Join Today and Benefit Daily from ABI's 35+ Years of Insolvency Expertise.
Join Today!
Help Center

St. John's Case Blog

By: Preston C. Demouchet
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
Although section 541 includes within the property of the estate both equitable interests and property that is recovered pursuant to section 550, in cases where the estate’s equitable interest is based on the fact that the debtor fraudulently transferred the subject property, the estate includes only the equitable claim for its recovery and not the property itself.[1] The actual transferred asset does not become property of the estate until after the trustee successfully recovers it.[2]
 
May 14 2010
By: Sabihul Alam
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
In In re Moore, the United States District Court for the Eastern District of Virginia found that Novus Law School violated a discharge injunction by refusing to issue a transcript or award a degree to Moore, a law student, until he paid his outstanding tuition balance, which had been discharged in Moore’s chapter 7 proceeding.[1] Moore successfully completed a two-year juris doctor program at Novus, a non-accredited web-based private law school, yet, at the time of completion, had an outstanding balance from unpaid tuition.[2] Moore’s obligation did not arise as a result of a government loan program, but instead was part of his tuition bill which he decided not to pay as it came due.[3] In May 2008, Moore filed for chapter 7 relief on account of his over $400,000 debt, approximately $6,000 of which was owed to Novus.[4] After receiving notification of Moore’s filing, Novus sent Moore an email stating that the law school would not grant Moore a degree nor certify his graduate status to employers if his debt was discharged through bankruptcy.[5] Subsequently, the court granted Moore a bankruptcy discharge.[6] The tuition owed to the law school was among those debts discharged.[7] In keeping with its prior warning, Novus refused to issue Moore his Juris Doctor degree or a transcript.[8] Moore then filed a motion seeking contempt sanctions against Novus for violating the discharge injunction for refusing to award Moore a degree or issue a transcript.[9]
 
May 13 2010
By: Brandi Sinkovich
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
The Sixth Circuit recently held that a bankruptcy court had the equitable power under section 105(a) of the Bankruptcy Code (the “Code”) to retroactively convert a chapter 11 case to chapter 7.[1] In Mitan v. Duval (In re Mitan), debtor Kenneth Mitan filed a chapter 11 petition in the Bankruptcy Court for the Central District of California that unsecured creditors, which had been awarded judgments against debtor in connection with a fraudulent business scheme the debtor operated, successfully moved to transfer to the Bankruptcy Court for the Eastern District of Michigan, where debtor resided and several creditors’ businesses were located.[2] After none of the parties appeared at either the status conference or the subsequent hearing to show cause why the case should not be dismissed or converted to chapter 7, the court dismissed the case. Later the court granted the creditors’ reconsideration motion in which the creditors argued that their absence was inadvertent while debtor's absence was calculated to result in dismissal of the case, which had been previously denied to the debtor.[3] At the hearing on the reconsideration motion, the bankruptcy court reopened the case and sua sponte converted it to chapter 7 after finding that it was necessary for a trustee to investigate debtor’s affairs in light of debtor’s alleged scheme to avoid his obligations and abscond with assets hidden overseas.[4]
 
May 12 2010
By: Robert J. Guidotti
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
Recently, in Dumont v. Ford Motor Credit Company (In re Dumont),[1] the Ninth Circuit reversed the rule established in McClellan Fed. Credit Union v. Parker (In re Parker)[2] by holding that the implied right of ride-through is no longer available to chapter 7 debtors who do not attempt to reaffirm debts on secured personal property. In this case, the debtor-plaintiff, Dumont, entered into a secured loan agreement with the creditor-defendant, Ford, for the purchase of a personal automobile. Three years after entering into the agreement, Dumont filed a petition for chapter 7 relief.[3]
 
May 10 2010
By: Christopher J. Palmese
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
The Federal Resource Conservation and Recovery Act (the “RCRA”) allows the government and private citizens to force parties responsible for the “handling, storage, treatment, transportation or disposal of any solid waste or hazardous waste” to take appropriate action to prevent the potential dangers posed by materials that may “present an imminent and substantial endangerment to health or the environment”.[1] In 2008, the district court for the Southern District of Illinois awarded the Environmental Protection Agency an injunction under section 6973 of the RCRA that ordered Apex Oil Corp. Inc. (“Apex”) to mitigate groundwater contamination at a site where Apex’s corporate predecessor had caused millions of gallons of oil to be trapped underground.
 
May 9 2010
By: Brendan Gage
St. John's Law Student
American Bankruptcy Institute Law Review Staff
 
Courts are increasingly divided over whether so-called “hybrid” claims – those involving both goods and services transactions – can qualify as an administrative expense under section 503(b)(9) and, if so, to what extent. Claims characterized as administrative expenses are paid off first whereas claims that fail to meet section 503(b)(9)’s requirements will be deemed unsecured claims which are paid at a lower priority level and rarely in full.[1] A product of BAPCA, section 503(b)(9)[2] creates a specific type of administrative expense claim for “the value of any goods received by the debtor within 20 days before the date of commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such debtor's business.”[3] Yet despite this seemingly straightforward language, courts battle over whether goods transactions within hybrid claims can be allocated as individual section 503(b)(9) expenses or whether hybrid claims should be considered indivisible and analyzed wholesale for qualification under section 503(b)(9).[4]
 
May 5 2010
By: Krystiana L. Gembressi
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
Recently, in In re Dunning Brothers Co.,[1] the United States Bankruptcy Court for the Eastern District of California affirmed the longstanding tenet that unscheduled assets remain property of the bankruptcy estate indefinitelyThe court held that a bankruptcy case that was closed more than seventy years ago could be reopened following the later discovery of certain unscheduled assets.
 
May 4 2010
By: Lauren E. Stulmaker
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
In a decision with important implications for public sector bankruptcies, the United States Bankruptcy Court for the Eastern District of California held that the rejection of collective bargaining agreements (“CBAs”) in chapter 9 cases is governed by § 365, rather than the enhanced standards of § 1113. [1]   However, rather than the relaxed business judgment standard normally applicable to contract rejections under § 365, the court applied the three part test established by the Supreme Court in NLRB v. Bildisco & Bildisco, before letting the City of Vallejo out of its collective bargaining agreements (“CBAs”).[2] The court in In re City of Vallejo, addressed the issue of whether chapter 9 of the Bankruptcy Code would allow a municipal debtor to reject the CBAs in place for its public sector unions.[3] After the City filed for bankruptcy under chapter 9 and sought to escape the CBAs at issue, the municipal employees sought protection under California’s state labor laws. Because the federal labor laws only govern private sector employment, the city employees attempted to rely on the state labor laws yet the court held that the state laws were entirely preempted by the Bankruptcy Code.[4] 
 
May 3 2010
By: Michael Vanunu
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
It is not uncommon for a chapter 13 debtor to file for bankruptcy after certain assets have already been repossessed.  This leaves the courts in the position of having to decide whether a particular creditor can continue to hold the asset it has repossessed, or must return it to the bankruptcy estate. Recently, in a case of first impression for the circuit, the Seventh Circuit, in Thompson v. General Motors Acceptance Corp.,[1] was called upon to determine whether an asset lawfully seized pre-petition must be returned to the estate after debtor files for chapter 13 bankruptcy, and if so, whether the asset must be returned even without a showing by the debtor that he can adequately protect the creditor’s interest.[2] In the case, Thompson had his car repossessed by General Motors Acceptance Corp (“GMAC”), a secured creditor.  A few days later Thompson filed for chapter 13, and sought the return of his vehicle from GMAC through the automatic stay provision of § 362(a)(3), which provides that “a petition filed [for bankruptcy] . . . operates as a stay . . . of any act to obtain possession of property of the estate . . . or to exercise control over property of the estate.”[3] GMAC refused because it claimed that Thompson could not adequately protect its interest.[4]
 
May 2 2010
By: Jacquelyn L. Mascetti
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
Recently the Fifth Circuit, in St. Paul Fire & Marine Ins. Co. v. Labuzan,[1]expanded the definition of “individual” in 362(k) to include creditors as parties able to bring an action for a violation of the automatic stay. Debtor, Contractor Technology, Ltd. (“CTL”), construction company owned by the Labuzans. St. Paul Fire & Marine Ins. Co. (“St. Paul”), the insurer, issued performance and payment bonds on behalf of CTL for its ongoing projects as insurance for the projects owners in case CTL was unable to complete construction. The Labuzans entered into an indemnity agreement with St. Paul and agreed to be held liable if St. Paul had to pay the bonds to the project owners. After facing some financial difficulty, CTL decided to reorganize and voluntarily filed chapter 11. Shortly thereafter, St. Paul contacted the owners of CTL’s current projects and threatened to reduce the bond insurance on the projects if the owners made any payments to CTL for any work done towards the completion of the project.[2] Caving to the threats, the project owners stopped sending payments to CTL, which drained its remaining assets to pay expenses, and forced the company to convert its proposed reorganization into chapter 7 liquidation.
 
May 1 2010