When you file for bankruptcy relief, you may be referred to as the ‘petitioner’ or the ‘debtor.’ Unfortunately, even if you have good reasons to file bankruptcy, there is no guarantee that your debts will be forgiven. For example, if you do not follow the proper procedures or neglect to comply with the bankruptcy laws, your case could be dismissed. A Chapter 7 bankruptcy case is rarely dismissed; however, dismissal for a Chapter 13 case is rather common. The reason for the dismissal determines whether a case is dismissed with prejudice or without prejudice. Protecting the Petitioner During the Bankruptcy Process As you move through the bankruptcy process, you are protected from your creditors by an injunction that is referred to as an ‘automatic stay.’ This injunction is used to protect you from nearly all the collection activities that your creditors use. The automatic stay goes into effect the day that you file your case. What to Expect Following a Chapter 7 or Chapter 13 Bankruptcy Discharge, or Dismissal If your case is successful and you obtain a discharge, you are not required to pay back any of the debts that were discharged in your bankruptcy case. However, if you are not successful and your case is dismissed, it is deemed void, which means that you are still liable for all your debt. In addition, directly following the dismissal, your creditors are permitted to initiate or continue any litigation (pursuant to Ohio state law) to garnish your income or foreclose on your property. Reasons for a Dismissal Once you have filed for bankruptcy, you are required to follow certain procedures to obtain a discharge and be relieved of your debts. If these procedures are not followed, your case may be dismissed. Typically, the majority of Chapter 7 and Chapter 13 bankruptcy cases are dismissed because the debtor fails to: file the necessary forms with the court; meet the established deadlines for documentation, as set forth by the court; provide the bankruptcy trustee with the required supporting documentation for his or her case; appear at the meeting of creditors; make timely plan payments (in a Chapter 13 bankruptcy case); or successfully complete a financial management course (debtor education). What Does It Mean If a Bankruptcy Case Is ‘Dismissed without Prejudice’? When a Chapter 7 or Chapter 13 bankruptcy case is dismissed without prejudice, the petitioner can immediately refile. Most of the bankruptcy cases that are dismissed without prejudice occur due to issues related to procedure. For example, if the petitioner fails to file the necessary forms with the court. Although the petitioner can refile immediately following this type of dismissal, he or she may need to file a motion to extend or impose the ‘automatic stay’ in the refiled case. Otherwise, collection activities will resume. Limits on Automatic Stay Even when a bankruptcy case is dismissed without prejudice and the petitioner refiles right away, there may be limits placed on the automatic stay. For example, if a case is refiled within 12 months of dismissal, the automatic stay is limited to 30 days; however, if the petitioner had two or more bankruptcy cases dismissed within 12 months of the current re-filing, automatic stay will not be granted. What Does It Means When a Case Is ‘Dismissed with Prejudice’? Whereas a case dismissed without prejudice can be refiled immediately, the opposite is true when a bankruptcy case is dismissed with prejudice. A petitioner whose case is dismissed in this manner may not re-file for a specific length of time or, in some cases, prohibited from ever filing bankruptcy on the debts that existed at the time of the initial filing. Possible reasons that lead to a bankruptcy case being dismissed with prejudice include, the debtor: filed his or her case in bad faith to delay creditors; tried to hide assets; willfully disregarded orders from the court; or abused the bankruptcy system in some other way. According to bankruptcy law, a debtor whose case was dismissed with prejudice cannot file another bankruptcy case within 180 days of the prior case if: the debtor requested that the case be dismissed after he or she filed a motion for relief from an automatic stay; or the debtor willfully failed to follow the court’s orders. Since bankruptcy judges are given far-reaching discretion when it comes to dismissing bankruptcy cases, he or she can determine the penalty the debtor receives based on the severity of the acts that led to the case being dismissed with prejudice. Ideally, a Bankruptcy Plan Will Lead to a Discharge When completed successfully, a Chapter 13 or Chapter 7 bankruptcy plan absolves the petitioner of all the debt listed in his or her case. Therefore, creditors are not permitted to pursue the individual for payment (as applicable by Ohio state law). Once a debt has been discharged, if a creditor continues to pursue the petitioner for payment, he or she should talk to a bankruptcy lawyer. If you have bankruptcy questions or want to learn more about how to file for bankruptcy, contact the Chris Wesner Law Office at 1.877.350.6039 today. The post Can You Refile If Your Bankruptcy Case Was Dismissed? appeared first on Chris Wesner Law Office.

Jevic--The Inside Story and the Impact on Future Chapter 11s featured participants from the case offering their perspective on the case and what it meant.   Dan Dooley of MorrisAnderson was the Chief Restructuring Officer for Jevic.   Domenic Pacitti of Klehr Harrison was Debtor's counsel.   Rene Roupinan of Outten & Golden represented the WARN Act claimants.   The panel was moderated by Judge Gregg W. Zive (Bankr. D. Nev.).    I have previously written about Jevic here.Jevic Holding Company was a trucking company based in New Jersey.   It had been acquired by Sun Capital and was financed by CIT Group.    CIT requested that the debtor liquidate itself in Chapter 11.   The Debtor apparently gave WARN Act notices.   However, New Jersey had its own state statute which was stricter than the national statute.When the case was filed, the CRO Dan Dooley, negotiated a wind-down budget which included $3.0 million for paying accrued wages and related payroll obligations.   After the company was liquidated, the Debtor was holding $1.7 million which was subject to Sun's lien (it was also a secured creditor).   There were two other important pieces of litigation.   The WARN Act claimants sued the Debtor and Sun Capital.  They alleged that the Debtor and Sun were a unitary employer.   The Official Committee of Unsecured Creditors sued Sun and CIT to unwind the leveraged buyout as a fraudulent transfer.     Eventually a settlement was reached where Sun allowed the $1.7 million to be used to pay creditors and CIT paid another $2.0 million to cover priority and administrative claims.  However, in the settlement Sun did not want any money to go to the WARN Act claimants because they were also suing Sun.  As a result, a structured dismissal was set up which provided that the settlement funds would be paid to creditors but not to the WARN Act claimants.   This involved skipping over the WARN Act claimants' priority claims.   The Bankruptcy Court approved the structured dismissal and the Third Circuit affirmed under the "rare circumstances" doctrine.   The Supreme Court reversed finding that a debtor could not violate the priority scheme under the Bankruptcy Code in a non-consensual an end of case distribution.  The Court left open the possibility that paying creditors out of sequence would be allowed in cases such as paying employee wage claims and critical vendor claims where doing so would advance Code-related goals.Mr. Pacetti (the Debtor's lawyer) explained that they used a structured dismissal because there are only three ways to end a chapter 11 case--a plan, conversion or dismissal.  11 U.S.C. Sec. 349(b) says that the parties shall revert to the status quo ante unless the court "orders otherwise."  The structured dismissal was an attempt to have the court "order otherwise."    Judge Zive focused on the Court's reference to allowing priorities to be skipped based on a Code-related objective.   He raised the case of Motorola, Inc. v. Official Committee of Unsecured Creditors (In re Iridium Operating, LLC), 478 F.3d 452 (2nd Cir. 2007).   In Iridium,  the debtor had claims against its parent, Motorola, and Motorola had administrative claims against the estate.    In settlement of other litigation, a fund of money was created to fund a litigation trust to sue Motorola.  Any money remaining in the litigation trust would go to the unsecured creditors.  Motorola objected to diverting funds which could have paid its administrative claim to the trust.   The Second Circuit generally found that the settlement was permissible because having a well-funded creditors' trust would increase the value of the claims against Motorola.  However, it remanded for an explanation of why the residual funds in the trust would go to the unsecured creditors instead of being distributed in priority order.Mr. Dooley stated that the Code-related objective here was maximizing the pie.Judge Zive said that other areas where priority-skipping would be allowed would be wage orders, critical vendor motions and roll-ups as part of DIP financing.   He said these are all orders that allow the case to proceed.   Ms. Roupinan was asked how Jevic would change WARN Act litigation.   She said that requiring parties to follow the absolute priority rule would provide clarity and predictability and improved ability to negotiate.Mr. Pacetti said that in skipping priorities, it was important to consider what the stage of the case is.  First day motions will get greater latitude than end of case distributions.  He also stressed the importance of making an evidentiary record.Judge Zive seconded this notion stating that any time you want the court to do something you should provide sufficient facts.  He gave the example of routine motions for cash management and continuing bank accounts which could result in de facto sustantive consolidation.  Ms. Roupinian asked whether priority-skipping would be ok if all parties consented.   She asked what would happen if the U.S. Trustee was the only party objecting.Judge Zive replied that the policy of the U.S. Trustee is not the Bankruptcy Code.  He said that "if everyone is consenting, I don't have a problem with that."   However, he focused on what constituted consent?   He said that if a party is given notice and fails to object, they have waived their objection.Mr. Dooley said that the take-away from the case was that it was really about the absolute priority rule, not structured dismissals.Judge Zive said that one of the problems with Jevic was that there was no going concern value to protect and no jobs.  As a result, the Code-related objective was much weaker.   A few moments later, he emphasized that priority skipping can be allowed to protect going concern value, jobs, etc. but that "there has to be a significant reason."   The panel also discussed gifting, that is, where one creditor gives up value so that it can go to a creditor with lesser priority.   Judge Zive pointed out In re LCI Holding Co., 802 F.3d 547 (3rd Cir. 2015) where lenders acquired the debtor's asset via a credit bid but deposited funds in escrow for professional fees and paid some funds directly to unsecured creditors.   Where the funds were paid directly by the secured lender, they were never property of the estate and thus the court had no jurisdiction over them.  Mr. Pacetti that lawyers should cut deals earlier in the case and read Jevic for what it says.   However, Ms. Roupinian said that parties should either follow the absolute priority rule or get consent.Judge Zive said that courts would be skeptical about non-consensual priority-skipping and that lawyers should get the evidence that shows why the settlement is proper.Mr. Dooley said that doing priority skipping "requires real proof."   He also said that structured dismissals must be squeaky clean and that first day orders may be more carefully examined.  He said that the ruling will embolden the U.S. Trustee.   The take-aways from the panel were build your evidentiary record, identify a Code-related objective and do your deal at a time when it will still advance the reorganization.  

Asset Protection Trusts--How to Make Them and How to Break Them examined a phenomenon emerging in the laws of several states, including Nevada.   This panel was moderated by Ron Peterson of Jenner & Block with Neal Levin of Freeborn & Peters, Judith Greenstone Miller of Jaffe Raitt Heuer  Heuer & Weiss, P.C., Rebecca Hume of Kobre & Kim, and Judge Brian F. Kenney of the U.S. Bankruptcy Court for the Eastern District of Virginia.According to Judith Greenstone Miller, there are now seventeen states that allow Debtor Asset Protection trusts ("DA Ps").    Some states have a statute of limitations as short as eighteen months to challenge a DAP while others may allow up to four years or more for an existing creditor that did not have knowledge of the transfer.   Some states require an affidavit of solvency.Michigan was the seventeenth state to allow DA Ps in March 2017 and amended the Uniform Fraudulent Transfer Act (UFTA) to exempt a "qualified disposition."    There are also variations in state law between those following the Uniform Fraudulent Transactions Act (UVTA) and the Uniform Voidable Transfers Act.   While UFTA does not have a specific choice of law provision, UVTA does. Ms. Miller explained that DA Ps require giving up control and that high net worth indiiduals don't like to give up control.    DA Ps are attractive to individuals with plenty of assets now who fear future liabilities such as doctors. In Michigan, DA Ps must be irrevocable.   The Trustee must reside in Michigan.   The settlor must execute an affidavit that the transfer of assets into the trust will not render them insolvent and that they are not subject to pending litigation other than as described.     They may retain the power to direct investments and request distributions of income and principal although they cannot demand a distribution.   The sole means to challenge a DAP is to bring an action under the UVTA by clear and convincing evidence.      The statute of limitations in Michigan is shortened from six years to two years, although it starts at the time of the qualified disposition.   If a claim arises after the disposition, the statute of limitations is two years from when the claim arises.   Beyond the state statute of limitations, the only resort is to Sec. 548 of the Bankruptcy Code for actual intent to hinder, delay or defraud.   If a transfer is set aside, the property reverts to the settlor and only to the extent necessary to satisfy the claim.   Neal Levin described Nevada's DAP law, which he described as an "absolute shield" for assets.  It has been around since 1999 and has a two year statute of limitations with a six month discovery rule.  There is no requirement for an affidvait of solvency.   The burden of proof is clear and convincing evidence. Additionally, the settlor retains incredible control over the trust assets.   He said that the only exception to the Act's protections is an action under the UVTA.Judge Brian F. Kenney described the Virginia law as being one of the least protective.  He said that his state statute says that a transfer is not voidable solely because is was made to a self-settled trust without consideration.   As with the law of several other states, Virginia's statute contains a provision shielding professionals who structure a transfer from liability.    However, at the same time, Virginia adopted a statute providing for sanctions against any party within its jurisdiction who transfers assets with knowledge of a judgment.   Thus, there is some conflict in the law.Rebecca Hume came all the way from the Cayman Islands to discuss foreign asset protection trusts which she described as a war between the world and the debtor's assets with a gate that only the debtor has a key to.   She described the Cook Islands as the worst jurisdiction for creditors with the Island of Nevis close behind.   The law of the Cayman Islands provides that issues relating to Cayman Islands trusts must be governed by the law of the Cayman Islands and that any order of a foreign court attempting to assert control over a Cayman Islands trust would be unenforceable.   In the Cook Islands, a claim must be brought within two years of when the transfer was made.   The creditor must prove a fraud beyond a reasonable doubt.   Further, the creditor must hire a lawyer in the Cook Islands and may not enter into a contingent fee arrangements.   She said she knew of only one case where a Cook Islands Trust was set aside. Judge Kenney said that Sec. 548(e) was added to the Code to address the problem of DA Ps.   He said that it allows a ten year lookback for a self settled trust and requires an intent to hinder, delay or defraud.    This standard relies on the traditional badges of fraud analysis.     The Trustee has two years to commence an action but that the statute could be equitably tolled.Ron Peterson asked Judge Kenney what he could do to a debtor who was ordered to repatriate assets from a Cook Islands Trust but refused to do so.   He said that under Sec. 105(a), he has the power to enforce his orders.   He said that as a practical matter, incarceration for civil contempt will often be referred to the U.S. District Court because the District Court has more tools available to deal with incarceration.   In one case, a debtor named Sala raised the defense of impossibility but the Court ruled that where is the impossibility is self-created, the defense would be rejected.   He described it as a game of chicken between the debtor who is willing to sit in jail without giving up his funds and the Court that keeps him there.In U.S. v. Grant, Neal Levin said that the settlor's widow raised the impossibility defense saying "I asked for the money back but they said no."   The Court found that this was not sufficient to purge the contempt.  Mr. Levin pointed out that one-third of the world's wealth is kept in off-shore jurisdictions.    He said that it was important to work with professionals in the affected jurisdiction.  Ms. Hume said that many offshore jurisdictions allow the settlor to retain great control over the trust and would only impose an independent trustee when "things get dicey."  She said that settlors frequently retain the policy to change the trustee.   She pointed to a court of appeals decision which required a settlor to disclose where trusts were located and what was within them.   She described a Privy Council decision where a settlor had a power to revoke the trust but refused to exercise that power.   The Council held that it could appoint a receiver over the power of revocation which allowed the trust to be revoked and the money collected.Mr. Levin talked about how most wire transfers pass through New York banks.   Because these banks are in the United States, the U.S. Courts have jurisdiction over them and they can be brought into the case. Ron Peterson pointed out that the U.S. has treaties with countries such as Switzerland and that the U.S. Attorney can be brought to enforce the treaty in limited instances.Mr. Levin pointed out that on the other side are "the forces of evil" such as foreign judges who view their responsibility as limited solely to enforce their laws and foreign professionals who want to protect their fees.    He also said that the United States is now considered to be the largest recipient of offshore funds as foreign citizens are transferring funds to DA Ps in the United States.  He described the problem of professionals helping people conceal their assets as a "pervasive problem."Ms. Hume pointed out that the Cayman Islands are now parties to various statutes requiring disclosures of cash transfers so that there is greater transparency and less advantage to hiding assets in the Cayman Islands. The main take-away from the panel was that when dealing with DA Ps or offshore trusts, the key is to engage qualified professionals who understand the local law in order to avoid committing malpractice whether trying to set up one of these vehicles or challenging one.

Taxes, Refunds & Dismissals During the past several years, there has been a huge increase in Chicago trustees under Chapter 13 demanding taxes and refunds of the debtors. The bankruptcy code requires that a debtor provide to the trustee, annually, a copy of his or her tax return. This statutory requirement was primarily to ensure+ Read More The post Chicago Chapter 13 Trustee’s Squeezing Debtors Into Dismissal appeared first on David M. Siegel.

Though Ohio laws on payday loans have changed over the year, one thing remains clear: Payday loans seem like a simple solution, but they are very costly and hard to get out of. Whenever possible, avoid them. If you already have them, it’s essential to know your rights. How Do Payday Loans Work? The traditional style of payday loan involves a consumer writing a check to a lender for the amount owed plus a fee. Most are short-term loans of only two weeks. The individual is expected to repay the loan on time. Usually the day he or she has received a payment from an employer. It sounds simple – borrow $300, pay back $330 in two weeks. However, this amounts to some 260 percent APR (annual percent rate), and it tends to be difficult to make such a large payment. Lenders often have a number of threats for individuals. They may say they are calling the police if you fail to make payment. They may state you will go to jail if you do not make payment. Some threaten to contact your friends and relatives to tell them about your debt. Some may contact you directly at your place of employment. Know Your Rights In 2008, Ohio passed the Short-Term Lender Law, or STLA. This law provides specific guidelines about payday loans and other short-term lending in the state. Here’s a breakdown of the law: Lenders cannot provide short-term loans over the phone, online or through mail. It caps the interest rate at 28 percent APR. The loan duration cannot be less than 31 days. The amount borrowed is capped at $500. Borrowers cannot obtain a loan for more than 25 percent of their gross salary. The laws also provide you with protection from harassment. Individuals who operate and provide such loans cannot make false claims. They cannot state they are from the FBI or that they are calling the police. They also cannot threaten you in any other manner. If this occurs, speak to the police and then call an experienced payday loan attorney. Are You Facing Harassing Calls? A common threat used by payday loan lenders is that an individual is going to go to jail for not paying back what is owed. It is possible that the lender can file a lawsuit against you, get a judgment against you in a court of law, ask the court to seize assets in some way, and legally peruse the debt. However, they cannot threaten you with jail time or other claims. Some may claim that you are “writing a bad check” when receiving a payday loan and that this is illegal. It is illegal to write a bad check. However, it is only illegal if you know that you will not have the funds available in your account when you write that check. If you will have enough in your account on that day – by all expectations – you are not writing a bad check. What Are Your Options? Payday loans continue to be very complex, and the laws continue to change in Ohio. It may be possible to get some help with these loans when you file for bankruptcy. Depending on the circumstances, you may not be able to have these loans discharged like you would other debt, but you may have options for making the debt easier to repay. Do not put off getting legal help in a matter like this. You cannot go to jail for not paying your loans back on time in most situations. The Federal Trade Commission also provides information about what steps you can take to report these illegal threats. Don’t Be a Victim: Get the Legal Support You Need Payday loan laws in Ohio are complex, and collection agents are merciless. However, you don’t have to be abused or feel overwhelmed by this. Our team at the Chris Wesner Law Office, LLC provides outstanding support and one-on-one guidance. We understand your concerns and have helped many people facing payday loan collections and even threats from these lenders. Call us first before you become a victim of this type of harassment at 937-339-8001. Or, fill out our online contact form. The post Can You Be Arrested for Defaulting on a Payday Loan in Ohio? appeared first on Chris Wesner Law Office.

The Commercial Law League of America presented a keynote address from Dean. Erwin Chemerinsky, of UC Berkeley Law School at its annual luncheon.  Dean. Chemerinsky discussed his main area of expertise in a talk entitled The Supreme Court:   Appointments to and Statutory and Constitutional Interpretation by the Court in Bankruptcy Cases.   He spoke for over an hour without notes.He started by talking about the place of bankruptcy cases in the Supreme Court's jurisprudence.  Although bankruptcy cases outnumber every other case in the federal system, the Supreme Court only takes two or three bankruptcy cases in a given term.   He noted that of the current justices on the court only one had served as a trial court judge and several justices had never argued a case in any court before being appointed to the Supreme Court.   As a result, the Court is taking fewer and fewer cases.   For much of the 20th Century, the Court heard as many as 200 cases a term.  Last term the Court heard only 59 cases (not counting cases decided without argument). The bulk of his talk discussed the battle between the formalists and the realists on the Court.  He offered three theses:  1)  we have and are likely to continue to have a conservative Supreme Court; 2)  the conservatives and some of the liberals tend to be quite formalistic; and 3) this trend is undesirable.  A Conservative Court Since 1971, the Supreme Court has had five to eight justices appointed by Republican presidents.  With the death of Antonin Scalia, the Court was split 4-4 for a brief period of time.   This led to a remarkable fight in Congress.   In recent years (I missed the exact number), there have been twenty-four justices nominated during the final two years of a president's term.  Of those, 21 were confirmed and three were voted down.  However, until the nomination of Merrick Garland, there had never been a nominee who was simply ignored.   Until the nomination of Neil Gorsuch, no nominee had ever been filibustered.   The Senate had to change its rules to end the filibuster by a majority vote.  Dean Erwin ChemerinskyJustice Gorsuch appears to be very conservative.   Since taking the bench, he has voted with Clarence Thomas 100% of the time.  In contrast, Antonin Scalia only voted with Thomas 81% of the time.   The Court's current makeup consists of three consistently conservative justice (Alito, Gorsuch and Thomas), one most conservative justice (Roberts), four consistently liberal justices (Breyer, Ginsberg, Kagan and Sotomayor) and Anthony Kennedy as the swing vote.   Justice Kennedy votes with the majority 97% of the time.  Eliminating unanimous decisions, he still sides with the majority 94% of the time.   The Dean tells his students to shamelessly pander to Justice Kennedy in their Supreme Court briefs.The age of the current justices indicates that conservative domination is likely to continue for decades.    Since 1960, the average age where justices retired from the court was 78.  Three of the liberal/swing justices are currently over 78 (Ginsberg, Breyer and Kennedy).   In contrast, three Republican appointees are likely to serve for an additional fifteen years (Alito, Thomas and Roberts) while Justice Gorsuch could possibly serve as many as forty years.   Thus, the Court is likely to remain very conservative for decades to come.Formalists Formulate More OpinionsDean Chemerinsky said that the conservatives and some liberals tend to be very formalistic.  Formalism is the view that judges take undisputed legal premises and apply them to the facts.   Formalism is often dominated by "plain meaning" analysis.    Formalism was the dominant approach to constitutional law through the 19th Century when the legal realists tried to blow it up. The legal realists argued that there are political decisions which form the basis for so-called undisputed legal premises so that courts should look at the values being served rather than pretending to apply neutral principles.  However, formalism is alive and well in the Supreme Court, especially when it comes to bankruptcy decisions.Formalism in Statutory InterpretationDean Chemerinsky argued that Henson v. Santander Consumer USA, Inc., 137 S.Ct. 1718 (2017) was an example of formalism.   The question was whether the FDCPA should apply to anyone who has purchased debts.   The Court ruled that it did not apply to creditors who purchased debts prior to default.   He described this as very formalistic.   He said that formalism rejects consideration of the legislative purpose, let alone the legal history.    The definition of "debt collector" under the FDCPA includes a person who regularly collects or attempts to collect debts owed to another.  He claimed that it was just as reasonable to construe this provision to anyone who collects debts.   He said that the purpose of the statute would be furthered by applying it to all persons who collect debts.   (I'm not sure I buy that analysis, but he is a really smart guy).   In Midland Funding, LLC v. Johnson, 137 S.Ct. 1407 (2017), the Court was asked whether a proof of claim filed on a debt that was barred by the statute of limitations violates the FDCPA. There is nothing in the Bankruptcy Code which bars the filing of a time-barred debt.    According to Dean Chemerinsky, Justice Breyer wanted to take a plain meaning approach to what is false, deceptive, misleading, unfair, or unconscionable.  However, Justice Sotomayor, in dissent, was concerned by the fact that the courts were being "deluged" with bad debts.       The professor asked why it wouldn't be unfair to file a debt that the creditor knew was time-barred?Going back a few years to Law v. Siegel, 134 S.Ct. 1188 (2014) a debtor sought to fraudulently invent liens which would keep the value of his property within the California exemption limit.   The Bankruptcy Court would have denied the exemption based on the fraud.   However, a unanimous Supreme Court reversed based on the plain language of Sec. 522.   He said that the formalists don't want to focus on the consequences of the decision and instead look just at the plain meaning.   On the other hand, Marrama v. Citizens Bank, 549 U.S. 365 (2007) was a functional decision.   The Bankruptcy Code said that a debtor had an absolute right to convert to chapter 13.   The liberal justices said that it would be a waste of time to allow a debtor to convert to chapter 13 if the case would just be converted back to chapter 7.   The four conservatives said just follow the statute.Dean Chemerinsky said that it is impossible to reconcile Law v. Siegel with Marrama.   Formalism in Constitutional AnalysisProf. Chemerinsky described Northern Pipeline Construction Co. v. Marathon Pipeline Co., 102 S.Ct. 2858 (1982) as one of the worst cases decided by the Supreme Court.    The issue was whether a Bankruptcy Court could enter a final judgment on a state law claim between two non-bankrupt parties.   The Court voted 6-3 to strike down the jurisdictional scheme of the original Bankruptcy Code.   However, no opinion commanded a majority.   He said that Justice Brennan's plurality opinion was the epitomy of formalism.  It gave no reasons why judges appointed under Article I could not rule on state law matters.  After all, he asked, who normally rules on state law matters?  State courts.  State judges do not have life tenure.  However, the subtext of the opinion had nothing to do with bankruptcy. It was the Reagan era.  Congress was seeking to restrict the authority of courts to consider hot button issues, such as abortion and school busing.   In Northern Pipeline, the Supreme Court sent a message to Congress that if it attempted to restrict its jurisdiction, it would be unconstitutional.   After Northern Pipeline, the Court took a functional approach in cases such as Commodity Futures Trading Commission v. Schor, 478 U.S. 833 (1986) where they considered where a grant of power to a non-Article III court would undermine the Article III judiciary.   The Court veered back into formalism with Stern v. Marshall, 131 S.Ct. 2594 (2011).   Chief Justice Roberts' majority opinion could not have been more formalistic.    While the majority acted as though practical consequences didn't matter, Justice Breyer's dissent was focused on the confusion that would result from the opinion.Four terms later the Court backed away from formalism when it decided Wellness International Network, Ltd. v. Shariff, 135 S.Ct. 1932 (2015).  The issue was whether an Article I Bankruptcy Judge could render a final judgment with consent.  By a vote of 6-3, the Court said yes.   Justice Sotomayor's majority opinion followed the Schor case's doctrine that delegation to a non-Article III tribunal was only unconstitutional when it undermined the Article III courts.   The difference between Stern v. Marshall and Wellness was that Justices Alito and Kennedy changed their minds.   Why did they do this?   It had nothing to do with bankruptcy.  Rather, both Justices were concerned about Magistrate Judges.   If Stern was followed to its formalistic conclusion, it could render Magistrate Judges unconstitutional as well and both justices had previously written opinions upholding Magistrate Judges.Dean Chemerinsky cautioned that Wellness will not put formalism to rest.   The Court vacillates between formalism and functionalism from case to case.The Critique of FormalismThe legal realists offered a critique of formalism a century ago.  Formalism provided a false certainty.   Do fixed legal principles really provide answers with certainty?   Formalism makes it look like the justices are not deciding how a case should turn out; it hides what's really happening. Dean Chemerinsky suggested that we should be asking what was Congress's purpose?   In his view, the Court got Congress's purpose wrong in both Henson and Midland Funding.   He said that there was no good reason to object to bankruptcy courts deciding state law issues.In conclusion, he asked, what should we do?   He said that academics need to explode the myth of formalism.   The Dean said that he hoped that the academic criticism of Stern v. Marshall caused Justices Alito and Kennedy to back away in Wellness.In the meantime, lawyers and judges should be aware that the Supreme Court is going to be receptive to formalistic arguments for a long time to come.   The take-away he said is the what if?   What if Hillary Clinton had defeated Donald Trump?  What if there had not been hanging chads in Florida in 2000?  What if John Kerry had been elected?   The Supreme Court would have looked much different today.   The bottom line is that elections matter.   And then he sat down.Note:  I did not use direct quotes in this article because I was not confident in my note-taking.  In some passages, I added or rearranged words to better reflect the sense of what Dean Chemerinsky was saying when my notes came off as wooden and jerky.   Dean Chemerinsky was anything but wooden and jerky so I did not want to portray him in that way.  However, I am pretty sure that the last sentence of his address is pretty close to verbatim.     

One thing that conferences like NCBJ celebrate are the best in the profession.  This year I went to three awards presentation.   Prof. Nancy Rapoport of the University of New Las Vegas Law School received the Lawrence P. King Award for Excellence in Bankruptcy from the Commercial Law League of America.   Judge Mary Walrath (Bankr. D. Del.) received the Norton Judicial Excellence Award from the American Bankruptcy Institute and Thompson Reuters.   Finally Judge Homer Drake (Bankr. N.D.Ga.) received the Distinguished Service Award from the Bankruptcy Alliance of the American Inns of Court.    Nancy Rapoport is the Special Counsel to the President of the University of Nevada, Las Vegas, the Garmin Turner Boyd Professor of Law at the William S. Boyd School of Law and an Affiliate Professor of Business Law and Ethics at the Lee Business School.    She has served as Dean or interim Dean of three separate law schools.   She received the Distinguished Alumna Award from Rice University.   Prof. Rapoport is a recognized expert in ethics.    She is the author of Enron and Other Corporate Fiascos:  The Corporate Scandal Reader and appeared in the Academy Award nominated move Enron:  The Smartest Guys in the Room.   She is currently serving on the Fee Review Committee in the Caesars Entertainment Operating Co., Inc. bankruptcy.    She is also a Board Member of the National Museum of Organized Crime and Law Enforcement (the MOB Museum).   In her spare time, she competes, pro-am, in American Rhythm and American Smooth ballroom dancing.   In her introduction of Prof. Rapoport, Wanda Borges of the CLLA quoted her as saying, "My parents taught me everything.  They taught me how to live a moral life."   Wanda quoted the President of UNLV as saying, "If she was a superhero, her power would be enthusiasm."In receiving the award, she said she was "flabbergasted but not speechless."    She went on to offer two true confessions:  that she took bankruptcy pass/fail and never took professional responsibility.  She said she had no interest in bankruptcy and intended to be a securities lawyer--until she began to work as a securities lawyer.Prof. Rapoport Accepts the King AwardProf. Rapoport said "I have built a career out of the intersection of bankruptcy law and professional responsibility.  I love bankruptcy law.  I love that bankruptcy lawyers find ways to make the pie bigger.   I love the people."    She also said that "good lawyers have the ability to change the world for the better."Finally she said  "We are at a pivotal point for the practice of law.   Our margins are tighter.   Think about where the practice of law should go."    She said that she teaches law students that it is more important to listen to the other side than to push your own position.On a personal note, I have enjoyed attending many continuing legal education programs where Nancy spoke.   She spoke on legal ethics at the very first Commercial Law League meeting that I attended.  Although she is kind of a big deal, she came and presented a showing of The Smartest Guys in the Room  to the Austin Bankruptcy Bar.    Her ability to include clips from lawyer movies in her ethics presentations has given me many laughs while making good points.  Finally, I am amazed by the pictures she posts on Facebook of her ballroom dancing exploits.    Judge Walrath Receives the Norton Award for ExcellencewJudge Mary Walrath (Bankr. D. Del.) is the current President of the National Conference of Bankruptcy Judges.    She has served on the Delaware Bankruptcy bench since 1998.   When she took the bench, Delaware had two bankruptcy judges but based on the workload could have qualified for eighteen.   She is a co-founder and co-president of the Delaware Bankruptcy Inn of Court.   She is also a fellow of the American College of Bankruptcy. In her remarks she mentioned that she also sits as Bankruptcy Judge for the District of Virgin Islands.  She expressed admiration for the Court Clerks who have experienced so much difficulty after Hurricanes Irma and Maria.Judge Homer Drake Accepts the Distinguished Service AwardJudge Homer Drake has been a bankruptcy judge since 1964, which is before they were known as bankruptcy judges.   He was president of the National Association of Referees in Bankruptcy in 1973 when the rules committee changed the name of the judicial officials from Referees in Bankruptcy to Bankruptcy Judges.   That was also when the National Conference of Bankruptcy Judges took its present name.    Judge Drake also has an Inn of Court named after him.   That was a significant honor since few Inns of Court are named after living persons.   

This panel discussed some of the unusual issues raised by limited liability companies.   The panel consisted of Bankruptcy Judge Ashely Chan from the Eastern District of Pennsylvania,  Prof. Carter Bishop from Suffolk University Law School, Craig Goldblatt form Wilmer Hale, Paul L. Lion, III from Morrison & Foerster, LLP and Emily Pagorski from Stoll Keenon Ogden PLLC   Emily Pagorski and Craig Goldblatt played the role of litigators in two moot court arguments.What Is It?According to Paul "Chip" Lion, a limited liability company is neither a corporation nor a partnership. LL Cs have members rather than shareholders.  They have managers who may be members who run the business.    LLC's are formed by filing a certificate of formation.   They are governed by their operating agreement.    The state where the certificate of formation governs the legal affairs of the LLC.The members of an LLC own interests, which consist of economic interests, information rights and management rights.    Managers of an LLC owe fiduciary duties to the LLC    These are duties of loyalty and care and can be modified under the law of some states.Bankruptcy Remote EntitiesProf. Bishop introduced the problem of an LLC being used as a bankruptcy remote entity.   Under the hypothetical, unanimous consent was required to file bankruptcy and allowed members to act in its own interest and waived all duties except for the implied duty of good faith and fair dealing.  The operating agreement was then modified to add a non-economic member to presumably represent the interest of the secured creditor.    When it is time to file bankruptcy, the members disagree.   However, the LLC files anyway.    The secured creditor then sought to dismiss the case as a bad faith filing.Two cases involving LL Cs have found that bankruptcy policy invalidated the state law blocking provision because the non-economic member did not have a duty to act in the entity's best interest.  In re Lake Michigan Beach Pottawattamie Resort LLC, 547 B.R. 899 (Bankr. ND Ill. 2016); In re Intervention Energy Holdings, LLC, 553 B.R. 258 (Bankr. D. Del. 2016)  However, a case involving a limited partnership reached the opposite conclusion.   In re Squire Partners, Limited, 2017 W.L. 2901334 (E.D. Ark. 2017), appeal filed to Eighth Circuit.   The Squire case relied on the fact that the partner with the blocking interest had a financial interest.The hypothetical posed a conflict between the ability of parties to contract as allowed by state law as opposed to whether the contractual provision was a waiver of the right to file bankruptcy similar to a pre-petition waiver of discharge.  After a mock trial, the court found that the non-economic member did not act in good faith and that therefore his blocking vote was invalid.   In partcular, under the hypothetical, the debtor had equity which would be lost in the event of a foreclosure.Is an Operating Agreement an Executory Contract?In the second hypothetical, a member holds the right to manage the LLC.    There are other members.   Under the Operating Agreement, the right to manage cannot be assigned.  Additionally, the Operating Agreement provides that upon filing bankruptcy, the member ceases to be a member.   When the managing member files bankruptcy, the Chapter 7 trustee attempts to assume the operating agreement and dissolve the LLC over the objection of the other members.  The hypothetical was based on a California LLC.Prof. Bishop argued that under Sec. 541 would bring the economic interest and management right into the estate.   Most Operating Agreements would not meet the Countryman test for an executory contract.   Additionally, Sec. 365 precludes the assumption of a personal services contract.    Further, the contract would be subject to the ipso facto clause of Sec. 365.   The hypothetical posed a conflict between the property of the estate provisions of Sec. 541 and the executory contract provisions of Sec. 365.   The judge asked whether it would be appropriate to apply a broader definition of an executory contract than the Countryman test.    The hypothetical also raised the issue of how the Chapter 7 trustee could meet the debtor's fiduciary duties to the other members.     The Court ruled that both the economic and non-economic interests entered the estate but that the Trustee would order the Trustee to wait six months before dissolving the LLC to maximize the value for the other members.One issue that was not raised by the discussion was the application of 11 U.S.C. Sec. 541(b)(1) which states that property of the estate does not include a power that the debtor may only exercise for the benefit of an entity other than the debtor.   In my opinion, the right to manage an LLC is a power which the member exercises for the benefit of the LLC and the other members.   Thus, I would expect that it would not be property of the estate.I liked the format of this program because it used two of the panel members to provide background and introduce the hypotheticals while the two litigator members of the panel argued the case to an actual Bankruptcy Judge.  

The Wolf (of Wall Street?) at the Door:   Lending to the Financial Underclass examined a variety of issues affecting those with limited means.   Bankruptcy Judge D. Sims Crawford from the Northern District of Alabama moderated a discussion with Thad Bartholow with Bartholow & Kellett and Prof. Creola Johnson from the Ohio State University Moritz College of Law.Prof. Johnson and Mr. Bartholow focused on several areas that they believed were subject to abuse, including car title lending, payday lending, loans made that were never requested and claims on non-existent debt.   Prof. Johnson spoke about subprime auto loans which carry double digit interest rates with collateral that is easy to repossess.  She said that while the volume of subprime loans was going down, a majority of them would likely end up in default and in bankruptcy.    A trend in subprime auto loans is to include a kill switch in the vehicle which turns off the car if payments are not made which she described as "synthetic foreclosure."    She said that subprime lenders often threatened to repossess cars if regular payments were not made post-petition and gave the example of In re Velichoko, 473 B.R. 64 (Bankr. S.D.N.Y. 2012) where the lender said that bankruptcy did not apply to it and repossessed the car during the bankruptcy.    In order for the debtor to get the car back, the creditor extracted a payment of $800 and execution of a reaffirmation agreement.Mr. Bartholow suggested that a best practice for chapter 13 cases involving kill switches was to include a plan provision invalidating that clause in the loan agreement.Another abuse he identified was student loan servicers who may fail to cancel a garnishment after bankruptcy is filed due to defects in their software.Prof. Johnson spoke about problems raised by payday lending.   She said that technology has changed so that where a payday lender would have previously obtained a post-dated check, now they obtain authority to debt a customer's bank account.    One practice she identified was when payday lenders would have authority to debit the customer's account for the full amount of the loan but would just debit for the amount of a rollover fee.   In that case, the customer would end up paying much more than the original debt.   Another problem she discussed was payday lenders threatening borrowers with criminal prosecution if they did not pay.   Although dishonoring a postdated check will not give rise to theft by check, she said that payday lenders take advantage of poorly educated consumers to make these threats.    She gave In re Hodge, 367 B.R. 843, 846 (Bankr. M.D. Ala., 2012) and In re Snowden, 422 B.R. 737, 740–41 (Bankr. W.D. Wash. 2009) as examples of bad behavior by payday lenders.    In the Hodge case, the creditor told the debtor that bankruptcy did not apply to checks, threatened the debtor with arrest and continued to make EFT withdrawals from her account post-petition.    In Snowden, the creditor called the debtor sixteen times including at her job as a nurse. According to Bartholow, the debt buying industry is buying debts without much due diligence and that this places the burden on debtor's counsel to remedy. He claimed that many debt buyers "don't know or don't care" whether the debt they buy is legitimate and that it imposes a massive cost to the bankruptcy system.    He said that because debtors who take out payday loans often take out many of them, they may not remember which ones are real.    He described time-barred claims as a "cancer on the system" and also pointed out the danger of fake claims and miscalculated claims.    Bartholow said that he has had problems with debtors who are already in chapter 13 taking out post-petition payday loans.   He noted a split of authority as to whether a court order is required to take out these loans but expressed his opinion that it should be required.   He expressed frustration that debtors would keep relying on payday loans which he described as "financial crack."    Mr. Bartholow described attempts to collect on debts not owed as the CFPB's #1 reported consumer complaint.   He put part of the blame on skip tracing services such as Accurint which may erroneously report that a debt is owed by someone with a similar name.   In one case, he had a client named Marco R who lived in South Texas but was being dunned by a creditor seeking to collect a debt from a debtor named Marcos R who lived near Dallas.    A related problem he discussed was consumers who may apply for a payday loan but don't agree to accept it.   In some instances, the payday lender will advance the funds anyway and it becomes a swearing match as to whether the customer accepted the loan.Prof. Johnson talked about trends in the fintech industry but focused on lead aggregators.   Many of the internet ads for payday loans are not from actual payday lenders but companies which use them to generate leads which are then compiled by lead aggregators.    A consumer may think she is applying for a low interest loan only to be paired with a high interest payday lender.    Mr. Bartholow also talked about abuses with loan modifications.   He said that in many cases, borrowers filed bankruptcy in order to buy time to obtain a loan modification.   However, in other cases, lenders may place a borrower on a trial modification that was not requested by the borrower.   The lender then files a notice of payment change with the court which results in the trustee reducing the payment to the lender.   When it is time to approve the final loan modification, it may extend the loan out forty years and greatly increase the amount the borrower would pay.   However, at that point, the debtor has a choice to either accept the bad deal or face a default created by the creditor's interim loan modification.Returning to the theme of debt buyers, Mr. Bartholow said that debt buyers usually are engaged in the purchase and sale of spreadsheets and do very little to verify the debts.   He estimated that debt buyers only have loan documents in 5% or less of transactions they do.    When the transaction involves, a payday loan, which is a closed end loan, Rule 3001 requires that "the writing" upon which the debt is based be attached to the claim.   If debt buyers don't have the documents, they are in violation of the rule.Bartholow also spent some time discussing the Supreme Court decision in Johnson v. Midland Funding.   He stated that in his opinion, the dissent got it right.   However, he said that it will be important to limit Midland Funding to its facts.   The opinion stated that filing a time barred claim that contains the information necessary to readily determine whether it is a time-barred claim is one thing.   However, he opined that the ruling should not apply to a non-existent debt or one that is miscalculated.    Finally, Prof. Johnson concluded with the story of the Tucker brothers,Scott and Joel Tucker.   Scott Tucker had a payday loan empire that made actual payday loans although the way he processed payments was fraudulent.   He used the money that he made to become a race car driver.   In addition to having fines levied against him, he is now being prosecuted for criminal violations.Bartholow chimed in with the story of his brother, Joel, who took data obtained from lead aggregators and entered it into spreadsheets which he represented to be legitimate payday loans.   He ultimately sold a portfolio of 15,000 fake payday loans in the amount of $390 which were then placed into the court system by unwary debt buyers.   Judge Marvin Isgur initiated a Show Cause Proceeding in the Southern District of Texas in which he compelled Joel Tucker to appear and testify with regard to the claims under penalty of being incarcerated.   Judge Isgur found Mr. Tucker's testimony to be non-credible.Disclaimer:   I am currently involved in litigation with Mr. Bartholow's firm.   While I have tried to accurately convey the highlights of what was discussed, nothing in this post should be construed to be a comment on our case.

This year's National Conference of Bankruptcy Judges takes place in Las Vegas at the Paris Hotel and Casino.   The conference kicked off just one week after the horrific shootings here.  Mass shootings represent a break down of the social contract.  The law is intended to resolve disputes between people without the need for violence.   Bankruptcy law deals with break downs of financial relations.   It can involve such weighty matters as whether a company goes out of business or a family loses their home.  It is an imperfect system.   However, the terrible tragedy that occurred here is a reminder of the alternative to the rule of law.  #VegasStrong.The conference opened with Broken Bench TV, NCBJ's current events program anchored by Judge Bruce Harwell (Bankr. D. N.H.), Prof. (and candidate for Congress) Katherine Porter from the University of California Irvine School of Law and Prof. John Pottow from the University of Michigan School of Law.     Last year, NCBJ opened with Broken Bench Radio.   This year brought the conference into the 21st Century with a combination of highly produced video reports and live in-studio conversations. 21st Century Repo Man Judge Mildred Caban from the Bankruptcy Court of Puerto Rico talked how technology is enabling auto lenders to more efficiently repossess autos.   She said that there is $1.2 trillion in auto debt in this country with one-fifth being advanced to people with bad credit.  She described secret weapons that subprime auto collectors ploy, including GPS trackers, starter interrupters and plate recognition technology.    A starter interrupter is a device which prevents the vehicle from starting.   A buy here pay here lender may give a debtor a code good for just that month or may disable the vehicle if payments are not made. Interestingly, Article 9 of the UCC specifically allows lenders to employ a device which renders the collateral inoperative.    License plate recognition allows repo men to identify vehicles that have been slated for pickup as they drive around.   The judge described a scene of repo men trolling a neighborhood where their presence was more pervasive than the police.Adventures in ValuationBill Rochelle from ABI and Susan M. Freeman with Lewis Roca Rothgerber Christie LLP presented a segment on Current Developments in the Saga of Sunnyside Housing.   This case dealt with a major valuation opinion from the en banc Ninth Circuit.Bill Rochelle introduced the discussion by noting that the Courts of Appeals had recently had two Emily Litella moments.   Emily Litella was the Saturday Night Live character who go off on a rant about something she had misheard and then when she was corrected would say "never mind."  (Remember the segment on Soviet Jewelry?). Mr. Rochelle said that the Fifth Circuit had an Emily Litella moment in Matter of Hawk.   The Court initially ruled that a chapter 7 trustee could seek turnover of property that was finally exempted when it changed form.  After a petition for rehearing, an outcry from the bankruptcy bar, an amicus brief and coverage from Bill Rochelle, the panel reversed itself.   (Bill did not mention his role in bringing attention to the issue).The other Emily Litella moment occurred in In re Sunnyslope Housing Limited Partnership, 818 F.3d 937 (9th Cir. 2016).   This was an affordable housing project.   As long as the debtor owned the property, it could only be used for affordable housing.   However, if the lender took it back, it could realize a greater value.    Thus, it was the rare case where liquidation value was greater than going concern value.  The panel opinion declined to apply the Rash case which required application of fair market value.    It focused on the language in Sec. 506(a) to value collateral based on the creditor's interest in the property.   However, on en banc review, the full Ninth Circuit reversed.   In re Sunnyslope Housing Limited Partnership, ___ F.3d ___ (9th Cir. 5/26/17).  The en banc court stated that it would take the Supreme Court at its word in the Rash decision.   It also noted that Sec. 506(a) actually refers to the creditor's interest in the debtor's interest in the property.   Thus, value under Sec. 506(a) could never exceed the value of the property in the debtor's hands.There has been a petition for cert. filed in the case.   Rochelle stated that if cert was granted, "I'm going to wet my pants" because it would mean that the Supreme Court was willing to re-examine the rights of secured creditors. Judge Laura Grandy (Bankr. S.D. Ill.) gave a commercial for the 2018 NCBJ in San Antonio which will be the city's tricentennial.   In discussing retail bankruptcies, she noted that it was a shame that Payless and not Prada was not well heeled.Getting PaidProf. Porter and Ed Baltz discussed issues of getting paid in consumer bankruptcy including unbundling and fee only chapter 13 cases.    Mr. Boltz said that if someone files a chapter 7 petition without receiving a retainer on the premise that they did not perform any work pre-petition, he has either committed malpractice or is lying.    However, he said the alternative was to wait until the debtor could cobble together the fee during which he would still be subject to collection actions.  An alternative is to file a no money down chapter 13, which he described as two-thirds of the chapter 13 cases being filed.  He said that the key to doing a fee only chapter 13 case was getting informed consent from the client.     Finally, Mr. Baltz discussed how suing creditors can be a way for debtor's lawyers to get paid.  He dismissed the Johnson v. Midland Funding case as merely eliminating "low hanging fruit." Supreme Court Weather ReportElizabeth Wydra of the Constitutional Accountability Center presented the Supreme Court weather report.    She said all eyes are going to be on swing vote Anthony Kennedy this term.   She noted the strange weather patterns presented by the gerrymandering case and noted that "representatives should not choose their voters; voters should choose their representatives."    Other highlights of the court's term include the Masterpiece Cake case about whether a Christian baker could refuse to bake a cake for a gay wedding and the whether public employee unions could charge non-members a representation fee, an issue on which the court had deadlocked 4-4 in the prior term.   She described the Carpenter case dealing with whether accessing cell phone tower records without a warrant as "sunshine through the partisan fog" (meaning that the case is likely to draw broad agreement among the justices)ArbitrationTwo New York bankruptcy judges, Judge Bob Drain and Judge Alan Gropper had a segment on binding arbitration of bankruptcy matters.    They noted that when parties seek to employ arbitration in bankruptcy, the answer is usually emphatically no.    However, the Supreme Court is dramatically in favor of arbitration.    Judge Drain raised the question of whether there could be arbitration of a motion to approve a DIP loan.   Judge Gropper stated that there are conflicting cases on whether a debtor could be forced to arbitrate a discharge violation.   I found two cases denying arbitration of discharge violations but could not find one allowing it.   Harrier v. Verizon Wireless Personal Communications, LP, 903 F.Supp.2d 1281 (M.D. Fl. 2012); In re Jorge, 568 B.R. 25 (Bankr. N.D. Ohio 2017).   They said that bankruptcy should not be allowed on a "core" bankruptcy matter but then changed that to a "primary" bankruptcy issue to avoid confusion with the formal core/non-core dichotomy.Up in SmokeRetired Judge Keith Lundin appeared to offer an op-ed on cannibis bankruptcies.   He appeared with a cardboard figure named CK (which I think stands for Cannibis Keith).  He appeared to be dazed and confused when he said that he was stoked about cannibis bankruptcies but that a letter from the U.S. Trustee meant that those cases could go up in smoke.  The U.S. Trustee program has issued a letter to trustees directing them not to administer marijuana assets in bankruptcy because marijuana remains illegal under federal law.   However,he raised the issue of what is a marijuana related asset.   Is it the warehouse where the cannibis was stored?   What about the truck that delivered the pot?   What if an employee of a marijuana dispensary files chapter 13.   Are his wages marijuana-related assets?     The Bankruptcy Court for the District of Colorado has dismissed a marijuana related case on the basis that the trustee would violate the law by administering the assets.  In re Arenas, 514 B.R. 887 (Bankr. D. Col. 2014).Judge Lundin argued that there is not an exception in the Bankruptcy Code for toxic assets.  However, he said that the U.S. Trustee has the power to say, "I appoint you and I forbid you."At that point, Irving Picard, trustee for Bernie Madoff, called in.   Mr. Picard said that he had collected $12 billion on behalf of creditors.   Judge Lundin asked him if any of the money he recovered constituted proceeds from illegal activities, to which Mr. Picard said, that's what a Ponzi scheme is.Judge Lundin concluded by stating that with the U.S. Trustee forbidding trustees to administer cannabis-related assets that state court receiverships may be sprouting up in the states where it is legal. Structured Dismissals Craig Goldblatt and Chris Landau, who battled each other in the Jevic case, appeared to discuss the case.   Mr. Goldblatt said that the takeaway from Jevic was that you can't have an end of case distribution which violates the the priority scheme and that any priority skipping distributions must have a code-related objective.  Mr. Landau said that although he technically lost the case, it was a win in the bigger picture of defining when payments to critical vendors, employee wage claims and other similar items would be permissible.A Series of Unfortunate Events  Professors Porter and Pottow discussed Sundquist v. Bank of America (In re Sundquist), 566 B.R. 563 (Bankr. E.D. Cal. 2017) in which Bank of America found itself on the receiving end of over $40 million in damages for violating the automatic stay again and again and again. The case began with a promised loan modification that Bank of America apparently never intended to process.   That does not violate the law.  However, it did result in the Sundquists filing Chapter 13.  Nevertheless, Bank of America proceeded to foreclose on the Sundquists and evict them from their home.   The Court founds that the stay violation would have been apparent to anyone who cared to look but that nobody at Bank of America cared to look.   Bank of America's agents then disconnected the utilities so that the yard died.   Attempting to remedy the situation, Bank of America transferred the property back to the Sundquists but failed to tell them.   Meanwhile, the overgrown loan, the homeowners association made an assessment against the Sundquists for failure to maintain their property.  The case was so serious that one of the debtors was hospitalized and the other attempted suicide.   The Court awarded $1 million in compensatory damages to the debtors and $45 million in punitive damages.   The Debtors were ordered to pay the punitive damages award to the National Consumer Law Center, the National Consumer Bankruptcy Rights Center to five law schools in the University of California system (including UC Irvine School of Law where Prof. Porter teaches).  In awarding punitive damages, the Court described the case as a problem of corporate culture.The professors noted that the parties are now engaged in settlement negotiations.  One term being discussed is vacating the opinion.   As a result, they said, go to 566 B.R. 563 and read the case while you still can.  A Commercial for Pro Bono AppealsRetired Judge Gene Wedoff appeared to give a commercial for his new project to represent pro se individuals in bankruptcy appeals on a pro bono basis.   He said that in 28 years as a judge, he saw many people who had good issues but could not afford to appeal.   He said "I want people to know that I am giving away appellate services."   He gave an example of one of his projects, an appeal of a student loan dischargeability case.   A teacher went to school to gain a graduate degree so she could work as an administrator.   However. she couldn't get an administrative position.   She persuaded the bankruptcy court that she was subject to an undue hardship while representing herself on a pro se basis.  However, the District Court reversed.   It rejected the Bankruptcy Court's fact finding without explaining why.  It also found that the debt should not be discharged because she did not make a wise decision in pursuing the additional education.   The Eleventh Circuit reversed requiring the District Court to explain its fact finding and to reject its new requirement.   Buying Retail Rick Wynne with Jones Day offered a prognosis on the future of retail bankruptcies.   He said the tsunami of retail bankruptcies is just started.   Low interest rates have allowed lenders to keep extending the debt and delaying the inevitable.   He said that one huge problem is not no one has found a way to respond to Amazon..   He said that retail companies are further weakened by high amounts of leverage.   For example, ToysR Us has a ratio of debt to EBIDTA of 14:1 compared to Amazon whose ratio was 1.3:1.   He said that another problem was that retail cases must go fast due to utility deposits, 503(b)(9) claims and restricted deadlines to assume or reject leases.Many of the issues covered briefly in this program were the subject of later panels.