Month: February 2012

Bankr. E.D.N.C.: In re Nance Properties, Inc.- Realtor’s Application for Compensation following Unconsummated Sale

Summary:

ECP was retained, prior to the bankruptcy filing by the Debtor, to sell certain of the Debtor’s properties.  The listing agreement included a provision that the Debtor would seek to employ  ECP in the event bankruptcy was filed.   ECP was, in fact, approved by the Court to sell the properties.  Unfortunately, following the objection by the lienholder,  the sale of the properties was ultimately not approved, as it did not satisfy the requirements of 11 U.S.C. § 363(f).  ECP, nonetheless, sought compensation.

The Court held the listing agreement between the Debtor and ECP provided for payment either if the sale was consummated, which it was not,  or if the Debtor was in breach of contract regarding the sale. … Read More

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Bankr. E.D.N.C.: In re Isha Homes, L.L.C.- Extension of Time to Obtain Ballots from a Class in Chapter 11

Summary:

While the secured classes in the Chapter 11  accepted the plan, none of the unsecured creditors cast ballots and the class was deemed to have rejected the plan.  The Debtor was, however, given an additional 14 days to obtain ballots.  Otherwise, the Debtor would be allowed to file an amended plan, where the principal could purchase the equity interest in the Debtor.

For a copy of the opinion, please see:

Isha Homes, L.L.C.- Extension of Time to Obtain Ballots from a Class in Chapter 11.PDF Read More

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Bankr. E.D.N.C.: In re Henries- Whether Abandonment of Property by Chapter 13 Trustee is Binding on later Chapter 7 Trustee

Summary:

The Debtor owned real property with her husband as tenants by the entireties, but then separated.  Pursuant to a Separation Agreement, the Debtor signed a Quit Claim Deed granting the property to her husband in 2005 and the parties divorced in 2006.  She later filed Chapter 13 on December 3, 2008, but, apparently unbeknownst to the Trustee,  the Quit Claim Deed was not recorded until January 9, 2009, one day after the §341 Meeting of Creditors.   The Debtor’s confirmed plan abandoned  her interest in the property to the secured creditors.  In 2010, she  converted to Chapter 7 and the Trustee initiated an adversary proceeding to avoid the transfer under 11 U.S.C.… Read More

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Bankr. E.D.N.C.: In re Sutton- Separate Classification of Student Loans in Chapter 11

Summary:

The Debtor proposed a plan that would have paid roughly a 3.8% dividend to general unsecured claims, but would have separately classified his non-dischargeable student loans and paid them in full.  The general unsecured class did not accept this plan.

11 U.S.C. § 1129(b)(1)  provides the bankruptcy court shall confirm a plan that “does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted, the plan.”

“There can be ‘discrimination,’ so long as it is not ‘unfair’’” 7 Collier on Bankruptcy ¶ 1129.03[3] (16th ed. Read More

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Bankr. E.D.N.C.: In re John Doe- Expungement of Bankruptcy

Summary:

Kenneth Jones filed a Chapter 13 bankruptcy on behalf of his minor nephew in 2003.  After finding no evidence that Jones was his nephew’s court appointed guardian, the Trustee moved for the appointment of a guardian ad litem pursuant to Bankruptcy Rule 1004.1.  Prior to that motion being heard, however, the case was dismissed for non-payment.

Recently, however, the Nephew (now presumably having reached his majority) experienced difficulties obtaining credit due to this bankruptcy.  Accordingly then moved to have the bankruptcy re-opened and then dismissed ab initio,

After finding there was just cause to re-open the case, the Court found that dismissal ab initio was not “the most practical or appropriate remedy in this case, as such action would call into question the fees paid and distributions made.”  Instead the Court ordered that the bankruptcy be expunged and that the Clerk of Court “remove all  references to the filing from the electronic record, while sustaining a hard copy of the record,  including this order, in a sealed file.”

Commentary:

While this may remove “references to the filing from the electronic record” maintained by the bankruptcy court, it addresses neither the electronic records maintained by the credit bureaus nor the record of this bankruptcy in private repositories, such as BANKO, AACER or RECAP.… Read More

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Bankr. M.D.N.C.: In re Freeway Foods- Application of Stern v. Marshall

Summary:

Not quite half-way through this exhaustive opinion, the bankruptcy court, in discussing Stern v. Marshall, states that “[t]he facts of Stern are interesting but not particularly helpful to the task before this Court.”  Similarly,  the facts here are interesting but not particularly helpful to the task of summarizing and digesting this case, largely because the opinion addresses so many variations that a complete, item by item summary would be no shorter than the actual case.

The generally holding by the bankruptcy court is  that  Stern provides for a two-prong test: “the question is whether the action at issue stems from the bankruptcy itself or would necessarily be resolved in the claims allowance process.” Stern, 131 S.Ct.… Read More

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Bankr. M.D.N.C.: In re Abdelaziz- Denial of Discharge under 11 U.S.C. § 727(a)(2) for concealment of assets

Summary:

The Debtor’s corporation filed Chapter 7 and the Debtor agreed to buy the assets of the corporation from the Chapter 7 Trustee for $3,400.00.  The Trustee was later contacted by an auctioneer, who informed the Trustee that the Debtor was attempting to sell additional corporate assets, that had not be listed in the bankruptcy petition filed by the corporation.  The Debtor eventually did sell these non-disclosed assets for $4,000.00 and also filed his own personal Chapter 7 bankruptcy, with the same Trustee being appointed.  The Trustee eventually settled with the Debtor for an additional $2,300.00, but then brought an adversary proceeding to deny the Debtor his discharge pursuant to 11 U.S.C.… Read More

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4th Circuit: Sun Trust v. Northen- Neither Actual Knowledge nor Constructive Knowledge based on the Stand of a “Competent Title Examiner” is relevant in Avoidance of Mortgage under 11 U.S.C. § 544(a)(3)

Summary:

The Debtors pledged two properties to Sun Trust as collateral for a Deed of Trust.  The Deed of Trust when recorded, however, was only indexed with the Orange Register of Deeds under the Parcel Identifier Number (“PIN”)  for Parcel II and not Parcel I.  (Orange County, unlike the other 99 counties in North Carolina, which index under a grantor/grantee system based on Deed Book and Page, give every parcel of real property a unique PIN.  This PIN is used as the basis for indexing all recorded documents related to that property.)

After the Debtors were involuntarily filed in a Chapter 7 bankruptcy, the Trustee avoided the Deed of Trust held by as to Parcel I.… Read More

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4th Circuit: McDaniel v. Blust- Liability of Trustee’s Agents

Summary:

The former officers of EBW Laser, Inc., which has been the subject of a fair bit of litigation in its bankruptcy in the Middle District of North Carolina, brought a complaint against the Chapter 7 Trustee’s law firm and several individual attorneys at the law firm, as well as the accountant for EBW Laser, as they allegedly improperly obtained the officers’ tax return in an attempt to show preferential transfers and/or fraudulent conveyances.  The case was originally brought in state court, but then removed by the Defendants to federal district court, where, following the recommendations of the magistrate,    the complaint was dismissed as to the Attorney Defendants and remanded to state court as to the Accountant Defendant, on the basis of the Barton v. Read More

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Broke: Porter, Katherine- Chapter One: Driven By Debt: Bankruptcy and Financial Failure in America

Summary and Commentary:

Starting by painting a vivid tableau of a §341 Meeting of Creditors, its atmosphere is aptly compared with the anxiety of an emergency room.  The metaphor  gets pushed too far,  with the Trustee being likened to a doctor diagnosing people “with a financial emergency- bankruptcy.”  This would be a fully congruent comparison only if, and I hesitate to extend this metaphor, because most Trustees are truly good and caring people, who keep a debtor’s interest in mind, if not at heart, a medical doctor was charged by his Hippocratic Oath to first do no harm to the viruses, tumors and injuries the patient suffers from. … Read More

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