"Sole Proprietor" Cannot File until Credit Counseling Complete

New Bankruptcy Law Changes Debtors Responsibilities

Courtesy of Tony Mankus, Esq. Way to go tax man.

Cases, Cases, Cases!

1st Circuit Lomagno v. Salomon Bros. (11/14/05 - No. 05-9003) Reversal of bankruptcy court's dismissal of plaintiff's Chapter 13 petition (e.g. reinstatement of Chapter 13 case) did not retroactively reinstate the automatic stay. Therefore, defendant's motion on the pleadings to foreclose its mortgage on plaintiff's home is affirmed. 5th Circuit Condrey v. SunTrust Bank of Ga. (11/14/05 - No. 04-30766) Where plaintiff did not incur damages and its remaining claims, which did not require proof of damages, were meritless, summary judgment for defendant is affirmed. 8th Circuit In re Bauder (11/14/05 - No. 05-6033) A memorandum decision denying discharge under §727(a)(4) is reversed where the court committed "clear error" in finding that the debtor knowingly and fraudulently made a false oath. A&L Labs. v. Bou-Matic (11/17/05 - No. 05-1469, 05-1471) In an action seeking a declaration of non-infringement of certain trademarks and asserting unfair competition, defamation, and other claims, the finding that plaintiff had a license in trademarks owned by defendant and ordering plaintiff's payment of a 3 percent license fee is affirmed. 9th Circuit In re Thomas (11/18/05 - No. 03-57164) The Bankruptcy Appellate Panel reversed the lower court's finding that a debtor had fraudulently transferred a condominium prior to filing bankruptcy. Here the BAP is reversed and its ruling vacated because it erred in excluding findings that supported the bankruptcy court’s initial decision.

In re Hedstrom Corporation

Issued: November 21, 2005 Judge: Jack B. Schmetterer Subject: Reasonable fees and costs in connection with a Chapter 11 case.

Pavement Maintenance, Inc. & Thomas V. Murray v.

Question from Member ... Looking for Feedback

Ladies and Gentlemen: First, let me wish each and every one of you Happy Holidays as we kick off this 2005 Thanksgiving-Christmas/Qwanza/Khanuka season (or as I call it, Thankschrisqwanzuka). I would include Ramadann but that month has already passed. Now, on to business. Member Jan Watson asks the following question and wants your feedback: Have you heard any comments on how CH 7 trustees and the UST are going to deal with changes in income - i.e. job loss - less than 6 months prior to filing. Using the 6 month income for both spouses, the presumption of abuse exists, although the income also no longer exists. Is this a situation where the trustee can waive the presumption? Or, do the clients, in essence need to wait 6 months to file? Same backward/forward issue on the expense side. Clients will probably surrender their upside down home with a large mortgage payment and 1 vehicle. Still use past 6 months expense figures on schedule J? Thanks for your input. I recommend commenting directly to this Blog post, or contacting me at mhedayat@mha-law.com so that I can post the results.

Cert to the Supreme Court and other cases

Certiorari Granted

The U.S. Supreme Court granted cert in Howard Delivery Service, Inc. v. Zurich American Insurance Co., No. 05-128 on the issue of whether unpaid premiums for workers compensation coverage owing to Zurich American qualify for priority status under the old 507(a)(4) (now 507(a)(5)) as "contributions to an employee benefit plan arising from services rendered”. The lower court decision is reported at In re Howard Delivery Service, 403 F.3d 228 (4th Cir. 2005). The issue will revolve around whether the statutory language requires the employee benefit plan to be a wage substitute. Several circuits had relied on legislative history to find it does. The Fourth Circuit disagreed and cited a Ninth Circuit decision that relied on the statute's plain and unambiguous meaning. Given its past decisions, the Supreme Court surely will use the “plain meaning” approach.

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Thomas v. Money Mart Financial Servs., Inc. (8th Cir. 2005)

The bankruptcy court's order finding that defendant did not violate the automatic stay by presenting plaintiff's checks for payment postpetition is affirmed where plaintiff had not received a discharge at the time defendant presented the checks.

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In re Athens/Alpha Gas Corp. (8th Cir. 2005)

Order denying plaintiffs' claim for administrative expenses reversed where there existed a post-petition transaction by plaintiffs which provided a tangible benefit to the bankruptcy estate.

Bankruptcy lawyer pleads to fraud, asks Court to "have a heart"

Daniel J. Gates, 44, late of Ocala, Florida plead guilty in Pittsburgh of defrauding clients out of more than $3.6 million -- including more than $115,000 from former Steeler Rod Woodson. The plea encompassed mail fraud, bank fraud, bankruptcy fraud, money laundering, and possibly finger-puppet fraud, little tiny gerbil fraud, and fraud fraud (these last 3 may be a misprint). Hearings were postponed after Gates collapsed in a Florida airport and was hospitalized while doctors performed heart procedures, including catheterization, that prevented him from traveling for a week. The best medical minds in Florida have been forced to concede that the Defendant's heart was broken.

Ed. note: ha!

What's good for the goose ...

From the Journal Sentinel

An husband and wife team of bankruptcy lawyers was convicted in Federal Court on multiple counts of conspiracy, bankruptcy fraud and money laundering for concealing hundreds of thousands of dollars while preparing to file their own Chapter 7 case.

MBNA's "Fair Share" of the Market

See the letter that MBNA is sending to its member agencies -- a veritable "how to" on ways to get money out of debtors knowing that they are about to file bankruptcy. It just keeps getting better ...

2 Cases

8th Circuit

PW Enterprises, Inc. v. Kaler (11/09/05 - No. 05-6038)

Court abused its discretion by approving a stipulation between the Trustee and the government for distribution of assets from an Estate after the plaintiff objected without first holding a hearing.

9th Circuit

Rains v. Flinn (11/08/05 - No. 03-16538, 04-15743)

District court erred in ruling that an appeal of a judgment enforcing a settlement agreement was untimely, and entry of judgment on that settlement in favor of the Trustee is affirmed. Settlement Agreement was valid and enforcement of the agreement proper under the circumstances.

Top 10 Things Overheard by Debtor's Counsel ...

10. If I can’t afford my mortgage how can I pay you? 9. It really belongs to my brother. 8. Can’t we just leave that out of the petition? 7. I couldn’t attend my meeting because I had to be at my ’s funeral in 6. What if I transfer it to my mother’s name? 5. I have to get to work. (in response to why the 2003 Mercedes M Class is necessary for reorganization) 4. How would the trustee ever find out? 3. My attorney told me I didn’t have to pay the mortgage. 2. They’re not going to take my cats, are they? 1. They can take the wife and kids but they can’t take the Harley! Thanks to committee member, full-time lawyer, and part-time humorist Richard Sexner

Reform Act II: Electric Boogaloo

Since Oct. 17 in one particular NY Jurisdiction approximatley 30 cases had been filed by local Attorneys without any indication whatsoever that the authors were complying with, or had attempted to comply with, the new law. Representatives of the Clerk's office had no explanation and said simply that those attorneys were in for a rude surprise.

In re Pension Benefit Guaranty Corporation vs. United Air Lines, et al.

Bankruptcy No. 02 B 48191 Adversary No. 05 A 00481 Issued: October 26, 2005 Judge: Eugene R.Wedoff Alternate Link: http://www.ilnb.uscourts.gov/JudgeWedoff/Opinions/PBGC_trial_opinion.pdf

1st Circuit

Marrama v. Citizens Bank of Massachussetts, et al. (10/31/05 - No. 04-9009)

Section 706(a) does not confer an "absolute" right to convert to Chapter 13. Where debtor acknowledged concealing transactions intended to protect his assets from creditors, the court may deny such conversion.

7th Circuit

Thomas v. Money Mart Financial Servs., Inc. (11/04/05 - No. 05-1176)

Bankruptcy Court's order finding that defendant did not violate automatic stay by presenting plaintiff's checks for payment postpetition is affirmed where plaintiff had not received a discharge when defendant presented the checks.

Hallmark v. Athens/Alpha Gas Corp. (11/04/05 - No. 05-6020)

Order denying plaintiffs' claim for administrative expenses reversed where there existed a post-petition transaction by plaintiffs that provided a tangible benefit to the Estate.

In re Repurchase Corp., 04-32933

Date of Issuance: October 31, 2005 Judge: Jack B. Schmetterer

American National Bank & Trust Co. of Chicago v. Matrix IV, Inc. (02 A 00283)

Date of Issuance: October 31, 2005 Judge: Jack B. Schmetterer

Opinion: In a lien priority dispute between pre-filing lien creditors of Chapter 11 debtor, motion by defendant-creditor to strike a count of the complaint brought by plaintiff'creditor is granted with prejudice based on Court's reading of Federal law concerning motions to strike.

In re Mid-City Parking, Inc. (04 B 45177)

Date of Issuance: October 31, 2005 Judge: Jacqueline P. Cox

Subject: Appeal of pre-filing judgment by DIP