired nearly all of the debtor’s assets by means of fraud.  The Bankruptcy Court entered a judgment discharging the debts the debtor owed the creditor and awarded the debtor a judgment of more than $3 million in compensatory and punitive damages.  The creditor appealed the Bankruptcy Court’s entry of a final judgment based upon three challenges:  (1) the debtor’s state law fraud claims are beyond the jurisdiction of the federal court; (2) the judgment entered was beyond the statutory authority of the bankruptcy court; and (3) the judgment was beyond the bankruptcy court’s power pursuant to Article III of the Constitution. Read More ›

Categories: 6th Circuit Court of Appeals, U.S. Supreme Court

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

6th Circuit: Michigan Bankruptcy-Specific Exemption Statute is Constitutional

The Sixth Circuit Court of Appeals recently held that Michigan's bankruptcy-specific exemption statute is constitutional under the Bankruptcy Clause and Supremacy Clause of the United States Constitution.

Historically, Michigan has allowed bankruptcy debtors to use the federal exemptions under 11 U.S.C. § 522(d), the general state exemptions under M.C.L. § 600.6023, or the state exemptions pursuant to M.C.L. § 600.5451 that are specific to debtors in bankruptcy (prior to it being declared unconstitutional).

Michigan is one of a few states that has a bankruptcy-specific exemption statute available to bankruptcy debtors only.  In the Western District of Michigan, the constitutionality of the bankruptcy-specific scheme was called into doubt by the Hon. James D. Gregg in In re Pontius, 421 B.R. 814 (Bankr. W.D. Mich. 2009) and the Hon. Jeffrey R. Hughes in In re Wallace, 347 B.R. 626 (Bankr. W.D. Mich. 2006).  Contrarily, the Hon. Scott W. Dales, held that the bankruptcy-scheme was constitutional in In re Schafer, 428 B.R. 720 (Bankr. W.D. Mich. 2010), pursuant to Sixth Circuit precedent and Congress' delegation of power to the states pursuant to 11 U.S.C. § 522(b) to create bankruptcy exemptions. Read More ›

Categories: 6th Circuit Court of Appeals