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attorneys and practitioners of the Bankruptcy Court for the District of Colorado)
In re Sniff, Bankr. Case No. 15-18086, Order entered October 6, 2015 (Fed. R. Bankr. P. 1004.1).
The Court found that the holder of a durable power of attorney, valid under the Colorado Uniform Power of Attorney Act, Colo. Rev. Stat. § 15-14-701, et seq., may qualify under Fed. R. Bank. P. 1004.1 as a representative for an incompetent bankruptcy debtor. Further, when the power of attorney contemplates that the attorney-in-fact will have broadest scope of authority, encompassing the right to act on the principal's behalf with respect to claims and litigation, the attorney-in-fact has the right to file a petition for bankruptcy relief and otherwise participate in a bankruptcy proceeding for the principal.
In this case, the Court concluded that there was no need for it to appoint the Debtor's wife as attorney-in-fact to act for the Debtor in their joint bankruptcy case, because the Debtor, through his general power of attorney, had already appointed his wife to act on his behalf.
Posted: 11/19/2015 3:03:20 PM
In re Escalera Resources, Co., Bankr. Case No. 15-22395, Order entered November 9, 2015 (payment of prepetition employee wages and benefits).
Noting that prepetition claims in a Chapter 11 case are typically paid only through a confirmed plan of reorganization and according to the priority scheme established in the Bankruptcy Code, the Court considered the statutory basis for allowing payment of prepetition employee wages and benefits and concluded that payment of the prepetition wages and benefits was permitted by the Bankruptcy Code and warranted in this case. In reaching this conclusion, the Court noted that Congress had afforded a very high priority to employee wages under 11 U.S.C. § 507. The Court found that under 11 U.S.C. §§ 1106, 1107, and 1108, payment of such prepetition claims is consistent with the fiduciary duty of the debtor-in-possession to stabilize, protect, and preserve the estate, including an operating business's going-concern value. The Court also held that its power to approve early payment of prepetition wage and benefits claims to employees was augmented by the Court's equitable powers, as codified in 11 U.S.C. § 105, to fill in "statutory gaps" as necessary to implement the priority scheme of the Bankruptcy Code. Accordingly, the Debtor was authorized to pay certain prepetition wages and benefits obligations.
Posted: 11/19/2015 3:00:59 PM
In re Formaneck, Case No. 10-20070 MER; Order entered July 13, 2015 (Material default of confirmed Chapter 13 Plan; conversion versus dismissal under 11 U.S.C. § 1307(c))
The Court confirmed the Debtors' sixty month Chapter 13 plan ("Confirmed Plan"), which included provisions to cure a prepetition mortgage default through payments to the chapter 13 trustee ("Trustee"), and to make post-petition mortgage payments directly to the mortgage creditor outside the Confirmed Plan. The Debtors completed all payments to the Trustee, and cured the prepetition arrears. However, the notice process under Fed. R. Bankr. P. 3002.1 revealed the Debtors' failure to make over thirty mortgage payments directly to the secured creditor. The Debtors never sought any modification of their Confirmed Plan, and the Trustee filed a motion to dismiss the case under 11 U.S.C. § 1307(c).
The issues before the Court were whether the Debtors' failure to make post-petition payments directly to the secured creditor is a "material default" by the Debtors with respect to a term in their Confirmed Plan, and if so, whether dismissal or conversion was in the best interests of creditors and the estate. The Court noted the provisions of the Confirmed Plan were binding on the Debtors under 11 U.S.C. § 1327(a), and two other divisions of this Court have recently addressed similar issues. Ultimately, the Court concluded the Debtors' failure to make over thirty post-petition payments directly to the secured creditor establishes a material default with respect to terms of the Confirmed Plan which harms both creditors and the estate. Although the Debtors made all required payments to the Trustee and the secured creditor failed to seek relief from stay to enforce it state law rights with respect to the residence, the Debtors failed to pay post-petition payments of $109,022.42 in violation of their Confirmed Plan and provided no evidence, or even allegations, as to where and how all of the income earmarked for these payments was used. The Debtors could not obtain a discharge of their debts in Chapter 13, and rewarding the Debtors with a discharge in Chapter 7 for their failure to comply with the Confirmed Plan and the Bankruptcy Code was inappropriate. In its discretion, the Court held the Debtors' material default warranted dismissal pursuant to § 1307(c)(6).
Posted: 8/25/2015 7:45:55 AM
In re Dominguez Juarez, Case No. 15-10030- HRT; Order entered July 2, 2015 (Relief from stay under 11 U.S.C. §§ 362(c)(3) and 362(d)(1)).
In this chapter 13 case, the Court granted the creditor's earlier § 362(j) motion for a declaration that the stay had automatically terminated under § 362(c)(3)(A) because Debtor had been a debtor in another case within the last year and had not been granted an extension of the stay under § 362(c)(3)(B). In that order, the Court cited to In re Holcomb, 380 B.R. 813 (B.A.P. 10th Cir. 2008), which held ‚Äúthe automatic stay terminates under § 362(c)(3)(A) only with respect to the debtor and the debtor's property but not as to property of the estate.‚ÄĚ Id. at 816.
Subsequently, the creditor filed this motion for stay relief under § 362(d)(1). The creditor argued § 362(c)(3)(C) creates a rebuttable presumption that Debtor's case was filed in bad faith, and the creditor's burden to show cause for relief under § 362(d)(1) is satisfied if Debtor fails to rebut the presumption with clear and convincing evidence as provided under § 362(c)(3)(C). The Court rejected the creditor's argument, holding the effect of the § 362(c)(3)(C) rebuttable presumption of bad faith is limited to motions for extension of the stay under § 362(c)(3)(B).
The Court went on to hold Debtor had filed his Chapter 13 petitions in good faith, following the reasoning set forth in In re Galanis, 334 B.R. 685 (Bankr. D. Utah 2005), a post- BAPCPA repeat filing case. The Court analyzed a number of factors, including the length of time between petitions, the nature of the debts, the Debtor's motive, the effect on creditors, the reason the prior case was dismissed, the likelihood of funding and completing a plan, and the position of the creditors. Based on the evidence, the Court weighed those factors in Debtor's favor and denied relief from stay. The Court further noted that Creditor's collateral had substantial equity providing adequate protection, even if specific payments to cure any arrearage had yet to be finalized by the plan confirmation process.
Posted: 7/21/2015 8:57:21 AM
In re Salvatore Trobiano, Jr., and Michelle Lee Trobiano, Bankr. Case No. 14-24635 (Bankr. D. Colo. Jun. 23, 2015)(Whether, as a condition of confirmation of their Chapter 13 plan, Debtors, one of whom is currently unemployed but who might obtain a job during the plan, are required pursuant to 11 U.S.C. § 1325(b)(1)(B) and Hamilton v. Lanning, 560 U.S. 505 (2010), to commit in their plan to turnover to the Chapter 13 Trustee annually one-third of their gross income in excess of their current gross annual income.)
After the Debtors filed their bankruptcy case, the Debtor-husband lost his job. The Debtors filed amended schedules I and J, reflecting decreased income and expenses associated with the job loss. They also filed an amended Chapter 13 plan, in which they addressed the job loss by including the following provision: "Within 30 days of Debtor-husband obtaining employment, Debtors shall amend Schedule I and modify their plan, as necessary, to pay all disposable income into the plan."
The Chapter 13 Trustee objected to the Debtors' plan on the ground that the "Debtors may not be committing all of [their] projected disposable income to plan payments" as required under 11 U.S.C. § 1325(b)(1)(B). The Trustee demanded that the Debtors include a plan provision that states: "Debtors will turn over the tax returns and year-end pay advices for every year of the plan. Debtors will turnover 1/3 of gross income in excess of $65,652 during the duration of the plan as well as income reporting commencing 2/1/16." The Debtors would not agree to do so.
The Court held that because the circumstances of the Debtor-husband's prospective employment and the effect thereof on the Debtors' income and expenses were unknown at the time of confirmation, the forward-looking approach endorsed by the United States Supreme Court in Hamilton v. Lanning, 560 U.S. 505 (2010) did not compel the inclusion of a mechanical income turnover provision as proposed by the Trustee. Instead, the Debtors' proposed provision requiring them to "amend Schedule I and modify their plan, as necessary, to pay all disposable income into the plan" was sufficient to ensure that all projected disposable income was committed to plan payments consistent with 11 U.S.C. § 1325. The Court held, however, that because the Trustee would have the burden of monitoring the Debtors' compliance with their plan, including the provision requiring them "modify their plan, as necessary," the Debtors could be required to amend their plan to include a provision mandating that they turnover tax returns and year-end pay advices on an annual basis. The Court noted that requiring turnover of such information is consistent with and reaffirms 11 U.S.C. § 521(f)(4)(B) and (g)(2), which requires that Chapter 13 debtors, on request of the Court, the United States Trustee, or any party in interest, file with the Court an annual statement of income and expenditures, including the sources of income to the debtors, and annual tax returns.
Posted: 6/24/2015 8:22:08 AM
In re Karen Lynne Tollefson, No.13-24681 TBM (Bankr. D. Colo. May 13, 2015) (Fed. R. Bankr. P. 7026, 7034 and 9014; discovery of opposing party's attorney's billing records in contested fee application litigation).
In a dismissed Chapter 11 case, the Court retained jurisdiction to consider the reasonableness of the debtor's attorneys' fees. A significant creditor in the case objected to the amount of the fees charged by applicant as unreasonable. In preparation for trial and during the course of discovery, the fee applicant sought discovery of the objecting creditor's billing records and other information in connection with the debtor's case and related cases. The matter came before the Court on the applicant's motion to compel the opposing party's attorney to produce billing records and other information.
After hearing argument, the Court issued its order denying the applicant's motion to compel, in part, on the grounds that the billing records of the opposing party were neither relevant nor within the proper subject of discovery under Fed. R. Bankr. P. 7026, 7034 and 9014. The Court, however, permitted the other limited discovery sought.
Posted: 6/24/2015 8:13:12 AM
In re Samuel Jesse Christian Morreale, No. 13-27310 TBM (Bankr. D. Colo. May 28, 2015) (Chapter 7 debtor's standing to challenge the Chapter 7 trustee's administration of the case).
The Chapter 7 debtor objected to the Chapter 7 trustee's efforts to sell property of the estate. To shore up his standing, the debtor acquired the claim of a pre-petition, unsecured creditor. The trustee objected to the debtor's standing and to the validity of the claim the debtor had acquired. The Court conducted an evidentiary hearing to determine: (1) whether the debtor held a "pecuniary interest" sufficient for purpose of standing, particularly whether there was a "reasonable possibility of a surplus" in which the debtor might ultimately share (the standard invoked for determining standing to appeal adopted by the Tenth Circuit in Co-op Mining Co. v. Aquila, Inc. (In re Matter of C.W. Mining Co.), 636 F.3d 1257, 1260 (10th Cir. 2011) ); and (2) the validity of the claim the debtor had acquired.
The Court concluded upon the facts of the case that: (1) there was not a reasonable possibility of a surplus in which the debtor might participate; and (2) the claim upon which the debtor relied for his standing was not a valid claim against debtor's estate. Thus, the Court held the debtor did not have standing to challenge the efforts of the trustee to marshal and liquidate the assets of debtor's estate. Among the legal conclusions reached, the Court held that a debtor cannot obtain standing by bringing a claim against himself.
Posted: 6/24/2015 8:07:34 AM
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