Bankruptcy docket roundup – November 29, 2021

Yes BK court really is in the post office.

Since it’s my blog and my jurisdiction, let’s start with the Ninth Circuit Court of Appeal. Got two appeals from lower court appeals, which is to say, the appellants already had a shot at appeal, whether it was with a district court or the 9th Circuit Bankruptcy Appellate Panel (BAP).

Let’s start with the appeal from the 9th Cir. BAP. Ninth Circuit rejects an appeal from the bankruptcy appellate panel as to whether an advance on an inheritance is a loan that can be discharged in bankruptcy. The BAP and this court rule that it cannot. Mellem v. Mellem (21-60020) Judges Schroeder, Fletcher, and Miller.

Second, the Ninth Circuit summarily affirmed the district court’s ruling from a pro se appeal from a bankruptcy court. Roughly, the appellant failed to follow the rules correctly, including FRBP 8003. Brugnara v. Brugnara (19-17267) Judges Owen, Bade, and Lee.

We have some more appellate court action as well, albeit pretty lightweight like the Ninth. The Fourth Circuit Court of Appeal summarily denied a petition to appeal from the lower district court because the underlying bankruptcy case was dismissed, so… no jurisdiction. Holmes v. Haynsworth (21-153)

Returning to the 90 or so bankruptcy trial courts, starting in Atlanta in the Northern District of Georgia, ruling on summary judgment arising out of disputes between the debtor and her mortgage servicer. Servicer wins most of the summary judgment points; however, trial will proceed on allegations of discharge and stay injunction violations. White-Lett v. Bank of NY Mellon (20-6278-BEM), Judge Ellis-Monro.

Moving up to the Southern District of New York, objection to pilots’ proofs of claims because of technicalities in collective-bargaining agreements is sustained. Interesting issues related to the confluence of collective bargaining contracts and “flow through” agreements intersecting with the POCs. In re: AMR Corp. (11-15463), Judge Lane.

In the Eastern District of Michigan, an adversary proceeding based on a fraudulent investment scheme to create software for healthcare organizations is ongoing. Today’s opinion arises out of a motion for summary judgment where Judge Randon concludes that “by a fine margin” there are sufficient facts in dispute to proceed to trial. Bojkovic v Kutsomarkos (20-04348), Judge Randon.

Up near Gerry Spence territory in the District of Montana, summary judgment on an undue hardship student loan case is denied (go debtor!). She owes $160k on a salary of $40k. I know the facts are, generally, rooted in cold, hard numbers, but summary judgement seems like it would super dangerous for a sympathetic debtor like this. Luckily, her case lives (I’m partial to student loan plaintiffs). Bonus for readers: interesting discussion of key nuances of the Brunner test in the Ninth Circuit as well. Box v. Granite State Mgmt. & Res. (21-9004-BPH), Judge Hursh.

And another student loan case! Returning to the Northern District of Georgia, post-trial judgment and opinion that debtors’ student loans are not an undue hardship (ugh) where co-signor debtors were caring for their adult child. Think I got the facts right on this, will review. Clark v. Wells Fargo (18-4012), Judge Ellis-Monro.

Seeing as how I have a pending student loan adversary, I think Box and Clark are next up for the podcast (Apple Podcasts link)!

See you tomorrow bankruptcy geeks!

Disclaimer: on these posts, I do not necessarily read the entire case. Often I don’t, in fact. I usually skim them briefly, so if you see anything I got really wrong or an important nuance I missed… please let me know by sending me an email!

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Landlord slapped with 523(d) attorney fees

Hey podcast listeners! Got a new episode for you today.

Down in Bradenton, Florida, a disgruntled landlord chased his former tenants into bankruptcy court attempting to keep his eviction judgment alive. The tenants, now bankruptcy court debtors, not only beat the 523(a)(2)(B) complaint but won attorney’s fees against the landlord.

Give today’s podcast a listen and let me know what you think. This is only my third episode, so I’m still trying to figure out what I’m doing.

The case is Diaz-Saavedra v. Pearson (In re Pearson) (M.D. Fla., Oct. 28, 2021), which I’ve attached to this post below.

The Bankruptcy Opinions Podcast

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Not so fast debtor!

Not so fast individual Chapter 11 debtor’s counsel! You might need a few days before reopening the case and discharging an individual chapter 11 debtor.

Before I start, you should know this is the kind of case only a civil and bankruptcy procedure nerd would love, which is precisely the category I fall in. And it’s definitely of interest to a small percentage of the bankruptcy bar. 

Today’s post and podcast is about In re Hill out of Southern District of Florida, Fort Lauderdale Division, 13-18344-PDR, filed yesterday on November 23. It’s an individual Chapter 11 case, which are pretty rare, although I got a unique opportunity to get exposed to them when I was clerking in bankruptcy in Arizona during the Great Recession.

As is fairly common, the case was temporarily closed while the debtor was making payments. This is a fairly common practice to avoid hefty quarterly United States Trustee payments.

Bankruptcy courts have routinely approved the practice in confirmed individual chapter 11 cases of administratively closing the case while the debtor makes payments under the plan progressing towards earning a discharge. This practice, approved by the United States Trustee, benefits the estate because the debtor need not bear the expense of filing operating reports or paying quarterly UST fees. In this case, after having made all plan payments, the Debtor seeks to simultaneously reopen the case, have his final report approved, obtain a discharge, and close the case all on the same date and in doing so avoid having to file operating reports and paying the associated UST fees. 

The debtor in this case got to the end of the payments, so he moved to reopen the case and obtain a discharge. 

The catch in this case is that he was trying to get all the relief on the same day: reopen the case and get a discharge. 

The US trustee objected because the creditors couldn’t object while the case was closed. 

The court agreed and ruled the case could be reopened but that the discharge hearing would have to wait until the creditors had thirty days to object. 

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Bankruptcy docket round up – November 23, 2021

Lobby of Bankruptcy Judges Kwan and Russell in the Central District of California

Got up early this morning on the hunt for a case or two to cover in my new podcast series. As always, even with bankruptcy cases at historic lows, there’s a lot going on!

In a new published case out of the Ninth Circuit BAP, Judges Lafferty, Faris, and Spraker affirmed trial court’s dismissal of an adversary proceeding against the debtor. Plaintiff failed to perfect its lien under California law. This court published because it wanted to clarify that 108(c) doesn’t toll filing notices under 546(b). Philmont Management v. 450 S. Western Ave. (2:20-bk-10264-ER).

Turning to the trial courts, there were two opinions out of the Eastern District of Michigan. A subchapter V case was dismissed for failing to file a plan. In re Back To Life Properties. In a different case, Judge Opperman granted summary judgment for a 523(a)(4) complaint over a construction dispute. Miller v. Safford.

Heading south to Kansas, Judge Somers wrote a fairly long and complex opinion regarding Summary judgment in a chapter 12 case regard a 363 sale. In re Parsons.

In a District of Nebraska court, a chapter 11 plan was denied because of concerns over a 1111(b) election. Those elections always confused the daylights out of me, so I think I’ll skip it for today’s podcast! In re Topp’s Mechanical.

Over in Delaware, the court denied cram down on a debtor’s primary residence. Pedicone v. Ajax Mortgage.

Nearby, in the District of Columbia, summary judgment was granted in dispute over the sale of a house and fraud claims under 523(a)(2). Johnson v Johnson.

In South Carolina, a “frequent” pro se litigant’s chapter 7 was dismissed. In re France.

In the case I’ll probably cover in the podcast, a Southern District of Florida court issued a decision about temporarily closing an individual chapter 11 case to avoid administrative fees. In re Hill.

Let’s head back West! Next door to California, in Arizona, Judge Collins who recently paneled an interesting conversation at the ABI’s Consumer Bankruptcy Extravaganza and who’s court I observed in person once, issued an amusing opinion about objections to proofs of claim under the Affordable Care Act. In re Vallejo.

Disclaimer: on these posts, I do not necessarily read the entire case. Often I don’t, in fact. I usually skim them briefly, so if you see anything I got really wrong or an important nuance I missed… please let me know by sending me an email!

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Bankruptcy docket roundup – November 22, 2021

View of a bankruptcy courtroom in Chicago, Illinois

This might be a fun project to do… round up bankruptcy cases from the day before. Let’s go!

In the storied Southern District of New York, there’s an involuntary case proceeding against a law firm where $8 million in escrow accounts went missing. The managing partner of the firm is facing criminal charges, and now Judge Jones is threatening jail time for misconduct in the bankruptcy case. Pretty interesting because it implicates a conflict between the debtor’s Fifth Amendment rights and bankruptcy court power. In re Kossoff PLLC (21-10699).

Fewer fireworks, but possibly more interesting to Western District of Virginia practitioners, Judge Connelly overruled the chapter 7 trustee’s objection to debtor’s claimed $10,000 in farming equipment. In re Ross (20-50885).

Returning to the Northeast, in New Hampshire Judge Harwood denied a motion to avoid what looks to be a judicial lien against the debtor’s house. In re Delong (20-10837-BAH).

Finally, in the Eastern District of Michigan, Judge Opperman denied a liquidating trustee’s motion against the State of Michigan. In my podcast, I talk about bringing you into the bankruptcy conversation, but this case looks more likely to be a long-running dispute that would be summarize in just a few moments. In re Boyce Hydro, LLC (20-21214-dob).

Disclaimer: on these posts, I do not necessarily read the entire case. Often I don’t, in fact. I usually skim them briefly, so if you see anything I got really wrong or an important nuance I missed… please let me know by sending me an email!

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Update on the CACB Local Rules CLE

I recently updated the event page for my upcoming CACB Local Rules CLE and wanted to share it with you.

Bankruptcy law is complex enough. Add in the Federal Rules of Civil Procedure, the Federal Rules of Bankruptcy Procedure, the Local Bankruptcy Rules of the Central District, and practitioners have a maddening maze to navigate with their clients.

The Central District of California’s rules are particularly complex in their length and scope, but also how they interweave the Court Manual and local forms as well. 

This is the first of a series of free continuing legal education (CLE) sessions to help practitioners in Central District refresh and discover new aspects of the rules they possibly hadn’t previously considered.


  • Overview of the Local Bankruptcy Rules in the context of the other rules
  • Deep dive on certain rules, including their relationship to the FRBPs, important cases, and other obscure topics like the Court Manual


  • Attorneys new to bankruptcy practice in the CACB
  • Experienced attorneys who would like a refresh on the Local Bankruptcy Rules
  • Staff and paralegals 

CLE CREDIT: 1.0 hours of credit (application pending)

COST: Complimentary for practitioners and their staff

What is Chapter 20?

Let’s say you have a house with a first and second mortgage on it. You end up in financial trouble, so you file a Chapter 7 case. Most of your debts are discharged, including your personal liability on the mortgages.

However, you continue to make payments on the mortgages because they’re secured debts. If you don’t make the payments, the mortgage holders can foreclose.

It’s hard to imagine it today, but let’s say property values decline. The value of the house drops below the amount owed on the first mortgage. So you file a chapter 13, and “strip” the second lien.

But what happens to debt on the second mortgage? 

If not for the prior Chapter 7, you would have to pay some some of the second mortgage through the plan as an unsecured debt. But here, recall that the Chapter 7 discharged personal liability.

This is the so-called “chapter 20” situation because of the combined effects of the Chapter 7 and 13 on the second mortgage. (There is not actually a chapter 20 in the Bankruptcy Code.)

In the Ninth Circuit, after a 2019’s BAP decision in Washington v. Real Time Resolutions, Inc., the second mortgage does not need to be paid in the Chapter 13 plan, which could save debtors a lot of money. 

Attorneys should keep it in mind… if property values ever decline again. I remember doing a lot of Chapter 13 lien strips back in the Great Recession. A chapter 20 could have been a useful tool back then for some clients.

For a more detailed write up, please read Gregory Salvato’s well written analysis for the Insolvency Committee at the California Lawyers Association.

Coming Soon: Free CLE on CACB’s Local Bankruptcy Rules

Hi Folks, as I mentioned previously, I’m trying to find the time to do some writing and thought leadership on the Central District of California’s (CACB’s) Local Bankruptcy Rules (LBRs).

They’re surprisingly (or, maybe not surprisingly) complex in that they intermix a lot of different sources such as the Federal Rules of Bankruptcy Procedure (FRBP), the bankruptcy Court Manual, and of course the local forms.

So there’s a lot to write and think about.

However, rather than wait to publish some formal book or even a series of blog posts, either of which can take a long time, I’m planning to host a free CLE for the local bankruptcy bar in December or January.

Additionally, if you have any specific hot topics you’d like me to cover please let me know!

LBR 1001-1 contains some great tools for local practitioners

Today’s post starts a new series focusing on the nuances of the Local Bankruptcy Rules of the Bankruptcy Court for the Central District of California.

Local Bankruptcy Rule (“LBR”) 1001-1 contains useful considerations to keep in mind while participating in matters in the CACB.  For example, if a matter implicates ambiguous or conflicting interactions with other rules, then Subsection (b) says that the Local Rules should be construed to be consistent with the FRBP rules or the Federal Rules of Civil Procedure to “promote the just, speedy, and economic determination” within each proceeding or within an overall case.  

LBR 1001-1 subsection (b) also says that, if the district court withdraws the reference to the bankruptcy court or a matter gets heard in district court for any reason, then the Local Rules continue to apply even though the parties are no longer within the bankruptcy court and would, otherwise, fall within the Central District’s Local Civil Rules.

In the Central District, we have a large number of pro se filers. LBR 1001-1 can be helpful if you encounter one for any reason. Subsection (c) requires pro se filers or litigants to follow local rules and goes so far as to explain that any reference to an “attorney” or “counsel” in the local rules applies with full force to pro se parties.  However, subsection (d) could, upon a judge’s discretion, limit the force of the rule to pro se litigants, which, in my anecdotal experience, does seem to occur with some regularity.  

LBR 1001-1 is also helpful if you made a mistake. Subsection (d) is an important rule to keep in mind in matters where non-compliance of the local rules may have occurred either for good reason or inadvertently, which is a reasonable possibility given the complexity of many layers of procedural rules—to say nothing of the substantive law’s complexity.  Subsection (d) preserves a judge’s leeway to make a ruling or order “in the interest of justice.” 

Under Subsection (e), if no Local Bankruptcy Rule is applicable to a situation, then the parties and the court should draw analogies to rules in the FRBPs, FRCPs, or the Central District’s Local Civil Rules.  If no analogy can be drawn, then one is free to proceed in “any lawful manner” (assuming it does not conflict with the Local rules, of course).  

While Subsection (d) could give some hope to an advocate or party who runs afoul of the local rules, Subsection (f) is a cautionary reminder that violations of the local rules can also be grounds for sanctions. 

As I mentioned, this is the first in a series that I’m planning to write up. When I really spent some time focusing on LBR 1001-1 I found there are some useful tools in there that I don’t see a lot of people leveraging.

Johnson & Johnson tries to leverage bankruptcy

Yesterday, Johnson and Johnson made a daring legal move to try to leverage the bankruptcy system to deal with all the lawsuits it’s facing over baby powder.

In case you haven’t been following along, there have been reports and allegations that baby powder, which has been used by households for decades and sold by Johnson and Johnson are cancerous. The talcum powder, as it is more generically known, in fact may have contained asbestos and there are allegations that the company knew about the dangers of the products and did nothing.

In fact, a group of women won an almost $5 billion dollar personal injury class action suit against Johnson and Johnson in Missouri back in 2018, which was a record.

The company continues to face thousands of lawsuits today, so you can imagine if just a few of those cases survive, it could financially destroy the company.

So the company did something called “brazen” by the American Association for Justice, and created a new subsidiary called LTL Management LLC. Roughly, it assigned the talcum (baby powder) assets to LTL, funded it with $2 billion to cover future claims, and promptly put LTL into bankruptcy. (Read more details in this Reuters article.)

Under the Bankruptcy Code, the automatic stay of Section 362 (known as the most power legal device in existence) kicks in and immediately halts all the pending lawsuits (among many other things it does). It doesn’t eliminate the suits, but it does pause them momentarily until a plan can be worked out in bankruptcy court.

J&J will mostly likely attempt to get a reorganization plan approved, arguing the the $2 billion in funding as well as the ongoing overseas operations (they stopped selling baby powder in the US), will be enough to fund the lawsuits if they win.

However, it’s almost certain that there will be some major drama in the bankruptcy court because the plaintiffs and other creditors will seek to dismiss the bankruptcy case on bad faith and other grounds.

Stay tuned–will be interesting to see what happens next.