Call for a professional consult today 734.281.2050

All posts tagged Bankruptcy Court

Posted:
April 25, 2013
Tags:
Comments:
Comments Off on Bankruptcy Cases in the News: Federal and State Exemptions

Bankruptcy Cases in the News: Federal and State Exemptions

Bankruptcy Cases in the News

Federal and State Exemptions

     Under the Bankruptcy Court, a debtor may elected between two sets of exemptions in a Chapter 7 case, the Federal exemptions, or (in Michigan) the Michigan exemptions. Generally, the Federal exemptions give the greatest coverage of property to the debtor. Exempt property is property that the debtor gets to keep from creditors and the trustee, which forms the basis of his or her fresh start going forward.

     In certain interesting circumstances, however, the Michigan exemptions are more favorable to the Chapter 7 debtor and should be elected. For instance, under the Federal exemptions, exemptions about $42,000.00 in home equity can be exempted by a married couple. However, if the home is jointly owned as entireties property (husband and wife) either may file individually a bankruptcy and exempt their entire equity, no matter how great, from all individual creditors.

     That is because the historical purposes of the state law favors protecting an innocent spouse from the debts of his or her spouse to preserve their primary residence. This concepts has been explored and defined in several published court decisions. For instance, see: In re: Trickett, 14 Br 85 (Bank W.D. Michigan) 1981; and, In re: Grosslight, 757 F2d 773 (6th Cir. 1985).

     One of the keys to this relief is the absence of joint indebtedness. So, if the non-filing debtor is jointly responsible on some of the incurred debt, the trustee may argue that it should be allowed to administer the estate (sell the martital home) to the extent of the joint obligations. Still, this type of harsh relief must be examined on a case-by-case basis as noted by Judge McIvor in In re: Edwin Harlin, 325 BR 184, 189 (Bank E.D. Mich) 2005:

“As a general rule, courts have been very reluctant to apply 11 USC §363 (h) to allow the sale of entireties property owned by the debtor, and a non-debtor spouse. The case law is well summarized in Collier on Bankruptcy as follows: Disputes over the applicability of a section (h) to tenancies by the entireties have created the largest number of reported cases under section, perhaps because of the unique nature of the ownership interest, the variations among the states as to the nature of the interest and the rather draconian remedy that section 363(h) gives the trustee, contrary to the deep historical roots of the form of title, which is supposed to protect each spouse from the unilateral action of the other… Thus, although generally speaking property held by the debtor as tenant by entirety is subject to sale under section 363(h), courts have erected various obstacles to such sale.”

     This suggests, of course, that married couples should strongly consider never co-signing for the other and avoid all joint debt. Also, they might consider making sure to concentrate payments to reduce and eliminate joint debt as a priority over individual debt, in the ordinary of their payments.

     If you or a loved one are considering whether bankruptcy relief would be helpful for you, please make sure to consult a qualified debt relief agency/attorney. Guy Vining is available for a no-charge initial bankruptcy consultation and would be pleased to meet with you.

Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in Taylor, Michigan where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

Posted:
February 18, 2013
Tags:
Comments:
0

Bankruptcy Cases in the News

Bankruptcy Cases in the News:

 

     On February 5, 2013 the 6th Circuit Court issued an interesting opinion concerning creditors’ rights after mortgage foreclosures in In re: Richard K. Miller, No.: 11-2357 (unpublished). The question before the court was whether the Bank’s credit bid at a Michigan Sheriff’s sale (after foreclosure by advertisement) extinguished the debtor’s debt to the bank. The bankruptcy court determined that it did and the 6th Circuit Court of Appeals affirmed/agreed with that decision.

 

     After the bank foreclosed against the the debtor’s home it bid the full amount of it’s mortgage at the sheriff’s sale and acquired the title, subject to debtor’s rights of redemption. When debtor did not redeem the  bank subsequently sold the home for less than the amount debtor owed and then claimed the difference against the debtor. The court would not allow this action based upon Michigan cases. Specifically holding:

 

     In Bank of Three Oaks v. Lakefront Properties, 444 N.W. 2d 217, 553 (Mich. Ct. App. 1989)(per curiam), the mortgagee bank bid $147,129.42, constituting the full amount of the debt plus the cost of foreclosure and statutory attorney’s fees, at the foreclosure sale following a Michigan foreclosure by advertisement. When the sheriff’s deed became operative at the conclusion of the redemption period, the bank became the titled owner of the property. Thereafter, the bank sold the property for $150,000.00. The bank filed suit against the mortgagors to collect an alleged deficiency for the interest, taxes, and insurance premiums accrued between the date of the foreclosure sale and the date the redemption period expired. Id. at 554-55. The Michigan Court of Appeals held that “[w]hen property is purchased at a foreclosure sale for an amount equal to the amount due on the mortgage, the debt is satisfied.” Id. at 555 (citing Guardian Depositors Corp. v. Hebb, 287 N.W. 796 (Mich. 1939), and Powers. v. Golden Lumber Co., 5 N.W. 656, 657 (Mich. 1880)). Because the debt was extinguished at the foreclosure sale, the court held that the bank could not pursue any deficiency where the mortgagor did not redeem the property. Id. at 556-557.

 

     The same legal principals have been applied in other Michigan cases. See Smith v. Gen. Mortg. Corp., 261 N.W. 2d 710, 712-13 (Mich. 1978)(per curiam); Kennedy v. Brown, 15 N.W. 498, 499-500 (Mich. 1883); New Freedom Mortg. Corp. v. Globe Mortg. Corp., 761 N.W. 2d 832, 836 (Mich. Ct. App. 2008); Emmons v. Lake States Ins. Co., 484 N.W. 2d 712, 714 (Mich. Ct. App. July 1, 2008) (unpublished per curiam). Similarly, the Second Circuit applied Michigan law in Chrysler Capital Reality, Inc. v. Grella, 942 F.2d 160 (2d Cir. 1991), to hold that a mortgagee who successfully bid the entire amount of the debt at a foreclosure sale could not thereafter maintain an action for damages against the mortgagor, despite the mortgagee’s allegations that the actual value of the property at the time of the foreclosure sale was far less than the debt and that the mortgagee had been fraudulently induced into making the transaction.

 

     If you or a loved one have questions concerning your rights or obligations with creditors you should immediately seek a qualified bankruptcy attorney.

 

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in Taylor, Michigan where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

Posted:
February 13, 2013
Tags:
Comments:
0

Business Cases in the News: Minority Shareholder Oppression

Business Cases in the News:

 

Minority Shareholder Oppression

 

     In our blogs we have on occasion discussed cases of minority shareholder oppression. Recently, in writing a brief to be filed in the Wayne County Circuit Court, on the issue of the proper valuation standard, Guy Vining ran across the following quote from the William Mitchell Law Review in 1996:

 

     “Close corporations typically are formed by friends, relatives, or other business associates who choose to combine their capital, skills, labor and experience in a new business. Shareholders in a close corporation generally plan to be employed by the corporation and to have an active role in management. As a result, shareholders usually expect to receive a salary, bonus and additional benefits consistent with their roles as employees, officers, and directors.

 

      While those corporations begin as friendly ventures, the balance of power in the close corporation often lends itself to oppression of those shareholders who do not control the corporation and usually own only a small percentage of shares — the minority shareholders. Minority shareholders may be subjected to a “freeze out,” (sometimes known as a “squeeze out”) by the majority shareholders. Typical “freeze out” techniques include terminating the minority shareholder’s employment with the corporation or terminating dividends and the minority shareholder’s returns on his or her investment.

 

      Although minority shareholders in any corporation are in a difficult position due to their lack of control, minority shareholders in closely held corporations have uniquely difficult positions because their shares are not readily marketable. In other words, when minority shareholders in a large, publicly-traded corporation become dissatisfied with corporate operations, they can “vote with their feet” — sell their shares and discontinue their involvement with the corporation. Minority shareholders in the closely held corporation, on the other hand, often cannot easily sell their shares.

 

      The lack of a market for close corporation shares owned by a minority shareholder means that a non-controlling investor may be locked into a business that is providing little return on investment, or at least is failing to fulfill the owner’s non-monetary expectation. Left without a meaningful return on his or her investment, the minority shareholder may have little choice but to sell for less than a fair price, usually to the majority shareholders.”

 

The above is a succinct summary of the problems encountered by minority shareholders in such small corporations. As the author notes many times, what starts as a friendly venture turns very ugly when the money starts rolling in.

 

Guy Vining of the Vining Law Group, PLC, would be happy to perform a no charge analysis of your case if you find yourself in such a situation. You may be entitled to significant relief from shareholder oppression under MCL 450.1489. Under this statute a judge is empowered to examine the circumstances and afford relief, such as advising the Defendants to buy your interest out at “fair value,” consistent with equity.

 

Guy Vining has practiced business law throughout the state of Michigan. His office is located in the downriver city of Taylor where he primarily serves the Metro-Detroit area. He serves the Metro-Detroit and Downriver communities, including Rockwood,  Gibraltar, Brownstown, Woodhaven, Grosse Ile, Trenton, Riverview, Romulus, Wyandotte, Ecorse, Lincoln Park, Alan Park, Dearborn, and Dearborn Heights.

Posted:
May 10, 2012
Tags:
Comments:
0

Bankruptcy Cases in the News

Bankruptcy Cases in the News

The 6th Circuit Court of Appeals issued an important and very interesting case recently in White v. Wyndham Vacation Ownership, Inc., 617 F3d. 472 (2010). This Court is the Court of Appeals for a great number of Midwestern Bankruptcy Courts, including the State of Michigan. The White case shows the importance of full disclosure of all assets in a consumer bankruptcy case. As we have discussed in the past blog postings, failure to make full disclosure can result in the dismissal of a case, attorney fees and in some instances, criminal charges.

The White case dealt with an interesting additional concept called “judicial estoppel.” Here is what happened. When Mrs. White signed and filed her bankruptcy petition she forgot to list as a possible asset of a lawsuit against her former employer, Wyndham. Apparently, the reason she had financial problems was because she had been discharged under circumstances which were suspicious of employment discrimination. A potential lawsuit is an asset.

Neither in her plan, nor in her schedules did she disclose to the Bankruptcy Court or her creditors that she had a significant cause of action for employment discrimination against her former employer, Wyndham. After her plan was approved and before she filed suit against Wyndham, she made some attempts to modify her bankruptcy schedules regarding the employment claim. Still, the U.S. District Court dismissed her lawsuit for discrimination, at her former employer’s request, based upon judicial estoppel and the 6th Circuit affirmed the dismissal. The 6th Circuit discussed in the opinion the doctrine of judicial estoppel:

    In the bankruptcy context, this court has previously noted that “judicial estoppel” bars a party from (1) asserting a position that is contrary to one that a party has asserted under oath in a prior proceeding, where (2) the prior court adopted the contrary position either as a preliminary matter or as part of a final disposition. [Citations omitted.] Id. At 476.

The White court noted that the doctrine was “utilized in order to preserve the integrity of the courts by preventing a party from abusing the judicial process through cynical gamesmanship.” Id. The Court further noted that it is the debtor’s absolute duty to disclose all assets to the Bankruptcy Court pursuant to various statutes in the Bankruptcy Code. Further, that based upon the purposes of bankruptcy:

  “[W]hen a bankruptcy court – which must protect the interest of all creditors – approves a payment from the bankruptcy estate on the basis of a party’s assertion of a given position that in our view is sufficient ‘judicial acceptance’ to estop the party from later advancing an inconsistent position.” [Citations omitted.]. Id. At 479.

The omission to list property or the true value assets is viewed as very significant when compared to the purpose of bankruptcy law. The White court specifically noted:

    “[T]he disclosure obligations of consumer debtors are at the very core of the bankruptcy process and meeting these obligations is part of the price that debtors pay in receiving the bankruptcy discharge. [Citations Omitted.] Viewed against the backdrop of the bankruptcy system and the ends it seeks to achieve, the importance of the disclosure duty can not be over emphasized. Id. At 480.

 
Dismissal of a significant claim was a drastic remedy. However, it was a remedy necessary to protect the bankruptcy court system. Had Mrs. White disclosed the Trustee might have brought the claim and any settlement or judgment could have been used to pay her creditors which would have got her out of her plan sooner, helping her and her creditors. When you and your bankruptcy lawyer file a petition for bankruptcy, yours assets (subject to proper exemptions) are no longer yours. The trustee has a right to bring those cases for the benefit of all administrative claimants and creditors. If all these folks get paid and there is money left over, the debtor will receive the balance.

The importance of the disclosure duty can not be over emphasized. Be sure to disclose all potential claims with your bankruptcy attorney. Otherwise, you will jeopardize your fresh start.

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in the city of Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

Posted:
May 8, 2012
Tags:
Comments:
0

Bankruptcy Cases in the News

Bankruptcy Cases in the News

Judge Thomas Tucker of the U.S. Bankruptcy Court for the Eastern District of Michigan recently issued an interesting and important decision in the Mehlhose case (11-64190), the lengthy opinion discusses, among other things, the inherent power of the Bankruptcy Court to sanction (punish) debtors who do not play by the rules and make dishonest disclosures. In this case the Court determined that the husband-wife debtors had significantly under reported their income and filed their case in bad faith otherwise. Specifically, Judge Tucker determined that the debtors “lied under oath” concerning their income and filed a case that could not serve a legitimate purpose as they had or should have known that their particular debts were non-dischargeable. Consequently, it was determined that the case was filed in bad faith and merely for delay. The Court set up an evidentiary hearing that the debtors did not appear to testify and explain their actions. Judge Tucker noted that a Bankruptcy Court has both the inherent and the statutory authority to sanction misconduct:

In John Richards Home Bldg. Co., L.L.C. v. Adell (In re John Richards Homes Bldg. Co., L.L.C.), 404 B.R. 220, 226-27 (E.D. Mich. 2009), the court discusses the scope of a bankruptcy court’s inherent power to issue sanctions as follows:

    Bankruptcy Courts, like all courts, have an inherent power to issue sanctions, as explained by the Untied States Supreme Court in the Chambers case. See Chambers v. NASCO, Inc., 501 U.S. 32, 43, 111 S.Ct. 2123, 115 L. Ed. 2d 27 (1991) (“Courts of justice are universally acknowledged to be vested, by their creation with power to impose silence, respect, and decorum, in their presence, and submissions to their lawful mandates.” (Quoting Anderson v. Dunn, 19 U.S. 204, 6 Wheat. 204, 227, 5 L.Ed. 242 (1821)). The Sixth Circuit Court of Appeals has similarly stated that “[b]ankruptcy courts, like Article III courts, enjoy inherent power to sanction parties for improper conduct.” Mapother & Mapother, P.S.C. v. Cooper (In re Downs), 103 F. 3d 472, 477 (6th Cir. 1996). … [T]he inherent power to issue sanctions is not limited to only those instances where a party violates a court order. “The federal courts’ inherent power to protect the orderly administration of justice and to maintain the authority and dignity of the court extends to a full range of litigation abuses.” Mitan v. Int’l Fid. Ins. Co., 23 Fed. Appx. 292, 298 (6th Cir. 2001) (ruling that a court can award sanctions “when bad faith occurs”).

In addition to a bankruptcy court’s inherent authority to sanction misconduct, 11 U.S.C. § 105(a) provides a bankruptcy court with statutory authority to do so. It provides:

(a)The court may issue any order, process, or judgment that is necessary;or appropriate to carry out the provisions of this title. No provisions of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.

In the end, the Court noted that sanctions would well include attorney fees. Debtors were sanctions by having their case dismissed, being ordered to pay reasonable attorney fees and costs and having been barred from refilling for 2 years. In filing your case, make sure to make complete and honest disclosures of debts, assets and income to the court, trustee and your creditors.

That is the trade-off. To obtain a discharge and a fresh start, the debtor must make an honest and full disclosure. Do not jeopardize your life or liberty and fresh start.

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in the city of Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]

 

Posted:
March 29, 2012
Tags:
Comments:
0

Top Ten Bankruptcy Mistakes: Bankruptcy Misconduct

TOP TEN BANKRUPTCY MISTAKES

 

      #7

             Bankruptcy Misconduct

 

In earlier postings it has been discussed that bankruptcy relief is available to the honest debtor. In a recent unpublished case by the Sixth Circuit Court of Appeals this concept was illustrated. The debtor, a businessman obtained significant loans based upon personal financial statements which were untrue. The Bankruptcy Court denied discharge, as to the defrauded creditor, and the Court of Appeals affirmed (agreed with) that decision. The Court of Appeals analysis, in part, follows:

    The principal purpose of the Bankruptcy Code is to afford a “fresh start” to the “honest but unfortunate debtor.” Grogan v. Garner, 498 U.S. 279, 286-87 (1991). The discharge of prepetition debts provided under § 727(b) and the discharge injunction of § 524(a) effectuate the debtor’s fresh start. See Green v. Welsh, 956 F.2d 30, 33 (3d Cir. 1992).

    (“The protection afforded by the discharge injunction… furthers one of the primary purposes of the Bankruptcy Code – that the debtor have the opportunity to make a financial fresh start.”). Some debts, however, are “nondischargeable,” such that the debtor’s liability continues even after emerging  from bankruptcy protection. Section 523 of the Bankruptcy Code specifies these exceptions, which include, among others, debt obtained through fraud. Section 523(a)(2)(B) addresses debt obtained by certain false statements in writing.

    For a debt to be nondischargeable under § 523(a)(2)(B), four conditions must be met: the debtor must have sought “money, property, services, or an extension, renewal, or refinancing of credit” by use of a writing (1) “that is materially false;” (2) concerning “the debtor’s or an insider’s financial condition;” (3) “on which the creditor… reasonably relied; and” (4) “that the debtor caused to be made or published with intent to deceive…” 11 U.S.C. § 523(a)(2).

Make sure to discuss with your attorney candidly any skeletons which may be in your closet. In the attorney-client relationship all conversations are privileged and confidential. Your attorney can not effectively counsel or represent you when you are not forth coming with all information, pro and con. There are other kinds of misconduct that may also result in denial of a discharge for obtained debt.

 

[Guy Vining, a bankruptcy attorney, in metro-Detroit, maintains his office in Taylor, Michigan, where he serves the downriver communities of Monroe, South Rockwood, Gibraltar, Brownstown Township, Grosse Ile, Woodhaven, Trenton, Southgate, Riverview, Allen Park, Lincoln Park, Dearborn, Dearborn Heights, Westland, Wayne, and Ecorse. If you or a family member of friend would like a no-obligation no cost consultation/financial analysis, just call or E-mail Guy Vining of Vining Law Group, P.L.C to schedule a meeting.]