Category: Middle District

Bankr. M.D.N.C.: Lanik v. Smith (In re Cox Motor Express) – Valuation for Determination of Insolvency

Summary:

The Trustee sought to recover a transfer made by the Debtor to James Smith, the principal of the Debtor, pursuant to 11 U.S.C. §§ 547 and 550(a). At issue was whether the Debtor was insolvent at the time of the transfer. The Trustee argued that based on the Debtor’s tax returns and the presumption of insolvency during the 90 days preceding the filing of bankruptcy, that the Debtor was insolvent, whereas Smith asserted that based on the scheduled value of assets and amount of liabilities, the Debtor was solvent.

Pursuant to 11 U.S.C. § 101(32)(A), insolvency is defined as a “financial condition such that the sum of such entity’s debts is greater than all of such entity’s property, at a fair valuation….” Following In re Heilig-Meyers Co. Read More

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Bankr. M.D.N.C.: In re NC & VA Warranty-Informal Proof of Claims

Summary:

This is the latest of a line of decisions resulting from a complicated set of commercial transactions (which this consumer bankruptcy blog will leave for others to explicate).

It does, nonetheless, have few nuggett of use in consumer cases, specifically in Footnote 1 which recognizes that “it is possible that the Counterclaim constitutes a claim filed against the estate.” Cf. Carroll v. Farooqi, 486 B.R. 718, 722-23 (Bankr. N.D. Tex. 2013). As such an objection/answer to the counterclaim may, pursuant to Rule 3006, preclude such claim being withdrawn “except on order of the court after hearing and notice….”

For a copy of the opinion, please see:

NC & VA Warranty-Informal Proof of Claims Read More

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Bankr. M.D.N.C.: NC & VA Warranty v. Fidelity Bank- Judicial Notice and Judicial Estoppel

Summary:

The bankruptcy court in this opinion begins by distinguishing between the judicial notice that a court may take of pleadings and proceedings in other courts and judicial estoppel. The bankruptcy court held that while a court cannot take judicial notice of the truth of facts alleged in those pleadings, it can nonetheless take judicial notice that such allegations were made. From the fact that such allegations had been made, the bankruptcy court then turned to determine whether such allegations judicially estopped a party in later proceedings. The requirements for judicial estoppel are:

1. The party sought to be estopped must be seeking to adopt a factual (opposed to legal) position that is inconsistent with a stance taken in prior litigation;
2.… Read More

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Bankr. M.D.N.C.: In re Dean- Laches and Avoidance of Judgment Lien

Summary:

Ferguson obtained a judgment in 2008 against the Robert Dean, who, with his then wife, Lisa Dean, subsequently filed a Chapter 7 bankruptcy in 2010. Believing that the real property was held as Tenants by the Entireties, the judgment lien was not avoided and the Deans received a discharge. Subsequently, the Deans divorced with Mr. Dean transferring his interest in the real property to Lisa and her new husband. When Lisa sought to refinance the real property in 2015, the judgment lien was discovered. The Debtors then sought to re-open the bankruptcy and to avoid the lien, with Ferguson objecting.… Read More

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Bankr. M.D.N.C.: In re Jeffries- Denial of Discharge

Summary:

Uncontested evidence showed that the Debtor had failed to disclose the transfer of real property to her brother 15 days prior to the filing of her bankruptcy as well as the omission of ownership interests in an investment club and several bank accounts. While it was determined in a separate action that the transfer of the real property was subject to a pre-existing lien and had no equity, the Bankruptcy Administrator nonetheless sought denial of the Debtor’s discharge under both 11 U.S.C. §§ 727(a)(2)(A) and 727(a)(4)(a).

Denial of a Debtor’s discharge pursuant to § 727(a)(2)(A) requires a showing that that the debtor:
(1) transferred or concealed,
(2) his property,
(3) with the intent to hinder, delay or defraud a creditor,
(4) within one year before filing the petition.… Read More

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Bankr. M.D.N.C.: In re Canuto- Sua Sponte Summary Judgment Denying Strip-Off based on Fixture Filing

Summary:

The Debtors sought to strip-off the lien held by PSNC Energy for a HVAC unit as wholly unsecured based on the value of the real property. Without any answer by PSNC, the Court sua sponte held that based on the record, consisting primarily of the Proof of Claim filed by PSNC, that A UCC-1 fixture filing had been recorded within 20 days of installation of the HVAC unit and was, pursuant to N.C.G.S. § 25-9-334(d), entitled to a first priority, perfected purchase money security interest in the HVAC.

For a copy of the opinion, please see:

Canuto- Sua Sponte Summary Judgment Denying Strip-Off based on Fixture Filing Read More

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Bankr. M.D.N.C.: In re Lucero- Payment of Administrative Expenses Following Conversion from Chapter 13 to Chapter 7

Summary:

The Court held that Harris v. Viegelahn, 575 U.S. ___, 135 S. Ct. 1829, 191 L.E. 2d 783 (2015) did not prevent a Chapter 13 trustee from paying administrative expenses funds held by the following conversion of the case to Chapter 7 pursuant to 11 U.S.C. § 1326(a)(2) and Bankruptcy Rule of Federal Procedure Rule 1019.

Commentary:

Attached to the application for fees was an affidavit from the debtor stating that she understood that the funds on hand could be returned to her but that she nonetheless wanted those funds sent to the her attorney. This makes it unclear whether the debtor’s attorney could compel the chapter 13 trustee to release funds to her in the face of an objection from the debtor.… Read More

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Bankr. M.D.N.C.: In re Novara- Uniform Transfer to Minors and Fraudulent Conveyances

Summary:

Ms. Novara deposited a check from her mother for $10,000 into her child’s custodial account twenty-seven (27) days prior to filing Chapter 7 bankruptcy. The Trustee sought to set this aside as a fraudulent conveyance and sought summary judgment.

To prevail on a motion for summary judgment premised on a fraudulent transfer, pursuant to 11 U.S.C. § 548(a)(1)(B)(I), the Trustee must be able to meet four elements:

(1) the debtor must have an interest in the property;
(2) the transfer must have been made within two years before the date of filing the petition;
(3) the debtor must have received less than a “reasonably equivalent value” in exchange for the transfer; and
(4) the debtor must have been insolvent on the date that the transfer was made.… Read More

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Bankr. M.D.N.C.: In re Martin- Confirmation Vacated Pursuant to Rule 60(b) due to Mistake

Summary:

Debtor’s Chapter 13 plan was confirmed cramming down the claim of Greater Piedmont Credit Union against mobile home and land, prior to the filing of the Proof of Claim by GPCU showing that title to the mobile home had been cancelled, affixing it to the real property. Within thirty days of confirmation and before the passing of the bar date for filing claims, GPCU filed a Motion pursuant to Rule 60(b) for relief from the Confirmation Order based on mistake.

The bankruptcy court held that to obtain relief under Rule 60(b)(1), GPCU was required to show:

(1) That the underlying motion was filed within one year of the date the Confirmation Order;
(2) That GFCU had a meritorious defense;
(3) That the Debtor would not be unfairly prejudiced by having the judgment set aside; and
(4) The existence of mistake, inadvertence, surprise, or excusable neglect as a ground for relief.… Read More

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Bankr. M.D.N.C.: In re Nevils- Exempt Worker’s Compensation Award is not Disposable Income

Summary:

After the filing of a Chapter 13 bankruptcy, Mr. Nevils received a lump-sum Worker’s Compensation award of $235,000. Over the Trustee’s objection, the bankruptcy court previously allowed Mr. Nevils’ exemption of the proceeds, without ruling at that time on whether such constituted disposable income. The Trustee, supported by the Bankruptcy Administrator, then brought a motion to modify, arguing that even though exempt, the award constituted a substantial and unanticipated change in circumstances and should be considered in calculating Mr. Nevils’ disposable income.

The bankruptcy court rejected this argument, finding that 11 U.S.C. § 522(c) provides “property exempted under this section is not liable during or after the case for any debt of the debtor that arose, or that is determined under section 502 of this title as if such debt had arisen before the commencement of the case….” Relying on Judge Doub’s opinion from In re Daniels, the bankruptcy court held that “[t]he clear language of [§ 522(c)] protects exempt property, regardless of form, from prepetition debts…[t]his express limitation cannot be ignored for purposes of defining disposable income under [§ 1325(b)]”).… Read More

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