The U.S. Court of Appeals for the Sixth Circuit recently held that a bankruptcy trustee seeking to recover fraudulent transfers could recover direct and indirect loan repayments made after the bank had knowledge of the debtor’s Ponzi scheme, but could not recover deposits not applied to pay back the bank’s debt because the bank was not a “transferee” under the Bankruptcy Code as to ordinary bank deposits.

More specifically, in a Chapter 9 bankruptcy proceeding, the debtor must allege that it negotiated in good faith at a pre-petition mediation. In Lake Lotawana, the mediation failed and the debtor alleged as a prerequisite to filing a Chapter 9 proceeding that it had negotiated in good faith. In response, the creditor sought the debtor’s mediation statement and argued that the mediation statement was not privileged.

(Bankr. W.D. Ky. Mar. 9, 2017)

The bankruptcy court grants the secured creditor’s motion for stay relief because it was inadequately protected as a result of there being insufficient funds to make the first payment to the creditor under the confirmed Chapter 12 plan. Opinion below.

Judge: Lloyd

Atttorneys for the Debtor: Kaplan & Partners LLP, James Edwin McGhee, III, Charity Bird Neukomm

Attorneys for Creditor: Andrews Law Firm, PLLC, Ashley Sanders Cox

The Appellate Court of Illinois, Second District, recently affirmed summary judgment in favor of a mortgagee that failed to meet the FHA requirement to either have a face-to-face meeting with the borrowers or to make “a reasonable effort” to arrange a face-to-face meeting before filing foreclosure, because doing so would have been a futile act after the borrowers’ mortgage loan debt was discharged in bankruptcy and they did not reaffirm the debt.

(6th Cir. B.A.P. Mar. 9, 2017)

(Bankr. W.D. Ky. Mar. 9, 2017)

The bankruptcy court grants summary judgment in favor of the creditor in this adversary proceeding in which the debtor alleged violations of the automatic stay and claims under the Kentucky Consumer Protection Act. The court holds that the creditor bank’s restriction of the debtor’s electronic privileges with respect to her accounts did not violate the automatic stay. Opinion below.

Judge: Stout

Attorney for Debtor: Ross Benjamin Neuhauser

Attorney for Creditor: Christopher M. Hill

Last month I posted a blog indicating that Gander Mountain was possibly preparing for Chapter 11 bankruptcy. The rumors were true.

(Bankr. E.D. Ky. Mar. 8, 2017)

The bankruptcy court grants the creditor’s motion to dismiss the debtor’s counterclaim in this nondischargeability action. The debtor failed to state a claim for conversion under Kentucky law. The debtor also failed to state claims under Kentucky’s statutes governing corporations, derivative actions, and shareholder claims. Opinion below.

Judge: Wise

Attorney for Debtor: Stuart P. Brown

Attorney for Creditor: Michael L. Baker

The United States District Court for the District of Massachusetts (the District Court) recently issued an opinion in the Paul Sagendorph bankruptcy case reversing the Bankruptcy Court's holding that a debtor can force a secured creditor to take title to its collateral in complete satisfaction of the creditor's secured claim.1 In reversing the decision of the Bankruptcy Court, the District Court held that the plain language of Sections 1322(b)(9) and 1325(a)(5)(C)2 does not empower a debtor to force a secured creditor to accept title to its collateral over that creditor's objection.3

It is commonly understood that, upon commencement of a bankruptcy case, section 362 of the Bankruptcy Code operates as an automatic statutory injunction against a wide variety of creditor actions and activities.