By Michael L. Moskowitz and Melissa A. Guseynov

In an opinion of interest to both debtors and judgment creditors, the Court of Appeals for the Second Circuit recently upheld the dismissal of a chapter 7 involuntary bankruptcy petition filed against debtor, Matthew Murray (“Debtor”), over the opposition of judgment creditor Wilk Auslander LLP (“Creditor”). Wilk Auslander LLP v. Murray, 17-1272 (2d Cir. Aug. 14, 2018). Read the full opinion here.

By Michael L. Moskowitz and Melissa A. Guseynov

In a recent memorandum opinion of interest, the Honorable Sean H. Lane, U.S.B.J., of the United States Bankruptcy Court for the Southern District of New York, held that a debtor’s attorney must disgorge fees received for filing a chapter 7 case where, among other things, counsel improperly utilized “appearance” counsel such that debtor was effectively left unrepresented. In re D’Arata, Case No. 18-10524 (Bankr. S.D.N.Y. Aug. 3, 2018). Read the full opinion here.

By Michael L. Moskowitz and Michele K. Jaspan

We recently reported on the success of our client in obtaining the imposition of monetary damages against a creditor for its violation of the bankruptcy discharge injunction. Our local bankruptcy judge ruled in debtor’s favor, despite counsel’s alleged good faith belief that her actions to collect the discharged debt were without malice or in violation of the Bankruptcy Code. Depending on the nature of the debt, creditors may operate under an incorrect presumption that their debt has not been discharged under the provisions of 11 U.S.C. 523 and undertake steps to collect their debt without first seeking a declaratory ruling from the court. Such was the case in a recent First Circuit decision, found here, where the court ruled the Internal Revenue Service (“IRS”) violated the discharge injunction when its employee took deliberate steps to collect on a debt, even though it had an alleged good faith belief the debt was not discharged and the collection actions of the IRS employee did not violate the discharge injunction.

By Michael L. Moskowitz and Melissa A. Guseynov

In an opinion of interest to debtors and creditors alike, the Court of Appeals for the Seventh Circuit affirmed a debtor’s four-year prison sentence for filing five chapter 13 petitions in what was determined to be a scheme to defraud her creditors. U.S. v. Williams, Case No. 17-2244 (7th Cir. June 6, 2018). Read the full opinion here.

By Michael L. Moskowitz & Melissa A. Gueynov

In an opinion of interest to Chapter 11 practitioners, the United States District Court for the Western District of Louisiana recently held that the rental value of a chapter 11 debtor’s unused leased equipment qualifies for administrative expense status if there are intangible benefits to the estate.  Kimzey v. Premium Casing Equipment LLC, 2018 U.S. Dist. LEXIS 42744 (W.D. La. Mar. 14, 2018). Read the full opinion here.

Kimzey involved oil field equipment leased - but not used - by debtor before filing for bankruptcy relief under chapter 11 of the Bankruptcy Code. Subsequent to its bankruptcy filing, debtor’s assets were purchased by a third party that did not buy the leased equipment. After the sale, lessor sought administrative expense status for the post-petition lease payments due, contending they were actual and necessary costs of preserving the bankruptcy estate.  

By Michael L. Moskowitz

Although Weltman & Moskowitz, LLP more often represents creditors in bankruptcy proceedings, the firm also represents a debtor from time to time. We recently represented a former client being harassed for payment by his former matrimonial attorney. What resulted is a playbook of “what not to do” after a debtor-borrower has completed her bankruptcy and received a discharge of her debts.

When a borrower seeks bankruptcy protection, whether under chapters 7, 11 or 13, the first thing the client should do is call us to determine their options. We will review the petition to determine next steps in a chapter 7 case, like the case here. We typically review the electronic docket to determine if there is a basis to object to debtor’s discharge or to the dischargeability of the debt.

By Michael L. Moskowitz and Melissa A. Guseynov

In an unpublished opinion dated October 19, 2017, the District Court for the Western District of Virginia held that the Virginia Department of Social Services was not entitled to receive funds paid to a chapter 13 trustee (“Trustee”) when debtor failed to confirm his chapter 13 plan. Virginia Dep’t. of Social Services v. Beskin, 2017 WL 4706912 (W.D. VA, Oct. 19, 2017).

In Beskin, debtor filed a chapter 13 bankruptcy petition listing, among other things, a $74,000 child support debt to the Virginia Department of Social Services (“State”). Debtor made plan payments totaling $3,000 to the Trustee, but was subsequently unable to confirm his chapter 13 plan. After debtor’s chapter 13 case was dismissed, State served Trustee with an order pursuant to Virginia’s child support enforcement statute, requiring Trustee hold the $3,000 rather than returning it to debtor. Seeking guidance, Trustee filed a motion with the Bankruptcy Court. The Bankruptcy Court determined Trustee must return the funds to debtor. State appealed to the District Court.

By Michael L. Moskowitz and Melissa A. Guseynov

In a recent opinion, the Court of Appeals for the Third Circuit reversed the lower courts’ rulings by holding that a debtor “receives” goods for purposes of section 503(b)(9) of the Bankruptcy Code when the debtor obtains physical possession of those goods. In re World Imports, Ltd., 862 F. 3d 338 (3d. Cir. 2017). Read the full opinion here.

By Michael L. Moskowitz and Michele K. Jaspan

A familiar scenario which Credit Unions and other lenders face is when their borrower obtains a discharge in bankruptcy, but still wishes to maintain a banking relationship with lender rather than try and obtain credit with a different institution. It is also common for Credit Union membership agreements to include standard verbiage that if the Credit Union incurs a loss due to borrower’s activities, or if an account is maintained in a manner to cause a loss to the Credit Union, then, in that instance, the Credit Union may terminate all accounts and services.  

By Michael L. Moskowitz and Melissa A. Guseynov

In an unpublished opinion dated July 19, 2017, the Court of Appeals for the Second Circuit (“Second Circuit”) denied a petition for rehearing of a decision by the District Court for the Western District of New York granting standing of an assignee’s rights to enforce individual notes and mortgages. The Court affirmed, among other things, that commercial lenders that advanced money and obtained assignments to pay off the loans of a chapter 11 debtor from individual lenders were entitled to file proofs of secured claims in the debtor’s bankruptcy case, regardless of whether the assignments were properly transferred.  Arnold v. First Citizens National Bank, 2017 WL 3049414 (2d. Cir. July 19, 2017).