Annual Review of Cases and New Development in Bankruptcy 2011


Ransom v. FIA Card Services

___ U.S. ___; 178 L.Ed.2d 603; 131 S.Ct. 716 (2011)

Chapter 13. A debtor who does not actually have car loan/lease payments may not use the “standard” car-ownership deduction in calculating disposable income under the means test.

Stern v. Marshall

___ U.S. ___; 131 L.Ed.2d 475; 131 S.Ct. 2594 (2011)

Bankruptcy judge has no constitutional authority to enter final judgment on a debtor’s counterclaim against a creditor who filed a proof of claim, notwithstanding the designation of such matters as core under 28 U.S.C. section 157(b)(2)(c). An Article III Judge must issue final rulings on any issue which, from its nature, is the subject of a suit at common law, in equity, or admiralty.



Barrientos v. Wells Fargo Bank

633 F.3d 1186 (9th Cir. 2011)

The proper remedy for a violation of a discharge injunction (11 USC section 524) is a motion in for contempt – – not an adversary proceeding. It seeks to enforce an existing injunction, not to issue a new one.

CA Franchise Tax Board v. Kendall (In re Jones)

657 F.3d 921 (9th Cir. 2011)

Chapter 13. Because plan confirmation revests property in the debtor (unless the plan provides otherwise), there is no stay in collecting taxes that come due after confirmation. Thus, for purposes of a subsequently filed Chapter 7 case (after the Chapter 13 had been dismissed), the three year period to except a tax obligation from discharge was not tolled under 507(a)(8) [unnumbered paragraph].

Father M v. Various Tort Claimants (In re Roman Catholic Archbishop of Portland in Oregon)

661 F3d 417 (9th Cir. 2011)

Bankruptcy Code section 107(b) supplants the common law approach (which balances the public’s right to know) with respect to the public access to documents within the three listed exception. As to exception for “scandalous or defamatory materials” exception, there is no requirement that scandalous matter be untrue or potentially untrue, or that it be irrelevant or filed for an improper purpose.

Grantham v. Cory (In re Flamingo 55,Inc.)

646 F.3d 1253 (9th Cir. 2003)

Partners or coventurers in a business venture with the debtor are not sureties, guarantors, or accommodation makers entitled to subrogation (11 USC section 509(a), but rather are joint borrower (section 509(b).

Ilko v. CA State Bd of Equalization (In re Ilko)

651 F.3d 1049 (9th Cir. 2011)

Affirming (and publishing) the BAP decision, which holds exempt from discharge as a tax an assessment as the responsible person for unpaid corporate sales taxes where the corporation ceased to do business and the assessment occurred after the debtor received a Chapter 7 discharge.

J.J. Re-Bar Corp v. USA (In re J.J. Re-Bar Corp, Inc.)

644 F.3d 852 (9th Cir. 2011)

Bankruptcy court properly refused under the Anti-Injunction Act to enjoin IRS from collection activities against corporate officers for penalty assessments for trust fund taxes because of confirmation of corporate plan that enjoined action against any party upon a claim to which the Debtor is the primary obligor).

Sherman v. SEC (In Re Sherman)

658 F.3d 1009 (9th Cir. 2011)

An attorneys obligation to disgorge funds received from a client who violated the securities laws is a nondischargeable debt under 523(a)((19) only if attorney is also guilty of the violation of the securities laws.

Palmdale Hills Property LLC v Lehman Comm. Paper, Inc. (In re Palmdale Hills Property)

654 F.3d 868 (9th Cir. 2011)

The automatic stay of a lender’s bankruptcy case prevents the equitable subordination of the lender’s secured claim in the borrower’s bankruptcy case.






In re Abdelgadir

455 B.R. 896 (9th Cir. BAP 2011)

The appropriate date for determining whether property is a debtor’s principal residence under Bankruptcy Code section 1123(b)(5) is the petition date.

In re Hokulani Square, Inc.

460 B.R. 763 (9th Cir. BAP 2011)

In determining Chapter 7 Trustee’s compensation under Bankruptcy Code section 326(a), a credit bid by a secured creditor in connection with the sale of property of the estate is excluded.

In re Placide

459 B.R. 64 (9th Cir. BAP 2011)

An attorney’s claim for pre-petition legal services provided to the debtor is subject to a reasonableness standard under Bankruptcy Code section 502(b)(4) regardless of the engagement letter agreement.

In re Wilshire Courtyard

459 B.R. 416 (9th Cir. BAP 2011)

The bankruptcy court does not have subject matter jurisdiction to interpret a confirmed and fully consummated plan of reorganization where the issues are relevant only to a dispute involving the tax effect of the plan on the debtor’s individual partners.

In re Veal

450 B.R. 897 (9th Cir. BAP 2011)

Stay relief sought by servicer and putative assignee of Illinois mortgage. The transfer documents did not include reference to a transfer of the note. The BAP reversed a grant of stay relief on the grounds that the creditor failed to establish standing. Court notes that states are split on what is necessary to establish right to enforce debt and “expresses no view” on the interaction between state law and standing.







Cruz v. Aurora Loan Services (In re Cruz)   (Judge Mann)

457 B.R. 806 (Bankr. S.D. Cal 2011)

A nonjudicial foreclosure sale is void where the beneficiary has failed to record the assignment of beneficial interest prior to the sale even under a MERS deed of trust. Note 1: Ruling reaffirms decision In re Salazar, 448 B.R. 814 (Bankr. S.D. Cal 2011), reference withdrawn by District Court on January 31, 2012 (finding issue a non-core decision in which the bankruptcy court may only make proposed findings. Note 2: The ruling is contrary to an unpublished California decision, Forbes v. Countrywide Home Loans, Inc. (2011) 2011 WL 4985965


South Bay Expressway v. County of San Diego (In re South Bay Expressway) (Judge Adler)

455 B.R. 732 (Bankr. S.D. Cal 2011)

California statute reclassifying privately owned toll road lease as public property exempt from property taxes was improper under the CA Constitution.

In re Victorio (Judge Taylor)

454 B.R. 759 (Bankr. S.D. Cal 2011)

Chapter 20 debtor could not strip off wholly undersecured junior mortgage lien. (Note: Judge Mann may disagree. In re Hill, 440 B.R. 176 ((Bankr.S.D.Cal 2010). ( 8th Cir. BAP disagrees. In Re Fisette, 455 B.R. 177 (8th Cir. BAP 2011.)


Pioneer Construction, Inc. v. Global Investment

202 Cal.App.4th 161 (2011)

Recording of mechanic’s lien during pending bankruptcy case did not violate the automatic stay, and the 90 day period to commence a suit for foreclose on the mechanic’s lien was tolled during the pendency of the stay in the bankruptcy case.

February 6, 2012  |  Categories: Business Insolvency & Creditors’ Rights
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