Chapter 11 filings in the Central District of California – October 2020

There were 17 chapter 11s filed in the cacb in October 2020.  Of those, 9 of them elected to be treated as a Sub V small business case.  By division, SFV 4; LA 6; Riverside 4; Santa Ana 3, SB 0.

My old blog: BankruptcyProf

I discovered that the Library of Congress has archived my old blog BankruptcyProf.  It’s kind of fun looking at these posts again.  And motivates me to pay more attention here.  You can access the old blogs here. 

9th Circuit Annual Report

These are pretty fun to browse through.  The 2019 9th Circuit Annual Report is here.  Just came out.  Lots of facts, statistics and pictures.

ILC Webinar Program on the discharge injunction, Tuesday afternoon, 11/17/2020

Discharge Injunction Violations: In re Marino Says Fine Print Doesn’t Save the Creditor

November 17, 2020, 12 noon – 1 p.m.

Special low price- $15! 1 Hour MCLE; 1 Legal Specialization in Bankruptcy Law

Speakers: Christopher Burke, Leonard Gumport, M. Jonathan Hayes.

Marino deals with letters from creditors to a debtor that said, in the fine print, that the debtor should ignore the letter if the debtor had received a discharge. The bankruptcy court awarded $119,000 in damages to the debtor but ruled that it had no power to award punitive damages. The BAP affirmed but sent it back to the bankruptcy court saying that it could award punitive damages for violation of the discharge injunction.

Register Here

October 2020 filings flat again

We had 41 more petitions filed in October than in September and more than 1,100 or  34% fewer than October a year ago.  If we figure 2,500 filings each in November and December, we are looking at a total of 28,500 for 2020 or 22% fewer than last year.

2020 2019 2018 2017 2016 2015 2014
Jan 2,828 2,745 2,741 2,839 2,872 3,364 4,704
Feb 2,781 2,754 2,708 2,795 3,299 3,829 4,574
March 2,736 3,481 3,363 3,782 3,923 4,496 5,430
April 1,669 3,631 3,277 3,209 3,584 4,486 5,364
May 2,080 3,347 3,226 3,384 3,484 3,971 5,500
June 2,257 2,967 2,981 3,252 3,545 3,966 4,386
July 2,415 3,270 3,057 2,953 3,239 3,731 4,701
Aug 2,355 3,274 3,337 3,387 3,543 3,544 4,540
Sept 2,169 2,934 2,772 3,071 3,168 3,493 4,317
Oct 2,210 3,355 3,259 3,170 3,235 3,751 4,554
Nov 2,636 2,821 3,004 3,025 3,531 3,642
Dec 2,723 2,419 2,416 2,902 2,718 3,733
Total 23,500 37,117 35,961 37,262 39,819 44,880 55,445

Filings by chapter year to date:

Non-Comm’l Commercial Chapter 7 Chapter 13 Chapter 11
21,390 2,114 20,012 3,225 263
91% 9% 85% 14% 1%

 

Federal Bar Assn 17th Annual Bankruptcy Ethics Symposium November 20, 2020

Email from Joe Boufadel:

All,

The Federal Bar Association is hosting (online only) its 17th Annual Bankruptcy Ethics Symposium on Friday, November 20, 2020, beginning at 9:00 a.m. (3 hours of legal ethics).  I hope and encourage you all to attend again this year (and registration takes less than a minute to complete online). Please note there is a discounted rate for all FBA, CDCBAA and LABF members, and it’s inexpensive for non-members as well. Please feel free to contact me if you have any questions.

Click here to register online for the symposium on November 20, 2020      Click here to download the PDF event flyer.

Federal Bar Association-Los Angeles Chapter’s 17th Annual Bankruptcy Ethics Symposium

Friday, November 20, 2020
Time: 9:00 a.m. to 12:15 p.m.   Online Only (GoToMeeting)

Read more…

My latest Daily Journal article on Small Business Chapter 11s

My Daily Journal Article Small Business Chapter 11 update: Where are we eight months in? was published on October 26, 2020.  You can access it here.  DJ 10-26-20 SBRA 8 months in  Let me know what you think.

Judge Zurzolo instructions for his November 16, 2020 chapter 13 hearings

Email from Keith Higgenbotham:

Dear Colleagues!

Judge Zurzolo has asked that attorneys appearing on his upcoming Ch13 Cf hearings for MONDAY, November 16th register their appearances with his chambers AS SOON AS POSSIBLE (now!) due to the number of matters on that calendar. Instructions for registration can be found below — including allowing you to register for more than 1 hearing in one email for ALL appearances for that day for that attorney.

As you may be aware, Judge Zurzolo was the first Judge to create a toll free appearance line so that we do not need to use CourtCall.  As a trade-off, we are REQUIRED to register your appearance(s) with his chambers beforehand using a new specific email address.

Since the Ch13 calendar has many matters on it, the Court is requiring all attorneys appearing on that calendar to begin registering NOW with Judge Zurzolo’s chambers, as is required.  Also, the Court is requiring ALL to register by NO LATER THAN 5:00 p.m. on Wednesday 11-11 — instead of the usual noon on the day prior to the hearing.

The Court has assisted us in posting the 11/16 calendar early and has been posted it on the Tentative Rulings page of the Court’s website with the following instructions (see below) on registering for appearances.

The Court is prepared to accept registrations beginning TODAY and strongly encourages it.  The Court asks that attorneys begin registering now and definitely no later than Wed 11/11. This will greatly assist Chambers in being prepared for the 11/16 calendar and NOT be deluged at the last minute.

NOVEMBER 16, 2020 CHAPTER 13 HEARINGS:

PLAN CONFIRMATION AND MISCELLANEOUS HEARINGS

Judge Zurzolo’s courtroom is CLOSED to the public until further notice.

Please refer to the home page of the court’s website for information on public access to the Roybal Building, including General Order 20-06 and Public Notice 20-009. All phone appearances are made on Judge Zurzolo’s toll-free line.

Keith Higginbotham Read more…

Failure to notify the FTB that the IRS “adjusted” your taxes, makes the tax debt non-dischargeable

Berkovich v. State of California Franchise Tax Board (In re Berkovich), — B.R. —, 2020 WL 5910033 (9th Cir. BAP  Oct, 2020)

Issue:   Is the required “report” which must be filed with the FTB after the IRS adjusts a taxpayer’s return a “return” such that failing to file it renders the tax debt non-dischargeable?

Holding:   Yes.

Judge Maureen Tighe, Central District of California

Standard of review.  “We review de novo the bankruptcy court’s decision to grant or deny summary judgment.”

Faris, Lafferty, Spraker

Opinion by Robert Faris

The debtor here filed his personal tax returns with the FTB but failed to notify the FTB of adjustments made by the IRS.  The debtor argued “that the reports required under RTC section 18622(a) are not ‘returns,’ so his failure to file them did not render his tax debts nondischargeable.  He is wrong.”  The bankruptcy court ruled that the taxes for those years were not discharged.

The BAP affirmed.  “The only question on appeal is whether the report required by RTC section 18622(a) that Mr. Berkovich failed to file is a ‘a return, or equivalent report or notice’ within the meaning of § 523(a)(1)(B).”  The BAP said it was based on the language of the RTC code section.

Note:  This was a chapter 13.  The debt was treated in the plan as unsecured i.e., dischargeable.  The plan was confirmed, completed five years later and after that the FTB filed an adversary asking the court to rule that the tax was not discharged.

Payment of an antecedent debt cannot be a fraudulent transfer per Civil Code section 3432

Universal Home Improvement v. Robertson, 51 Cal. App. 5th 116 (July 2020)

Issue:   Can a transfer of property with actual intent to delay, hinder or defraud creditors be avoided when the transfer is in satisfaction of a bona fide debt?

Holding:   No, Civil Code section 3432 specifically permits a person to “pay one creditor in preference to another.”

In the middle of certain litigation, Robertson transferred her interests in certain property to her sister.  Plaintiff filed this complaint later seeking to avoid the transfer as a fraudulent transfer arguing that the transfer was with actual intent to delay, hinder or defraud creditors.  Robertson’s defense was that even if done with actual fraud, the transfer to her sister was in payment of a bona fide debt which is permitted under Civil Code section 3432, which provides as follows: “A debtor may pay one creditor in preference to another, or may give to one creditor security for the payment of his demand in preference to another.”  The court heard significant evidence and concluded that the debt was actually owed to the sister and that the value of the property transferred was less than the debt.  Plaintiff argued that the debt was barred by the statute of limitations.  The court ruled that the statute had not run because of previous transfers and that even if it did, the statute of limitations is a defense that can be waived.  Plaintiff also argued that it established 7 of the 12 “badges of fraud” in section 3439.04(b) and that should be given precedence over the argument that the transfer was in payment of an antecedent debt.  The court ruled that “[T]he existence of one or more badges of fraud is not a mathematical formula and does not compel a finding one way or another.”  “Put simply, this court believes and therefore finds that the transfer that is the subject of this litigation was a good faith satisfaction of a legitimate debt.”

The court of appeals affirmed.  Recognizing that such transfers should be given strict scrutiny, it said, “Judge Swope’s conclusions are spot on. And plaintiffs’ arguments to the contrary are easily rejected.”

The lower court also awarded costs to defendant based on the cost of proving up facts at trial that were denied in a previous Requests for Admissions.  The court of appeals reversed that noting that the requests were made “within 30 days of the filing of the complaint”  It stated:

Frankly, we are troubled that a defendant can at the very inception of litigation, at a time when, as best we can tell, no discovery had taken place, and certainly no deposition, serve RFAs essentially seeking responses admitting that plaintiff had no case, and then, if plaintiff ultimately proves unsuccessful, recover costs of proof attorney fees, as here. This, it could be said, is tantamount to a form of strict liability: make a claim; deny an early-served RFA that the claim has no merit; vigorously pursue the claim; lose the claim; and pay. That cannot be the law. And we will not affirm the award here, for several reasons.