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The Codes Policies Go Bankrupt When it Comes to Petitions Filed by Same-Sex Couples

By: Jacklyn A. Serpico
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
Federal law continues to have a disparate impact on same-sex couples filing bankruptcy petitions. In In re Roll,[1] the debtors, Roll and Currie, were a same-sex couple that filed separate bankruptcy petitions under chapter 7. They were residing together in the same household, along with Roll’s adult niece. The United States Trustee moved to dismiss the debtors’ separate petitions pursuant to section 707(b)(1) of the Bankruptcy Code based on the presumption of abuse of chapter 7.[2] The United States Trustee argued that, despite filing separate petitions noting their own individual finances, the couple’s finances were in fact shared, and thus, the debtors “should be treated as a single economic unit.”[3] The United States Trustee argued that the debtors’ combined income was sufficient to pay off their debts, and as such, their individual petitions listing insufficient separate finances constituted an abuse of chapter 7.[4] Yet, the Bankruptcy Court for the Western District of Wisconsin denied the motion to dismiss because the United States Trustee failed to meet the evidentiary burden demonstrating the debtors’ income and expenses to support a finding of abuse.[5] The court further discussed that the totality of the circumstances did not support a finding of abuse merely because the couple lived together, shared certain resources, and together had the potential ability to pay creditors.[6] More importantly, in emphasizing that only married persons may file joint petitions,[7] the court noted that same-sex marriages are prohibited under the Wisconsin Constitution and that federal law prohibits a federal court from recognizing any such marriage.[8] Consequently, the court reasoned that Roll and Currie had no choice but to file separately, and thus, have their income assessed independently of one another for purposes of determining abuse under chapter 7.
 

Equities Can Adjust Administrative Claim for Stub Rent

By: Timothy Poydenis
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
The Bankruptcy Court for the District of Delaware recently held in In re Sportsman’s Warehouse, Inc., that landlords who seek payment of administrative claims for stub rent, the rent for the period from the petition date through the first of the following month, are not per se entitled to an administrative priority.[1] In this case, Sportsman’s Warehouse, a retail sporting goods store, filed for bankruptcy under chapter 11 on March 21, 2009. Sportsman’s Warehouse was renting the warehouse in which it operated its business. Despite the fact that rent was due and payable on the first of each month, Sportsman Warehouse failed to pay the rent due on March 1, 2009. Consequently, the landlord sought the allowance and immediate payment of the unpaid stub rent for the period from March 21, 2009, through March 31, 2009.[2] Although the court recently held that a debtor’s post-petition use and occupancy of leased premises, per se, creates an administrative claim,[3] the court held that its previous holding was a “misapplication of the law and will no longer be followed by this Court.”[4] Rather, the court held that a case-by-case analysis “must” be used to determine the amount of the benefit to the estate. The result of that determination will provide the amount of payment the landlord is entitled to as an administrative claim under section 503(b).

Chapter 13 Plan Cannot Avoid Lien Absent Adversary Proceeding

By: Michael Buccino

St. John's Law Student

American Bankruptcy Institute Law Review Staff

 

In SLW Capital, LLC v. Mansaray-Ruffin (In re Mansaray-Ruffin), the Third Circuit held that a creditor’s lien could not be avoided through the confirmation of a Chapter 13 plan that treated the claim as an unsecured claim.

[1]

  Notwithstanding the importance of finality in bankruptcy proceedings and statutory language binding creditors to the terms of a confirmed plan, since the Federal Rules of Bankruptcy Procedure require an adversary proceeding to invalidate liens, the order confirming the confirmed plan was not res judicata with respect to the status of the creditor’s lien.

[2]

 

Master Repurchase Agreement Penetrates the Automatic Stay

By: Valerie Sokha

St. John's Law Student

American Bankruptcy Institute Law Review Staff

 

The derivatives provisions of the 2005 BAPCPA amendments greatly enlarged the scope of the financial contracts that are shielded from traditional bankruptcy limitations such as the automatic stay and the prohibition on ipso facto clauses.  Those exceptions were reaffirmed in a strong anti-debtor opinion in American Home Mortgage, Holdings, Inc. v. Lehman Brothers Inc.

[1]

Although Lehman may now regret its victory since it is a debtor in its own bankruptcy case, it succeeded in defeating a number of theories that might have limited the scope of the exceptions.  In an opinion relying in part on the market protection policy reflected by the exceptions, the Delaware Bankruptcy Court adopted a liberal definition of “repurchase agreement” that turned mostly on the intention of the parties as stated in the four corners of their agreement.

 

Single Asset Real Estate Tightening the Noose for Developers

By: Anna Drynda

St. John's Law Student

American Bankruptcy Institute Law Review Staff

 

Recently, the United States Bankruptcy Court for District of New Jersey in In re Kara Homes, Inc. held that affiliated Chapter 11 debtors, each owning separate real estate development projects for the construction of single family residences and condominiums, qualified as single asset real estate (“SARE”) cases, a holding that allowed the lenders expedited relief from automatic stay.

[1]

  The case focused on whether the debtors conducted “substantial business” other than operating the real property sufficient to exclude them from the SARE provisions.

[2]

  Adopting a “pragmatic approach,” the Court held that even if the business activities would qualify had the debtors performed them for third parties, such activities when performed for the debtor itself, or one of its affiliates, do not constitute substantial business.

[3]

  The residential home building business, although involving real estate, arguably has more similarity to a manufacturing operation than to the on-going property management operations of many SARE debtors.  The Kara Homes approach makes it very difficult for real estate developers to reorganize in bankruptcy.

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