Joining the majority position, U.S. District Judge Walter Smith has ruled that inherited IRA accounts may be exempted as "retirement funds" under 11 U.S.C. Sec. 522(d)(12). Hill v. Studensky, No. W-11-CA-00214 (W.D. Tex. 2/22/12), which can be found here. (PACER registration required).The issue on appeal was whether an inherited IRA continued to constitute "retirement funds" once the person for whose retirement they had been saved was no longer alive. The Court found that there were two elements to be satisfied: (1) whether the account contained "retirement funds"; and (2) whether the funds were exempt from taxation. When an IRA is inherited, the beneficiary may receive the funds immediately, in which case they are recognized as ordinary income. Alternatively, they may be transferred to a new trustee. The account will still be in the name of the decedent and the beneficiary must begin receiving distributions within one year or withdraw the entire amount within five years. Turning to the issue of whether the inherited IRA constituted "retirement funds," the Court noted that both parties' interpretations were reasonable. However, section (d)(12)'s relation to the other subsections of section 522(d) proved important. The other subsections of section 522(d) referred to the debtor's interest in property, but section 522(d)(12) did not. The issue of inherited IR As is presently pending before the Fifth Circuit Court of Appeals. The Eastern District of Texas reached the same result as Judge Smith in Chilton v. Moser, No. 4:10-CV-180 (E.D. Tex. 3/16/11). The case is pending before the Fifth Circuit as Case No. 11-40377, Chilton v. Moser. The case was argued before the panel on February 8, 2012.

If you are considering filing for bankruptcy you probably have a number of questions about what creditors must be listed and what payments you can make in the months leading up to bankruptcy.  Clients may have a number of reasons for wanting to exclude creditors, including wanting to keep and ongoing business or personal relationship with a particular creditor.  However, when filing for bankruptcy you are required to list every debt owed.  You may not pick and choose what to include in your bankruptcy petition.  The next natural question is can you pay off the debt prior to filing for bankruptcy to keep it out of your petition.  The answer depends on the nature and the amount of the debt.  Any payment to a friend or family member in the year leading up to bankruptcy can be reversed by the trustee.  This is because any payment to a friend or family member is automatically presumed to be fraudulent by the court.  You will want to avoid this type of payment, even if you are paying back an amount borrowed from that individual.  Payments to ordinary creditors, meaning not friends or family, should not exceed $600 in the months leading up to bankruptcy However, if your minimum payment is over $600, for example if your mortgage is $1,000, you may pay what is actually owed.  The idea is that the bankruptcy code is written so that debtors may not try to exclude certain creditors from the bankruptcy or give any creditor preferential treatment.  If you do make a payment of more than $600 the trustee may reverse the payment and make that payment a part of your bankruptcy. It is true that if you file bankruptcy and name certain creditors they make cancel your accounts or not do business with you in the future.  Unfortunately, they still must be listed.  There are a few options that may be available.  You may choose to voluntarily repay the debt after the bankruptcy is closed if you choose.  However, doing this will eliminate some of the benefit that filing for bankruptcy offers as you will not truly be starting over.  There are a number of creditors that specialize in working with people that have filed for bankruptcy and can get you on the right start to improving your credit.  If you still have questions, or would like to speak with a St. Louis Bankruptcy Attorney, call us today!

    My call to the inept bankruptcy practitioners to get better or get out spawned some surprising push back. I spoke bluntly about what I saw as harm to the public from less than competent or committed bankruptcy attorneys. Most reaction was supportive:  A trustee wanted to use the piece for a presentation he was making; another lawyer asked to reprint it.  Many simply added their voice to my call. But I got two very heated, negative responses. The Arrogance Of A Helping Hand The first is easier to understand:  this reader thought I was arrogant.  I suppose he finds arrogance  in my willingness to name the performances I saw as sub par and to protest publicly when client cases are dismissed for the lawyer’s  failings.  Should that offend?  What obligates us to sit by in silence? It does make me wonder what that attorney, a certified specialist in consumer bankruptcy law, is doing to help people in his area become better at their craft.  Does he sit with practitioners and assist in the crafting of plans?  Does he educate his colleagues about new developments in the law? I suspect that he does nothing, sitting idly by as the next generation of bankruptcy lawyers circles the drain with their hapless clients in tow. To this lawyer I say, “If you’re not helping, get out of the way of those who do.” Scheming For Someone’s Clients The second retort was more disturbing in some ways.  The reader attributed the observed incompetence to competition among lawyers that ran counter, he thought, to the idea of a profession. He saw my criticism as being borne of a desire to take the bumbler’s clients, and contended that as profession we should be circling the wagons around the less-stellar members and nurturing them. After all, he claimed, we are a profession, not a business. This lawyers doesn’t know me personally, nor does he know my firm.  He has no sense of whether we’re booked solid or begging for business. I personally find it reprehensible for a professional to speak poorly of another attorney with the intent to steal his or her clients.  And you certainly can’t make the case that I’m confronting those lawyers who sparked this dialogue  with an eye on their clients because, like at most CLE presentations, the people who could really benefit aren’t reading here. Most disturbing in this angry comment was the unstated proposition that we, as a profession, should be protecting the least among us from criticism or consequence of their ineptitude.  Reminds me of the conspiracy-of-silence charge against professions, where no member of the profession can be found to testify for the victim of the defendant professional. Yes, this is a profession.  One dedicated not only to profit but to assisting people who need it most.  By coddling those who bumble through in the face of proffered education, we are allowing them to sacrifice the best interests of their clients at the altar of their profit.  And that, gentle reader, is abhorrent. Part of being a profession is having a duty to the calling as well as to the client. A Call To Action The experienced attorneys need to take up the mantle, make themselves available to mentor,  and point out educational opportunities for inexperienced bankruptcy attorneys.  Immediately. In my local case, the bench and the trustee’s office had labored mightily to educate the bar on the new procedures.  The local bar associations and the Bankruptcy Forum run classes all over California. The National Association of Consumer Bankruptcy Attorneys runs two programs each year.  The American Bankruptcy Institute puts on many programs, some of them dedicated to consumer issues. I offer educational opportunities, both live and online.  So do other lawyers and private groups, some of them excellent. A lawyer who remains clueless in the face of such educational opportunities should be pointed in the right direction.  If he or she fails to get the hint, permission to practice before the bankruptcy court should be revoked.  It may sound harsh, but we are a helping profession; a failure to help is a danger to those we are here to protect. What do you think?  As a profession, what should be our attitude be toward the less competent?  As a specialty within a profession, are the rules in bankruptcy practice any different? Image courtesy of Steve Snodgrass.

Do I have to appear in front of a Judge for my bankruptcy? No. The Judge does oversee the bankruptcy process; however you are not required to appear in front of him. Depending on your specific case, your attorney may need to appear in front of the Judge for certain motions or objections that may arise, but you do not need to attend. So do I have to go to court at all for my bankruptcy? Yes. One time during your bankruptcy you are required to appear in front of a trustee who has been assigned to your case. This appearance is often referred to as the “meeting of creditors”. What happens at the meeting of creditors?  The meeting of creditors is required under 11 USC §341 of the United States Code. This meeting is required in order to receive your discharge under both Chapter 7 and Chapter 13 bankruptcies. At the meeting the trustee will ask you questions under oath. There are some required questions and other questions will be asked depending on what you have listed on your petition, schedules, statements, and related documents. Generally, the questions are aimed towards verifying information you have listed (i.e. Are all of your creditors listed? Is your income still the same at it was on the date the petition was filed?). If you were honest and reviewed for accuracy your documents before they were filled with the court, then you will have nothing to worry about at this meeting. Are my creditors going to show up and tell me that I have to pay them back? Yes and no. Can creditors show up at your meeting of creditors? Yes, but they usually do not. Even if some of your creditors do show up, they cannot come and tell you to pay them back. Their appearance is permitted to allow them to ask you questions about your income, assets, etc. Again however, appearance by creditors is rare. Who is the trustee and what does he do? The trustee is appointed by the United States trustee, an officer of the Department of Justice, who oversees the bankruptcy. The trustees’ role is to determine whether there are assets that can be liquidated for the creditors’ benefit. They are essential appointed to make sure your bankruptcy complies with the bankruptcy code and that you have disclosed all income and property and that those items do not exceed that which is allowed in the bankruptcy in order to receive a discharge. In Closing…. The meeting is nothing to be worried about. If you have been thorough and completed your forms honestly and accurately, then this will be a breeze. Show up on time with your ID and SS card and the rest is easy!

By Prashant Gopal - Feb 7, 2012 Banks, accelerating efforts to movetroubled mortgages off their books, are offering as much as$35,000 or more in cash to delinquent homeowners to sell theirproperties for less than they owe. Lenders have routinely delayed or blocked suchtransactions, known as short sales, in which they accept lessfrom a buyer than the seller’s outstanding loan. Now banks havedecided the deals are faster and less costly than foreclosures,which have slowed in response to regulatory probes of abusivepractices. Banks are nudging potential sellers by pre-approvingdeals, streamlining the closing process, forgoing their right topursue unpaid debt and in some cases providing large cashincentives, said Bill Fricke, senior credit officer for Moody’sInvestors Service in New York. Losses for lenders are about 15 percent lower on the salesthan on foreclosures, which can take years to complete whiletaxes and legal, maintenance and other costs accumulate,according to Moody’s. The deals accounted for 33 percent offinancially distressed transactions in November, up from 24percent a year earlier, said CoreLogic Inc., a Santa Ana,California-based real estate information company. Karen Farley hadn’t made a mortgage payment in a year whenshe got what looked like a form letter from her lender. “You could sell your home, owe nothing more on yourmortgage and get $30,000,” JP Morgan Chase & Co. (JPM) said in theAug. 17 letter obtained by Bloomberg News. $200,000 Short Farley, whose home construction lending business dried upafter the housing crash, said the New York-based bank agreed tolet her sell her San Marcos, California, home for $592,000 --about $200,000 less than what she owes. The $30,000 will covermoving costs and the rental deposit for her next home. Farley,who is also approved for an additional $3,000 through a federalincentive program, is scheduled to close the deal Feb. 10. “I wondered, why would they offer me something, and whywouldn’t they just give me the boot?” Farley, 65, said in atelephone interview. “Instead, I’m getting money.” Tom Kelly, a JP Morgan spokesman, declined to comment on thecompany’s incentives. “When a modification is not possible, a short saleproduces a better and faster result for the homeowner, theinvestor and the community than a foreclosure,” he said in ane-mail. A mountain of pending repossessions is holding back arecovery in the housing market, where prices have fallen for sixstraight years, and damping economic growth. Owners of more than14 million homes are in foreclosure, behind on their mortgagesor owe more than their properties are worth, said RealtyTracInc., a property-data company in Irvine, California. Foreclosure Holdouts Short sales represented 9 percent of all U.S. residentialtransactions in November, the most recent month for which datais available, up from 2 percent in January 2008, according toCorelogic. Bank-owned foreclosures and short sales sold at adiscount of 34 percent to non-distressed properties in the thirdquarter, according to RealtyTrac. As lenders shift their focus to sales, they are findingthat some borrowers would rather risk repossession while theywait for a loan modification, according to Guy Cecala, publisherof Inside Mortgage Finance, a trade journal. In a loanmodification, the monthly payment, and sometimes principal, isreduced to help prevent seizure. Homeowners facing foreclosuremay live rent-free for years before they are forced out. “That’s why the banks have got to pay the big bucks,”Cecala said. “The real question is why is the bribe so big? Isthat what it takes to get somebody out of their home?” Multiple Banks Banks also pay a few thousand dollars to the owners ofsecond liens, whose loans can be wiped out by a short sale, toencourage them not to block the deals. While JP Morgan is giving the largest incentive payments,other banks and mortgage investors are also offering them,according to interviews with 12 real estate agents in Arizona,California, Florida, New York and Washington. Lenders alsoprovide incentives on loans they service and don’t own when themortgage investor, such as a hedge fund, requests it. JP Morgan, the biggest U.S. bank, approves about 5,000 shortsales a month. It generally offers $10,000 to $35,000 in cashpayments at settlement, real estate agents said. Not all of thesales include incentives. Borrowers also can receive payments from the federalgovernment’s Home Affordable Foreclosure Alternatives program,which in 2010 began offering as much as $1,500 to servicers,$2,000 to investors and $3,000 to homeowners who complete shortsales. Quicker Resolution For banks, approving a sale for less than is owed on thehome can cut a year or more off the time it takes to unload aproperty. From listing to sale, the transactions took about 123days on average at the end of last year, according to theCampbell/Inside Mortgage Finance HousingPulse Tracking Survey. Lenders spend an average of 348 days to foreclose in theU.S. and an additional 175 days to sell the property, accordingto RealtyTrac. In New York, a state that requires court approvalfor repossessions, it takes about four years to foreclose on ahome and then resell it, the company said. Lenders can often afford to forgive debt, offer theincentive and still make a profit because they purchased theloan from another bank at a discount, said Trent Chapman, aRealtor who trains brokers and attorneys to negotiate with banksfor short sales. Chapman, who also writes a blog on TheShortSaleGenius.com,said he’s heard about 50 homeowners who have received incentivesfrom lenders including JP Morgan, Wells Fargo & Co., CitigroupInc. and Ally Financial Inc. Wells Fargo “My guess is they want to get rid of bad loans,” Chapmansaid. “If they short sale these types of loans, they have lessof a headache and have some goodwill with the homeowner.” Wells Fargo, based in San Francisco, offers relocationassistance of as much as $20,000 for borrowers who completeshort sales or agree to transfer title through a deed in lieu offoreclosure “in certain states with extended foreclosuretimelines, including Florida,” Veronica Clemons, a spokeswoman,said in an e-mail. Bank of America Corp. sent letters to 20,000 Floridahomeowners as part of a pilot program, offering incentives of asmuch as $20,000, or 5 percent of the unpaid loan balance, Jumana Bauwens, a spokeswoman, said in an e-mail. The program expiredin December and the Charlotte, North Carolina-based bank hasn’tdecided whether to introduce it in other states, she said. About15 percent of the homeowners agreed to participate in theprogram, she said. Citigroup Offers “The bank is pleased with the response,” Bauwens wrote.“The state is experiencing higher foreclosure rates than otherparts of the country and is therefore seen as a viable market togauge incremental short-sale response and completion rates whenpresenting homeowners with relocation assistance at closing.” Citigroup offers $3,000 to most borrowers who qualify forits program, but the “amount may increase based on thecircumstances of each individual case,” Mark Rodgers, aspokesman for the New York-based bank, said in an e-mail.“Investor programs have different guidelines for relocationincentives, which we honor.” Susan Fitzpatrick, a spokeswoman for Detroit-based Ally,didn’t comment specifically on incentives when asked about them. Borrowers typically can’t negotiate the incentives, whicharrive by mail, Chapman, the Realtor, said. Tap on Shoulder “It’s not really easy to identify the guidelines becauseChase doesn’t tell you, they kind of tap you on the shoulder,”he said. “When I first saw it in January 2011, I thought it wasa joke or a typo. I was convinced it must say $3,000, not$30,000.” Offering enough for the homeowner to put down a deposit ona rental apartment is reasonable, said Sean O’Toole, chiefexecutive officer of ForeclosureRadar.com, which tracks sales offoreclosed properties. Giving tens of thousands of dollars todelinquent homeowners sends the wrong message, particularly ifthey got into trouble by running up home-equity loans during thehousing boom, he said. “It may make sense for people to walk away, it doesn’tmake sense for them to get rewarded for doing it,” O’Toolesaid. “It’s not the homeowner’s fault that house prices droppedso dramatically, but they have already received months of freerent, if not cash out.” Cecala of Inside Mortgage Finance said he wonders whetherlenders are making big payments on properties with underlyingtitle problems. Evan Berlin, managing partner of Berlin Patten,a real estate law firm in Sarasota, Florida, saidrepresentatives of a large bank told him the incentives areprimarily given to borrowers when it doesn’t have the properpaperwork needed to win its foreclosure case. He declined toname the bank for publication. Incentive Disconnect State attorneys general across the U.S. began investigatingforeclosure practices in October 2010 following allegations thatthe nation’s top mortgage servicers were using faulty documentsto repossess homes. Berlin said his office negotiated about 400 short sales inthe past year and about a quarter included an incentive, rangingfrom $3,000 to $48,000. In some cases, the payments aren’tincentives at all because they’re offered after the borrower hasalmost completed the short sale, he said. “The idea is that this is relocation assistance,” Berlinsaid. “But when you’re offering $48,000, obviously it doesn’tcost $48,000 to relocate.” Cooperation Sought The size of the payment may have little to do with salesprice. JP Morgan gave one Phoenix homeowner $20,000 after shesold her property in June for $32,000, according to RoyceHauger, the real estate agent who represented the seller andshared a copy of the settlement sheet with Bloomberg News. Thebank also agreed to forgive more than $70,000 in debt, she said. Kelly, the JP Morgan spokesman, declined to comment on thepayment. The homeowners are getting the money in exchange for theircooperation, said Kris Pilles, a Riverhead, New York-based realestate broker who represents banks, servicers and hedge fundsthat own distressed housing debt. Pilles is frequently dispatched to the homes of delinquentborrowers to explain the benefits of avoiding foreclosure, hesaid. His clients have paid as much as $92,500. In return, thelenders expect the seller to clean the house before showings,and trim the grass. “Money talks,” Pilles said. “From the bank side, it’sanything to initiate a conversation with someone who may not belistening to them.” ®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.

If you are considering filing for bankruptcy for a business there area number of options available to you.  First you would need toconsider what type of liability you have.  If you are a soleproprietor or a general partner you are personally responsible for thedebt.  If you are a limited partner, have an interest in acorporation, or you have an interest in a limited liability companyyou are generally not personally responsible for the debt.  However,there can be exceptions to this where an individual has personallyguaranteed the debt of a company or the corporate veil can be pierced. Prior to filing for bankruptcy you will want to consult with theattorney that handled the start up of your business. Filling for a Chapter 7 differs, depending on the type of business youhave.  If you are a sole proprietor you cannot file for bankruptcysolely for the business.  In this case you would need to filepersonally and list the business.   This is because a soleproprietorship is not a separate legal entity and is not consideredseparate from you personally.  If, however, you have a partnership,corporation, or limited liability corporation you may file on behalfof the business and are not required to file for bankruptcypersonally. If you have a sole proprietorship and are required to file personally,both personal debts and business debts will be eliminated throughfilling.  You can use exemptions available in personal bankruptcyfilings to exempt both personal and business property, though the samelimits and rules still apply.  The debt will be discharged and you canstill operate your business.  This is a very good option if you wouldlike to save your business.  Of course, if you do not want to continueyour business you may choose to surrender assets and begin winding upyour business. If you have a partnership, corporation, or limited liability companyand file on behalf of your business filing for bankruptcy willdissolve the business.  Upon filing you would need to begin winding upaffairs.  You could not enter into any new business, but could finishexisting obligations to the extent possible.  Assets would beliquidated to pay off creditors.  The business debt is not dischargedand you cannot apply any exemptions that would be available in anindividual filing.  This would not eliminate any personal obligationon debts incurred by making a personal guarantee of piercing thecorporate veil.  However, if you do have some personal obligation onthe business debts you can also file for a personal bankruptcy toeliminate your obligation.If you have any questions, or would like a free consultation with aSt. Louis Bankruptcy Attorney, contact us today!

Pleading a claim to recover a preferential transfer is one of the most basic bankruptcy causes of action. Merely by establishing the date, amount and recipient of the transfer, the plaintiff can establish that a transfer was made, within 90 days before bankruptcy while the debtor was presumed to be insolvent. Most preference complaints include this basic information and then the conclusions that the payment was made on account of an antecedent debt and that the transferee received more than it would have received in a hypothetical chapter 7. Anyone who has practiced bankruptcy law for any period of time has seen (or drafted) the form complaint with an exhibit A describing the transfer. Preference complaints are sometimes paired with fraudulent conveyance claims making skeletal allegations. After Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court signaled that a higher standard would be required for pleading, one of plausibility. Instead of pleading the bare elements of a cause of action, the pleading must contain sufficient facts to make the claim plausible. How does that apply to common avoidance actions? Judge Craig Gargotta addressed that question in Crescent Resources Litigation Trust v. Nexen Pruet, LLC, Adv. No. 11-1082 (Bankr. W.D. Tex. 1/23/12), which can be found here. In Nexen Pruet, the Litigation Trust filed a complaint which alleged two causes of action: a preference claim and a fraudulent transfer claim. The complaint included the following: *A description of the debtors’ cash management system; *A statement that the debtors’ schedules, statement of financial affairs, disclosure statement and a declaration of the debtors’ CFO (none of which were attached) indicated that the debtors were insolvent at all relevant times; *An exhibit describing the transfers by date, amount, invoice number and date the check cleared; and*A statement of each cause of action. The defendant filed a motion to dismiss for failure to state a cause of action, alleging that the claims were based on “naked assertions devoid of further factual enhancement.” The Court found that both claims should be dismissed without prejudice. The Court relied extensively upon In re Careamerica, Inc., 409 B.R. 737 (Bankr. E.D. N.C. 2009). In the case of the preference claim, the Court found that the plaintiff had failed to allege sufficient facts to show that the transfer was made on account of an antecedent debt: Notwithstanding the Court’s finding that the Trust has sufficiently pleaded the majority of the elements of a preferential transfer action, the Court finds that the Trust has not sufficiently pleaded the existence of an antecedent debt. By contrast to the cases cited above, including those which espouse even the most lenient of pleading standards, the Trust’s Complaint contains no description whatsoever of the Defendant, Nexen Pruet, much less a description of the nature of the relationship between Nexsen Pruet and the Debtors. The Complaint merely contains the conclusory allegation that “[t]he Transfers were made . . . for or on account of an antecedent debt owed by the particular Debtor to the Defendant before such Transfers were made,” with no factual allegations to support this contention (id. at 6). Without more, the Court is unable to infer the existence of an antecedent debt based on the conclusory allegations presented under Count I of the Complaint. Opinion, p. 12. With respect to the fraudulent conveyance claim, the Court found that the pleadings with regard to both insolvency and lack of reasonably equivalent had not been adequately pled, concluding: In this case, like in Caremerica, the Trust’s allegations with respect to the fraudulent transfer claim contained in Count Two of the Complaint do no more than mirror the elements of § 548(a)(1)(B) (see docket no. 1, at 7). The Trust argues that the Complaint, read in its entirety, contains a “detailed pleading of insolvency” and a “clear pleading of reasonably equivalent value.” (Docket no 1 at 9.) Like in Caremerica, however, “other than dates, amounts, and names of transferees included in Exhibit B,” along with general conclusory allegations of insolvency and reasonably equivalent value, the Trust fails to support its allegations with factual assertions. (citation omitted). First, with regard to insolvency, the Trust alleges that the Debtors’ Schedules, Statements of Financial Affairs, and Disclosure Statement, along with the declaration of the Debtors’ chief financial officer, reflect that the Debtors were “deeply insolvent at all times relevant to the complaint.” (Docket no. 1 at 5.) The Trust did not attach any of these documents to its Complaint nor did it refer the Court to any specific facts provided in these documents that would allow the Court to draw a reasonable inference of insolvency. The Trust further alleges that the Debtors were insolvent “under a number of tests” and then proceeds to describe each test, without providing the applicable facts to support a finding of insolvency under any of them (id.). Second, with regard to reasonably equivalent value, the Complaint contains only one sentence, which states, “The Debtor or Debtors identified on Exhibit B received less than the reasonably equivalent value in exchange for the Transfer(s).” (Docket no. 1, at 7.) In light of Iqbal and Twombly, this Court will not accept such “threadbare recitals of a cause of action’s elements, supported by mere conclusory statements.” (citation omitted). Opinion, pp. 14-15. The Nexen Pruet opinion has much different implications for the two causes of actions involved. With regard to preference claims, the opinion imposes only a minor burden. In performing its due diligence before filing suit, the plaintiff should have investigated the relationship between the debtor and the creditor and, in particular, should have reviewed the invoices submitted by the creditor. Thus, pleading facts with regard to an antecedent debt should not impose a significant burden. By the same token, it does not provide that much more information to the defendant, who presumably would know this information as well. The fraudulent conveyance claim is another matter. A preference is a preference primarily because of timing. On the other hand, a fraudulent conveyance could be based on any number of scenarios from a payment made on the debt of another to a payment made to an insider based on made-up invoices. In this regard, the heightened pleading requirements provide useful information to the defendant, as well as requiring the plaintiff to have a theory which would survive scrutiny under Rule 9011. In many cases, a preference claim and a fraudulent conveyance claim will be mutually exclusive. Generally, an antecedent debt implies value. Thus, only an antecedent debt in a transaction for less than reasonably equivalent value could be actionable under both statutes. By requiring a higher standard for pleading fraudulent conveyance claims, the Court protects defendants from having to respond to potentially spurious claims.

Sometimes a legal argument which seems clever in the abstract can look downright silly when placed in context. That was the case with several arguments rejected by the court in Smith v. Citimortgage, Inc., et al, Adv. No. 11-5136 (Bankr. W.D. Tex. 2/21/12), which can be found here. Argument #1: 39. None of the Plaintiffs’ first three (3) claims, which assert that the Defendants are in “breach” or “violation” of the Court’s orders entered in the Plaintiffs’ bankruptcy, come close to meeting the facial plausibility standard. The Plaintiffs have already settled and released these claims through the Court-approved Settlement. Specifically, through the Settlement, they have “release[d]” “Citimortgage . . . and [its] agents and employees . . . from all claims of any kind . . . that [the Plaintiffs’] may have with respect to the . . . [Plaintiffs’] Bankruptcy . . . or any other matters[.]” 40. The Plaintiffs’ allegations that the Defendants are in violation of the Court’s orders are claims with respect to the Plaintiffs’ bankruptcy. Even if the Plaintiffs’ factual allegations are taken as true for the moment, through the Court-approved Settlement, the Plaintiffs’ (sic) traded their rights to enforce the related orders for a contract right to enforce the Settlement pursuant to Texas-state law. They have no right to rescission of the Settlement and cannot now assert claims against any of the Defendants that they affirmatively gave up through the Settlement. Renewed Motion to Dismiss, pp. 14-15, Dkt #17. At first blush, the argument that the Debtors released certain claims and are now attempting to pursue them appears to be quite plausible. However, the Bankruptcy Court’s opinion adds the relevant context. The court declines to read this provision as precluding claims for breach of the settlement agreement itself and violation of the court order approving it. The court also declines to read this provision as precluding claims for violation of the discharge injunction that arise after execution of the settlement agreement. The provision above is best understood as applying to claims that the Smiths had at the time of execution of the settlement agreement. Opinion, p. 9. While the argument appeared plausible on its face, it quickly turned outrageous when it became manifestly clear that the plaintiffs were suing for violation of the settlement agreement and the order approving the settlement agreement, each of which necessarily occurred after execution of the underlying agreement. While the power to compromise claims is broad, an agreement which negates its own enforcement is no agreement at all. To put it another way, a release, no matter how broad, cannot release the right to enforce the agreement in which it is contained. Also, I am not aware of any legal principal which would allow a party to release wrongs yet to occur. What is really insidious about the argument in this case is that it appears that Citimortgage was arguing that because the discharge occurred in the bankruptcy case, that the Debtors released their right to ever enforce the discharge against Citimortgage. That is an audacious claim. Argument #2: 28. The Fifth Circuit has long recognized that in order for a bankruptcy court to have jurisdiction over a matter, “the outcome of that proceeding [must] conceivably have an[] effect on the estate being administered in bankruptcy. (citation omitted). Once administration of a case concludes and a Court closes the case, no bankruptcy case is “being administered”—the bankruptcy court’s jurisdiction over all matters therefore ends at closure of the case. (citations omitted). 29. The Court’s closure of the Plaintiffs’ bankruptcy on September 1, 2011 ended its jurisdiction over any and all related matters. Even if the Adversary were “related to” the Plaintiffs’ bankruptcy for the purposes of 28 U.S.C. Section 157 when filed (which the Defendants deny), the Court’s jurisdiction over the Adversary would have terminated on September 1. Renewed Motion to Dismiss, p. 11. Close, but no cigar as noted by the Bankruptcy Court: None of the cases relied on by Citimortgage involve a debtor’s post-discharge attempt to hold a defendant in contempt for violating court orders. For this reason, Citimortgage’s argument can be easily dispensed with. Bankruptcy courts always retain jurisdiction to interpret and enforce their own orders. (lengthy list of citations omitted). (emphasis added). Opinion, p. 7. Never tell a judge that he lacks authority to enforce his own order. By arguing that the court lacked authority to enforce its own orders, Citimortgage struck at the court’s authority. Orders issued by a court which cannot enforce them are not worth the paper they are written on (or in the case of electronically stored data, the PD Fs into which they are converted). What of Citimortgage’s other arguments? They were on the money. Ten out of eleven statutes relied upon by the Plaintiffs for jurisdiction were either not jurisdictional at all or were inapplicable. The court found that it lacked jurisdiction over the Plaintiffs’ Fair Debt Collection Practices Act claim and its state law claims. The court dismissed the claims brought against two employees of Citimortgage. It could be said that the Plaintiffs’ claims contained several grains of wheat among an excess of chaff. Had the defendants excluded just two arguments from their motion, they would have done a valuable service in helping the court separate the wheat from the chaff. However, by overreaching with grimace-inducing* arguments, they attacked the very integrity of the court from which they sought relief. Better to accept a strong half-victory than to generate an opinion which is equal parts rebuke to both sides.*--Readers, can you come up with a better term? Originally, I was going to use OMG-inducing, but when I looked it up in the Urban Dictionary, it was defined as a term overused by teenage girls in chat rooms who are incapable of spelling out entire words. I tried forehead-slap, as in Homer Simpson saying "Doh!" but that didn't quite work either. I went with grimace-inducing, even though it is a bit staid, because I could not come up with something more powerful.

After I unloaded on the incompetence I saw in the courtroom last week, it’s only fair to ask:  what are you struggling with?  Is there something I can do to help? I’m here to share what I know, with an emphasis on fitting together the pieces of what you can learn from books or traditional CLE courses into a scheme for actual practice of bankruptcy law. I raise the issues I either see around me being mangled or the odd issues that come up in my practice.  Not at all systematic.  It’s a shot in the dark about what would help new practitioners. So, I ask, what’s baffling you?  Where do you see the holes in your skill set?  What would you like to see here? What are your ambitions for your practice?  For taking the next step forward? Image courtesy of jmgardner.

When filing for bankruptcy there are a number of options to consider with regard to property.  A debtor can choose to surrender property, reaffirm debt, or to redeem the collateral.  Each has different advantages and disadvantages.  Here we will focus on redemption of collateral.  Redemption means that a debtor will make a one time lump sum payment to a creditor in the amount of the secured portion of the debt.  The secured portion is determined by evaluating the fair market value, as only that is secured.  When a a loan is worth more than the fair market value of the collateral a creditor is under secured and can only recover for the secured amount.  For example, lets say that a debtor has a vehicle that is worth $10,000 and the loan value is $15,000.  You can determine what the unsecured portion is by subtracting the fair market value from the loan value.  Here there is $5,000 of unsecured debt.  To redeem this property through a bankruptcy a debtor would need to make a payment of $10,000 to the creditor.  The remaining $5,000 balance on the loan would be discharged through a Chapter 7 Bankruptcy proceeding.  As mentioned previously, each of the options has certain advantages and disadvantages.  The advantage to redeeming property is that a debtor can keep then keep the property, will own the property free and clear of encumbrances, and will not have any ongoing payments on the collateral.  Of course, this option does require a debtor to make a lump sum payment, which may not be possible for all debtors.  In the event that you cannot make that payment there are financers that offer redemption loans specifically for this purpose.  Choosing to finance a redemption will mean that a debtor has an ongoing payment even after filing for bankruptcy.  When considering this option, particularly with financing, debtors should make sure that they can truly afford the payment or the debtor may be at risk of repossession at a later date.  In some cases financing a redemption is a good choice because the terms of the loan may be better than the existing loan terms. If you still have questions you can schedule an appointment with a St. Louis Bankruptcy Attorney today to discuss the available options.