All posts in Courts

Self-Calendaring System for Judge Ahart Cases (U.S. Bankruptcy Court — Central District of California — San Fernando Valley Division)

By | December 5, 2014 | Judges Corner | No comments

Judge Ahart (U.S. Bankruptcy Court — Central District of California — San Fernando Valley Division) will retire in January of 2015 and Judges Tighe (“MT”) and Kaufman (“VK”) will divide up his cases by number, until the new judge takes the bench.

Please see attached instructions re self-calendaring pleadings for Judge Ahart cases. Beginning on January 1, 2015, NEW instructions for self-calendaring hearings are on page 5.

The Court has informed us that all Judge Ahart (“AA”) cases will remain “AA” in the case number: e.g., 14-bk-12345-AA. Hovever, MT or VK will hear all matters, all pleadings will be addressed to MT or VK, and mailed to MT or VK.

 

Supreme Court to Review Lam Motions

By | November 23, 2014 | Chapter 7, Supreme Court | No comments

The Supreme Court has accepted cert in Bank of America, N.A. v. Caulkett agreeing to review the right of a chapter 7 debtor to strip off an entirely unsecured lien. In Los Angeles we call them “Lam Motions.” I expect oral argument some time in April, 2015 and I expect to be there. Nearly every court in the country has held that the Supreme Court case of Dewsnup requires denial of the strip off in chapter 7. My briefs of the cases follow.

Bank of America, N.A. v. Caulkett, (unpublished) (11th Cir., May, 2014)

Issue: May a chapter 7 strip off a wholly unsecured lien pursuant to sections 506(a) and 506(d)?

Holding: Yes.

The bankruptcy court here “void[ed] a wholly unsecured second priority lien on residential property owned by a Chapter 7 debtor. The issue on appeal is whether a Chapter 7 debtor is allowed to ‘strip off’ a second priority lien on his home, pursuant to 11 U.S.C. § 506(a) and (d), when the first priority lien exceeds the value of the property.” The district court affirmed.

The 11th Circuit affirmed in a very short opinion saying only that it is bound by its prior ruling in McNeal v. GMAC Mortg., LLC (In re McNeal), 735 F.3d 1263 (11th Cir. 2012).

McNeal v. GMAC Mortg., LLC (In re McNeal), 735 F.3d 1263 (11th Cir. 2012)

Issue: May a chapter 7 strip off a wholly unsecured lien pursuant to sections 506(a) and 506(d)?

Holding: Yes.

Per curiam

The debtor here filed chapter 7. “In her petition, McNeal reported that her home was subject to two mortgage liens: a first priority lien in the amount of $176,413 held by HSBC and a second priority lien in the amount of $44,444 held by Homecomings Financial, LLC, a subsidiary of GMAC Mortgage, LLC (collectively, “GMAC”). McNeal also reported that her home’s fair market value was $141,416. The parties do not dispute these factual allegations.” “McNeal then sought to ‘strip off’ GMAC’s second priority lien, pursuant to sections 506(a) and 506(d).” The bankruptcy court denied the request and the district court affirmed.

The 11th Circuit reversed also in a very short opinion. “That GMAC’s junior lien is both ‘allowed’ under 11 U.S.C. § 502 and wholly unsecured pursuant to section 506(a) is undisputed. To determine whether such an allowed—but wholly unsecured—claim is voidable, we must then look to section 506(d), which provides that ‘[t]o the extent that a lien secures a claim against a debtor that is not an allowed secured claim, such lien is void.’” The court distinguished Dewsnup saying, “[b]ecause Dewsnup disallowed only a ‘strip down’ of a partially secured mortgage lien and did not address a ‘strip off’ of a wholly unsecured lien, it is not [determinative of] the facts at issue in this appeal.”

Supreme Court Sets Oral Argument in Wellness

By | November 23, 2014 | Supreme Court | No comments

The Supreme Court has set oral argument in the Wellness case for Wednesday January 14, 2015.  Wellness is the followup to Bellingham.  The court will resolve the issue, hopefully of whether parties can consent to have the bankruptcy court enter final judgment in a Stern type case.  A Stern type case is one where congress has designated the issue to be core but the Supremes have determined that it is “unconsitutionally core,” in other words a dispute where final judgment can be entered only be an Article III court.

In Wellness the Stern type claim is the issue of whether the debtor is the alter ego of a corporate type entity, thereby making the corporate property, property of the individual’s estate.  The 7th Circuit ruled that only an Article III court can issue a final judgment on that issue and that that cannot be waived.

I will not be able to attend as I will be in trial here in Los Angeles.  I had pretty much decided not to go anyway as I would rather attend the Lam Motion cases which will likely be set for oral argument in April, 2015.

Bankruptcy Fees to Increase Dec. 1st

By | November 21, 2014 | Court Clerk Information, Courts | No comments

Appealing a bankruptcy order directly to Court of Appeals (bypassing District Court) will go from $157 to $207. 

Motion to Redact information from previously filed records – new charge $25 per case.

See more here:  http://news.uscourts.gov/new-court-fees-take-effect-dec-1

Cert. Asks Supreme Court to Resolve Where Funds from Ch. 13 Should Go After Case Is Converted (Harris v. Vieglahn, No. 14-400)

By | November 8, 2014 | Appeals, Chapter 13, Chapter 7, Courts, Supreme Court | No comments

The appellant argues, “…of 320,000 Chapter 13 cases filed each year, 60,000 are later converted to Chapter 7″. But where should the funds held by the Chapter 13 Trustee go when Debtor converts the case: back to the debtor or to the creditors?  Harris v. Viegelahn, No. 14-400, petition for cert. filed (U.S. Oct. 6, 2014).

Because of a circuit split, the appellant has asked the Supreme Court to resolve this issue.  The appellant reminds us that our 9th Circuit B.A.P. requires the return post-Chapter 7, undistributed funds to the debtor.

Please find the full article below from Westlaw Journal Bankruptcy at Debtor Wants Supreme Court to Resolve Where Post-Petition Funds Go After Conversion, 11 Westlaw Journal Bankruptcy 2 (2014).

Read more…

Does the Debtor Deduct Hypothetical Costs of Sale When Computing 522(f) – No, says Judge Ted Albert in a Tentative Ruling

By | November 5, 2014 | Cases, Judges Corner | No comments

United States Bankruptcy Court
Central District of California
Judge Theodor Albert, Presiding
Courtroom 5B Calendar
Santa Ana

Thursday, November 06, 2014 Hearing Room 5B
11:00 AM
8:14-13351 Donald R. Dahlgren Chapter 7
#18.00 Motion for Reconsideration of Debtors’ Motion to Avoid Lien Under 11 U.S.C. §
522(f) (Real Property)

Docket 48
This is the debtor’s motion for reconsideration of the court’s order entered Sept. 11, 2014 denying debtor’s §522(f) motion to avoid a judgment lien in favor of Newport Capital Recovery Group in the original amount of $30,085 as impairing his homestead. In the order denying the motion, the court indicated by its arithmetic there existed value of $31,192.97 above the sum of all senior liens and homestead of $175,000. In consequence, there was equity to which the senior lien could attach in full, and after deduction of the senior judgment lien, the most junior lien had a value of the remaining $1107 as well, and was likewise not avoidable for that amount. There may be interest issues as well that by now eclipse the junior lien, but the court is given no means to calculate these. In this motion debtor complains that actual costs of sale are now a known quantity, $68,339.93, and this amount of sale costs should have been recognized as ahead of the liens, leaving both judgment liens effectively unsecured. The court notes that debtor in his original motion in page 3 of Mr. Dahlgren’s declaration asked for deduction of sale costs, but the court implicitly did not grant this when calculating the result and denying the original motion.

Read more…

October 23, 2014 – OCBF – Judges’ Night

By | October 22, 2014 | Bankruptcy Data, Community, Courts, Current Events, Judges Corner, Programs | No comments

The Orange County Bankruptcy Forum

October 23, 2014

Judges’ Night
Differing Perspectives on Important Legal Issues

Participating Judges include:
Hon. Theodor C. Albert
Hon. Catherine E. Bauer
Hon. Scott C. Clarkson
Hon. Richard Neiter
Hon. Deborah J. Saltzman
Hon. Erithe A. Smith
Hon. Scott H. Yun

Moderator:
Jess Bressi, McKenna Long & Aldridge LLP

(Additional Judges may be included at a later date)

Read more…

Debtors + Class Action: Stir Carefully

By | October 19, 2014 | Cases, Chapter 11, Chapter 13, Chapter 7, Courts | No comments

You remember the class action quartet, right? Numerosity, Commonality, Typicality,  and Adequacy of Representation.

The Supreme Court in Wal-Mart Stores, Inc. v. Dukes (2011) took issue with plaintiff’s lack of commonality with other members’ claims.

But much recently, the Hon. James Otero of our local U.S. District Court of the Central District, took issue with the last requirement – adequacy of representation. In Alakozai v. Chase Investment Services Corp. (Oct. 2014), the court denied certification of the class on the following grounds: (a) plaintiffs’ claims were not “typical” of other members, and (b) the plaintiffs could not “adequately represent” the class.

Sitting at the edge of your seat, you ask — why!? Simple, the plaintiffs failed to disclose their personal bankruptcy filings, and failed to mention their class action claim in their bankruptcy schedules. Tsk-Tsk-Tsk.

To summarize, the court found that plaintiffs who had a personal bankruptcy pending would have other priorities that would obscure their full attention to the class action case, and that the plaintiff’s right to sue in the class action belonged to the trustee not the debtor (since the Ninth Circuit has said in Cloud v. Northrop Grumman,  all causes of action that accrued before the filing were property of the estate).  As such, argued the U.S. District Court, it was not the plaintiff’s claim to begin with – rather the Trustee’s. So you can’t “adequately represent” the class, if you are not the representative at all.

The case stands for the proposition that a District Court, at least in Judge Otero’s courtroom, will deny certification if the named plaintiff(s) do not disclose their bankruptcy filings or fail to list the class action in their schedules.

Rule of thumb: fully vet your plaintiff’s in the class action, and disclose if plaintiff’s have filed bankruptcy. Failure of which is, in legal parlance, a “big no-no”.

 

Full opinion at http://www.employmentclassactionreport.com/wp-content/uploads/sites/232/2014/10/Alakozai.pdf

11/4/2014 – Settlement Agreements: What You Need to Know for State and Bankruptcy Courts

By | October 8, 2014 | Bankruptcy Data, Chapter 11, Chapter 13, Chapter 7, Community, Courts, Programs, Specialist Information | No comments

Settlement Agreements: What You Need to Know for State and Bankruptcy Courts

Panel:
Hon. Julia W. Brand, U.S. Bankruptcy Court
Stella Havkin, Esq., Havkin & Shrago
Raymond H. Aver, Esq., Law Offices of Raymond H. Aver APC

Moderator:
Christian Cooper, Esq., Public Counsel

Date: Tuesday, November 4, 2014
Time: 9am to 12 pm
Location: Roybal Federal Building
255 E. Temple Street, Assembly Room 1268
Los Angeles, CA 90012

YOU MUST COMPLETE A TWO-HOUR PRO BONO COMMITMENT BEFORE ATTENDING THE PROGRAM

Read more…

What’s a Taxpayer Thinking When S/he Tries to Evade a Tax?

By | September 19, 2014 | Courts, Taxes | No comments

 

If the government can prove that you “willfully attempted in any manner” to “evade or defeat” a tax, then you cannot discharge that tax debt in bankruptcy.  11 U.S.C. 523(a)(1)(c).   I’ve always seen this as a very low bar for the IRS to prove, because the elements are simple: 1) the taxpayer had a duty to pay a tax; 2) the taxpayer knew that he had this duty; and 3) the taxpayer voluntarily and intentionally violated that duty.  Payment of any expense beyond subsistence, such as a child’s college tuition, at a time when taxes remain unpaid could meet the standard.  That’s what the cases around the country teach.

The 9th Circuit, however, has changed the standard here in California and elsewhere in its domain.  In Hawkins v. FTB, Case No. 11-16276, decided on September 15, 2014, the court has held that the taxpayer needs to have a specific intent of evading tax for this discharge exception to apply.  Outside the 9th Circuit, a “willful attempt “ to intentionally violate the duty to pay tax means a deliberate act that results in nonpayment of tax.  Here in the 9th Circuit, the “willful attempt” means a deliberate act with the intent of evading tax.

 

The facts in Hawkins are rather shocking to this former IRS attorney.  The debtor-taxpayer made a fortune in Silicon Valley enterprises, and tried to shelter some of his capital gains through sophisticated yet dubious transactions.  A large tax bill ensued, and then his enterprises lost a great deal of money. Yet he continued to live large: in the face of of a $25 million tax bill, he continued to maintain two residences worth a total of more than $6 million, and bought a fourth family car (in a two-driver family) for $70,000.  The family spent between $17,000 and $78,000 more per month than its income for several years.

I think that the result in Hawkins is wrong.  This kind of spending by a taxpayer who knows he owes $25 million in taxes is dishonest.  As a taxpayer, I do not want my fellow Americans to get away with this by saying “gee, I wasn’t trying to avoid paying the taxes, but I just couldn’t stop myself from spending.”  But I do salute the attorneys who reached this result.  It is a good result for my clients, and I intend to use it until the Supreme Court reverses the 9th Circuit.

 

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