Westlaw Topical Highlights: Bankruptcy, June 24, 2013

June 24, 2013

BankruptcyWestlaw Topical Highlights for Bankruptcy provides summaries of significant federal and state judicial decisions and legislative and administrative activities affecting Bankruptcy law. A Westlaw subscription is required to access the documents linked from this page.

Claims: Debtor could not use cash collateral to pay creditors of its shareholders.

In re Universal Finance, Inc. 2013 WL 2467757 (Bkrtcy.M.D.N.C.)  Even assuming that the “doctrine of necessity” continued to apply to provide a possible basis for payment to unsecured creditors in a Chapter 11 case other than pursuant to confirmed reorganization plan, a debtor could not invoke the doctrine as a basis for using its limited cash collateral in order to pay banks that were creditors, not of the debtor, but of the debtor’s shareholders. It did not matter that the shareholders’ debt to one of these banks was secured by a mortgage on real property out of which the debtor operated its business, and that payment of the other bank was allegedly necessary to preserve a contingent source of financing for the debtor’s plan. It was pure speculation that, if the first bank were not paid, it would foreclose and evict the debtor, a tenant current on its rent, from the premises, or that the debtor could not continue operating its business from another location. Moreover, a contingent source of financing was merely convenient, not a necessity, and the ongoing nature of the proposed payments made this use of cash collateral harmful to other creditors in the case. (The full-text of the rest of the Topical Highlights are available within Westlaw Next, subscription required)

In re Universal Finance, Inc. 2013 WL 2467757

Avoidance: Trustee could avoid transfer of real property effected by unrecorded divorce decree.  In re Golemo 2013 WL 2932285 (Bkrtcy.D.Mass.)

Case Administration: Chapter 12 case had to be dismissed as not properly authorized.

In re Loverin Ranch 2013 WL 2477264 (Bkrtcy.D.Or.)

Bankruptcy Estate: Amendment to exemption schedule could not be denied on “bad faith” grounds.  Schwab v. Rockel 2013 WL 2476381 (M.D.Pa.)

Discharge: Intent required to except debt from discharge on “embezzlement” theory is not intent to defraud.  In re Ghaemi 2013 WL 2565122 (Bkrtcy.D.Colo.)

Debtor Protections: Postpetition state court domestic relations order violated automatic stay.  In re DeSouza 2013 WL 2991034 (1st Cir.BAP (Mass.))

Discharge: Sham postjudgment sale was in nature of fraudulent transfer, supporting denial of debtor’s discharge.  In re Roggasch 2013 WL 2633462 (Bkrtcy.E.D.Ark.)

Case Administration: City was “insolvent” on petition date, as required to be eligible for Chapter 9 relief.  In re City of Stockton, Cal. 2013 WL 2629129 (Bkrtcy.E.D.Cal.)

Case Administration: Request to reopen case would be denied as futile.  In re Owsley 2013 WL 2352604 (Bkrtcy.E.D.Tenn.)

Discharge: Conversion of sales proceeds was “willful and malicious injury.”  In re Rezykowski 2013 WL 3043410 (Bkrtcy.E.D.Pa.)

Parties: Complainant could not rely on admissions in debtors’ schedules to establish its standing as alleged “creditor.”  In re Bilfield 2013 WL 3062037 (Bkrtcy.N.D.Ohio)

Jurisdiction: Bankruptcy court had “related to” jurisdiction over trustees’ civil RICO claims.

In re Fiorillo 2013 WL 2636985 (Bkrtcy.D.Mass.)

Jurisdiction: Permissive abstention was warranted in debtor’s removed state-court action against insurer.  In re Laddusire 2013 WL 2543296 (Bkrtcy.W.D.Wis.)

Discharge: Debtor acted with fraudulent intent in appropriating judgment creditor’s consignment proceeds.  In re Marshall 2013 WL 2897043 (Bkrtcy.D.Mass.)

Plans: Res judicata did not apply to bar lender’s objection to subcontractor’s proof of claim.

In re 1555 Wabash LLC 2013 WL 3070779 (Bkrtcy.N.D.Ill.)

Discharge: Late-filed state tax returns were not “returns” under nondischargeability statute, making tax debts nondischargeable.  In re Pendergast 2013 WL 2897050 (Bkrtcy.D.Mass.)