Los Angeles Bankruptcy Forum Annual Night with the Judges June 6, 2016

The LABF is pleased to host its Annual Night with the Judges
on Monday, June 6, 2016, at The L.A. Hotel Downtown.
Come meet and greet a number of bankruptcy judges from the Central District of California who, following dinner, will each discuss a recent case with special meaning either to the judge or to our practice.  Our distinguished panel will again be moderated by the Hon. Sheri Bluebond, Chief Bankruptcy Judge of the U.S. Bankruptcy Court for the Central District of California.
During the program, we will also pay tribute to the Honorable Richard M. Neiter, United States Bankruptcy Judge.  Judge Neiter will be retiring later this year, after over 10 years on the bench.  Please join us for this special occasion. Read more…

Individual Chapter 11 Plans – So I Learned a Few Things at NACBA

I had a good time at the annual NACBA meeting last weekend in San Fran.  I did a program on individual chapter 11 cases with Judge Laurel Davis from Las Vegas and bankruptcy pundit Wayne Silver from San Jose.    We decided to let the audience, which was quite substantial, ask questions and I definitely learned a few things.

One big lesson was about whether plans must be five years, in other words, whether the individual must pay his net disposable income into the plan for five years.  It sure seems to say that in Section 1129(a)(15).  I know that it is required only “when a creditor objects,” but I sort of assumed that less that five years would bring an objection so it should be presumed to be five years.  There was a question about whether a “no” vote on the plan by an unsecured creditor is an “objection” but we obviously did not resolve that.   Read more…

Judge Scott Clarkson Appointed Mediator by Delaware Court

Congratulations to Judge Scott Clarkson who has been appointed mediator by the Bankruptcy Court in Delaware.  I’m told it’s a $100 million dollar issue in the Exide Technologies case.

“Consumer” Bankruptcy Attorney? Or “Business” Bankruptcy Attorney? Maybe a Little Clarification.

I completed the Judicial Performance Survey for two of the judges I have appeared before.  One of the questions gripes me because it shows the bias of the system.  The question is whether you are a consumer attorney or a business attorney or both.  But then it asks this question:

During the past three years, has your consumer bankruptcy work been concentrated in chapter 7 or in chapter 13? (Please select one.)

It assumes that consumer bankruptcy attorneys do only chapter 7s or 13s.  That is largely true but still much too restrictive in my opinion.  I would like to note that in 2015, there were 402 chapter 11 cases filed in the Central District of California.  (There were actually 426 but I am counting the multiple Freedom Communications cases as one rather than about 24.)  Of the 402 cases, 203 were individual chapter 11 cases, in other words, an individual trying to save his home or rental property (usually).  That is 50% of all chapter 11s!  Those are almost entirely consumer cases filed by consumer bankruptcy attorneys.

Of the 109 individual chapter 11 cases I have filed (or subbed into) since the beginning of 2012, only one case was filed by a person for the primary purpose of saving a business.   For whatever it’s worth, I have also filed 31 “corporate cases” since 2012.  In 16 of those cases, the entity owned an operating business it was trying to save.  (Of those 16, 6 cases were filed because of the debtor’s problems with its landlord, good luck with those eh?)  The remainder of the corporate cases dealt with real property issues.

So where does all this leave us?  I think its fair to say that most “consumer” attorneys do not do chapter 11s at all or very, very rarely.  But I consider myself a consumer attorney when I file chapter 11s for individuals trying to save their homes or rental properties, or sometimes because of tax problems or business problems.    I personally do very few chapter 7s and almost no chapter 13s.  Those are handled by a different department at the firm.  I still consider myself largely a consumer bankruptcy attorney.

Judicial Evaluations

Now is the time folks.   This is an email from the Federal Judicial Center.  As far as I know, the judges that are being reviewed have volunteered for the review.  That includes Judge Scott Clarkson, Judge Ernest Robles, Judge Mark Wallace.

Dear Attorney,

Judge Scott C. Clarkson of the United States Bankruptcy Court for the Central District of California asked the Federal Judicial Center (FJC) to survey members of the Bar to assess his performance.  The judge’s decision to ask the FJC to conduct this survey is entirely voluntary and is part of his ongoing commitment to provide the highest level of public service possible. The FJC, which is the research and education organization for the federal courts, is located in Washington, D.C. The FJC has been conducting similar surveys for judges for several years. An announcement of this survey is on the Court’s website.

Judge Clarkson would appreciate your taking a few minutes by Friday,May 20 to complete an online questionnaire, available at:

https://fjc.co1.qualtrics.com/SE/?SID=SV_8HqQCxkScu9z1vD Read more…

Down with “Bankruptcy Remote Vehicles”

I was bitten by this concept once.  At the time I was stunned to learn that the courts seem to say that bankruptcy remote vehicles were appropriate and enforceable.  Finally Bankruptcy Judge Timothy Barnes, Northern District of Illinois, has ruled that public policy overrides the veto given to the lender that was appointed in a workout to be a “special member” of the debtor, a Michigan LLC.  The article can be accessed here.  The case is In re Lake Michigan Beach Pottawattamie Resort LLC, 2016 WL 1359697 (Bankr. N.D.Ill. April 5, 2016).  The court also denied the lender’s motion to dismiss the bankruptcy as a bad faith filing under section 1112 (b) of the Bankruptcy Code because the lender failed to meet its burden of showing bad faith.

So what’s this all about?  The lender agrees to lend to an LLC but only if the Operating Agreement provides that the lender or some third party be entitled to vote on whether the LLC may file a bankruptcy case.  In fact, the lender or the third party is given a complete veto on the issue.  This means that the members that owe fiduciary duties to the entity are prevented from voting for bankruptcy protection by a person whose sole interest is the lender.  Assuming the lender’s appointee has fiduciary duty of care to the LLC, Delaware law permits “exculpation from all fiduciary duties except the duty of loyalty.”

So the foreclosure sale of the LLC’s sole asset is next week.  The managing members are trying to figure out the best course for the LLC.  The third person is not involved in this.  It is only when the members decide to vote on a bankruptcy filing that they must give notice to the new person, appointed by the bank, who then gives a thumbs up or thumbs down.  This is simply a waiver in advance of the right to file bankruptcy!  That violates public policy but is largely, hopefully until now at least, permitted by the courts.

Sheryl Sandberg at the University of California at Berkeley 2016 Commencement

Such a moving Commencement Address.  Click here.  I didn’t know this lady until I read about her husband suddenly dying about a year ago.  Her remarks start at 1.24 of the tape.

I’m going to try this tonight.

Finding gratitude and appreciation is key to resilience.  People who take the time to list things they are grateful for are happier and healthier.  It turns out that counting your blessings can actually increase your blessings.  My New Year’s resolution this year is to write down three moments of joy before I go to bed each night.  This simple practice has changed my life.  Because no matter what happens each day, I go to sleep thinking of something cheerful.  Try it. Start tonight when you have so many fun moments to list— although maybe do it before you hit Kip’s and can still remember what they are.

San Fernando Valley Bar Assn Program on Chapter 13 Plans, May 20, 2016

Dear All:

The next Bankruptcy Section program on May 20th at lunch is a rare combination of fun and learning. We did this program last year. People learned a lot and people laughed a lot as well.

This program is the flawed chapter 13 plan. Teams of attorneys have been working for months on putting together a new plan which has subtle flaws and obvious flaws…. a lot of flaws. We break the attending attorneys up into small groups and each group works as a team to find and to list as many mistakes as possible. After perhaps 20 to 30 minutes of group work, we reconvene as a whole and see how many flaws the different groups have found.

Sometimes groups find new undiscovered flaws. It is in fun. It is educational. You get MCLE for this! Read more…

David Gould’s Rules – From the Grand Old Man of Bankruptcy


(which are the result of 50 years of making mistakes  and learning from them)

1.         Remember, if you wish the court to do something for you/your client, give the court the admissible evidence and the law to support the request.  Speaking at the podium is not evidence!

2.         The more notice you give as far as time and the number of parties who receive the notice the more likely it will be that you will get what you request.  If all creditors received notice and had a month to think about it and no one objects, it is likely that the court will be willing to give you what you ask. If what you were seeking were not proper someone would likely file a pleading saying just that.

3.         The party having the burden takes the side closest to witness box or jury box.

4.         Assume that the microphones in the courtroom are on at all times and sometimes the judges while in chambers may hear what you say.  Don’t say anything that you would not be willing to say on the record at the podium.  Read more…

MCLE for Bankruptcy Specialists

At the last state bar specialist commission meeting I inquired about the MCLE requirements for BK Specialists.  The hours of bankruptcy needed must be bankruptcy oriented but that doesn’t mean specifically designated as specialist approved.  The program must be bankruptcy specifically and not something that is general law that helps bankruptcy lawyers but only in general.  For example, a program on how to do depositions helps bk lawyers but would not count as bk specialist hours.