On September 14th, a Bankruptcy Court entered partial summary judgment in favor of defendants, brokerages through whom the debtor conducted a fraudulent stock lending scheme. The Chapter 7 bankruptcy trustee cannot avoid as fraudulent transfers funds and stock received by defendants directly from the victims of the scheme, margin interest paid to defendants by the debtor, and cash transfers that the debtor directly deposited into the brokerage accounts in the year prior to the bankruptcy filing.
On September 15th, the Sixth Circuit resolved a conflict among the district courts within the circuit. It held that a bank holding the undersecured home mortgage of a Chapter 13 debtor who is in arrears at the time of filing, is entitled to receive under the Chapter 13 bankruptcy plan fees and costs in the arrearage cure. Deutsche Bank National Trust Co. v. Tucker.
On July 2nd, the Sixth Circuit affirmed a bankruptcy court's finding that, under Kentucky law, a bank did not perfect its security interest in an auto loan until that security interest was noted on the title. Because perfection did not occur within 20 days after the debtor received possession of the auto, Section 547(c)(3) of the Bankruptcy Code did not protect the bank's loan from avoidance as a preferential transfer. Branch Banking and Trust Co. v. Brock.
Two recent rulings have provided significant guidance on the determination of whether an entity is eligible to be a debtor under Chapter 9 of the Bankruptcy Code. On April 26, 2010, the Bankruptcy Court for the District of Nevada issued a decision denying a motion to dismiss the Chapter 11 case of Las Vegas Monorail Company (LVMC) filed by Ambac Assurance Corp. In re Las Vegas Monorail Company (Las Vegas Monorail).
On April 12th, the Sixth Circuit held that a Chapter 13 debtor has standing to bring an avoidance action even when the bankruptcy trustee does not. It further held that the defendant mortgage company perfected its lien by equitably converting the lien on plaintiff's manufactured home to one for real property when the state court entered judgment on defendant's lis pendens claim. Since that order was entered during the 90 day preference period, the lien was avoidable.
This week, in a 2-1 decision affirming the District Court’s reversal of a ruling of the Bankruptcy Court for the Eastern District of Pennsylvania, the United States Court of Appeals for the Third Circuit held that secured creditors do not have a right as a matter of law to credit bid their claim at an auction pursuant to a plan of reorganization where the debtor intends to impose the plan on its secured creditors through a “cramdown” under section 1129(b)(2)(A)(iii) of the Bankruptcy Code; i.e., a plan providing the secured creditors with the “indubitable equivalent” of their secured claim.
On March 18th, the Fifth Circuit held that a U.S. bankruptcy court may offer avoidance relief under a foreign country's law in a Chapter 15 bankruptcy proceeding. Plaintiffs had been appointed trustees by a Nevis court in a Nevis winding up petition. Plaintiffs filed a Chapter 15 bankruptcy petition in the U.S. alleging that the debtor had transferred assets to put them out of the reach of the Nevis court. The U.S.
Defanging Stern v. Marshall1: The United States District Court for the Southern District of New York Modifies the Reference of Bankruptcy Matters to Address Issues Resulting from the Supreme Court’s Ruling
On January 11th, the Eighth Circuit held that a bankruptcy court properly awarded summary judgment to the bankruptcy trustee in a suit seeking to avoid as a preferential transfer, the pre-petition transfer of a mortgage from the debtor to the bank. Because the bank failed to record the home mortgage prior to the borrower's filing of a Chapter 7 bankruptcy petition, Section 547(e)(2)(C) of the Bankruptcy Code deemed the transfer of the mortgage to have occurred immediately before the debtor filed his bankruptcy petition.