Category Archives: Questions Concerning Assets and Exemptions

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.

Trustee is Bona Fide Purchaser

Trustee is Bona Fide PurchaserTrustee is Bona Fide Purchaser – Is Trustee is bona fide purchaser despite simultaneous filing of debtor’s electronic petition and schedules. Here’s an example,

When debtor refinanced her condominium, she gave Chase a deed of trust to secure her note that was not recorded. Instead, all that was recorded was the deed of conveyance from the previous loan, which was paid off in full. Thus, it appeared from county records that the condo had been paid off.

Debtor later filed for Chapter 7 relief, electronically filing her petition and schedules simultaneously. The schedules listed Chase’s secured debt. Chase then commenced an adversary proceeding to quiet title to its lien. It actually prevailed in the bankruptcy court on the theory that, under In re Professional Investment Properties of America, 955 F.2d 623 (9′” Cir. i992), the schedules provided constructive notice to the trustee of the unrecorded lien. The SAP reversed.

Chase appealed to the Circuit Court, which affirmed. Chase Manhattan Bank, USA, N.A. v. Taxel (In re Deuel), 594 F.3d 1073 (9′” en.2010). The Circuit Court focused on the phrasing in § 544(a)(3) that the trustee has the status of a bona fide purchaser of real property from the debtor “at the time of commencement of the case” without regard to any knowledge of the trustee “as of the commencement of the case .”

The court observed that when a Chapter 7 case is filed, only the petition commences the case, regardless of what else happens at the same time. “The trustee has not even been appointed when the petition is filed and could not possibly be a bona fide purchaser for value without notice upon the filing of the petition, but he is treated by the statute as though he were.” Moreover, because the strong-arm power exists without regard to any knowledge of the trustee it did not matter whether a hypothetical trustee who immediately read what was filed would have actual knowledge of the lien from the schedules. Finally, the Circuit Court distinguished Professional Investments limited to involuntary petitions that gave notice of an interest and further rejected Chase’s argument that its current lien should be treated as subrogated to its own previous lien, since it used the money from the most recent refinancing to payoff the loan from the prior refinancing.

If you have questions about whether the Trustee is bona fide purchaser in a chapter 7 case, you should contact an experienced bankruptcy attorney.

Trustee is Bona Fide Purchaser – for more information about Bankruptcy laws  – 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.

Determining the Initial Transferee in a Corporate Transaction

Determining the Initial Transferee in a Corporate TransactionDetermining the Initial Transferee in a Corporate Transaction – How does the bankruptcy court go about determining the initial transferee in a Corporate Transaction? Here is a recent court case example.

The principal of the corporate Debtor obtained a divorce from his wife pre-petition. Pursuant to the divorce decree he had a continuing support obligation to his ex-wife and their children.

During the applicable four-year fraudulent conveyance reach-back period. multiple checks totaling $68,684.25 were written to the ex-wife from the corporate Debtor’s bank accounts. The Trustee sought avoidance and recovery of these payments under §544(b), applicable state law. and §550.

The ex-wife asserted that her former husband, the Debtor’s principal was the initial transferee. She argued that though the corporate checks were made to her.  The “economic reality of the transactions” amounted to her ex-husband withdrawing corporate money to pay the support obligations. She also argued that the Debtor’s corporate financial records identified the payments as advances to its stockholder, or as a distribution of capital to him.

The Bankruptcy Court ruled for the Trustee, and appeal was taken to the First Circuit BAP. Antex, Inc., 397 B.R. 168 (1st Cir. BAP 2008). The Appellate Panel acknowledged that lower courts were split on the question of whether the principal of a debtor corporation was the initial transferee of corporate funds paid to satisfy a personal obligation.  However, the Court noted that all of the circuit courts addressing the issue (being the Fourth , Ninth, Tent h and Eleventh Circuits) had all concluded that the debtor principal was not the initial transferee. These courts found the principal lacked “legal domination and control” or , stated another way, the “right to put those funds to one’s own purpose.” The checks were direct transfers from the Debtor’s corporate account to the ex-wife and, once issued, the principal had no right to use the
money for any other purpose .  Furthermore, characterizing the payments as “advances to a stockholder” or as “distributions of capital” did nothing to establish the requisite “legal dominion and control” by the principal. If you have questions about how the courts go about determining the initial transferee in a corporate transaction – you should seek the advice of an attorney.

Determining the Initial Transferee in a Corporate Transaction – for more information about determining the initial transferee in a corporate transaction – 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.

Plea Agreement establish Ponzi debtors intent to defraud

Plea Agreement establish Ponzi debtors intent to defraudPlea Agreement establish Ponzi debtors intent to defraud – Does a plea agreement establish Ponzi debtors intent to defraud?

After filing for Chapter 7 relief, a Debtor was charged with crimes in connection with an alleged Ponzi scheme. Pursuant to a plea agreement, he subsequently pled guilty to the charges and was sentenced to prison . In the plea agreement, he admitted that he operated a Ponzi scheme over a lengthy period.

In a fraudulent transfer action , the Trustee sought to avoid transfers from the Debtor to investors, to the extent they exceeded the amount invested (“false profits”). The Bankruptcy Court granted summary judgment to the Trustee, finding that the Debtor’s guilty plea and plea agreement conclusively established that the Debtor had operated a Ponzi scheme from which the actual intent to defraud his creditors would be imputed. The District Court affirmed.

Further appeal was taken to the Ninth Circuit. In re Slatkin, 525 F.3d 805 (9th Cir. 2008). The Circuit Court also affirmed, finding that once the existence of a Ponzi scheme is established, payments received by investors as purported profits are deemed fraudulent transfers as a matter of law. The Circuit Court further noted that the Debtor was not a “stockbroker” under the Code and, therefore, the Trustee was not barred by §546(e). The Court also rejected the investors’ argument that the plea agreement should not have been admitted because it was hearsay. The Court found it to be admissible under Federal Rule of Evidence 807. The admissions in the plea agreement were more probative on issues of the Debtor’s intent to defraud than any other evidence the Trustee could procure. The interest of justice would be best served by its admission as evidence. Further. the plea agreement had the equivalent circumstantial guaranties of trustworthiness as a statement covered by Rules 803 or 804 . A plea agreement does establish a Ponzi debtor’s intent to defraud. If you have questions about a Ponzi scheme you should seek the advice of an attorney.

Plea Agreement establish Ponzi debtors intent to defraud – for more information about Bankruptcy and plea agreements establish a Ponzi debtor’s intent to defraud  – 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 Order to Vacate Home

Bankruptcy Order to Vacate HomeBankruptcy Order to Vacate Home. In a bankruptcy, can you be ordered to vacate your home? The answer is yes. Here’s what happened in another case.

The Trustee successfully avoided the lien on a debtor’s residence. Thereafter, the trustee sought to sell the home in order to realize the value for the benefit of the bankruptcy estate. Debtors refused to cooperate and argued that their exemptions exceeded the value of the home thereby depriving the trustee of the ability to administer the asset.

Alternatively, the debtors argued that the trustee would be required to foreclose the lien thereby giving the debtors an opportunity to exercise their right of redemption. The trustee moved for turnover of the property. The court granted the motion. In re Neal, 424 B.R. 235 (Bankr. E.D. Mich. 2010). Judge Rhodes first held that debtors would only be entitled to an exception to the extent of any equity therein, and there was none. Next the court found that the trustee was not required to foreclose in her capacity as holder of the lien on the property, because instead could exercise the rights of a trustee to sell the property under the Bankruptcy Code.

As the debtors had failed to cooperate with the trustee in the marketing of the property, the court held that the trustee was entitled to have them removed so that she could perform her statutory duties as a trustee. If you have questions about a bankruptcy order to vacate home, you should seek the advice of a knowledgeable bankruptcy attorney.

For more information about Bankruptcy and your home  – 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.

Dismissal of Chapter 7 Case

Dismissal of Chapter 7 CaseDismissal of Chapter 7 Case. Can the Court reject a debtor’s request to dismiss his case? The answer is yes! Here’s an example.

After a Debtor’s case was converted from Chapter 13, the Chapter 7 Trustee proposed settlement of a discrimination suit which the Debtors had belatedly disclosed in a second amendment to their schedules. The Debtors did not agree with the settlement; and moved to dismiss their case for failure to file payment advices and a statement of monthly net income within the requisite 45 days under 521. The Trustee objected and the Bankruptcy Court “excused” the Debtors’ failure to file under these circumstances. The District court reversed, finding no authority to do anything other than dismiss after the 45-day deadline. Appeal was taken to the First Circuit. In re Acosta Rivera, 557 F.3d 8 (1st Cir. 2009).

The Circuit Court noted the two opposing views. On one side, In re Parker, 351 B.R. 790 (Bkrtcy, N.D. Ga. 2006); In re Jackson, 348 B.R. 487 (Bkrtcy. S.D. Iowa 2006); In re Bonner; 374 B.R. 62 (Bkrtcy, W.D. NY 2007), finding that special circumstances can warrant nunc pro tunc relief.

On the other side, Warren v. Wirem, 378 B.R. 640, (Bkrtcy, N.D. Cal. 2007) and In re Hall, 368 B.R. 640 (Bkrtcy, W.D. Tex 2007), holding that the Court must dismiss the case after expiration of the 45 days.

The First Circuit found that neither approach “satisfies both the head and heart in equal measure.” Acknowledging that the stricter reading might appear to address a congressional effort to reduce the escalation of bankruptcy filings, the Court also found that Congress, through the enactment of BAPCPA, “was not bent on placing additional weapons in the hands of abusive debtors.”

Thus, the Court held that “where…there is no continuing need for the information or a waiver is needed to prevent automatic dismissal from furthering a debtor’s abusive conduct, the Court has discretion to take such action…The great divide in 521 is between information that is required and information that is not. The Act allows courts to do the sifting suggested by that divide without rigid adherence to the 45-day deadline.

Dismissal of Chapter 7 Case – for more information about Bankruptcy and if you are able to dismiss a chapter 7 case after you file it  – 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 Cars

Bankruptcy and CarsBankruptcy and Cars

Bankruptcy and Cars.  What options do I have to keep my Car is I file Bankruptcy and I have a loan on my car? When you file a bankruptcy, you will have the option to declare your the intention to “retain collateral and continue to make regular payments” on a car loan.  You should not that the Court finds that: 1) the automatic stay expires 30 days after filing, 2)the collateral was no longer property of the bankruptcy estate, and 3) repossession of the vehicle did not violate the say after 30 days. For more information you can review the case:  In re McFall, 356 B.R. 674 (Bkrtcy. N.D.) Ohio 2006).

Under S 521(a)(2) a debtor who has financed their car, and filed bankruptcy, has 30 days to declare their intention to reaffirm, redeem, or surrender their car (or other personal property); and another 30 days after the 341 hearing to perform that intention. If the debtor does not reaffirm, redeem, or surrender their car (or other personal property) timely, then X362 (h) provides that the stay is lifted as to the property and the creditor is able to recover the car (or other collateral), since it ceases to be part of the property of the bankruptcy estate. Thus, in such cases, not only can the creditor take the collateral, but the Trustee in a Chapter 7 case also loses the bankruptcy estate’s interest in it as well and is not able to take possession of the property.

For more information about Bankruptcy and cars and your concerns regarding your car – especially if it is financed  – 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.