Can the Court Avoid a Judgment Lien under 522(f) When the Debtor Owns no Real Property?

I have seen this issue come up on numerous listserves.  Judge Mund explains why the answer is no.

In re Kenney,  1:10-bk-11635-GM (Bkrtcy, C. D. Cal. Nov, 2018)

Issue:   Is a 522(f) appropriate to avoid a prepetition judgment lien when the debtor owned no real property on the petition date?

Holding:   No.  There is no lien to avoid.

Judge Mund

The debtors filed chapter 7 and got their discharge in 2010.  At the time a creditor had a judgment against them and had recorded an abstract of judgment.  They had no real property at the time.  In 2018, they are trying to buy a house.  They reopened their case and filed a Motion to Avoid Judgment Lien under 522(f).

Judge Mund denied the motion on the basis that there is/was no lien to avoid.

Because there is no valid lien to be avoided, Debtor is not entitled to the protections of 522(f).  The Court recognizes that Debtor is trying to ensure that no encumbrance results from a pre-petition recorded abstract of judgment; such a result would have the absurd consequence of creating an unenforceable lien on property acquired post-petition, but only in the specific counties which the creditor recorded the abstract of judgment.

Bankruptcy Litigation Clinic – Woodland Hills

 Announcement

A bankruptcy litigation clinic will be held at the San Fernando Valley division on Friday, December 14, 2018 and on Friday, January 11, 2019.  The two hour programs will begin at 10:00 a.m.

Designed for people who have already filed a bankruptcy petition to address the following issues:

  • After filing for bankruptcy, have you been served with a lawsuit?
  • Are you trying to collect, but the debtor filed bankruptcy?
  • Were you served with a Motion, such as Relief From Stay?
  • Are your creditors ignoring your discharge?
  • Do you have overwhelming medical debt?
Reservations are not required, however, the program may be limited to the first 6-8 people attending.
Sponsored by:
Neighborhood Legal Services of Los Angeles County and the University of West Los Angeles – School of Law, 9201 Oakdale Avenue, Chatsworth, CA 91311

Suing Debtor for Specific Performance – Discharge Violation? Maybe not…

A discharge under 727 discharges a debtor from all prepetition debts (liability on a claim) and any liability on a claim (right to payment).   But what if the debtor is sued for something other than a “right to payment”.   Is that a discharge violation?  Hmmm….let’s take a look at an example.

Read more…

Subtle Difference Between “Deemed Exempt” versus “Claimed Exempt” — Just Because Schedule C Lists the $100 in Bank Account Does Not Mean Debtor Can Immediately Use It

I tried to make the title as concise as possible — Ockham’s Razor failed.

Client comes to see you and they have $5,000 in their checking account.  You list it on Schedule B then exempt it on Schedule C and file the case.  The 341(a) is in 30 days.  Client goes to the bank the next day and withdraws all of the funds to pay rent and spend it on gambling.  You don’t think it is a problem because the funds have been fully exempt.

But is it?

In Section 70a of the former Bankruptcy Act, there was an automatic exclusion of exempt property such that by simply listing the asset on Schedule C — then that asset was automatically and immediately exempt.  That is not how it works under the current Code — it is not automatic.  I was reading the Mwangi case from the Ninth Circuit that clarifies a subtle distinction between an asset that has been “claimed exempt” versus one that is actually “deemed exempt.“   In the hypo above, it is a “no harm, no foul” situation but it’s still worth thinking about.

Read more…

Receivership and Bankruptcy

Imagine this, prepetition, Debtor owns and operates 50-unit Apartment upon which Wells Fargo holds a note and deed of trust.  Debtor defaults on the note and WF commences foreclosure.  The state court appoints you Receiver to take possession of and operate the Apartments.  The Apartment is mismanaged and you begin improving the Apartments and collect $100,000 in new rent and the bank, WF, gives you additional funds also in your capacity as Receiver.   As you are running the Apartments and holding onto a substantial amount of funds — debtor files Chapter 11 bankruptcy and orders you, as the Receiver, to turnover the funds to him since it is property of the estate now.

Will the court grant Debtor’s Motion for Turnover such that the funds you hold as Receiver have to be turned over to the scumbag Debtor who will likely dissipate the funds?  

Read more…

Annual Holiday Party Hosted by the Los Angeles Bankruptcy Forum — December 3, 2018

Annual Holiday Party Hosted by the Los Angeles Bankruptcy Forum — December 3, 2018 6:00 to 9:00 p.m. – Angel City Brewery | 216 Alameda Street, Los Angeles, CA 90012

Cost: Members of Sponsoring Group: $100 (cdcbaa!) | Non-Members: $135 | Government Employees/Students: $45 | At door: Add’l $10

Register here. 

Don’t miss LABF’s holiday party at the Angel City Brewery in the Los Angeles Arts District. Support a worthy cause and join us for outstanding craft beers and food trucks for a great evening with colleagues and bankruptcy judges.  A portion of the net proceeds generated by the Holiday Party will be used to support the “Self-Help Desks” which are operating at the various divisions of the Bankruptcy Court. The Co-Sponsors are proud to support the very valuable and important contributions the Self-Help Desks make to the operation of our Bankruptcy Court.

The following organizations are proud to
co-sponsor this year’s Holiday Party:
Los Angeles Bankruptcy Forum
Beverly Hills Bar Association – Bankruptcy Section
Central District Consumer Bankruptcy Attorney Association
Financial Lawyers Conference
International Women’s Insolvency & Restructuring Confederation
Turnaround Management Association SoCal

Flyer attached. 

Does Filing BK Severe Joint Tenancy to Tenancy in Common?

I enjoyed how this judge put it — The concept that the filing of a petition for relief severs a joint tenancy is evidently from the fantasy world of make believe or born as a result of wishful thinking. It is just not true. The debtor does not transfer his title to 541 property of the estate but holds his title subject to the exercise by the trustee of [the trustee's] rights to sell, use or lease such property by appropriation under the “avoidance” or “strong arm” sections as typified by Sections 542, 543, 544, 545, 546 and 547 of the 1978 Act, as amended. . . . The trustee has no title to property of the estate until he elects to take affirmative action and proceedings are had or orders made. See Whittington v. Gilbralter Sav. & Loan Assoc. (In re Spain), 55 B.R. 849, 854 (Bankr. N.D. Ala. 1985).

As for this Circuit, I’ve found cases that appear to same the same and the opposite.

San Fernando Valley Bar Association Bankruptcy Section Meeting, Friday, November 9, 2018 at lunch

Email from Steve Fox

Dear All:

It is really nice when I can announce a program that will appeal to wide variety of bankruptcy attorneys.  This is one of those programs.  Jeff Hagen will be leading a discussion about several Ninth Circuit, Ninth Circuit BAP and Central District cases which address consumer debtor cases.  One opinion by the 9th Circuit, the Goudelock case, runs 100% counter to the position I advocated in a CDCBAA article some 10 years ago.  In another case, the Ninth Circuit considered whether the IRS could shield itself from liability from an alleged 362 violation.  The outcome may surprise you.  Jeff’s cases examine issues of importance to both creditors and debtors.

Judge Kaufman has picked a number of litigation cases for our consideration.  She will lead that discussion.  One case, Lamar, is problematic for all of us attorneys.  The judge will also lead a discussion about the Taggert case which, depending on one’s perspective as a creditor or as a debtor, has either evened the playing field or is a ruling rife with injustice.

Finally Andy Goodman also has some fun cases.  In one case, the secured creditor purchased unsecured claims to block plan confirmation in a chapter 11 case.  Can that creditor do this?  Come and find out.  In another case, the chairman had a salary of just under $800,000 annually.  He filed a claim for about $250,000 for unpaid monies during the case.  The optics look bad.  The result for the chairman?  Come and find out.

So the program is good.  Not only that, the materials are relatively hefty.  Here are the particulars: Read more…

Bankruptcy Filings for September, 2018

Bankruptcy filings were down again a little in September.

2018 2017 2016 2015 2014
Jan 2,741 2,839 2,872 3,364 4,704
Feb 2,708 2,795 3,299 3,829 4,574
March 3,363 3,782 3,923 4,496 5,430
April 3,277 3,209 3,584 4,486 5,364
May 3,226 3,384 3,484 3,971 5,500
June 2,981 3,252 3,545 3,966 4,386
July 3,057 2,953 3,239 3,731 4,701
Aug 3,337 3,387 3,543 3,544 4,540
Sept 2,772 3,071 3,168 3,493 4,317
Oct 3,170 3,235 3,751 4,554
Nov 3,004 3,025 3,531 3,642
Dec 2,416 2,902 2,718 3,733
Total 27,462 37,262 39,819 44,880 55,445

New Median Income Amounts Effective After November 1, 2018

Census Bureau Median Family Income By Family Size

(Cases Filed On or After November 1, 2018) Read more…