In a decision approved for publication, addressing the intersection of New Jersey Court Rule 4:5-4 and 11 U.S.C. 524(a), the New Jersey Appellate Division recently held that a bankruptcy discharge precluded a creditor from obtaining a judgment of personal liability and debtor’s failure to plead that defense did not waive it. Vadim Chepovetsky and Svetlana Nashtatik v. Louis Civello, Jr. , No. A-0476-21 (App. Div. Jun. 16, 2022).

The United States District Court for the Western District of New York recently upheld the findings of a Bankruptcy Court, which held that the in rem tax foreclosure of the subject property was a fraudulent conveyance. SeeDuvall v. Cty. of Ont., 2021 U.S. Dist. LEXIS 216970 (W.D.N.Y. 2021). The matter arose from the tax foreclosure of property (the “Property”) for the non-payment of taxes arising in 2015. In October 2016, the County issued a foreclosure petition and notices, advising that interested parties had the right to redeem the Property on or before January 13, 2017.

In a split decision, the United States Court of Appeals for the Ninth Circuit recently determined that the Bank of New York Mellon (the “Bank”), as first deed of trust lienholder, could challenge a homeowner’s association’s (“HOA”) sale of a property as a violation of an automatic bankruptcy stay, giving the Bank superior title. SeeBank of New York Mellon as Tr. for Certificateholders of CWALT, Inc., Alternative Loan Tr. 2005-54CB, Mortg. Pass-Through Certificates Series 2005-54CB v. Enchantment at Sunset Bay Condo. Ass’n, 2 F.4th 1229 (9th Cir. 2021).

The U.S. Court of Appeals for the Sixth Circuit recently ruled in a case involving a Chapter 13 debtors’ attempt to shield contributions to a 401(k) retirement account from “projected disposable income,” therefore making such amounts inaccessible to the debtors’ creditors.^[1] For the reasons explained below, the Sixth Circuit rejected the debtors’ arguments.

Case Background

A statute must be interpreted and enforced as written, regardless, according to the U.S. Court of Appeals for the Sixth Circuit, “of whether a court likes the results of that application in a particular case.” That legal maxim guided the Sixth Circuit’s reasoning in a recent decision^[1] in a case involving a Chapter 13 debtor’s repeated filings and requests for dismissal of his bankruptcy cases in order to avoid foreclosure of his home.

The Eleventh Circuit recently affirmed a Bankruptcy Court and held that dismissal of an underlying bankruptcy case did not divest the Bankruptcy Court of jurisdiction in related quiet title action. In re Lindsey, 2021 WL 1140661 (11th Cir. 2021). In 2015, the plaintiff filed a voluntary petition for Chapter 13 bankruptcy relief. In his schedule of assets, the plaintiff listed a fee simple interest in a commercial multi-tenant building and an adjacent vacant lot.

The Fifth Circuit recently affirmed a Bankruptcy Court’s order, finding that a bank's properly perfected security interest in a debtor’s assets had priority over oil producers’ unfiled, unperfected security interests in oil proceeds, but did not have priority over a statutory lien granted to certain producers under the Oklahoma Lien Act. SeeMatter of First River Energy, L.L.C., 986 F.3d 914 (5th Cir. 2021). In the case, First River Energy, LLC (the “Debtor”), a Delaware limited liability company headquartered in Texas, filed a petition for Chapter 11 bankruptcy.

On January 14, 2021, the U.S. Supreme Court decided City of Chicago, Illinois v. Fulton (Case No. 19-357, Jan. 14, 2021), a case which examined whether merely retaining estate property after a bankruptcy filing violates the automatic stay provided for by §362(a) of the Bankruptcy Code. The Court overruled the bankruptcy court and U.S. Court of Appeals for the Seventh Circuit in deciding that mere retention of property does not violate the automatic stay.

Case Background

When an individual files a Chapter 7 bankruptcy case, the debtor’s non-exempt assets become property of the estate that is used to pay creditors. “Property of the estate” is a defined term under the Bankruptcy Code, so a disputed question in many cases is: What assets are, in fact, available to creditors?

Once a Chapter 7 debtor receives a discharge of personal debts, creditors are enjoined from taking action to collect, recover, or offset such debts. However, unlike personal debts, liens held by secured creditors “ride through” bankruptcy. The underlying debt secured by the lien may be extinguished, but as long as the lien is valid it survives the bankruptcy.