Articles Posted in Bankruptcy

The Committee, which represented more that 400 clergy sexual abuse claimants, appealed the district court's decision affirming the bankruptcy court's denial of the Committee's motion for substantive consolidation of debtor, the Archdiocese, and over 200 affiliated non-profit non-debtors (Targeted Entities). The Eighth Circuit held that the Targeted Entities were entitled to the protections under 11 U.S.C. 303(a), and could not be involuntarily substantively consolidated with the Archdiocese. In this case, the Committee failed to plausibly allege sufficient facts to negate the non-profit non-debtor status of the Targeted Entities. View "The Official Committee of Unsecured Creditors v. The Archdiocese of Saint Paul and Minneapolis" on Justia Law

The Eighth Circuit affirmed the imposition of sanctions on Ross. H. Briggs for contempt of an order and for misleading the bankruptcy court. The court held that the bankruptcy court had authority to enter sanctions for events that occurred while trying to enforce the order compelling turnover and the show-cause orders; the bankruptcy court did not abuse its discretion in holding Briggs in contempt where the bankruptcy court gave Briggs multiple opportunities to comply with the order compelling turnover, specifically outlining methods of compliance; Briggs's contempt was a sufficient basis for the sanctions; not invoking Rule V of the district court's disciplinary-enforcement rules was not a due process violation; and neither Local Rule 2094(B) nor Rule VII provided a basis for the bankruptcy court's chief judge to hear Briggs's reinstatement motion. View "Briggs v. Hon. Charles Rendlen" on Justia Law

The Bankruptcy Appellate Panel affirmed the bankruptcy court's orders confirming debtors' chapter 13 plan. In order for the anti-modification provisions of 8 U.S.C. 1322(b)(2) to apply, creditors' claim must both be secured only by an interest in real property and the real property must be the debtor's principal residence. The panel held that debtors could modify creditor's secured plan because debtors' manufactured home was not a fixture under Iowa law. In this case, the panel saw no reason to disturb the bankruptcy court's finding that debtors' testimony was credible and that they did not intend to make the home a permanent accession to the real estate. View "The Paddock, LLC v. Bennett" on Justia Law

At issue in this case was whether substantial evidence was presented in support of the objection as a matter of law sufficient to rebut the Internal Revenue Service’s (“IRS”) proof of claim. Debtors-appellees Scott and Anna Austin filed a voluntary petition under Chapter 13 of the Bankruptcy Code with the Bankruptcy Court for the Eastern District of Missouri in 2014. In their schedules, the Austins listed two pending worker’s compensation claims as contingent and unliquidated exempt property. These claims were valued at $0.00 or an “unknown value.” The Austins listed the IRS as a secured creditor. The IRS filed proof of claim no. 5-1, asserting in part a secured claim as a result of a tax lien. The Austins objected to the amount of the IRS’s priority claim (“January Objection”), arguing that no value should be attributable to their worker’s compensation claims in determining the secured portion of the IRS’s claim. They also argued, in the alternative, that since there were neither settlement offers nor a basis to determine the value of the worker’s compensation claims, the present value of the worker’s compensation claims should be $0. The Bankruptcy Court overruled the Austins’ January Objection, finding they failed to meet their burden to produce substantial evidence to rebut the IRS’s claim. The Bankruptcy Court disagreed the worker’s compensation claims had no value. In the meantime, the Austins negotiated a settlement of the worker’s compensation claims for $21,448.80. After attorneys’ fees, the Austins received a net settlement of $15,661.60. The IRS learned of the settlement, and filed an amended claim, No. 5-3, which included as part of its secured claim the amount of $15,661.60 for the value of the settlement. The Austins again objected to the IRS’s claim, filing an affidavit their worker’s compensation attorney, who opined that the worker’s compensation claims had a “nuisance” value of $3,000.00 on the petition date. The IRS argued that the affidavit was not substantial evidence sufficient to overcome the prima facie validity of the IRS’s claim. The Bankruptcy Court ruled that the affidavit was “substantial evidence” of the value of the claims, sufficient to rebut the prima facie validity of the IRS’ claim. The Bankruptcy Court therefore sustained the Austins’ objection and valued the worker’s compensation claims at $3,000, and reduced the IRS’s secured claim by $12,661.00. Based on its de novo review of the record, the Bankruptcy Appellate Panel found the Austins failed to present substantial evidence sufficient to overcome the presumption of the validity and amount of the IRS’s proof of claim. Therefore, their objection to claim should have been overruled. View "United States v. Austin" on Justia Law

Debtor's wife, who was not a party to the bankruptcy court proceedings, appealed several of the bankruptcy court's orders. The Eighth Circuit affirmed the bankruptcy appellate panel's dismissal of her appeal, holding that she was not a "person aggrieved" by the orders and therefore lacked standing. View "Wigley v. Wigley" on Justia Law

The Bankruptcy Appellate Panel (BAP) affirmed the bankruptcy court's orders dismissing the trustee's complaint and denying leave to file a further amended complaint. The panel held that the ultimate issue presented was whether the finality of an auction sale order, together with statutory provisions and procedural rules, effectively defeated the trustee's claims. The panel held that the bankruptcy court properly dismissed the adversary proceeding; the trustee's allegations in the amended complaint against defendants were inconsistent with the specific findings of the sale order; the findings regarding proper notice, lack of collusion, good faith, fair and reasonable consideration, etc., were all necessary and integral to the bankruptcy court's approval of the sale; the panel rejected the trustee's claim of privity as irrelevant; the trustee's reliance on Czyzewski v. Jevic Holding Corp., ___ U.S. ___, 137 S. Ct. 973 (2017), where the Supreme Court held that structured dismissals must follow the same priority rules as required for a Chapter 11 plan confirmation, was misplaced; and whether the trustee liked the specific findings of the sale order or not, they were the detailed findings of the bankruptcy court and were not appealed and thus final. The panel rejected the trustee's remaining claims. View "Fulmer v. Fifth Third Equipment Finance Co." on Justia Law

The Eighth Circuit affirmed the district court's decision affirming the bankruptcy court's finding that funds investors transferred to TSF were part of TSF's Chapter 7 bankruptcy estate. The court held that Judge Hastings, the new bankruptcy judge, did not exceed the scope of the BAP's mandate by revisiting Judge Mahoney's, the retired bankruptcy judge, factual findings; Judge Hastings did not abuse her discretion by declining to apply the law-of-the-case doctrine; and Judge Hastings did not clearly err in finding that the investors failed to show, by clear and convincing evidence, that TSF held the funds in trust. View "Allison v. Centris Federal Credit Union" on Justia Law

The Eighth Circuit affirmed the district court's decision affirming the bankruptcy court's finding that funds investors transferred to TSF were part of TSF's Chapter 7 bankruptcy estate. The court held that Judge Hastings, the new bankruptcy judge, did not exceed the scope of the BAP's mandate by revisiting Judge Mahoney's, the retired bankruptcy judge, factual findings; Judge Hastings did not abuse her discretion by declining to apply the law-of-the-case doctrine; and Judge Hastings did not clearly err in finding that the investors failed to show, by clear and convincing evidence, that TSF held the funds in trust. View "Allison v. Centris Federal Credit Union" on Justia Law

The Bankruptcy Appellate Panel affirmed the bankruptcy court's conclusion that DPG's claim against debtor was not nondischargeable under 11 U.S.C. 523(a)(6). The panel held that the bankruptcy court did not clearly err by determining that DPG had failed to establish the essential elements of its claims by a preponderance of the evidence. In this case, no evidence established that filing of the mechanic's lien at issue was certain or almost certain to cause harm to DPG, and therefore malicious or willful under section 523(a)(6). View "Dering Pierson Group, LLC v. Kantos" on Justia Law

The Bankruptcy Appellate Panel affirmed the bankruptcy court's determination that debtor failed to meet her burden of proof to establish an undue hardship pursuant to 11 U.S.C. 523(a)(8) to discharge her student loans. The panel held that the bankruptcy court did not err in dividing her federal tax refund by each month in the year and including it as monthly income; based upon the evidence of her age, health, skill sets and abilities, debtor failed to meet her burden to demonstrate that her future employment opportunities will not result in higher wages and full time employment; and the bankruptcy court's finding that debtor had sufficient income in excess of her expenses to make modest monthly payments to her lenders was amply supported by the evidence. View "Piccinino v. U.S. Department of Education" on Justia Law