Category Archives: Property of the Estate

Error in the Debtor’s Name Seriously Misleading

Error in the Debtor's Name Seriously MisleadingIs an error in the debtor name seriously misleading? In what appears to be a national trend, two more recent cases have affirmed that a slight error in the Debtor’s name seriously misleading in the age of computer search logic. Here are the cases.

In re John’s Bean Farm of Homestead, Inc., 378 B.R. 385 (Bkrtcy. S.D. Fla. 2007). the creditor filed a UCC- l financing statement with the Florida Secured Transaction Registry identifying the Debtor as “John Bean Farms, Inc.”, instead of the proper incorporation name, “John’s Bean Farm of Homestead , Inc.” When the Trustee searched the database using the Debtor’s correct name, the search yielded no match. The Trustee found the creditor’s financing statement only after striking “previous command” 60 times. The Trustee objected to the secured claim filed by the creditor, and was awarded summary judgment. The Court held that the initial search page displayed the result of applying Florida’s standard search logic. Further, even if what constituted a search result were more than the initial page display, there would be a reasonable limit to the search. The Court deemed this limit to be no more than one page “previous” and one page “next” from the initial result screen.

In a second case, In re Jim Ross Tires. Inc.. 379 B.R. 670 (Bkrtcy. S.D. Tex. 2007), the Court construed Texas law. The financing statement was filed by the creditor in the Debtor’s correct corporate name. However, it added the Debtor’s trade “or d/b/ a” name, which had expired and not been renewed. Judge Isgur found that the financing statement did not contain a proper statement of the Debtor ‘s name, and left the creditor unperfected. The Court reasoned that only exact matches would be returned from a computer search of the Secretary of State’s database , and including the d/b/ a in a financing statement would
inevitably have resulted in the failure of the financing statement to appear.

If you have questions about the validity of a financing statement an attorney can help you decide if an error in the debtor’s name seriously misleading to the bankruptcy court.

For more information about Bankruptcy and an error in the debtor’s name seriously misleading  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Alimony Dischargeable in Bankruptcy

Alimony Dischargeable in BankruptcyIs Alimony dischargeable in Bankruptcy? It might be, it depends on many factors.

Generally speaking, one of the most significant changes in the bankruptcy code in 2005 (BAPCPA) is that all domestic relations obligations created by a divorce decree or separation agreement are non-dischargeable. The spousal support defined as Domestic Support Obligations are non-dischargeable in every chapter, but non-support obligations under 523 (a)(15) MAY BE dischargable in a Chapter 13 plan.

How do we know if alimony is dischargeable in a chapter 13 bankruptcy? The court will consider the substance of the underlying obligations, as well as the relative financial circumstances of the parties at the time of their divorce. To ascertain the intent of the parties and the substance and function of the obligation, a bankruptcy judge may consider any or all of the following factors:

(1) The amount of alimony, if any, awarded by the state court and the adequacy of any such award;
(2) the need for support and the relative income of the parties at the time the divorce decree was entered;
(3) the number and age of children;
(4) the length of the marriage;
(5) whether the obligation terminates on death or remarriage of the former spouse;
(6) whether the obligation is payable over a long period of time;
(7) The age, health, education, and work experience of both parties;
(8) whether the payments were intended as economic security or retirement benefits;
(9) the standard of living established during the marriage.

If your spouse is trying to discharge your alimony you need to see an attorney right away to make sure your rights are protected. Alternatively, if you need to discharge alimony, an experienced attorney can help you determine how the court is likely to view your case.

For more information about Bankruptcy and if alimony dischargeable in bankruptcy   – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Aiding and Abetting Fraudulent Transfers

Aiding and Abetting Fraudulent TransfersAiding and abetting fraudulent transfers. Can a Trustee maintain an action against parties who were directly involved in the implementation of a fraudulent transfer, but were not the recipient of any of the fraudulently transferred property? Would it matter if the involved party were an attorney? It depends on where you are.

Two bankruptcy courts have addressed this issue and made contrary holdings, based on differing state law. In the case of In re Parker, 2009 WL205011 (Bkrtcy. E.D. N.Y.), Judge Eisenberg held that applicable New York law “does not recognize a cause of action against parties for aiding and abetting a fraudulent conveyance because …the parties were neither transferees of the assets nor beneficiaries of the conveyance.” Further, the status of one party as an attorney did not change this finding. The Trustee’s only remedy was avoidance of the transfer and recovery of the transferred property for the bankruptcy estate.

In the case of In re Restaurant Development Group, Inc. 397 B.R. 891 (Bkrtcy.N.D. Ill. 2008), Judge Schmitterer noted that Illinois courts recognize claims for conspiracy against attorneys where there is evidence of participation in a plan with their clients to commit fraud. Though acknowledging that other states, under their version of the Uniform Fraudulent Transfers Act, have not found and do not recognize aiding and abetting claims against non-recipients of fraudulent transfers: The Court found such liability under Illinois law. If you have a question about the liability of aiding and abetting fraudulent transfers you should seek the advice of an experience bankruptcy attorney.

For more information about Bankruptcy and aiding and abetting a fraudulent transfers  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Post-Petition Inheritance

Post-Petition InheritancePost-petition inheritance disclaimer was avoided. Here’s what happened.

Post-petition inheritance disclaimer was avoided.  The Debtor’s mother died on June 27. 2006, and the debtor filed her bankruptcy petition on September 29, 2006. On November 3, 2006. the Debtor. who was executrix of the probate estate, filed a disclaimer of the inheritance she was to receive. The Trustee then sought to avoid the purported disclaimer as an unauthorized post-petition transfer under §549. The Debtor countered that under Fifth Circuit and Texas law the disclaimer related back to the date of death, and therefore did not occur post-petition. ln re Schmidt. 362 B.R. 318 (Bkrtcy.W.O. Tex. 2007).

Finding for the Trustee, Judge Clark followed In re Farrior, 344 B.R. 483 (Bkrtcy. W.O. Va. 2006), which held that federal pre-emption trumps a Debtor’s ability to employ if state law disclaimer as to property designated by federal statute (§54I) as property of the estate. The Court distinguished Simpson v. Penner 36 F.3d 450 (5th Cir. 1994) which involved a pre-petition disclaimer. However Judge Clark questioned whether Simpson was still good law, as it pre-dated Drye v. United States 528 U.S. 49 (1999), where the Supreme Court ruled that a state-authorized disclaimer of inheritance could not defeat attachment of a federal tax lien to the taxpayer’s beneficial interest in the inheritance prior to execution of the disclaimer. The Court also cited Matter of Burgess, 438 F.3d 493 (5th Cir. 2006) (en banc) as further authority that Simpson no longer applies. In Burgess. the Fifth Circuit held that a subsequent event (passage by Congress of a crop disaster relief bill) could not be used to revise a state of affairs that existed on the date of the bankruptcy filing. In this case the inheritance was property of the es tate on the petition date, giving the Trustee dominion and control over it, not the Debtor. Even if the Fifth Circuit did not find Drye persuasive, Judge Clark was certain that the Circuit Court would not permit a post-petition disclaimer to be effective. Post-petition inheritance disclaimer avoided.

For more information about post petition inheritance disclaimer avoided- contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Bankruptcy tax refund.

Bankruptcy tax refundBankruptcy Tax Refund.  This is an article about what happens when there is a tax refund and the IRS files an offset.

Here’s an example of what happens.  A debtor filed a chapter 13 bankruptcy.  After the filing the IRS retain a portion of the debtors income tax return.  The Debtor sought to recover his bankruptcy tax refund, retained by the IRS in his chapter 13.  The IRS had retained a portion because it had been set off by the IRS against a priority tax liability. In re Jones, 359 B.R. 837 (Bkrtcy. M.D. Ga. 2006).

Judge Walker analyzed the three different approaches to this issue:

(1) the majority view that an IRS setoff under $553 is not permitted by the bankruptcy court for exempt property. See In re Jones, 230 B.R. 875 (M.D. Ala. 199); In re Alexander, 225 B.R. 145 (Bkrtcy. W.D. Ky. 1998);

(2) The minority view, that the setoff by the IRS is allowed, See In re Wiegand, 199 B.R. 639 (Bkrtcy. W.D. Mich. 1996); or

(3) An emerging view that the “overpayment” by the Debtor does not become a “refund” until and unless all setoffs have been applied, See Beaucage v. U.S., 341 B.R. 408 (D. Mass. 206); In re Baucom, 339 B.R. 504 (Bkrtcy, W.D. Mo. 2006); In re Pigott, 330 B.R. 797 (Bkrtcy, S.D. Ala. 2005).

The Court in this case chose the third options, premised on 26 U.S.C. S6402, which specifically allows setoffs from “overpayments”. From the characterization of the claim as an “overpayment”, it follows that the setoff is allowed and, after it is applied, only then does any excess become a ‘refund” which is an asset of the debtor, or the bankruptcy estate.

For more information about Bankruptcy and Taxes  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Bankruptcy and Disability Income

Bankruptcy and Disability IncomeBankruptcy and Disability Income. Is Disability Income considered income or property of the estate? Here’s a case where the court addressed bankruptcy and disability income.

In 1995, the debtor was diagnosed as suffering from depression. When he filed his Chapter 7 petition in 2000, he was receiving approximately $11,400.00 per month from a former employer as disability insurance, while he continued to work for a subsequent employer. Four days post-petition, the debtor ceased employment. Over a year later he submitted a disability claim to his second employer, seeking benefits retroactive to 1995 (the date the depression disability began). The claim was denied as to the time prior to termination of employment, but granted going forward, from the date employment ceased. This left the Debtor with monthly payments from disability insurance of approximately $21,700.00. The Trustee sought turnover of the disability payments as assets of the bankruptcy estate. In re Stinnett, 465 F.3d 309 (7th Cir. 2006).

Affirming the Bankruptcy and District Courts, the Circuit Court initially found that an insurance contract in which the debtor has an interest pre-petition, generally consituties property of the estate. Further, payments from such insurance contract in which the debtor has an interest pre-petition, generally constitutes property of the estate. Further, payments from such insurance policies, to the extent the debtor has a right to receive and keep such payments, are proceeds of estate property, which are also property of the estate. The court then addressed the debtor’s argument that this disability payment represented post-petition personal services income, which is exempt from becoming estate property under 541(a)(6). The debtor asserted that his entitledment to the payments was predicted on his inability to obtain personal services income, making them a “substitute” for such earnings, and their equivalent. Rejecting this argument, the Court cited In re Prince, 85F.3d 314 (7th Cir. 1996), holding that the “post-commencement earnings exception should be interpreted ‘extremely narrowly’ and ‘excepts only earings from services actually performed by an individual debtor.”

Therefore, “earnings obtained solely by virtue of the inability to perform services cannot be considered the legal equivalent of ‘earnings from services performed.”

For more information about Bankruptcy and Disability Income  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

 

Good Faith Bankruptcy

Good Faith BankruptcyGood Faith Bankruptcy – What is a good faith bankruptcy and why do we care  so much about it?  Here’s the issue – the bankruptcy code requires that a debtor’s petition is filed in “good faith”.  However, whether a person has filed their petition in good faith is subjective and a test by the Court can not begin to address all of the reason’s a petition is filed in good faith and in bad faith.  But generally, the Court historically looks at the 11 factors there were presented in the case of In Re Kull, 12 B.R. 659 (S.D. Georgia 1981.) Following is a list of the the 11 factors the Court considers when determining a good faith bankruptcy:

  1. the amount of the debtor’s income from all sources (for example was all the income disclosed);
  2. the living expenses of the debtor and his dependents;
  3. the amount of attorney’s fees
  4. the probable or expected duration of the Debtor’s Chapter 13 plan;
  5. the motivations of the debtor and his/her sincerity in seeking relief under the provisions of a Chapter 13 bankruptcy;
  6. the Debtor’s degree of effort (for example, did the debtor complete all the schedules);
  7. the Debtor’s ability to earn and the likelihood of fluctuation in his earnings;
  8. special circumstances such as inordinate medical expense;
  9. the frequency with which the has sought relief under the Bankruptcy Reform Act and its predecessors (has there been multiple filings);
  10. the circumstances under which the Debtor has contracted his debts and his demonstration bona fides, or lace of same, in dealing with his creditors; and
  11. the burden which the plan’s administration would place on the trustee.

Good Faith Bankruptcy – For more information about Bankruptcy Laws, contact the Remboldt Law Firm at 404-348-4081. Free consultations can be scheduled by calling 404-348-4081.  If bankruptcy is a good solution for your financial concerns, payment plan are available if needed and weekend appointments are also available.

Unperfected Secured Creditor

Unperfected Secured CreditorUnperfected Secured Creditor – Notice of unperfected secured creditor? Is the disclosure of an unperfected secured creditor inquiry notice?

Here’s an example, pre-petition, the Debtor refinanced the mortgage on her residence. However, the deed of trust securing the refinanced obligation was not recorded when the Debtor filed her Chapter 7 petition. In her Schedule A, the Debtor listed a “secured claim” of $134,740.00 against the property. In Schedule D, she listed a claim held by the refinancing creditor with a balance of $134,165.00. It further stated: “Incurred: 2002, Lien: deed of trust…” She also attached a copy of her 2003 mortgage interest statement.

When the Trustee sought to avoid the unrecorded mortgage, the creditor argued that the Trustee’s hypothetical bona fide purchaser status under § 544(a)(3)was defeated by constructive or inquiry notice to the Trustee of the unrecorded deed. This notice allegedly came from the information included in the Debtor’s bankruptcy schedules. The Bankruptcy Court agreed with the creditor, citing Professional Investment Properties of America, 955 F.2d 623 (9th Cir. 1992), and the Trustee appealed to the Ninth Circuit BAP, 361 B.R. 509 (9th Cir. BAP2006).

The Appellate Panel considered the specific statutory language, and found that a Trustee’s strong-arm power arises “as of the commencement of the case… before there could be any constructive notice from debtor’s bankruptcy schedules.” The Court then distinguished Professional Investment as an involuntary case in which the petitioning creditors stated, in the petition itself, that the claims were “supposedly secured by assignments of deeds of trust….” There the inquiry notice came from the petition, at the commencement of the case. Here, the case was commenced with the filing of the petition, such that the schedules and statements were filed after commencement of the case.

If no case were commenced by a petition, there would be no case in which to file statements and schedules, which must therefore be deemed filed after the petition, even if presented to the Clerk contemporaneously with the petition. Thus. any inquiry or constructive notice was ineffective against the Trustee, whose strong-arm powers arose prior to receipt of such notice.

See, however, In re Lauver, 372 B.R.757(Bkrtcy. W.D.Pa. 2007). which held contra on essentially identical facts. There. Judge Markovitz held the Trustee did not qualify as a bona fide purchaser of the property under Pennsylvania law. The Court found that a review of the Debtor’s bankruptcy papers, where the petition and statements and schedules were filed contemporaneously, would put a hypothetical purchaser using ordinary diligence upon notice as to whether the mortgage was still in effect. leading to further inquiry. Disclosure of unperfected secured creditor not inquiry notice. If you have a questions about a secured creditor’s lien, you should contact an attorney to help.

Unperfected Secured Creditor – For more information about Bankruptcy and secured creditor’s lien  – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Are Pre-petition checks delivered post-petition avoidable?

Are Pre-petition checks delivered post-petition avoidable?Are pre-petition checks delivered post-petition avoidable?   Here’s the story:  One day before filing for bankruptcy, a Debtor obtained a cashier’s check payable to his former personal injury attorney.  The check was sent express mail to the law firm’s post office box. The Trustee learned of the transaction, and established that the cashier’s check was not negotiated until five days after the debtor’s petition was filed. When the Trustee sought to avoid the payment under § 549,
the defendant (the personal injury attorney) argued that delivery of the check was before the petition was filed.  In re Scheu, 356 B.R. 751 (Bkrtcy. D. Idaho 2006 ).

Judge Pappas cited In re Mora, 199 F.3d i024 (9th Cir. 1999). which held that “the transfer of a cashier’s check for purposes of § 547(b) occurred at the time it was delivered rather than honored.” Applying Mora to § 549, the issue to be determined in this case was whether the transferee received the cashier’s check before the petition was filed. Based on the Trustee’s showing that the check was negotiated post-petition, the Court found the burden was on the transferee to prove it was delivered pre-petition. Refusing to take judicial notice that “express mail” is delivered on the day following mailing; the Court held for the Trustee, due to the defendant’s inability to prove when the check was actually received. Therefore, the check mailed before the debtor’s petition was presumed to be delivered post-petition and was avoidable under § 549.

Are Pre-petition checks delivered post-petition avoidable? For more information about Bankruptcy and the questions – are pre-petition checks delivered post petition avoidable – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.

Avoidance Action Timely Filed

Avoidance Action Timely FiledHow do you know if a Court would see an avoidance action timely filed? Here’s an example of a court’s process.

The order for relief was entered in debtor’s case on September 13, 2004. The trustee filed avoidance actions on September 13. 2006, seeking to avoid several transfers of real property and marketable securities that were made to debtor’s spouse. The spouse subsequently filed a motion to dismiss on the basis of the action being time-barred under § 546(a).  The bankruptcy court and district courts both overruled her dismissal motion.  The spouse then sought a ruling from the Eighth Circuit Court of Appeals, In re Raynor, 406 B.R. 375 (8th Cir. BAP2009).

The Eighth Circuit Court of Appeals likewise found that the avoidance action of the Trustee was timely filed under § 546(a) the court found that the specified avoidance actions “may not be commenced after the earlier of the later of 2 years after the entry of the order for relief.”

The Eighth Circuit Court of Appeals found that although the language was “inelegant,.. it was nevertheless unambiguous and included the 2-year anniversary date so long as the complaint was filed before midnight of that date.   Accordingly, the trustee’s avoidance action timely and not time-barred.

If you have questions about real property and securities transfers to a spouse when you are considering filing a bankruptcy, or if a transfer avoidance action timely filed – you should seek the advice of an experience bankruptcy attorney to discuss your options.

For more information about Bankruptcy and if an avoidance action timely filed – contact Cynthia Remboldt, at the Remboldt Law Firm at 404-348-4081. FREE consultations can be scheduled by calling 404-348-4081.  Evening and Weekend hours are available to meet with an attorney.  If bankruptcy turns out to be the best way to move forward considering your alternatives, goals and financial challenges, payment plans are available if you need them.