All posts tagged bankruptcy

Chapter 11 Debtors Are Prohibited From Paying Taxes… Without a Notice and Hearing!

Before people worry too much, this is not as bad as it sounds but it is still pretty awful.

Under Bankruptcy Code section 102, “notice and hearing” is a due process safeguard: “after such notice as is appropriate in the particular circumstances, and such opportunity for a hearing as is appropriate in the particular circumstances.” In other words, there are circumstances where notice and hearing means just notice or notice and an opportunity to object. Hopefully local bankruptcy rules are modified to make these notice only requests.

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Bankruptcy Works!

My wife wanted to go shopping at the Burbank Mall yesterday. I told her to have fun but that did not work.

After we worked up an appetite, we headed to the food court. While she ordered food, I headed over to Hot Dogs on a Stick. There was a moderate line, good. I was given a free hush puppy to try and when I inquired about their ice drinks, I was given a nice size sample. Delicious.

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Bankruptcy Judges Might Not Be Able to Remand Removed Cases!

This is a dangerous article to write but I am hoping the comments will be worth it.

So the Wellness case came out and the Supreme Court seems to have taken a pragmatic view by allowing parties to consent (implied or explicit) to the jurisdiction of bankruptcy courts. Fine. But is there more to this story?

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Wise Words by the Honorable Sheri Bluebond, Chief Judge!

My good friend Paul McCullum was sworn in today by none other than the Chief Judge of the Central District Bankruptcy Courts, the Honorable Sheri Bluebond. His family flew over from Indiana to watch him take the oath. It was a tremendous occasion and I was honored to be invited. The best part was Judge Bluebond’s moving pre-Oath “advice to new lawyers” which contains sage advice for practitioners of all seasons. With her permission, I am happy to share: Read more…

Basic Introduction to Unsecured Creditors’ Committee

This article is a quick introduction to unsecured creditors’ committees.

When an individual or company files bankruptcy, there are generally two routes it can take (for the purpose of this discussion, Chapter 13, a limited form of reorganization for individuals, is omitted.)

The first route is Chapter 7 liquidation where assets are liquidated for payment to creditors.

A Chapter 7 bankruptcy is structured as follows: a Chapter 7 Trustee is appointed; the trustee is a professional whose job is to maximize the value of the assets (referred to as the Estate) and to pay creditors as much as possible. The Department of Justice oversees the Chapter 7 Trustee. Creditors may participate in this process but since the Chapter 7 Trustee is a professional, experienced and neutral, the role of creditors is limited. They may seek to protect themselves but generally stay out of the Chapter 7 Trustee’s business.

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Secured Creditors Who Do Not File Continuation Statements Will Lose Their Secured Status, Despite a Bankruptcy

UCC-1 financing statements are effective for five years.  Before the five years has run, the creditor must renew the financing statement by filing what’s called a continuation statement.  This is essentially a UCC-1 with a check next to the box labeled “continuation statement.”  The only caveat is any continuation statement must be filed no sooner than six months before the five year period has expired.  Assuming a continuation statement is filed, the five year period is expanded by five years from when the original would have expired.  This can be done indefinitely.

What if the Debtor filed bankruptcy?

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California One-Action Rule Preempted by Federal Debt Collection Improvement Act

Cal. Code Civ. P. § 726, often referred to as the one-action rule, has many facets. Relevant to this article is the “security-first” rule which requires “a secured creditor to proceed against the security before enforcing the underlying debt”; the penalty for failing to do so is waiver of the security.

In practical terms, this means a creditor secured by property has to either pursue foreclosure or file a lawsuit on the debt. The aforementioned ‘or’ is an exclusive ‘or’ meaning the lender has to pick one or the other and cannot pick both options. Consequently, this is what’s typically referred to as an “election of remedies.” Read more…

Proposed Changes to the California Homestead Exemption

SB 308 is a new bill introduced by Senator Bob Wieckowski in the California State Senate that provides significant improvements to California’s current exemptions including:

  • increasing the homestead to $300,000 for all individuals;
  • removing the 6 month reinvestment requirement;
  • increasing the exemption for vehicles to $6,000;
  • establishing that bankruptcy alone is not an event of default; and
  • creating a grubstake of $5,000 for self-employed individuals.

The complete text of the amendment can be found here.

Note: the link above is to the original proposal and is easy to read. The original proposal provided for a $700,000 exemption which was amended down to $300,000. A more difficult to read, updated version can be found here.

What’s Not a Claim In Bankruptcy?

Before joining his firm, I visited Professor Hayes’ Bankruptcy class which he teaches at the University of West Los Angeles. The topic of the day was “claims.”  As we parsed through the case law, I gave the students a hint, if there is any question whether something is a claim, it’s a claim! In fact, I couldn’t think of something that wasn’t a claim! Read more…

Central District Needs Mediators

I recently received a letter from Judge Barry Russell, as did everyone else on the mediation panel I assume, asking for help in increasing the Central District Mediation Panel.  They had a high of 252 mediators but are down now to 173.    For attorneys reviewing this post, I highly recommend joining the panel.  You have to have practiced for 5 years I believe and complete a 30 hour training program at Pepperdine but I found the program very beneficial to my practice.  Once you are on the panel, I believe you commit to do one no-charge, half-day mediation per quarter.  If you are interested in joining the panel check out the information on the bankruptcy court website under mediation.