Filing bankruptcy for one company may bring the assets of another company owned by the same family or group into the bankruptcy of the first. In a recent decision, In re Cameron Construction & Roofing Co., Adv. P. No. 15-1121, 2016 WL 7241337 (Bankr. D. Mass. December 14, 2016), the Bankruptcy Court made the assets […]
Please Note:
The information contained in this web site, article or link may be outdated, incorrect or not applicable; it is your obligation to confirm the accuracy.
It is very important that you obtain legal advice from an attorney experienced in the laws related to your particular situation. Never rely on information obtained from the Internet, your friends or neighbors; it is very rare that their situation is exactly like yours. Seeking good legal advice before you take action will certainly cost you less than it will cost to fix your unintentional errors.
The information in this web site is not intended to constitute legal advice or to create an attorney-client relationship.
I was fortunate enough to be invited for an interview on a local radio station. The short discussion is about financial challenges and bankruptcy. This is just an audio program, only 12 minutes long, but I hope this is informative.
Diane L. Drain, bankruptcy attorney, retired law professor, mentor and community spokesperson.
Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about Arizona bankruptcy and foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys. Read about Diane and her promises..
I would be flattered if you connect with me on GOOGLE+ and ‘Like’ us on Facebook
*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice nor create an attorney client relationship between you, me, or the author of any article. Any information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*
Please Note:
The information contained in this web site, article or link may be outdated, incorrect or not applicable; it is your obligation to confirm the accuracy.
It is very important that you obtain legal advice from an experienced foreclosure or bankruptcy attorney regarding your particular situation. Consultation before you take action will certainly cost you less than it will cost to fix your unintentional errors.
The information in this web site is not intended to constitute legal advice or to create an attorney-client relationship.
SEPTEMBER SALES
Debtor’s name and case number:
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Debtor’s name and case number:
Debtor’s name and case number:
Debtor’s name and case number:
Debtor’s name and case number:
Debtor’s name and case number:
Debtor’s name and case number:
Debtor’s name and case number:
Debtor’s name and case number:
Debtor’s name and case number:
Debtor’s name and case number:
Please Note:
This area is intended for the exclusive use of attorneys. You know the drill – do your own due diligence. We make no representations as to the accuracy or current status of any information cited herein.
If you are NOT an attorney it is important to educate yourself, but this is not the place to do it. You must obtain legal advice from an experienced attorney familiar with your unique situation. Fixing unintentional errors will cost far more than doing it right the first time; if it can be fixed at all.
The information in this web site is not intended to constitute legal advice or to create an attorney-client relationship.
IMPORTANT: This firm makes NO representations as to the accuracy or current status of any law, case, article or publication cited herein or linked to.
Warning – some of these references are pre-BAPCPA.
REOPENING BANKRUPTCY CASE
This Motion is filed on an Ex Parte basis in that JPMorgan Chase Bank, N.A. (the “Defendant”) never filed a response to the Summons and Complaint or an appearance in the adversary matter. The request for relief herein is ministerial in nature Cusano v. Klein, 264 F.3d 936, 948 (9th Cir.2001) (“The mere reopening of a bankruptcy case is a ministerial act that ‘lacks independent legal significance and determines nothing with respect to the merits of the case.”) (citation omitted). Cause exists to file this motion on an ex parte basis and to grant the relief requested by the Plaintiffs herein. The Debtors’ motion is as follows:
Also, check out section 350 of the Code.
Please Note:
The information contained in this web site, article or link may be outdated, incorrect or not applicable; it is your obligation to confirm the accuracy.
It is very important that you obtain legal advice from an experienced bankruptcy attorney regarding your particular situation. Consultation before you take action will certainly cost you less than it will cost to fix your unintentional errors.
The information in this web site is not intended to constitute legal advice or to create an attorney-client relationship.
The following is an excellent article by another attorney. I like to give credit where credit is due – so I offer to you Mr. Blades insights. These also are true for Arizona residents. In this article are some videos from me regarding Arizona and bankruptcy issues.
Written by Rock Hill Bankruptcy Lawyer, Showell Blades
A client who has a good bankruptcy lawyer usually has a calm experience once the case is filed. The idea is to, as my mentor explained to me twenty years ago, disclose everything and fly under the radar. You do not want to do anything which draws unnecessary attention to your file or your fact situation so that your creditors or the United States Trustee’s office decides to take a closer look at the file. Even if nothing comes of that closer look, the process can be stressful for the clients.
Recently I had a woman storm out of my Rock Hill bankruptcy office after a free thirty-minute consultation which she ended by calling me an unpleasant orifice. My crime: I told her she had to wait four months to file bankruptcy and she wanted to file right then. She would best be served by remembering Ovid’s quote: “Bear patiently with a rival.”
The reason a client with a good bankruptcy attorney usually has a calm experience once the case is filed is because that attorney knows of the pitfalls that can come from taking simple actions, or by not taking them, before the case is filed. If all the bases are covered properly, there is nothing for anyone to scrutinize, or the client is at least prepared for those items which will come under closer scrutiny.
Be advised: the bankruptcy system can be a system where you encounter strong, well-funded and well-prepared rivals. Ovid’s advice can come in handy.
First, Debtors need to make sure that they do not have any deposits in any banks to which they owe money, whether in the form of CDs, checking or savings accounts, or other forms of deposits. This is because a bank has the right of setoff. If you file bankruptcy and owe a bank any money, then that bank has the right to administratively freeze the account and take the funds to pay the loan which you are not likely to pay in bankruptcy. For that reason, most good bankruptcy attorneys will make sure that you move your accounts to which you owe no funds so that you do not file bankruptcy and have your checking account frozen and all of the money that you would have going to pay bills that month disappear. You will not get it back. Also, keep in mind that many clients have automatic payroll deposits which need to be moved and drafts to pay important things like life and health insurance which need to be moved (both of which often take thirty days to change) .
Second, your attorney will ask you to whom you’ve paid payments on debts within the ninety days prior to filing bankruptcy and to whom you’ve paid payments on debts within the one year prior to filing bankruptcy if the lender was a family member. Take time to think about your answers. If you say “No one” and the bankruptcy trustee finds out that you have, then you have not told the truth which means you’ve committed at least three federal crimes. Additionally, any payment on a debt which qualifies as one of the above payment can be taken back by the trustee (preferential treatment) and given to the rest of your creditors. In other words, if you gave Aunt Zelda the $15,000 you owed her eight months ago and then you file bankruptcy, your bankruptcy trustee can sue Aunt Zelda to get all of the money back and will win causing her great concern because she probably doesn’t have it. Christmas will never be the same.
Also, if you paid the four mortgage payments you were behind all at once a month before you file bankruptcy and do not wait ninety-one days after that check clears, then the trustee may be able to get all of that money back from the mortgage company. You would find yourself in bankruptcy and still four mortgage payments behind which could put you in foreclosure. Tell your attorney about these things and expect to have to wait to file bankruptcy.
Third, if you are remotely thinking about filing bankruptcy or feel overwhelmed, but you have a 401(k) or IRA or a similar investment vehicle, and are thinking about solving your problems by cashing it in, DON’T. Go talk to a bankruptcy attorney and get some advice. This is for several reasons. Initially, you need to understand that your creditors cannot take that investment from you no matter how broke you are. It is exempt, protected from the reach of creditors or the bankruptcy trustee. So leave it alone. Don’t cave to the creditors’ threats and take what may be your last or only safe asset.
Another reason to consider disposing of this asset very carefully is this: I cannot tell you how many people I have seen who have cashed in their 401(k) and paid their credit cards down only to find themselves overwhelmed and now without their 401(k) still needing to file bankruptcy. Get advice before you try to pay off your debts with your 401(k). The only way I would advise that would be if you could pay off all of your debts in full, be able to handle any tax ramifications of cashing it in early, and be able to make it on your family budget after the debts are gone so that you do not find yourself upside down very soon so that cashing in the 401(k) was a waste.
Finally, if you cash in your 401(k) within the six months prior to filing bankruptcy, this could cause you to fail the Means Test. This is one of the things that the Court looks at to see if you qualify for bankruptcy and, if so, which type and what a payment would be if you filed a chapter 13. (This reason MAY have been negated by a Supreme Court decision that came out this week, but I wouldn’t want to be the first person to try to make sure of that). So talk to your attorney before you do it.
A fourth trap for the unwary is to renew loans or taking out loans prior to filing bankruptcy. You need to tell your attorney what you’ve done with your credit in the last six months or so. This is because creditors have the right to object to your discharging, or getting rid of, their debts. There are a number of reasons creditors can use to do this but one of them involves your borrowing money right before you file bankruptcy. What IS “right before filing bankruptcy” is not defined. I have had a creditor object to charges that were made four and a half months prior to my client filing bankruptcy. If this happens you have to pay me extra money to defend that lawsuit or you have to settle it by paying back the creditor. It can be avoided by figuring out when you last used credit, telling your attorney, and waiting to file. Renewals of loans before filing count also.
The fifth and final trap involves not making sure you know what your assets (your property) is worth. Your attorney is going to be asking you all kinds of questions. Many of them deal with the value of your house, your cars, your furniture, antiques, an other property. The Court expects you to know what they are worth. If you do not it could have bad results for you for several reasons.
Most of the reasons involve the trustee’s selling your stuff because he can make money by selling them, paying off the liens on them, paying you your share of the money (your exemption) and, if he still can make more money after all of that, it is his to use pay to your creditors. If you make sure that you have an accurate value for your assets, then it will be close to what a trustee could get by selling them and your attorney can claim the correct exemptions and protect your assets. Since sometimes you have to make choices about what you want to protect and what you don’t, knowing a good value is important.
Also, a recent U.S. Supreme Court opinion (“Schwab” exemption case) says that, if a debtor undervalued his assets when he claimed his exemptions and a trustee can sell them for more, the Debtor cannot get the money that the trustee made over the debtor’s exemption amount even if he could have claimed more but did not. Thus, you need to know the value so you can claim the full amount of protection.
Another reason value is important is that, in some cases, if your collateral is worth less than you owe, you can pay the value of the collateral to the creditor and not the larger amount that you owe. If you undervalue your stuff and file a motion to value and the property turns out to be worth close to what you owe, then you wasted everyone’s time and you and your attorney look stupid.
Finally, if you undervalue your assets and they turn out to be worth significantly more, not only could you lose them but you could find yourself being criminally prosecuted for bankruptcy fraud. This could happen even if you did not intentionally undervalue them; rather, you were too lazy or irresponsible to try to find out a good value. Debtors have the burden of investigating their affairs and reporting everything truthfully and completely to the Court.
In summary, there are many considerations which must be addressed before you file bankruptcy. Attorneys know that everyone who needs to file bankruptcy wants it done as soon as possible. However, it also is their job to help Debtors make the best decisions. Debtors must understand that sometimes they must fully apprise their attorneys of the facts and think about what they are telling their attorneys (and of what their attorneys are telling them). They also need to understand that, sometimes, they are going to have to be patient before they enter Bankruptcy World because the wolves are at the door.
Please Note:
This area is intended for the exclusive use of attorneys. You know the drill – do your own due diligence. We make no representations as to the accuracy or current status of any information cited herein.
If you are NOT an attorney it is important to educate yourself, but this is not the place to do it. You must obtain legal advice from an experienced attorney familiar with your unique situation. Fixing unintentional errors will cost far more than doing it right the first time; if it can be fixed at all.
The information in this web site is not intended to constitute legal advice or to create an attorney-client relationship.
IMPORTANT: This firm makes NO representations as to the accuracy or current status of any law, case, article or publication cited herein or linked to.
Warning – some of these references are pre-BAPCPA.
DISCLAIMER OF INHERITANCE PRE-BANKRUPTCY
In re Costas, 06-16520, 555 F.3d 790 (2009) (BAP 9th Cir. 2008) Costas inherited $34,800, but refused to accept it and, on November 7, 2002, executed a disclaimer under Arizona law to relinquish her claims to the Trust property.
December 3, 2002, Costas filed a Chapter 7. Maureen Gaughan, trustee, sought to avoid Costas’ disclaimer of the Trust property under 11 U.S.C. § 548 as a fraudulent conveyance within a two year pre-petition. The question in this case is whether an Arizona disclaimer qualifies as a “transfer … of an interest of the debtor in property.” BAP decided “not a transfer”Arizona’s relation-back rule says that a disclaimant neither transfers nor possesses an interest in disclaimed property and thus creditors cannot reach the disclaimed interest. We hold that a disclaimer, properly executed under Arizona law, is not a “transfer … of an interest of the debtor in property” for purposes of § 548.
DEBTOR TRANSFERS INHERITANCE POST-PETITION
In re Brown, Brown vs Barclay, BAP No. SC-17-1068-AKuS (5/21/18) BAP for 9th Circuit affirmed summary judgment entered by bankruptcy court (SD Cal.) in favor of plaintiff-chapter 7 trustee avoiding debtor’s postpetition transfer of inheritance proceeds to his brothers. Because of debtor’s bad faith, postpetition receipt of inheritance proceeds while in chapter 13 remained property of chapter 7 estate under 11 USC 348(f)(2). Because debtor’s transfers were not ordinary and necessary expenses, 11 USC 348(f)(1) did not safe harbor transfers of inheritance proceeds from estate. Consequently, postpetition transfers of property of estate were avoidable.
EXEMPTION FOR INHERITANCE or OTHER MONIES
In re Berryhill, 2:19-07421-BKM The Court has reviewed the party’s arguments and the case cited by Mr. Mumme, In re Royal 165 B.R. 802 (Bankr. MD 1994). In analyzing a Maryland exemption statute, the court in Royal determines that it is appropriate to distinguish an inheritance from third party obligations triggered upon a person ‘s death.
“This distinction is significant because the Maryland statute lists out various third party obligations as being covered by the statute. In contrast, ARS 33‐1126(A)(1) lists no such examples and by its wording applies to any and all monies “payable or received… upon the life of a deceased….” The Court agrees with the analysis in In Re Thiem that the Arizona statute contains nothing to suggest the source of the funds received by the beneficiary is limited to insurance pay outs, or to amounts paid from third party sources. The Court, thus, concludes that ARS 33‐1126(A)(1) applies to all monies received by way of inheritance. Accordingly, the Trustee’s objection to Debtor’s exemption is overruled”
Please Note:
This area is intended for the exclusive use of attorneys. You know the drill – do your own due diligence. We make no representations as to the accuracy or current status of any information cited herein.
If you are NOT an attorney it is important to educate yourself, but this is not the place to do it. You must obtain legal advice from an experienced attorney familiar with your unique situation. Fixing unintentional errors will cost far more than doing it right the first time; if it can be fixed at all.
The information in this web site is not intended to constitute legal advice or to create an attorney-client relationship.
IMPORTANT: This firm makes NO representations as to the accuracy or current status of any law, case, article or publication cited herein or linked to.
Warning – some of these references are pre-BAPCPA.
JUDGMENT PROOF v COLLECTION PROOF
“Judgment-proof” is a legal concept and refers to those individuals, such as minors and those not legally competent, against whom a judgment may not be entered, or if entered, is not enforceable. “Collection-proof” is a factual concept and refers to an individual who does not have sufficient non-exempt assets against which a creditor could levy execution.
JUDGMENTS
Typically unsecured liens do not exist after bankruptcy because the liens did not attach to anything before bankruptcy. The judgments are void per 11 USC 524(a)(1). A void judgment cannot create a post-petition lien. Therefore the judgments do not attach as liens to property acquired post-petition.
It is true that pre-petition liens on nonexempt property survive bankruptcy, but that requires that the liens have attached pre-petition to property owned pre-petition.
524 (a) A discharge in a case under this title—
(1) voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged under section 727, 944, 1141, 1228, or 1328 of this title, whether or not discharge of such debt is waived;
Article: Will My Judgment Get Discharged in Bankruptcy? Ward and Smith, P.A. – Lance P. Martin
WARNING: Talk to an experienced bankruptcy attorney in order to know your rights and obligations.
A.R.S. Section 33-964: B. Except as provided in section 33-1103, a recorded judgment shall not become a lien on any homestead property. Any person entitled to a homestead on real property as provided by law holds the homestead property free and clear of the judgment lien. The protection of A.R.S. Section 33-964(B) is good, but not necessarily all-encompassing when the homestead’s equity exceeds $150,000.00. In Judge Haines’ Rand v. United Auto Group decision 400 B.R. 749 (Bankr. Az 2008), he mentioned creditors had another possible recourse, specifically A.R.S. Section 33-1105 whereby the creditor can require an execution sale and obtain a bid in excess of the consensual liens plus the homestead amount and the allowable costs of sale under Title 12. Also see, ARS 33-1103 (A)(4). Except – To the extent that a judgment or other lien may be satisfied from the equity of the debtor exceeding the homestead exemption under section 33-1101. See also Evans vs Young, 661 P.2d 1148 (Az Court of Appeals, Div 1, 1983) (“In conclusion, we find that a judgment lien obtained pursuant to A.R.S. § 33-964 does not extend to homestead property. Given the special protection of the homestead statutes, a judgment creditor can reach excess value in the property over the amount of the homestead exemption only by first invoking the appraisal procedure set forth in A.R.S. § 33-1105.”)
Note: The recorded judgment lien survives the bankruptcy. The creditor can go after real property the debtor owned at the time of filing the bankruptcy that secures that lien. This is the reason why these liens must be avoided under 522, irrespective of the Haines decision in Rand that the lien does not attach to debtor’s homestead. 522 addresses an “interest” in debtor’s property in support of a lien avoidance. Irrespective of the fact as to whether there is equity in the property, or that the homestead exemption is not affected by a lien, a debtor’s interest is impaired, and thus avoidance is appropriate, otherwise, what is the point of 522? The point of 522 is to give the debtor a fresh start and that is not achieved by the refusal to avoid a lien which will remain in place post discharge and could eventually be foreclosed when property values increase.
It appears that the judgment lien and the right to enforce that lien survive a Chapter 7. If the judgment creditor seeks to enforce its lien prior to the expiration of that lien, perhaps the owner could file a Chapter 13 and pay the creditor the value of the excess equity. Sales to enforce Judgment liens are done by Sheriff’s sale and somewhat rare. The expense in the form of bonding the Sheriff of this procedure make it very price prohibitive.
Pacific, et al. v. Castleton, et al. December 27, 2018 – 1 CA-CV 17-0667 – Whether a judgment creditor may attach a judgment lien to homestead property, or whether it may execute on its judgment only by way of a forced sale of the property under Ariz. Rev. Stat. section 33-1105.
§ 33-964 A RECORDED JUDGMENT DOES NOT BECOME A LIEN ON HOMESTEAD PROPERTY:
Section 33-964 thus establishes the general rule that a recorded judgment does not become a lien on homestead property. See also Union Oil Co. of Ariz. v. Norton Morgan Commercial Co., 23 Ariz. 236, 245 (1922) (holding that “no lien shall be permitted to attach to the real property claimed as a homestead”).
EXCESS EQUITY (consensual secured debts + homestead) IN HOMESTEAD CAN BE JUDICIALLY FORECLOSED UNDER § 33-1105
See In Evans v. Young, 135 Ariz. 447, 453 (App. 1983), and Grand Real Estate, Inc. v. Sirignano, 139 Ariz. 8, 13 (App. 1983); see also In re Rand, 400 B.R. 749 (Bankr. D. Ariz. 2008) (clarifying that a recorded judgment does not create a lien on property subject to homestead even when the value of the property exceeds the amount of the homestead. “It remains the case that both the homestead statute and the judgment lien statute both conceive of the ‘homestead’ as being the real property, not the equity value of such real property.” 400 B.R. at 754); and In re Glaze, 169 B.R. 956, 966 (Bankr. D. Ariz. 1994)
ONCE A JUDGMENT ATTACHES IT RUNS WITH THE LAND
ABANDONMENT OF HOMESTEAD BY CONVEYING TO TRUST A.R.S. § 33-1104(A):
CONCLUSION: For the foregoing reasons, we affirm the entry of an injunction enjoining a Sheriff’s sale of the Home.
JUDGMENT RENEWAL
MRH Sub I, LLC v. Pilat, 2019 WL 2539192 (Ariz.App. June 20, 2019)
This case concerns the requirements under Arizona law to renew a judgment by affidavit. MRH Sub I, LLC (“MRH”) acquired the judgment from CitiMortgage, Inc. (“Citi”). MRH moved to renew the judgment on October 13, 2017, just three days before it would have expired, when it filed the “Judgment Renewal Affidavit” in the superior court (the “Renewal Affidavit”).
Defendant/Appellants moved to strike MRH’s Renewal Affidavit as invalid and laden with misrepresentations. They argued the Renewal Affidavit was invalid because it did not meet the formal requirements of A.R.S. § 12-1612; and misrepresented certain specifics of the judgement.
The superior court denied the motion. It found that the Renewal Affidavit “substantially [met] the requisites of an affidavit … in light of the purpose of A.R.S. § 12-1612, which is to notify interested parties of the existence and continued viability of the judgment.”
LIEN AVOIDANCE
In re Charnock, 318 B.R. 720 (BAP 9th Cir, 2004) has the legislative history of 522(f)(2) and says that the debtor may avoid a judgment lien recorded before a consensual lien regardless of state law, because Congress wanted to favor consensual liens regardless of the priority of recording.
STATUTE OF LIMITATIONS - AGREEMENT NOT TO ENFORCE
Harle v. Williams: No. 1 CA-CV 17-0665 (Az Ct Appeals, Div One 3-14-19) Holds that the enforcement period on a judgment is tolled until the judgment is executable, and this judgment wasn’t executable until the date of William’s breach.
Harle and Williams were business partners, then the partnership split. Harle sued Williams. In 2011 the two reached a settlement in which Williams agreed to a total judgment amount and to make monthly payments. As long as Williams made his monthly payment, according to the terms of the settlement, Harle was precluded from recording or enforcing the judgment. The superior court held the judgment had not expired. After all, the court implied, it would be very unfair to allow a debtor to promise the world to a judgment holder in order to convince them to hold off on recording a judgment, but then back out after 5 years, and leave the judgment holder “[prejudiced in the extreme].” (NOTE – renewal of judgments in Arizona is now changed from 5 to 10 years).
STATUTE OF LIMITATION RUNS FROM FIRST MISSED PAYMENT
Mertola LLC v Alberto J Santos/Arlene Santos CV-17-0109-PR (AZ 
Supreme Court, 7-27-18) Statute of limitation for debt collection in Arizona – cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment.
Mertola, LLC, sued Alberto Santos and his wife Arlene Santos to collect an outstanding credit-card debt. Although the credit-card agreement gave the creditor the option of declaring the debt immediately due and payable upon default, we hold that even if that option was not exercised, the cause of action to collect the entire debt accrued as of the date of Santos’s first uncured missed payment. Mertola’s claim was barred by the statute of limitations six years after that date pursuant to A.R.S. § 12-548(A)(2). We vacate the court of appeals’ opinion and affirm the trial court’s summary judgment in favor of Santos. We award Santos reasonable attorney fees pursuant to the Account Agreement and costs pursuant to A.R.S. § 12-341.
LAW OF CASE DOCTRINE IN BANKRUPTCY
Reprint from Weil Bankruptcy Blog – by Robert Lemons & Candice Carson
When a court reaches a decision in a case, the law of the case doctrine generally provides that parties should not be able to relitigate the same issue in that case, and for the court to adhere to its prior decision.1 The doctrine does not, however, apply to every decision a court reaches. Two recent decisions by Judge Elizabeth Stong in the Brizinova chapter 7 cases in the Bankruptcy Court for the Eastern District of New York explore when the doctrine may or may not apply in bankruptcy cases.
Judge Stong’s decisions suggest that the law of the case doctrine has limited application in the bankruptcy context because it may only be applicable when (i) there is identity of parties between the prior decision and the matter at issue and (ii) the prior decision was a final judgment.2 In Brizinova I, Judge Stong ruled that the chapter 7 trustee (the “Trustee”) adequately alleged that certain proceeds constituted property of the Debtors’ estate.3 In two subsequent Brizinova decisions, Soshkin and Brizinova II, the Trustee argued that the court must adhere to the court’s prior ruling in Brizinova I and apply the law of the case doctrine to deny defendants’ request to dismiss the Trustee’s complaint.4 In both decisions, Judge Stong refused to apply the law of the case doctrine because the court did not enter a final order in Brizinova I. In Soshkin, the identity-of-parties requirement was also not met because the Trustee litigated against a separate party.
In Brizinova I, Estella Brizinova and Edward Soshkin (together, the “Debtors”), who were husband and wife, jointly filed a chapter 7 case, and the Trustee was immediately appointed on the petition date. Ms. Brizinova held 100% of the stock of ENSI Consulting, Inc. (“ENSI”), an online auto supply parts company that employed both Ms. Brizinova and Mr. Soshkin, with Mr. Soshkin serving as ENSI’s bookkeeper. The Debtors’ schedules listed a value in the amount of zero dollars for Ms. Brizinova’s shares in ENSI. The Trustee asserted that the Debtors continued to operate ENSI to generate post-petition sale proceeds after filing their chapter 7 case (the “Sale Proceeds”), and that the Sale Proceeds were property of the Debtors’ estate. The Debtors refused to turn over the Sale Proceeds to the Trustee.
In response, the Trustee filed a complaint against the Debtors to recover the Sale Proceeds and seeking damages for conversion and violation of the automatic stay arising from the transfer of the Sale Proceeds. The Debtors filed a motion to dismiss the Trustee’s complaint arguing, inter alia, that the Sale Proceeds were not property of the Debtors’ estate because ENSI was not operating when the bankruptcy petition was filed and that the allegations were too speculative and, therefore, the element of each claim was not adequately pleaded.
The court sustained the Trustee’s turnover and automatic stay violation claims, but denied in part the Trustee’s conversion claim because the complaint did not identify specifically the property that was allegedly converted.5 The court granted the Trustee leave to replead the denied conversion claim.
Rather than repleading the denied conversion claim, the Trustee commenced another adversary proceeding alleging substantially similar claims to the Sale Proceeds as in Brizinova I against Zlata Soshkin, the daughter-in-law of the Debtors. Ms. Soshkin moved to dismiss the Trustee’s complaint but argued an additional defense that was not included in the Debtors’ motion to dismiss in Brizinova I — that the Sale Proceeds were property of ENSI and were not the property of the Debtors’ estate. In response, the Trustee argued that the law of the case doctrine required the court to reach the same conclusions as those ruled in Brizinova I and find that the Trustee adequately pleaded that the Sale Proceeds were property of the Debtors’ estate.
When considering the law of the case doctrine, Judge Stong found that “[t]wo considerations stand out as fundamental: whether there is identity of parties between the prior and subsequent matters; and whether the prior decision is a final one.”6 Here, the identity of parties was not met because the parties in Brizinova I were the Trustee and the Debtors, but the parties in Soshkin were the Trustee and Ms. Soshkin. Since Ms. Soshkin was not party to the prior proceeding, applying the law of the case doctrine would have deprived Ms. Soshkin the opportunity to be heard, which is a fundamental right of due process. Judge Stong noted that this right was an opportunity for Ms. Soshkin and not her counsel, who also represented the Debtors in Brizinova I. Moreover, Judge Stong found that there was no final judgment in Brizinova I because the decision denying the motion to dismiss allowed the case to continue and did not end the case.
After refusing to apply the law of the case doctrine, Judge Stong held that the Trustee did not adequately plead that the Sale Proceeds were property of the Debtors’ estate.7 The complaint only alleged that the Sale Proceeds collected from the sale of auto parts belonging to ENSI were property of the Debtors’ estate, but ENSI was not a Debtor. Therefore, Soshkin’s motion to dismiss was granted with leave to replead.
In Brizinova II, the Debtors used the same argument made in Soshkin — that the Sale Proceeds were property of ENSI and not the Debtors’ estate — in a second attempt to dismiss the Trustee’s adversary proceeding against the Debtors by filing a motion for summary judgment. The Trustee opposed this motion because the court previously held in Brizinova Ithat the Trustee adequately alleged that the Sale Proceeds were property of the Debtors’ estate and, therefore, the law of the case doctrine required the court to reach the same conclusion for the motion for summary judgment.
Judge Stong, applying a substantially similar analysis as she did in Soshkin, held that the law of the case doctrine did not apply and that the Trustee did not adequately plead that the Sale Proceeds were property of the Debtors’ estate.8 Although, unlike Soshkin, the requirement for the same identity of parties was met, Judge Stong declined to apply the law of the case doctrine because there was no final order in Brizinova I. The court’s denial of the motion to dismiss in Brizinova I was not a final order because it allowed the parties to engage in further dispositive motion practice and allowed the case to continue to trial.9 Judge Stong noted that the finality requirement also cannot be satisfied by a refusal to grant summary judgment.
Although Soshkin and Brizinova II did not involve situations where the law of the case doctrine was applicable, they do provide some guidance for when it may apply in a bankruptcy case. Clearly, the parties to the old and new litigation must be the same. The question of whether the first order was a final judgment may be trickier. Presumably, an order granting a motion to dismiss or granting summary judgment in an adversary proceeding would satisfy the final judgment requirement because that order would end the litigation. Similarly, a judgment in favor of a plaintiff in an adversary proceeding presumably would also satisfy the final judgment requirement. Whether orders granting or denying motions in the main bankruptcy case are final judgments may be harder to determine. As Judge Stong noted, however, the requirement of a final judgment in the law of the case doctrine is similar to the same requirement for the related rule of res judicata. Accordingly, case law considering the application of res judicata in bankruptcy cases should provide an additional source of guidance. Regardless, as demonstrated by the decisions in the Brizinovacase, parties should not assume that the law of the case doctrine will apply and should ensure that they also fully argue the underlying merits in the matter at hand.
Footnotes:
DOCTRINE OF COLLATERAL ESTOPPEL, CLAIM PRECLUSION & RES JUDICATA
In re Duran, Adv. Case No. 4:17-ap-00523-BMW (2/22/19 – AZ Bankruptcy Court). Doctrine of Collateral Estoppel “The preclusive effect of a judgment is defined by claim preclusion and issue preclusion, which are collectively referred to as ‘res judicata.’” Taylor v. Sturgell, 553 U.S. 880, 892, 128 S. Ct. 2161, 2171, 171 L. Ed. 155 (2008). “These terms have replaced a more confusing lexicon. Claim preclusion describes the rules formerly known as ‘merger’ and ‘bar,’ while issue preclusion encompasses the doctrines once known as ‘collateral estoppel’ and ‘direct estoppel.’” Id. 553 U.S. at 892 n.5, 128 S. Ct. 2161 n.5.
Generally speaking, “[t]he doctrine of issue preclusion forecloses relitigation of those
issues of fact or law that were actually litigated and necessarily decided by a valid and final
judgment in a prior action between the parties” and applies to both findings of fact and
determinations of law. In re Duncan, 713 F.2d 538, 541 (9th Cir. 1983); In re Hagele, No. AP
14-02200, 2016 WL 3965899, at *4 (B.A.P. 9th Cir. July 18, 2016).
PERFECTION OF LIEN, OR FAILURE TO PERFECT
So, for example, if a title loan company (or any loan company) does not perfect the lien at all, then provided that no other lienholders have recorded anything with DMV, the lender can repossess if you don’t stay current. Perfection is about notice only. Lack of perfection does not make the lien invalid, but it does make it junior in priority to any other liens subsequently recorded.
This is true with any lien (not just DMV liens) but also liens for personal property recorded as UCCs, lender’s liens on real property that are not recorded with the recorder’s office, etc.)
If not, the bankruptcy code allows a trustee to avoid it at the trustee’s discretion. So, once the debtor files BK, timely perfection was necessary to preserve the lien and to prohibit a trustee from avoiding the lien.
If the trustee elects not to avoid the lien for any reason, then after BK, the lien still exists, and the lender is back to the status quo of enforcing its lien, even though it was not perfected. Lack of perfection risks the lien being avoided under the BK code.
In re Cortez, 191 B.R. 174 (1995) : an unavoided, non-perfected lien still is valid. “An unrecorded, thus unperfected, deed of trust is subject to avoidance by the bankruptcy trustee as a hypothetical lien creditor, pursuant to § 544. The appellee’s unperfected deed of trust was subject to avoidance during the debtors’ bankruptcy. However, because it was not avoided, it survived the bankruptcy, even though it was not perfected. In re Eakin, 153 B.R. 59, 60 (Bankr.D.Idaho 1993) (so long as the lien, although it could have been, was not avoided, a valid security interest passes through a bankruptcy filing unaffected). In the instant case, while the appellee was listed as an unsecured creditor and the debt was discharged, the appellee was actually a secured creditor under California law by virtue of the deed of trust lien which had not been avoided in bankruptcy. Its lien survived the bankruptcy; thus, the bankruptcy court did not err by denying the debtors’ motion to reopen the case to avoid the lien.”
See also: North Canyon Ranch Owners Association v. Allen No. 1 CA-CV 17-0227 (2018 Ariz. App. Case – unpublished) that confirms this rule of law and cites Cortez (although this case dealt with an HOA which does not have to be recorded).
Please Note:
The information contained in this web site, article or link may be outdated, incorrect or not applicable; it is your obligation to confirm the accuracy.
It is very important that you obtain legal advice from an experienced bankruptcy attorney regarding your particular situation. Consultation before you take action will certainly cost you less than it will cost to fix your unintentional errors.
The information in this web site is not intended to constitute legal advice or to create an attorney-client relationship.
In many cases, filing for bankruptcy is your best financial option. However, that doesn’t mean your head, heart and wallet are in sync. Bankruptcy can be difficult to accept emotionally. When you’re facing bankruptcy, it is normal to be overwhelmed by feelings of loss and frustration. There are a few steps you can take to help relieve the emotional stress that accompanies your financial situation.
It can be very difficult not to focus on the negative aspects of declaring bankruptcy. You may be losing a business you’ve put an enormous amount of time and money into building or a home you’ve raised your family in. At the very least, you are admitting that, whether it was your fault or not, you ended up under water. The best way to tear your mind away from these negative feelings is to stay focused. Make a detailed calendar that includes the steps you need to take toward having your debts discharged, and focus on the process.
The process of filing for bankruptcy is complex and often frustrating. However, take some solace in knowing the Automatic Stay granted by filing for bankruptcy protection will get the harassing debt collectors off your back. Know that when your filing process is complete, you will have a clean slate and be back on the road to good financial health.
The most important thing you can do to avoid an unnecessarily painful emotional experience with bankruptcy is to surround yourself with people who want to help. This means being open with family members, and accepting their support.
In addition, choosing an experienced bankruptcy lawyer who has been through this before with other families can really be helpful legally and emotionally. No matter how you feel about bankruptcy, your attorney has seen the benefits of getting through the process. It’s good to have a knowledgeable advisor on your team.
Please Note:
The information contained in this web site, article or link may be outdated, incorrect or not applicable; it is your obligation to confirm the accuracy.
It is very important that you obtain legal advice from an experienced bankruptcy attorney regarding your particular situation. Consultation before you take action will certainly cost you less than it will cost to fix your unintentional errors.
The information in this web site is not intended to constitute legal advice or to create an attorney-client relationship.
Here is a great blog from Matt Berkus, another bankruptcy attorney, in response to the statement we all heard “I have a simple bankruptcy”.
Invariably, two-thirds of prospects will preface a consultation with “I have a simple bankruptcy.” The transparent motive behind the comment is the belief that a simple bankruptcy case should be inexpensive. Let’s state two facts. First, 99.5% of prospective clients are not bankruptcy attorneys and have never filed bankruptcy; so they have no clue what goes into a bankruptcy and the time it takes. Second, simple bankruptcies are actually rare. Simple bankruptcies are the exception, not the rule.
A bankruptcy’s cost is based on the anticipated time to be spent on the case. As bankruptcy attorneys we understand that we are working with people in financial distress. So, our margins are razor thin and subject to fierce competition. Anything, at all, that adds time to a case, even if it is 12 minutes, increases the cost of a case. Let’s put the issue to rest. Here is what a simple bankruptcy looks like. If you have anything more than what is stated here, you don’t have a simple bankruptcy.
A simple bankruptcy has no more than one source of income. If a husband and wife file a joint bankruptcy, and both work; you don’t have a simple bankruptcy. If you receive social security, and your spouse works, you don’t have a simple case. For every source of income, we need six months of payment documentation that must be reviewed, input and analyzed. In short, the more sources of income, the more time your case takes.
If you are anything other than an employee, unemployed, or retiree whose only income is social security, you don’t have a simple case. The self-employed, business owner, or independent contractors never have a simple bankruptcy case.
To have a simple bankruptcy, all debts must appear on your credit report. There are two reasons why. (a) A credit report gives us an independent source for identifying your creditors. (b) Most bankruptcy preparation software will allows us to direct import the creditors from your credit report. Common creditors that do not appear on a credit report are medical bills and pay day loans. Those debts require us to verify those debts and manually input them (e.g. spend more time).
In a simple bankruptcy, the debtor cannot have special debts. Special debts include back income tax, child support, spousal support, any sort of business related debt, restitution, etc.
Owning real estate compounds the time we spend on the case. It is an additional asset, your home is important to you, and there is usually a mortgage associated with it. So, we must do the due diligence to make sure the home is not at risk, and add that information to the petition.
This factor takes a bit to explain. Exemptions are the laws that allow you to keep your stuff notwithstanding the fact you are filing bankruptcy. Rest assured, in most chapter 7 bankruptcies, the person loses nothing or very little. In real terms, having only non-exempt assets means that you have the typical assets we would expect for a middle class family in debt. These assets are furniture, clothing, television, computer, car, and a 401(k) or IRA.
If you own anything, even something minor, that is non-exempt (e.g. tax refund, a 3rd car or a business), you don’t have a simple bankruptcy case. First, we have to take the extra time to explain the consequences and options for dealing with non-exempt assets. Second, if you have non-exempt assets, your chapter 7 bankruptcy will become an asset chapter 7 case. That means we will be doing significantly more work after the bankruptcy is filed to deal with the trustee, keep you informed, and instruct you on what to do. For Colorado, the big category of non-exempt assets are tax refunds and firearms.
If you are unmarried, you only have one vehicle. If you are married, you have no more than 2 vehicles. If you have car loans, you are current on payments and the equity in the vehicles is break-even. If none of the above is true, you don’t have a simple bankruptcy case.
Even a simple bankruptcy (chapter 7 bankruptcy) takes about 15-20 man-hours. That time estimate assumes the client does what they are supposed to do. Here’s the thing, a typical bankruptcy attorney charges $250.00 per hour. That would mean that a simple chapter 7 bankruptcy, charged by the hour, would cost $3,750.00 to $5,000.00. However, most markets cannot support that fee. So, bankruptcy attorneys charge significantly less than their counterparts in almost any other area of law. When you see advertised bankruptcy fees of $699.00, take it with a grain of salt. Understand you will probably end up paying more (because of “add ons”) and an attorney is “barely” involved in your case.
A simple bankruptcy involves only one source income, debts that appear only on a credit report, no one has real estate, assets are all exempt, and only 1 car per debtor. In addition, the debtor cannot have done anything in the run-up to bankruptcy to create issues. I think you can see, that a simple bankruptcy is actually rare.
