(7th Cir. June 23, 2016)

The Seventh Circuit reverses the bankruptcy court, concluding that the bankruptcy code permits modification of a confirmed Chapter 13 plan based on increased income post-confirmation. While the code does not expressly permit modification on this basis, other courts have permitted this. The trustee had filed a motion to increase the debtors’ plan payments based on an alleged $50,000 post-confirmation increase in the debtors’ annual income. Opinion below.

Judge: Adelman

Attorney for Debtor: Eugene Wedoff

(6th Cir. June 15, 2016)

The Sixth Circuit affirms the decision finding sanctions were appropriate against the attorney because he unreasonably and vexatiously multiplied the proceedings with repeated filings. The bankruptcy court did not abuse its discretion in entering the sanctions order. Opinion below.

Judge: White

Appellant: Dennis Allan Grossman

Attorney for Appellee: Louise M. Mazur, Marc Bryan Merklin, Brouse McDowell, Caroline Louisa Marks

(E.D. Ky. June 16, 2016)

(U.S. Sup. Ct. June 13, 2016)

The Supreme Court holds that Puerto Rico is a “State” for purposes of Chapter 9’s pre-emption provision, despite the Code’s definition of “State” excluding Puerto Rico for purposes of defining who may be a debtor under Chapter 9. Thus, Puerto Rico cannot authorize its municipalities to seek relief under Chapter 9 nor enact its own municipal bankruptcy laws. The district court properly enjoined enforcement of the laws enacted by Puerto Rico in 2014, which enabled its public utilities to modify their debts. Opinion below.

(7th Cir. June 13, 2016)

(7th Cir. June 10, 2016)

The Seventh Circuit reverses, holding the bankruptcy court applied too narrow of a baseline payment range to the creditor’s ordinary course defense in this preference action. While this court agreed that there were a few payments outside the ordinary course, the new value defense applied to completely offset those payments. Opinion below.

Judge: Sykes

Attorneys for Appellant: Nixon Peabody LLP, Richard Scott Alsterda, Theodore Eric Harman

Attorneys for Appellee: Clark Hill PLC, Pamela Joy Leichtling, Scott N. Schreiber

On June 10, 2016, the Treasury Department (Treasury) and the Internal Revenue Service (the IRS) issued final regulations on the federal income tax treatment of discharge of debt issued by disregarded entities (e.g., single member LLCs) and grantor trusts (e.g., investment trusts). Under the regulations, the exemption of cancellation of debt income of taxpayers that are insolvent or in a Title 11 case (bankruptcy) only applies if the owner of the disregarded entity or grantor trust is insolvent or is a debtor in a bankruptcy case.

(E.D. Ky. June 7, 2016)

(Bankr. E.D. Ky. June 6, 2016)

(6th Cir. June 6, 2016)

The Sixth Circuit affirms the B.A.P. and dismisses the appeal for lack of jurisdiction. Following the principal creditor’s objection, the bankruptcy court denied the trustee and debtors’ motion to approve a settlement of a legal malpractice claim held by the estate. The debtors appealed. The court finds that the appealed order was not a final order that could be appealed because the debtors were free to propose a new settlement for approval. Opinion below.

Judge: Kethledge