Syllabus - School of Law

Transcription

Bankruptcy & Creditors’ Remedies - Fall 2016
Law 715
Monday & Wednesday 7:45-9:00PM
Room assignments at MyUB
Professor Charles Shafer
[email protected]
(v):410 837 4623 (f):410 837 4492
Office Hours - Suite 1014
Monday 5:00 – 7:30
Wednesday 4:00 – 7:30
The Fine Print
Catalog Description: Bankruptcy, with emphasis on consumer bankruptcy issues; common law compositions; assignments for the
benefit of creditors; fraudulent conveyances; receivers; supplementary proceedings; and the enforcement of judgments.
Recommended: Contracts I & II, Property.
Student Learning Outcomes: (1) Understand the operation and policy behind the statutes discussed in class. (2) Identify
the specific statutory language at issue in problems and cases. (3) Understand and be able to apply approaches to
construction of statutes. (4) Understand the holdings and reasoning of cases. (5) Understand the public policy issues
relevant to bankruptcy and debtor creditor law.
Course Expectations: ABA Standards for Law Schools establish guidelines for the amount of work students should expect to
complete for each credit earned. Students should expect approximately one hour of classroom instruction and two hours of out-ofclass work for each credit earned in a class.
Class Preparation, Participation, and Professionalism: You are expected to complete all reading assignments before
class, be ready to summarize problems, have a proposed solution for problems (explaining the relevant statutory
language that) or explain why you are unable to do so, be able to summarize cases and explain the holdings,
participate consistently in class discussion demonstrating that you have read and reflected on the issues raised in the
assignment, respect the views of other students
Class Cancellation: If the instructor cancels a class, notice will be sent via email and posted on the classroom door. If there is
inclement weather, students should visit the UB web site or call the UB Snow Closing Line (410) 837-4201. If the University is
open, presume that classes are running on the normal schedule.
Academic Integrity: Students are obligated to refrain from acts that they know or, under the circumstances, have reason
to know will impair the academic integrity of the University and/or Law School. Violations of academic integrity
include, but are not limited to: cheating, plagiarism, misuse of materials, inappropriate communication about exams,
use of unauthorized materials and technology, misrepresentation of any academic matter, including attendance, and
impeding the Honor Code process. The Law School Honor Code and information about the process is at
http://law.ubalt.edu/academics/policiesandprocedures/honor_code/
Title IX Sexual Misconduct and Nondiscrimination Policy: UB’s Sexual Misconduct and Nondiscrimination policy is
compliant with Federal laws prohibiting discrimination. Title IX requires that faculty, student employees and staff
members report to the university any known, learned or rumored incidents of sex discrimination, including sexual
harassment, sexual misconduct, stalking on the basis of sex, dating/intimate partner violence or sexual exploitation
and/or related experiences or incidents. Policies and procedures related to Title IX and UB’s nondiscrimination
policies can be found at: http://www.ubalt.edu/titleix
Disability Policy: If you have a documented disability requiring an academic accommodation, contact Leslie Metzger,
Director of Student Services, at 410-837-5623 or [email protected].
Attendance: Class attendance is a primary obligation of each student. The right to continued enrollment in the course and
to take the examination is conditioned upon a satisfactory record of attendance. A student who exceeds the maximum
allowed absences (5 class sessions for this class) may be compelled to withdraw from the course, or barred from sitting
for the final exam. Students who are forced to withdraw for exceeding the allowed absences may receive a grade of FA
(failure due to excessive absence). This policy is consistent with ABA Standards for Law Schools.
Use of electronic devices during class: Please do not use electronic devices for any reason other than taking or reading
notes or accessing class materials Violators will not be allowed to bring electronic devices to class.
BK F16 SYL V01.DOCX
7/27/2016
PAGE 1
Required Reading
Warren & Westbrook, 2013 Supplement of The Law of Debtors and Creditors
Bankruptcy Code – 2016 edition
Maryland Law Supplement (to be distributed at the first class and available on TWEN)
Case Supplement (to be distributed at the first class and available on TWEN)
All additional statutes, additional problems, cases and other course materials are available on TWEN
Grading Policy
Final Exam
Completely Open Book & Open Notes - Essay
Per Cent of
Final Grade
80 -100 %
Class
Participation
Please give me a note prior to class if you are unprepared to discuss
the material assigned for that class.
0 - 15%
Additional
Assignments.
I may give announced or unannounced quizzes regarding the
day’s assignment. I may give homework assignments regarding
the operation of some statute sections. These may be voluntary
or required.
Note: There are a number of questions labeled “Exercises.” They
are primarily designed to guide you through specific sections and
words in the statute. Sometimes I will ask you to submoit your
answers to those questions in advance of class. However, I
expect that you will be able to demonstrate in class that you have
made a good faith effort to complete these exercises.
0-15%
Lateness
Each time (above two) arriving after class begins
2% off
Cell phones
Each time a cell phone or pager goes off audibly during class
2% off
BK F16 SYL V01.DOCX
7/27/2016
PAGE 2
Note: I will distribute a hard copy of this syllabus on the first day of class, along with the hard
copies of the cases and statutes you will need for the course. It may also include some revisions.
Please contact me if there is any questions about the assignment for the first week.
Abbreviations Used in This Syllabus
WW: pages in Warren & Westbrook 2013 Supplement
Pages without attribution are for Warren & Westbrook
PS or Problem Set: problem sets in Warren & Westbrook.
CJP: Maryland Courts & Judicial Proceedings
CL Maryland Commercial Law
MD Rule or Rule (with no attribution):MD Court Rules
BC: Bankruptcy Code
Sections without attribution:the Bankruptcy Code.
Other references are to cases in the Case Supplement or
materials that are on TWEN
.
8/22
8/24
8/29
8/31
9/7
9/12
1/11
1/13
1/20
1/25
1/27
2/1
9/14
9/19
9/21
9/26
9/28
10/3
10/5
10/10
10/12
10/17
10/19
2/3
2/8
2/10
1/15
2/17
2/22
2/24
2/29
3/2
3/7
3/9
Topic
Overview & Article 9
Property of the Estate
Special Problems
Judicial Liens: Real Property
Judicial Liens: Personal Property
Garnishments
Multiple Jurisdictions
Prejudgment Remedies
Lis Pendens, Statutory Liens
Exemptions
Section of Materials Attached
I & II
III A
III B & C
IV A
IV B
IV C & D
Lien Avoidance
VC
Automatic Stay
VI
Fraudulent Conveyances
VII
Claims & Distributions
Discharge
Reaffirmation / Redemption /Ride
Thru
VIII
IX
X
IV E
IV F & G
V A & B
10/24 3/21
Abuse & The Means Test
XI
10/26 3/23
10/31 3/28
XII
11/2 3/30
Chapter 13 – Secured Claims
11/7 4/4
11/12 4/6
Chapter 13 – Unsecured Claims
XIII
11/14 4/11
11/19 4/13
Chapter 13 - Discharge
XIV
11/21 4/18
XV A & B
Trustee’s Lien Avoidance
11/23 4/20
XV C
11/28 4/25
Bankruptcy Jurisdiction
XVI
NOTE: If at any time you notice a mistake or ambiguity in any of these assignments please notify me
as soon as possible by phone or email or in person.
BK F16 SYL V01.DOCX
7/27/2016
PAGE 3
Basic Concepts of Debtor Creditor law
Overview of the Course
1.
This course deals with the issue of how a person (remember that includes
corporations) that is owed money can get that money from the debtor. There are three
main avenues toward that goal:
a)
Extralegal: (Note: not “illegal.”) Convince the debtor to pay. There are
legal limitations on the techniques that may be used to achieve this. Each state and
the federal government have debt collection statutes and there are common law tort
remedies. We don’t discuss them in this class. But essentially creditors shouldn’t
lie, harass, or threaten or engage in violence. These limitations, of course, take a
lot of the fun out of collecting debts.
b)
Legal:
(1)Obtain an interest in the debtor’s property; sell that property, and take the
debt out of the proceeds of that sale. This can be done in two ways:
(a)
Voluntary: Obtain a security interest in some of the
debtor’s property. This is largely governed by Article Nine of the
Uniform Commercial Code as enacted in each state.
(b)
Involuntary: Get a judgment against the debtor. Then
obtain a lien on the debtor’s property. Enlist the state to seize and
sell the property subject to that lien.
c)
Bankruptcy (either voluntary or involuntary).
2.
There are two main issues that will come up in our discussion throughout the
course:
a)
How does a creditor get an interest in the Debtor’s property?
b)
How are conflicts among creditors resolved?
Security Interests Under Article Nine of the UCC
Why study this
1.
There is a course that covers this area of the law in great detail. But the Secured
Creditor is also an extremely important player in the material we cover in this course. So
our goal is just to understand the basics of Article Nine to understand the interaction of
the Secured Creditor and the statutes we cover.
2.
Essentially this is also an overview of those two basic concepts involved in this
course:
a)
How does a creditor get an interest in the Debtor’s property?
b)
How are conflicts among creditors resolved?
Reading
1.
W&W: 44-49
2.
Read through the following sections of Title Nine of the Maryland Commercial
Law: 9-102(74), (75); 9-203; 9-308; 9-309; 9-317(a); 9-322; 9-516
Problem for class discussion
1.
We will discuss the following facts in class in order to understand
a)
How a lender gets a security interest in property. The security interest
allows the lender on default to seize and sell the debtor’s property.
b)
How conflicts among a few types of secured parties are resolved.
BK F16 SYL V01.DOCX
7/27/2016
PAGE 4
Basic Documents
This questions in this part involve the following documents:
#1 Promissory
Note
I promise to pay to the
order of Ed Norton, $100
on April 1, 2012.
Ralph Kramden
February 1, 2012
#2 Security
Agreement
#3 Financing Statement
I hereby grant to Ed
Norton a security interest in
my Magic Can Openers as
collateral to secure the
performance of my obligation
to pay Ed Norton $100.
Ralph Kramden
February 1, 2012
Basic Facts
Ralph Kramden had an idea for a new business venture
involving the sale of a product called the “Miracle Kitchen Tool”
However, Ralph was afraid that his wife would not approve. So
without telling her, he took $100 out their piggy bank to purchase
a thousand of the tools. He then became afraid that his wife would
discover the money was missing before he would be able to
replenish the piggy bank with the profits from the venture. So he
asked his friend Norton to loan him $100 so that Ralph could
replace the money in the family Piggy Bank.
These facts are based on
https://www.youtube.com/watch?v=xPq_lgtidbQ
Property of the Estate
Overview
1.
When a person files for Chapter 7 Bankruptcy, an “estate” is created. See §541.
The trustee has the job of assembling, protecting, and selling that property. Please note
that the Code refers to “interests of the debtor in property.” This is language that is
absolutely crucial. We should never speak of the “debtor’s property” but rather the
“debtor’s interest in property.”
2.
Reading
a)
WW 61-64
b)
BC § 541 (a) & (b)
c)
PS 3: 3.1
BK F16 SYL V01.DOCX
7/27/2016
PAGE 5
3.
Various Interests in Property.
Do you remember Tenants By The Entireties, Tenants in Common and Joint Tenants from property class?
Refresh your recollection before class.
Table A
Spouse A & Spouse B own property worth $100,000 as Tenants By Entirety
1/1
A files for Bankruptcy
2/1
A dies
B Dies
6/1
Trustee sells estate interest in property
7/1
B dies
A Dies
Result for Estate and Q
Albert and Betty own property worth $100,000 as Tenants In Common
1/1
Albert files for Bankruptcy
2/1
Albert dies
Betty dies
6/1
7/1
Albert dies
Alice and Brian own property worth $100,000 as Joint Tenants
1/1
Alice files for bankruptcy
2/1
Alice dies
Brian Dies
6/1
Severance
occurs when
petition filed
Betty dies
Severance does not
occur until
property sold
4.
BK F16 SYL V01.DOCX
Additional Problems
a)
Dorrit’s only property is Marshalacre which he owns free and clear of
liens. Marshalacre is worth $100,000. If Dorrit files for Bankruptcy what will be
the property of the estate and what will be the value of the estate. In this and in all
subsequent problems ignore any possibility of exemptions.
b)
Assume the above facts except that:
(1)Dorrit owns the property as a tenant by the entirety with her spouse.
(2)Dorrit owns the property as tenant in common with her daughter Amy.
(3)Dorrit owns the property as joint tenant with her daughter Fanny
c)
Suppose in the above examples, Spouse, Amy or Fanny died shortly before
Dorrit filed her Bankruptcy petition.
d)
Suppose in the above examples, Spouse, Amy, or Fanny died shortly after
Dorrit filed her Bankruptcy petition.
e)
Dorrit’s only property is his 1946 Marshal automobile worth $100,000.
On March 1, 2010, Dorrit borrowed $50,000 from First London Bank & Distrust
(FIRSTBANK) and gave FIRSTBANK a security interest in the Marshal. The
security interest was properly perfected. If Dorrit filed for Bankruptcy on March 15,
2012 what is the property of the estate and what is the value of the estate? Base your
answer on §541(a).
f)
Assume the above facts plus the following additional facts: On March 10,
2010, Dorrit borrowed $25,000 from SECONDBANK and gave SECONDBANK a
security interest in the Marshal. The security interest was properly perfected. If Dorrit
filed for Bankruptcy on March 15, 2012, what will be the property of the estate and
7/27/2016
PAGE 6
what will be the value of the estate. To what will each party be entitled? Base your
answer on both the UCC and §541(a).
g)
Assume that the loan from FIRSTBANK was for $120,000. If Dorrit files
for Bankruptcy what will be the property of the estate and what will be the value of
the estate?
Allocation of Property
1.
WW: 65-68
2.
On March 1, Robert Cratchet, a charming but impecunious law teacher, filed for
bankruptcy. On April 1 he won the $1,000 Teaching Excellence Award tor the school
year. Who gets the $1,000?
Limitations on Transfers
1.
68-72
2.
§541(c)
3.
PS 3: 3.2
4.
Harrell. v. Phoenix Suns
5.
Problem:
Fanny Fan filed a Chapter 7 Bankruptcy on May 30, 2011. At the time of the filing, Fan was the
holder of season tickets for the 2011–2012 game season of the Mississippi Mushers hockey team. For
these tickets and an accompanying parking pass, Fan promised, pre-petition, to pay $2,000.00 by a down
payment, followed by seven monthly installments of $100. The “Terms and Conditions regarding
Mushers’ Tickets” as printed on the reverse of the ticket invoice provide, in pertinent part that:
1. Any Mushers ticket purchased under this invoice is a revocable license which may be withdrawn and
admission to any Mushers game refused at any time, in the sole discretion of the Mushers upon refunding
the purchase price printed on the face of the ticket less any discount the purchaser may have received.
2. Resale or attempted resale of any Mushers ticket at a price higher than that printed thereon, including
tax, is grounds for seizure or cancellation without refund or other compensation.
5. The Mushers acceptance of payment for season tickets from any individual or entity who is not the
account holder for such season tickets does not grant rights to such tickets to such individual or entity.
6. Season ticket holders have no right to transfer the seat locations designated by their tickets to any
person or entity, whether by a request to transfer the account into another name, or by an attempt to
transfer the seat locations by sale, gift, transfer by will or trust, property settlement, transfer to creditors or
any other means. Therefore, any attempt to sell or otherwise transfer season ticket privileges may result in
the cancellation of all season ticket privileges. Upon any court order directing the distribution of season
tickets to a person or entity not listed as the season ticket holder, whether in bankruptcy or otherwise, will
result in the Mushers’ right immediately to withdraw the license represented by the tickets, including any
season ticket renewal privileges, upon refund by the Mushers of all amounts paid for games that have not
yet been played.
The Mushers will, however, generally recognize two exceptions to the above prohibition. First, the
Mushers will allow an individual season ticket holder to request transfer of season ticket privileges to
members of the season ticket holder's immediate family. Second, if the season ticket holder is a
business, it may request a change in the name of the contact person for its account
Can the Trustee sell Fan's season ticket rights by internet auction?
BK F16 SYL V01.DOCX
7/27/2016
PAGE 7
Judgment Creditors & Judicial Liens
Judgment Liens on Real Property
1.
A creditor must get a lien on property in order to have the right to have the
property sold and use the proceeds to satisfy the judgment. The first step is to get a
judgment against the debtor. It then depends upon whether the property is real property
or personal property.
2.
McCartney v. Frost
3.
Read CJP 11-402
4.
Problem:
a)
FACTS: Creditor sued Debtor on March 1, 2012 in the Circuit Court of
Baltimore County. The trial ended on April 2, 2012. On April 15, 2012 the judge
found the Debtor liable to Creditor for $10,000. On May 3, 2012 the clerk recorded
and indexed the judgment. On June 1, 2012, Creditor recorded the judgment in the
land records.
b)
Using 11-402
(1)When did the judgment lien arise?
(2)What is deemed to be the effective date of the judgment lien
5.
Dorrit’s only property is Marshalacre, in Baltimore County, which he owns free
and clear of liens. Marshalacre is worth $100,000. On March 10, 2010, Clenman obtained
a judgment against Dorrit in the Baltimore County Circuit Court for $50,000. If Dorrit files
for Bankruptcy on March 30, what will be the property of the estate and what will be the
value of the estate. Use CJP §11-402.
6.
Assume the facts above except that on March 12, 2010, Dickens got a judgment
against Dorrit for $60,000 in the Baltimore County Circuit Court. Dorrit filed for
Bankruptcy on March 15. What will be the property of the estate and what will be the
value of the estate. To how much will Clenman and Dickens be entitled?
7.
Firstbank has a mortgage on Marshalacre for a $40,000 debt. Subsequently
Dickens gets a judgment against Dorrit for $20,000 in the Baltimore County Circuit Court.
What will be the property of the estate and what will be the value of the estate. To how
much will Firstbank and Dickens be entitled?
8.
Owen owns Landacre in Baltimore County worth $50,000. On January 1, 2012
Judith obtained a judgment against Owen for $20,000 in the Baltimore County Circuit
Court. On March 15, 2012, Owen sold Landacre to Purdue for $50,000. To what is each
party entitled?
9.
Justin Fine owned a house in Baltimore city worth $100,000. On April 1, 2009,
DragonInc obtains a judgment against Fine for $200,000 in the Baltimore City Circuit
Court. On June1, 2009, Fine spent $50,000 to build an addition onto his house which
increased the value to$150,000.
10.
Sandy and Pat are co-owners of a large farm in Baltimore city, Maryland. Steven
Mean obtains a judgment for $50,000 against Sandy in the Baltimore City Circuit court on
July 5, 2011. On August 5, Sandy died. To what is Mean entitled, depending upon
whether Sandy and Pat owned the property as
a)
Tenants by the entirety?
b)
Tenants in common?
c)
Joint tenants?
11.
In the above problem, suppose that instead of the judgment, Sandy filed for
Bankruptcy on July 5, 2011.
BK F16 SYL V01.DOCX
7/27/2016
PAGE 8
Date
January 1
February 1
March 1
April 2
May 1
June 1
July 1
August 1
A gets
B gets
12.
Carol Chance owns a house in Baltimore County worth $100,000. On January 1,
2011 Chance granted LUCKBANK a mortgage on the property to secure an $80,000 loan.
The mortgage carries an interest rate of 12% per year (i.e., 1% per month –$8,000 per
month). On January 2, 2011 Fran Fate obtained a judgment against Chance for $200,000
in the Baltimore County Circuit Court., Assume that Chance makes no payments. To
how much are Chance, Fate and LUCKBANK entitled if the property is sold (for $100,000)
on
a)
February 1, 2011?
b)
March 1, 2011?
c)
April 1, 2011?
d)
January 1, 2012
e)
September 1, 2013
13.
Assume the facts of the above problem except that Chance files a Bankruptcy
petition on February 1, 2011. To how much is each party entitled if the property is sold
on the date above (except for 2/1/2011)?
Execution Liens on Personal Property
1.
Statutes
a)
CL §§ 2-403, 9-317, 9-324
b)
CJP § 11-403
c)
MD RULES 2641 ,2-642,2-643,3-641, 3-642,3-643
d)
WW: Pages 45-51
2.
Problems
a)
Debtor has a computer worth $10,000. Determine how much each party
should obtain upon a sale for $10,000.
Exercise 1
SECNARIO 1
SCENARIO 2
SCENATIO 3
A obtains Judgment for
$7,000
B obtains Judgment for
$8,000
A obtains writ of execution
from court
B obtains writ of execution
from court.
A delivers writ to sheriff
$8,000
$7,000
from court
from court.
B delivers writ to sheriff
Sheriff levies on the
computer on B’s writ.
computer on A’s writ.
$7,000
from court
$8,000
from court.
b)
As creditor, what action would you instruct the sheriff to take to effect a
levy upon:
(1)The animals for sale by Debtor Pet Shop
(2)The dental equipment of Dr. Debtor (most of which is built-in)
(3)Bernie Madoff’s prison blog [more facts]
BK F16 SYL V01.DOCX
7/27/2016
PAGE 9
Date
January 1
March 1
May 1
July 1
Who has
priority?
c)
C wins a judgment against the D Lumber Yard. C gets a writ of execution
against D's property and has the sheriff levy on D's electric saw. Before the sheriff
actually seizes the saw, D sells it to P. What are the rights of the parties? §2-403.
d)
Which lien has priority? §9-317(a) (2)
Exercise 2
SECNARIO 4
SCENARIO 5
SCENATIO 6
S obtains a security interest
on D’s printing press
The security interest is
perfected.
J obtains a judgment against
D.
J has the sheriff levy on the
property.
D
perfected
property.
D
property.
perfected
Garnishment
1.
WW: 51-55
2.
RULE 3-645
3.
Flat Iron Mac Associates v. Foley
4.
Aesop Andreas had his checking account at Mythic State Bank (MSB). As of
February 1, 2012 the account was overdrawn by $10. Consider the following facts.
2/1/2012
Bugs Finance Company (BFC) obtained a $3,000 judgment against Aesop
Andreas
2/2/2012
Leonardo Finance Company (LFC) obtained a $3,000 judgment against Andreas
2/3/2012
Andreas had written and delivered a $500 check to the telephone company.
2/5/2012
MSB was served with a writ of garnishment regarding LFC’s judgment
2/7/2012
MSB was served with a writ of garnishment regarding BFC’s judgment
2/10/2012 The bank paid the telephone company check.
2/8/2012
On February 8, Andreas deposited $5,000 in the account
2/11/2012 Andreas deposited $200 in the account.
2/15/2012 MSB answered the garnishment writs.
2/17/2012 Andreas's employer made an automatic electronic deposit to Andreas’ account
of his weekly wages of $300
2/19/2012 The court held a hearing regarding both garnishments.
2/20/2012 Andreas deposited $100 in the account.
2/21/2012 The court issued its judgment.
2/24/2012 Andreas's employer made an automatic electronic deposit to Andreas’ account
of his weekly wages of $300
Multiple Jurisdictions
1.
Maryland judgments
a)
Here is the rule in Maryland.
(1)CIRCUIT COURT JUDGMENTS: A judgment creates a lien on all the
debtor’s land in the county in which the judgment.
(2)DISTRICT COURT (Except Baltimore City): A judgment lien arises only
after the judgment is recorded in the district court.
(3)BALTIMORE CITY: A judgment creates a lien on all the debtor’s land in
Baltimore city.
BK F16 SYL V01.DOCX
7/27/2016
PAGE 10
2.
(4)OTHER COUNTIES: A judgment from one county creates a judgment
lien only after the judgment is recorded in the Circuit Court of the county in
which the land is.
b)
Multiglomerate, Inc. owns the Multiglomerate Building in Towson in
Baltimore County, Maryland. The building is worth $20,000.
(1)O n March 15, 2012 the following plaintiffs obtained the following
judgments against Multiglomerate.
(a)
MegaBank obtained a $50,000 judgment in the Baltimore,
City Circuit Court.
(b)
Widow Wilkins obtained a $4.86 judgment in Baltimore
County District Court.
(2) On November 1, 2012 Multiglomerate files a Chapter 7 Bankruptcy
petition.
(3)Questions
(a)
What will be property of the estate?
(b)
To how much will each party be entitled?
(c)
What could each party have done to improve its position?
(d)
Suppose Widow Wilkins had obtained the judgment in the
Baltimore County Circuit Court.
Foreign State & Foreign Country Judgments:
a)
Vocabulary
(1)What is the difference between “full faith and credit” and “comity?”
(2)Where can the requirement of “full faith and credit” be found?
(3)To what courts must the Maryland courts give full faith and credit?
(4)To what courts may the Maryland courts extend comity?
b)
What must the following parties do to obtain debtor’s property in
Maryland?
(1) Maryland Courts & Judicial Proceedings §11-801, et. seq. Charlie Cheese
obtained a $60,000 judgment in the Wisconsin District Court.
(2)28 U.S.C. §§ 1962, 1963. Fred Fed obtained a $500,000 judgment in the
Federal District Court in New Jersey. 28 U.S.C. §§ 1962, 1963
c)
Iraq Middle Market Development Foundation v. Harmoosh.
d)
Extrinsic & Intrinsic Fraud and Collateral attack
(1)Generally, a judgment or decree rendered by a court having jurisdiction
over the parties and subject matter must be challenged by direct appeal and
cannot be attacked collaterally. A party may, however, assail a void
judgment at any time, by direct or collateral attack. Although a judgment
obtained by "extrinsic fraud" is void and, therefore, subject to direct or
collateral attack, a judgment obtained by "intrinsic fraud" is merely voidable
and can be challenged only by direct appeal or by a direct attack in an
independent proceeding.
(a)
‘Extrinsic fraud' consists of 'conduct which prevents a fair
submission of the controversy to the court
(b)
Intrinsic fraud includes means of obscuring facts presented
before the court and whose truth or falsity as to the issues being
litigated are passed upon by the trier of fact.
(2) Iraq Middle Market Development Foundation v. Harmoosh. (Reread discussion
of extrinsic and intrinsic fraud.)
BK F16 SYL V01.DOCX
7/27/2016
PAGE 11
(3)Are the following intrinsic or extrinsic fraud?
(a)
Bully sued Buller (his employee) for cheating with regard
to pay. Buller won the suit but Bully had excellent grounds for
appeal. However Buller intimidated Bully with threats of violence.
As a result Bully decided not to appeal.
(b)
Lyin Ted sued Crooked Hillary for cheating him (Ted). In
the trial Ted committed perjury. As a result Ted obtained a
judgment against Hillary
(c)
Richard sold Payton a painting by the Renaissance artist
Rontavello. However the Loser museum claimed the painting
belonged to it. In a trial Payton introduced into evidence a
document demonstrating an owner of the painting had sold it to
Richard before allegedly selling it to the Loser. As a result Payton
won the law suit. The Loser subsequently discovered that the
document was a forgery.
e)
In 1975 Hastings borrowed $10,000 while in Belgium from
SPROUTBANK at 120% interest (a legal rate in Belgium).In 2012,
SPROUTBANK sued Hastings. Assume the statute of limitation on a loan in
Belgium is 40 years. SPROUTBANK obtained a $400,000 judgment in the
appropriate court in Belgium. Hastings had returned to the US in 1985. Pursuant
to Belgian law, SPROUTBANK mailed a summons to Hastings at Hasting’s office in
Towson. The court rendered a default judgment against Hastings.
(1) Can SPROUTBANK enforce the judgment in Maryland? Maryland
Courts & Judicial Proceedings §10-701, et. seq.
(2) In the Maryland statute would the result be different without section 10704(c).
f)
Rupert Murdoch obtained a $1,000,000 libel judgment in the appropriate
court in London England. This suit resulted from statements Manuel Multi, the
CEO of Multiglomerate, made while visiting in England. He stated that Rupert
Murdoch had surreptitiously placed listening device in one of the fillings of his
(Multi’s) teeth. Murdoch sued Multiglomerate in England for libel under English
law after Multi had returned to the United States. Pursuant to English law,
Murdoch mailed a summons to Multiglomerate at Multiglomerate’s office in
Towson. The court rendered a default judgment against Multiglomerate.
(1)Can Murdoch enforce the judgment in Maryland? Maryland Courts &
Judicial Proceedings §10-701, et. seq.
(2)In the Maryland statute would the result be different without section 10704(c).
Prejudgment Attachments
1.
CJP §§3-303, 3-304
2.
Ephraim Frisch operated a dry cleaning shop at 1420 North Charles Street,
Baltimore, MD. On September 1, 2010, Frisch and Martha Onslo entered into an oral
agreement whereby Onslo would remodel a portion of Frisch's building. The agreement
provided that Frisch would pay Onslo $5.00 per hour for all work done plus 115% of the
cost of materials installed. Onslo kept no written record of hours spent and has lost some
receipts for materials installed but claims to have installed $200 in fixtures and to have
spent two 8-hour days doing the work. On February 1, 2011, Onslo mailed Frisch a bill.
On March 1, Onslo called the store but was informed the phone was disconnected. Onslo
went to visit the store but it was closed with a note on the door stating "pick up dry
BK F16 SYL V01.DOCX
7/27/2016
PAGE 12
cleaning at Dairy Queen on corner." Onslo returned the next day and found the same
situation. Onslo went to Frisch's home but no one answered the doorbell and there was no
car in the driveway. Onslo returned to the store the next day but found the same sign.
Onslo went to the Dairy Queen. The woman on duty said she didn't know where Frisch
was but that she thought Frisch was in Florida
a)
Can Onslo obtain a prejudgment attachment?
b)
Suppose Onslo's lawyer filed the necessary papers to obtain a
prejudgment attachment of the equipment in Frisch's store. Frisch, although he
disputes the debt, immediately pays. He is unable to carry on his business without
use of the equipment and feels he cannot afford a lawyer to resist. What are the
rights and liabilities of the parties?
3.
At all relevant times, the only nonexempt property owned by D is Greenacre,
which is worth $4,000, and miscellaneous personal property worth $3,000. Assume the
rule for priority in prejudgment attachments is the same as for execution liens.
1/10
X sues D Corp. for $5,000.
X obtains a writ of attachment that is directed to the sheriff.
Y sues D for $6,000.
Y also obtains a writ of attachment, which is delivered to the sheriff.
Y instructs the sheriff to levy on Greenacre, which the sheriff does
The sheriff levies on Greenacre pursuant to X's writ of attachment.
X obtains a $5,000 judgment against D.
Y obtains a $6,000 judgment against D.
1/13
1/14
1/16
4/15
4/18
a)
Whose judgment will be satisfied first: X's or Y's?
b)
Suppose D files for Bankruptcy on 4/02
c)
d)
4.
The rule for priorities involving prejudgment attachments can be expressed either
of two ways which reach the same result:
a)
The lien of the prejudgment attachment relates back to the date the date
that the sheriff levys on the property
b)
When the sheriff levys on the property that creates an inchoate lien which
becomes choate when the plaintiff gets a judgment against the defendant.
c)
Using the above two statements and applying them to the problem
complete this exercise.
Exercise 3
Alternative descriptions of prejudgment Attachment
Alternative
1
Alternative
2
1.
2.
3.
4.
5.
6.
1.
2.
3.
5.
6.
Y’s lien on the property was inchoate on
Y’s lien became choate on
X’s lien on the property was inchoate on
X’s lien became choate on
Therefore the oldest lien is
Therefore, the lien with priority is
Y’s lien on the property relates back to
X’s lien on the property relates back to
X’s lien on the property was inchoate on
Therefore the oldest lien is
Therefore, the lien with priority is
5.
BK F16 SYL V01.DOCX
7/27/2016
PAGE 13
6.
On February 2, C sues D for $2,000, obtains a writ of attachment, and causes the
sheriff to levy on D's horse, Fido. On March 3, B, who does not know of the attachment
line, buys Fido from D for $3,000 without asking to see the horse. On April 4, C obtains a
$2,000 judgment against D. Who has greater rights to Fido: creditor C or buyer B?
7.
Ed Eaton has come to you with the facts listed below. He wants to satisfy his
judgment by executing on the property. What are the priorities of the various parties to the
property? What additional information needed?
4/10/12 Harriet and Wilber Jones own property as tenants by the entirety in Baltimore County.
1/10/13 Charles Cole obtained a judgment in a contract action against Harriet Jones in
the Baltimore County Circuit Court.
2/10/13
Donna Drake sued both Harriet and Wilber Jones, claiming that they (the Joneses)
defrauded her (Donna) of $20,000 in the sale of vacationland in Arizona.
2/20/13 Donna obtained a prejudgment attachment of the Jones' land in Baltimore County.
3/10/13
Ed Eaton obtained a judgment against the Joneses in a tort action in the
Baltimore County Circuit Court.
4/10/13
Harriet Jones became depressed by her legal troubles and decided to throw in the
towel. She settled with Drake and confessed judgment in the Baltimore County
Circuit Court. Wilber has proved feistier; So, Drake is still pursuing him.
Lis Pendens
1.
12-102
2.
Weston Builders & Developers, Inc. v.. Mcberry
Considering the following facts who has priority to the property?
January 1
In a business transaction, A gave B a note promising to pay
B $10,000 and a mortgage on A's property called
Downsland.
A discovers that B engaged in fraud
A sues B to rescind the note and mortgage.
B forecloses and sells Downsland to X.
A gets a judgment against B.
February 14
March 3
April 4,
May 5,
Statutory Liens
1.
CL §§ 9-333, 16-301, 16-302
2.
Simon has given First Bank a security interest in his collection of
photographs by Mark Lens. On June 18, 2011, Simon noticed that the frames
were cracked on two of the photographs, "The Carrot Tree" and "The Noodle
Harvest." Simon took them to Art's Repair Shop. Simon picked up "The Carrot
Tree" when it was ready. When the time came to pick-up "The Noodle
Harvest," Simon was unable to pay the bill and Art refused to surrender the
photograph. Simon also defaults in his loan to First Bank. Who has priority to
the photographs? What argument would you make if you were First Bank as to
both photographs?
EXEMPTIONS
Exemption Statutes
1.
CJP § 11-504
2.
11 USCA 522(b), (d)
3.
WW: 83-107
BK F16 SYL V01.DOCX
7/27/2016
PAGE 14
4.
Debtor and Spouse live in Xlandia. Xlandia has the same rules regarding tenancy
by the entirety as Maryland has. The exemption law of Xlandia reads as follows:
§101 Exemptions From Execution: A judgment debtor may exempt any property with
an aggregate value of no more than $25,000.
a)
Debtor and spouse own LuxAcre as tenants by the entirety. Its value is
$100,000. Debtor(s) file bankruptcy. In the chart below indicate how much
debtor(s) will be able to exempt.
Table B
Debtor and Spouse file
jointly
Only Debtor files
Debtors decide to use State X
exemptions.
Debtors decide to use Bankruptcy
[§552(d)] exemptions.
b)
Debtor’s only property is $30,000 home and a car worth $10,000 (both of
which he owns free and clear of any liens). Using §522(b), what choices does
Debtor have with regard to exemptions.
5.
PS 4: 4.1, 4.2, 4.3 [Use Texas, Wyoming & Maryland statutes]
6.
Kelly v Montgomery County
Exemption Planning
1.
113-130
2.
PS 5: 5.1, 5.2, 5.3 (Be sure to note if any facts are missing or ambiguous.
Lien Avoidance
1.
106-09
2.
In order to understand 522(f) consider the following:
a)
522(f) (1) (A)
(1)Assume the State permits the debtor to exempt $5,000 in animals.
(2)Leash owns Bark, a 3-year-old German Pointer. Bark is worth $4,000.
(3)Growl obtained a judgment against Leash for $3,000. Growl obtained a
writ of execution and had the sheriff levy on Bark
1
2
a.
b.
c.
d.
.e
Exercise 4
If Leash had not obtained a lien on Bark, how much could Leash have exempted of Bark?
As a result of the lien
How much of the value of Bark will Leash be able to keep?
How much of the value of Bark will be in the estate.
How much of the value of Bark will Growl get
How much less will Leash get than if there had been no lien on Bark?
By how much does the lien impair Leash’s exemption?
$
$
$
$
$
$
b)
3.
BK F16 SYL V01.DOCX
522(1(B)
(1)Would the answer change if instead of an execution lien on Bark Growl
had obtained a security interest in Bark when Growl lent $3,000 to Bark? If
so, how?
(2)Would the answer change if Leash had bought Bark from Growl and
Growl had taken a security interest in Bark for $3,000.
PS 4: 4.4
7/27/2016
PAGE 15
1
2
3
4
5
6
7
8
4.
Fill in the following exercises using §522(f) to determine the amount of the lien
that may be avoided
Exercise 5
A
B
C
D
E
F
G
Execution Lien
Type Of Lien
PMSI
Non- purchase money, non-possessory
security interest.
Furniture
Furniture
Furniture
Furniture Auto
Furniture Auto
Property
$4,000
$4,000
$4,000
$8,000 10,000
$800
10,000
Value
$2,000
$2,000
$2,000
$2,000 $5,000
$5,000
$5,000
Potential Exemption
$8,000
$8,000
$5,000
$8,000 $12,000
$12,000
$12,000
Debt
Secured Claim
Unsecured Claim
Amount Of
Exemption Impaired
By Lien
Can Debtor Avoid
Lien?
If yes:
9
Amount Of Lien
That Debtor Can
Avoid
10 Resulting Secured
Claim
11 Resulting Unsecured
Claim
a)
SKIP THIS EXERCISE Use 522(f) (2) formula to determine that amount
of each linen that can be avoided.
Exercise 6
Lien
(1)
Type
(2)
Amount
H
1st
2nd
Mortgage
Judgment
$50,000
$5,000
I
1st
2nd
Mortgage
Judgment
$75,000
$20,000
J
1st
2nd
3rd
Mortgage
Judgment
Judgment
$70,000
$ 7,000
$50,000
K
1st
2nd
3rd
Mortgage
Judgment
Mortgage
$75,000
$25,000
$25,000
BK F16 SYL V01.DOCX
(3)
(i) lien
(4)
(ii) other
liens
7/27/2016
(5)
(iii) exempt
(6)
TOTAL
(7)
TOTAL VALUE
(8)
AVOID?
PAGE 16
Automatic Stay
1.
2.
3.
11 USC §§362(a), (b), (c) (1) & (2), (k), (l), (m) (n), 366
72-78
Problem Set 3:3.4, 3.5, 3.6
Fraudulent Conveyances
State Law - Reading
1.
CL, Title 15, Subtitle 2
2.
Uniform Fraudulent Transactions Act
State Law - Problems
1.
Answer questions with regard to the Uniform Fraudulent Transfer Act and the
Maryland Uniform Fraudulent Conveyance Act.
2.
Adrienne Leiske is insolvent. She owes $50,000 to Family Finance. In order to
raise money so she can make her rent payments and eat, she sells her grand piano.
Although the piano is valued at $40,000, she runs a want ad asking $20,000. When
offered $15,000, Adrienne accepts. Can Family Finance successfully claim a fraudulent
conveyance? See UFTA §§4, 5, 8.
3.
Bonney O'Hare is insolvent, and she feels the tightening web of creditors. She
decides to sell her coin collection to her cousin, Susan Mallow. Although the collection
would bring $75,000 if she sold it to a dealer, Bonney sells it to Susan for $5,000 so that
"it will stay in the family." Bonney also knows that Susan has no real interest in the
collection and will undoubtedly be willing to sell it back when Bonney's financial
troubles are over. The day after her conveyance to Susan, Bonney uses her American
Express card to purchase $25,000 in new furnishings. Can American Express
successfully claim a fraudulent conveyance? See UFTA §§4, 5.
4.
Ginsberg owns Howlacre, land in Baltimore County valued at $100,000. Afraid
that his creditors will seize the property, Ginsburg gives his friend Chantilly Om a
mortgage in the property allegedly stating that it is for a $100,000 debt. There was no
such debt.
5.
Ginsberg owns Howlacre, land in Baltimore County valued at $100,000. He is
afraid that his creditors will seize the property. Therefore when Chantilly Om sues him
for $100,000 in Baltimore County Circuit Court, Ginsberg does not contest the law suit
and Om obtains judgment. In fact, Ginsburg owed Om nothing.
6.
Jeremiah Stoke owns a homestead free and clear worth $200,000. His other assets
total $55,000; his debts, all unsecured, total $75,000. He knows that under state
exemption law his homestead is safe from his creditors. He has made a mess of his own
affairs, but his favorite son has just married, and Jeremiah would like to do just one thing
right. So he conveys the homestead to his son as a gift and settles down to await the
battles with his creditors over his debts. Can Jeremiah's current creditors reach the
homestead conveyed to the son? See UFTA §§1, 2, 5.
7.
S. R. Wilson is insolvent. His chief creditor is Lo-Cost Credit Union, to which he
owes $100,000. Wilson sells his mobile home, valued at approximately $160,000, to his
neighbor Sam for $80,000 cash. Sam moves into the home, cleans it up, spends $10,000
for repairs, and enhances the value of the mobile home by 20 percent. Lo-Cost
successfully claims that the conveyance was fraudulent. What can Lo-Cost recover from
Sam? See UFTA §8.
8.
Mr. and Mrs. Young are members of the Crystal Evangelical Free Church. They
are active in their church, attending services regularly with their children, serving as
BK F16 SYL V01.DOCX
7/27/2016
PAGE 17
officers, and contributing their time. They tithe regularly, following the biblical
injunction to contribute 10 percent of their income to the church. Last year, their church
contributions totaled $13,450, all made while the Youngs were legally insolvent. They
have filed for Chapter 7, and their trustee has asked the church to return the contributions.
You represent the church; what do you advise?
9.
On January 15, 2010 Ernie Doe borrowed $40,000 from his mother in law.
Debtor had read an advertisement stating that he could purchase live vinellas, the animal
whose fur is used to make vinyl clothing with the hopes of raising the animals in his
basement. January 15, 2011 Doe paid his mother in law back. Can Tony Toussaint, a
creditor of Doe’s, set aside the payment as a fraudulent conveyance?
10.
Could the sale described in McCartney v. Frost be set aside as a fraudulent
conveyance?
The Shelter Principle –
Use UFTA §8 and UFCA §15-209(a) to solve the following problems.
1.
Careless was having trouble paying his bills. One of his creditors was Pester.
Careless decided to hold a yard sale to raise some money to pay off some of his creditors.
At the yard sale, Careless sold a box of paintings that he had found in his house when he
had moved in. He sold the box to Lucky for $50. Lucky had planned to use the paintings
as wallpaper.
Discuss Pester’s rights against Lucky
2.
Lucky’s friend Buddy told Lucky that one of the paintings (a picture of an old
man sitting in a chair) might actually be a painting called “Daddy” by the famous artist
Whisper. Buddy offered to buy “Daddy” for its true value. The two went on Junk
Journey, a television show and told the story of how Lucky bought the painting for only
$50 from Careless. The expert on Junk Journey told them that the painting was indeed by
Whisper and was worth $20,000. As agreed, Buddy bought Daddy from Lucky for
$20,000.
Discuss Pester’s rights against Buddy.
3.
Buddy then sold the painting to Sheldon for $20,000. Sheldon had no knowledge
of any of the events described above.
Discuss Pester’s rights against Sheldon.
4.
Sheldon sold the painting to Marie. Marie had seen the episode of Junk Journey
and she actually knew Careless. So Marie knew all of the facts described above. Marie
convinced Sheldon that the painting was of less value given the problems with the chain
of title. She bought the painting for $10,000.
Discuss Pester’s rights against Marie.
Bankruptcy Law
1.
11 U.S.C. §548
2.
What result if Adrienne Leiske sold her piano, and then files for Bankruptcy?
BK F16 SYL V01.DOCX
7/27/2016
PAGE 18
Claims & Distributions
Basic Bankruptcy Math
Remember when you learned about per cents and how to figure out what one amount is a per
cent of another amount. If you still have your 5th grade notes from that day, go back and refresh
your recollection. Then you can do the following exercises. If you went to law school because
you couldn’t do arithmetic, maybe there is still time to transfer to art school.
Exercise 7 - Percentages
What percent is the amount in column B of the amount in Column A? This calculation is
important since if the Debtor has the amount of assets in column B and owes creditors the
amount in Column A, the debtor’s creditor’s will get the percent (in column C) of their claims.
A
B
C
Debts
Assets
% of Debts
$100
$50
$100
$25
$50
$50
$50
$25
$50
$20
$77
$60
$1025
$30
How much is the per cent in Column D of the amount in column E. This computation is
required since if the debtor has a debt of the amount in column D. Creditor will get the percent
of the amount in column E
D
E
F
Amount of debt
Per Cent creditor gets
Amount Creditor gets
$100
50% $
$30
10% $
$65
8% $
BK F16 SYL V01.DOCX
7/27/2016
PAGE 19
Exercise 8 –
Using per cents in bankruptcy
Here is the property and debts of our Debtor.
ASSETS
LIABILITIES
Home $ 50,000 Bank 1 - Unsecured Claim
Truck
50,000 Master Card -Unsecured Loan
Bank 2 - Perfected Security Interest in Truck
$ 190,000
10,000
50,000
1. What is the value of the estate’s interest in the property of the estate?
2. What is the total Unsecured claims
3. The value of the property of the estate is what per cent of the unsecured claims?
4. Therefore each creditor will be paid what percent of their unsecured claim?
5. How much will Bank 1 be paid for its unsecured claim?
6. How much will Master card be paid for their unsecured claim?
7. How much will Bank 2 receive?
Assume that the Bank 2 claim is unsecured. Therefore Bank 2 will have an unsecured claim?
8. What is the value of the estate’s interest in the property of the estate?
9. What is the total Unsecured claims
10. The value of the property of the estate is what per cent of the unsecured claims?
11. Therefore each creditor will be paid what percent of their unsecured claim?
12. How much will Bank 1 be paid for its unsecured claim?
13. How much will Master card be paid for their unsecured claim?
14. How much will Bank 2 receive?
Allowed Claims
1.
Pages 141-164
2.
Owen has borrowed $5,000 from Lenny. Owen has given Lenny a security
interest in his robot which Owen calls Myron. Owen has filed a Chapter 7 bankruptcy.
Assume Owen’s unsecured claims will be paid at a rate of 10% in the bankruptcy
distribution. Using ONLY §506(a) (1), complete the following chart.
Exercise 9
(1)
(2)
(3)
(4)
Value Of
Myron
$1,000
4,000
6,000
7,000
BK F16 SYL V01.DOCX
(A)
Lenny’s
Allowed
Secured Claim
(B)
Lenny’s Allowed
Unsecured Claim
7/27/2016
(C)
Amount Lenny Will
Receive For The
Unsecured Claim
(D)
Amount Lenny Will
Receive For The
Secured Claim
PAGE 20
3.
Owen has borrowed $5,000 from Lenny at 120% interest. Owen has given Lenny
a security interest in his robot which Owen calls Myron. Owen files a Chapter 7
bankruptcy on 2/15/2011. Assume Owen’s unsecured claims will be paid at a rate of 10%
in the bankruptcy distribution. Myron is worth $5000, using ONLY §506 and, §502(a)
(2,) complete the following exercise.
Exercise 10
(E)
(F)
Lenny’s Allowed
Lenny’s
Date
Event
Secured Claim
Unsecured Claim
1/1/2011 $500 interest accrues
2/1/2011 $500 interest accrues
(5) 2/15/2011 BANKRUPTCY
(6) 3/1/2011
$500 interest accrues
(7) 4/1/2011
(8) 5/1/2011
(9) 6//1/2011 $600 Lenny’s lawyer’s work.
4.
Debtor filed bankruptcy on July 1, 2011. Using section 502 indicate the amount of
the allowed unsecured claim.
Exercise 11
(G)
(10) Debtor borrowed $1,000 from A, Debtor’s brother. On 1/1/2011. The contract
provides for no interest.
(11) Debtor fulfilled contract with B to murder C for $10,000.
(12) Debtor borrowed $5,000 from E on January 1, 2010. The contract provides for
interest at the rate of 10% per month. Assume that means $500 per month.
(13) Debtor bought a Timex computer from F for $500 on 1/1/2000 and has not yet
paid for the computer.
Distribution Priorities
1.
167
2.
How much will each creditor get in a Chapter 7 Bankruptcy filed on 2/16/2011?
Use §§ 507 & 726.
Exercise 12
(H)
(I)
The Bankruptcy estate has this amount for distribution for
allowed unsecured claims.
→
$1,060
$2,000
( 14) The trustee has had expenses
$1,000
protecting the property of the estate.
(15) The debtor did not pay worker W1
$100
for work done on 2/1/2011.
$200
for work done on 2/15/2011
$1,000
for work done on 2/1/2009
(18) The debtor has not paid his bill to
$400
the Shop & Shop grocery story for
groceries bought on 3/1/2009
BK F16 SYL V01.DOCX
7/27/2016
PAGE 21
3.
Mel Splitson and his former wife Robin More were divorced. As part of the
settlement Splitson was ordered to pay More $400,000 in alimony in 4 yearly payments
of $100,000. Shortly after the divorce Splitson filed for Bankruptcy. Assume that besides
More, Splitson has unsecured creditors owed $20,000. Splitson’s unsecured nonexempt
assets include a yacht and a car. The car is worth $2,000.
a)
The Bankruptcy code (prior to fairly recent amendments) had the
following list of priorities.
(1)First priority: Administrative Expenses
(2)Second priority: Domestic Support Obligations
b)
Complete the following exercise.
Exercise 13
Value of
Yacht
$450K
$400K
$400K
$400K
Value of
car
2,000
2,000
2,000
2,000
Trustee’s expenses to
protect and sell
Yacht
$2,500
$1,000K
$2,000K
$2,500
Car
$200
$100
$500
$500
Amount
available for
2nd priority
(More’s) claim
$
$
$
$
Trustee’s
priority
claim.
$
$
$
$
Amount available for
nonpriority unsecured
creditors
$
$
$
$
c)
But as you know, §507 now has a more complicated list of priorities. In
the following Exercise apply §507(a) (1) & (2)
7/27/2016
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
How much is available
for unsecured
$
$
$
$
How much is the
Trustee’s priority
claim?
$
$
$
$
How much does support
claimant get
$
$
$
$
How much must be
taken out of support
payment according to
§507(a)(1)(B)
BK F16 SYL V01.DOCX
$200
$100
$500
$500
Is there enough to pay
admin?
Yacht
$2,500
$1K
$2K
$2,500
Amount of admin
expense
2,000
2,000
2,000
2,000
Balance of estate left
over
Value of
Yacht
$450K
$400K
$400K
$400K
Amount More receives
as a priority claimant
According to
§507(a)(1)(A)
Value
of car
Trustee’s
expenses to
protect and sell
Car
Exercise 14
$
$
$
$
PAGE 22
4.
Computing income tax priority using §507(a) (8)
The whole point of this exercise is to help you read and understand the language of § 507(a) (8).
Use the table below to determine whether the taxes for a particular year of employment are priority
claims depending on the date the petition was filed. See the sample column. Always assume that the
final date for paying taxes for each calendar year’s employment is April 15 of the following year
(8) Eighth, allowed unsecured claims of governmental units, only to the extent that such claims are for-(A) a tax on or measured by income or gross receipts for a (i) for which a return, if required, is last due, including extensions, after three years before the date of the filing of the
petition;
5/15/2009
(K)
2005
2014
2010
2008
2000
(J)
3/15/209
(H) (J))
5/15/2013
2015
2014
2013
2009
2005
Year of employment
3/15/2014
3/15/2000
1999
Debtor Filed
1 Bankruptcy on
2
(G)
2005
Exercise 15
Sample (A) (B) (C) (D) (E) (F)
12/31/1999
3 What is the end of the
calendar year for the year
in row 2?
(A)taxable year 4 Is the date of row3
ending on or
before row1?
before the date of
the filing of the
petition5 What is 3 years before
the date of the filing of
the petition?
YES
3/15/1997
6 When is the return last 4/15/2000
due for the year of
employment (i.e., year in
row 2)
(i)a return, if
7 Is row 6 after row5?
required, is last
due, including
extensions, after
three years
before the date of
the filing of the
petition;
yes
yes
8 Are both rows 4 & 7
answered Yes?
9 Based on your answer in yes
row8 are the taxes for
that year eligible for
priority?
5.
BK F16 SYL V01.DOCX
PS 7:
7/27/2016
PAGE 23
Discharge
1.
169-198
a)
Samantha was insolvent. On January 1, she maxed out her credit card,
purchasing all sorts luxury items. However, all of those items would probably be
exempt. On January 2, Samantha filed for Chapter 7 bankruptcy. Bankruptcy
Judge Craft believes that Samantha should be denied discharge. However,
Bankruptcy section 523(a) (2) contained only the following. Can she deny the
discharge based on this section?
(2) for money, property, services, or an extension, renewal, or refinancing of credit,
to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement
respecting the debtor's or an insider's financial condition;
2.
3.
BK F16 SYL V01.DOCX
PS: 8: 8.1, 8.2, 8.3, 8.4, 8.53
a)
In Problem 8.1
(1)Be sure to answer all three questions.
(2) Suppose Mr. Loyman had been a successful physician until a year prior to
filing the bankruptcy? Are there additional facts necessary and why?
b)
Problem 8.5 In addition to the charges listed in the problem, the Lujans
obtained cash advances from FirstBank MasterCard ($600) and SecondBank Visa
($500). Instead of the question in the problem answer the following questions:
(1)Prior to the charges indicated in the second paragraph of the problem
Maria was told that she would get her old job back and that her income would
be increased. Would the credit card debts be nondischargeable under §523(a)
(2) (A)? §523(a) (2) (B)?
(2)Prior to the charges indicated in the second paragraph of the problem
Maria developed a serious physical disability and was told she would not be
able to work for several years. At the same time Reynaldo lost his job.
Would the credit card debts be dischargeable under §523(a) (2) (A)? §523(a)
(2) (B)?
(3)When applying for her credit cards Renaldo gave the following
information. Would any of the items be grounds for nondischargeability
under §523(a) (2) (a)? §523(s) (2) (B)
(a)
He was a professional dancer when in fact he was a
prostitute/
(b)
He was President of the United States.
(c)
He earned $400,000 a year when in fact he earned only
$40,000 a year.
(d)
He promised to repay the debts according to the terms of
the credit plan. In fact he was crossing his fingers when signing
the agreement. He never intended to pay back any of the money he
borrowed.
Discuss whether the following student loans are dischargeable.
a)
Ed has a student loan debt of $24,000. Ed has an undergraduate degree in
physics and a graduate degree in science education. He is unemployed, suffers from
post-traumatic stress disorder resulting from his service in Iraq, and has a daughter
from a prior marriage he is required to support. Ed’s wife makes $12,000 a year but
he claims he cannot rely on that income for support since the marriage is troubled.
Ed received $220 a month from the Veterans Administration for a 30% disability
7/27/2016
PAGE 24
due to the post-traumatic stress disorder. Ed’s psychiatrist testified that Ed might
improve within a year. Discuss whether Ed’s student loan is dischargeable
b)
Sheila has student loans of approximately $69,000 incurred to finance
medical school tuition. Sheila is married with 2 children, aged 2 and 4 years old.
Since dismissal from medical school for academic failure, Sheila has worked in a
small town as a chimney sweep, a bartender, a satellite dish salesperson, with an
average income of only $2,000 per year. Sheila received a disability check from the
government for a psoriasis problem that developed while she was in the Army.
Currently she operates a tire business which is losing money and is pessimistic as
to whether there would be any substantial increase in her income in the near future.
Sheila’s husband works for the police department earning approximately $7,000 a
year and the family is in good health.
4.
Clara filed for Chapter 7 Bankruptcy and received her discharge. None of her
creditors objected to her discharge. Several months later, the following creditors asked
the court to deny her discharge for the following debts. What result? (Indicate where
more facts are needed and why.) See §523(c).
a)
Edubank for
(1)Student loans.
(2)Credit card debts
b)
Dr. Needle for medical treatment.
c)
Clara’s ex-husband for
(1)Unpaid alimony
(2) Property settlement payments.
d)
Maryland for
(1) Unpaid taxes.
(2)Parking fines
e)
Myron Meek for injuries suffered when Clara
(1) Hit him over the head with a Whiskey bottle.
(2)Accidentally ran over him in the parking lot of the bar
f)
Clara’s son for using money in his trust fund to pay for her clothes.
5.
Simon works for the United States Good People Administration, an agency of the
Federal Government. Simon filed a Chapter 7 Bankruptcy petition. After receiving his
discharge, Simon was called into the office of Director Nice and told that Rush Limbaugh
had complained that many of the employees of the Good People Administration were not
good at all and had, in fact, filed Bankruptcy to stiff their creditors. Director Nice fired
Simon. Can he do that? §525
6.
PS 9.6
Reaffirmation/Redemption/Ridethrough
1.
2.
BK F16 SYL V01.DOCX
Problem Set 9: 9.1, 9.2, 9.3, 9.4,
Ridethrough Problems
a)
For the following problems use:
(1)§ 362(h),
(2)365(a), (b);
(3)521(a) (2) & (6), (d) & (i).
b)
For the following questions consider Debtors A & B:
(1)Debtor A has a 1960 Edsel valued at $25,000. Debtor owes FIRSTBANK
$30,000 on the Edsel. Debtor is not behind on payments. The Promissory
Note contains the following language
7/27/2016
PAGE 25
I promise to pay$500 per month.
If I don’t pay you can keep the car.
(2)Debtor B filed for Bankruptcy. Debtor has a banjo valued at $80,000.
Debtor owes SECONDBANK $40,000 on the Banjo. Debtor is not behind
on payments. The promissory note contains the following language.
I promise to pay$500 per month.
If I don’t pay you can keep the car.
If I file Bankruptcy that is a default.
c)
d)
What options do Debtors A, B, FIRSTBANK, & SECONDBANK have?
(1)Can Debtors cannot avoid under 522(f)
(2)Can Debtors can redeem?
(3) Can Debtors reaffirm?
(4)Can Debtors just keep the property and continue making payments?
(5) Can Debtors repossesses the property?
(6) Can Debtors assume the contracts under 365?
(7)Suppose the parties do nothing prior to A & B receiving discharges. Then
A & B begin to fall behind in their payments. What options will the creditors
have? Suppose B accidentally leaves the banjo in A’s car and the car is
subsequently destroyed in a fire?
PS 9: 9.5
Abuse & Means Test
1.
2.
3.
4.
273-299
Go to the web sites referred to in the text for Income and Expense standards
PS 12:12.1, 12.2, 12.3, 12.5 Means Test Calculations
Exercise 16
Determining whether there is a presumption of abuse
Section 707 (2) (A)
(i) In considering under paragraph (1) whether the granting of relief would be an abuse of the provisions of this chapter, the court shall
presume abuse exists if
the debtor’s current monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv), and multiplied by 60
is not less than the lesser of—
(I) 25 percent of the debtor’s nonpriority unsecured claims in the case, or $7,475, whichever is greater; or
(II) $12,475.
Step 2:
Figure out
the surplus?
Step 1:
707(b)(2)(A)(i)(I):
Which is greater? 25% of claims or $7475?
Unsecured
25 % of secured
Which is greater?
Step 3:
Which is less, $12,475
or the 707(b)(s)(A)(i)(I)
amount?
Step Four:
Is Surplus greater than Step 3? If so
there is a presumption of abuse.
12,476
12,474
7,476
7474
Chapter 13 Plan – Secured Claims
1.
2.
3.
4.
5.
BK F16 SYL V01.DOCX
223-235
PS: 10 – 10.1, 10.2
235-240
PS: 10-10.4
240-246
7/27/2016
PAGE 26
6.
PS 10: 10.5, 10.6
7.
Bank of America V. Caulkett
8.
Why do you suppose three justices refused to support the Court’s footnote?
9.
Caulkett bought his home in June 2006 for $249,500, financing 100 percent of the
purchase price with a first mortgage of $199,600 (80%) and a second mortgage of
$49,900 (20%). At the time of his bankruptcy filing in 2013, his home was worth
$98,000. The outstanding balances on his first and second mortgages were $183,264 and
$47,855, respectively, for a total of $231,119. Thus, the balance on his first mortgage
alone was almost twice the value of the home (187%), and the two mortgages had a
combined loan-to-value ratio of 235.8%. One must expect that Caulkett would be
unwilling or unable to pay more than twice the value of his home in order to keep it. The
house, therefore, will likely be sold by the first mortgagee, perhaps in a foreclosure
proceeding. Under state law, Bank of America will receive nothing in such a sale and its
lien will be terminated. Given that Bank of American had nothing to gain from its
mortgage, why did it pursue this case all the way to the Supreme Court?
10.
As the Court acknowledged, its opinion in Dewsnup has been heavily criticized.
To begin with, its statutory methodology was deeply flawed because the Court read each
of the three statutory words—“allowed,” “secured” and “claim”—separately, ultimately
interpreting the subsection to apply to any claim that is supported by some amount of
collateral. That gave the phrase a different meaning in § 506(d) than it carries in § 506(a).
The Court bolstered this interpretation with policy arguments that do not hold up under
scrutiny.
a)
First, the Dewsnup Court believed its interpretation was necessary in order
to protect a creditor’s right to any post-petition appreciation in the value of the
property. The Court failed to realize, however, that Chapter 7 cases move rapidly
enough that appreciation is seldom seen. Furthermore, any increase that does occur
is fully captured by valuation as of the time the debtor pays off the creditor’s
interest, thereby satisfying the lien.
b)
Second, Dewsnup erroneously believed that the maxim “liens pass through
bankruptcy unaffected” provides a correct statement of the law. In fact, numerous
provisions of the Bankruptcy Code may affect liens, and they survive bankruptcy
unaffected only if none of those bankruptcy powers come into play.
c)
Third, the Dewsnup Court misread its own precedents regarding the
treatment of liens in bankruptcy. The Court read Louisville Joint Stock Land Bank
v. Radford to suggest that stripping a lien down to its supporting value raises
constitutional concerns. It failed to note a line of later cases to the contrary, at least
one of which specifically asserted that a bankruptcy statute permitting the debtor to
purchase encumbered property by paying its current value does not violate the
mortgagee’s constitutionally-protected rights: “Safeguards were provided to protect
the rights of secured creditors, throughout the proceedings, to the extent of the
value of the property. * * * There is no constitutional claim of the creditor to more
than that.” Wright v. Union Central Life Ins. Co
d)
Finally, Dewsnup failed to recognize that the drafters of the 1978
Bankruptcy Code adopted a statutory structure under which secured creditors are
assured the value of their collateral, but not in rem rights to that specific piece of
property.
e)
Given these flaws in the controlling precedent, why was the Court
unwilling to overrule Dewsnup in the course of deciding Caulkett? Could it not
have done so, despite respondents’ effort to distinguish Dewsnup rather than attack
BK F16 SYL V01.DOCX
7/27/2016
PAGE 27
that case head-on? (Perhaps it helps here to know that respondents’ amici did ask
the Court to do just that.) And why did respondents not call for overruling
Dewsnup?
11.
Although Dewsnup dealt with § 506(a)—a provision applicable to cases under all
chapters of the Code—later cases have agreed that the holding is limited to Chapter 7.
Chapter 13 Plan – Unsecured Claims
1.
2.
3.
4.
249-253; 263-269
PS 11: 11.1 11.2 11.3, 11.5
253-263, 299-301
PS 11: 11.4, PS 1: 12.4
Chapter 13 – Discharge
1.
Clara filed for Chapter 13 Bankruptcy. Here plan was confirmed. None of her
creditors objected to her discharge. Several months later, the following creditors asked
the court to deny her discharge for the following debts. What result? (Indicate where
more facts are needed and why.) See §§ 523(c), 1328
a)
Edubank for
(1)Student loans.
(2)Credit card debts
b)
Dr. Needle for medical treatment.
c)
Clara’s ex-husband for
(1)Unpaid alimony
(2) Property settlement payments.
d)
Maryland for
(1) Unpaid taxes.
(2)Parking fines
e)
Myron Meek for injuries suffered when Clara
(1) Hit him over the head with a Whiskey bottle.
(2)Accidentally ran over him in the parking lot of the bar
f)
Clara’s son for using money in his trust fund to pay for her clothes.
Trustee’s Avoiding Powers
§ 544(a)
1.
Reshaping the Estate
2.
Suppose Larry Lean is owed $400 by Oscar Owen. Lean has a properly perfected
security interest in Owen’s LadderAll brand utility ladder that is worth $300. Assume
that in a Chapter 7 bankruptcy all of Owen’s unsecured claims are paid 10 cents on the
dollar.
a)
Given the above facts what is the amount of Lean’s unsecured and secured
claims.
b)
How much should Lean receive for the unsecured and secured claims?
3.
Suppose that Lean had failed to file the financing statement and that, therefore,
the security interest is unperfected.
a)
Can the trustee using 544(a) avoid Lean’s lien on the LadderAll?
b)
What would then be the amount of Lean’s unsecured and secured claims?
c)
How much should Lean receive for the unsecured and secured claims?
BK F16 SYL V01.DOCX
7/27/2016
PAGE 28
§544(b) and §548
1.
All parties live and events take place in Maryland. Boris filed a chapter 7
bankruptcy petition on September 1, 2009.
2.
On January 1, 2008, Dudley obtained a judgment against Boris for $1,000. On
February 1, 2007, Boris gave his daughter Natasha his (Boris’) a gold watch because
Boris wanted to prevent Dudley from having the sheriff seize the property to satisfy a
judgment.
a)
What is “applicable law” referred to in §544(b) (1)?
b)
Under the ‘applicable law’ is there a creditor that has an unsecured claim?
c)
Who is that creditor?
d)
Has the statute of limitations expired on that creditor’s claim?
e)
Does that creditor have the right to avoid the transfer under the applicable
law?
f)
Under §544(b) (1), may the trustee avoid the transfer?
g)
Under §548, may the trustee avoid the transfer?
h)
If the transfer of the watch had been on January 1, 2008, may the trustee
avoid the transfer under §548.
3.
August 9, 2008, Boris gave his daughter Natasha his (Boris’) gold watch. On January 1,
2009, Boris paid Dudley back. Because of the payment, Boris had no creditors. Then, on
February 1, 2009, Boris borrowed $10,000 from Rocky. Boris was unable to pay Rocky
back.
a)
May the trustee avoid the transfer of the gold watch under §544(b).
b)
May the trustee use §548 to avoid the transfer of Boris to Natasha.
4.
August 9, 2008, Boris gave his daughter Natasha his (Boris’) gold watch because Boris
wanted to prevent Dudley from having the sheriff seize the property to satisfy the
judgment. However, On January 1, 2009, Boris was able to pay Dudley back. Because
of the payment, Boris had no creditors. On February 1, 2009, Boris borrowed $10,000
from Rocky. Boris was unable to pay Rocky back.
a)
Could the trustee avoid the transfer under §544(b)?
b)
Could the trustee avoid the transfer under §548?
5.
Assume Bernard Madoff made a sizable contribution to the Madoff Foundation
to Support Incarcerated Financiers, protected by §501(c) (3), shortly before filing a
bankruptcy petition.
a)
Could the trustee avoid the donation under §544(b)?
b)
Could the trustee avoid the donation under §548?
Preferences
1.
Basics of 547
This is designed to walk you through §547, the preference provision of the Bankruptcy Code.
Essentially, this provision attempts to reverse a particular type of conveyance that may not be fraudulent
in terms of the UFTA, but that also defeats the purpose of Bankruptcy by favoring some creditors above
others. The basic scenario is this: Debtor owes many debts and knows he will be in the bankruptcy.
Therefore, he pays off some creditors before filing.
For example, if Debtor owes creditors $1,000,000 and has $10,000 in assets, each creditor will
get paid 10% of their claim. One of Debtor’s creditors is Knuckles Kaboon. Debtor owes Kaboon
$5,000. Fearing what might happen to him if he does not pay Kaboon in full, Debtor pays Kaboon in
full $5,000. If Debtor hadn’t done this Kaboon, would have obtained only $500 in the bankruptcy
distribution. However, Kaboon got $5,000. In addition, there is now only $5,000 in assets for the other
BK F16 SYL V01.DOCX
7/27/2016
PAGE 29
creditors with claims of $995,000. Thus, now each creditor will get only about 5% of their claims. It
doesn’t seem fair that Kaboon gets so much more (percentage wise) than the other creditors.
Therefore, bankruptcy law considers that payment a preference. Kaboon has to give the money
back, get in line like everybody else, and get his measly 10%. Section 547 of the code provides for the
avoidance of preferences. Below are the relevant provisions of §547 with notes indicating the
application of the facts.
§ 547. Preferences
(b) Except as provided in subsections (c) and (i) of this Giving Kaboon the money was a transfer of
section, the trustee may avoid any transfer of an property.
interest of the debtor in property-(1) to or for the benefit of a creditor;
It was to the benefit of Kaboon
(2) for or on account of an antecedent debt owed It was on account of an antecedent debt. Kaboon
by the debtor before such transfer was made;
was owed the money before the transfer was made.
(3) made while the debtor was insolvent;
 [see presumption in §547(f)]
(4) made-(A) on or within 90 days before the date of the This transfer was made within 90 days.
filing of the petition; or
B) between ninety days and one year before
the date of the filing of the petition, if such
creditor at the time of such transfer was an
insider; and
(5) that enables such creditor to receive more This transfer enabled Kaboon to receive $500.
than such creditor would receive if-(A) the case were a case under chapter 7 of this .
title;
(B) the transfer had not been made; and
(C) such creditor received payment of such In a Chapter 7 case, Kaboon would have received
debt to the extent provided by the provisions of $500. Therefore, the transfer enabled Kaboon to
this title.
receive more than he would have received in the
Chapter 7 distribution.
BK F16 SYL V01.DOCX
7/27/2016
PAGE 30
2.
Exercises on §547(b)
Exercise 17
a)
Debtor filed a Bankruptcy petition on June 1. On that day, Debtor had
the following debts and property.
Nonexempt Property
Debts
Cash
$100,000 Bank A
$10,000
Store B
40,000
Neighbor N
50,000
Florist F
$100,000
On May 1, Debtor pays Neighbor $50,000
ALTERNATIVE I
%
What percent of their claims would each creditor have received if the transfer had not
been made?
Therefore, how much would Neighbor have received if the transfer had not been made?
As a result of the transfer, how much will Neighbor receive? (i.e., combine the amount
Neighbor received before bankruptcy and the amount Neighbor will receive after
bankruptcy)
As a result of the transfer, did Neighbor receive more that he would have received had
the transfer not been made?
ALTERNATIVE II
$
$
On May 1, Debtor pays Neighbor $30,000 of Neighbor’s claim. Debtor now only owes Neighbor $20,000
What percent of their claims would each creditor have received if the transfer had not been
%
made?
$
$
bankruptcy)
BK F16 SYL V01.DOCX
7/27/2016
PAGE 31
Exercise 18
Debtor filed a Bankruptcy petition on June 1. On that day, Debtor had the following debts and property
Nonexempt Property
Household Goods
$ 40,000
Stamp Collection
$ 10,000
BMW
$ 30,000
Log Cabin
$ 10,000
Cash 10
$10,000
.
Bank A’s secured claim is
N’s secured claim is
$
$
Debts
$ 10,000 A has a security interest in BMW
$ 40,000
$ 50,000 N has a security interest in the stamp collection
$ 100,000
Bank A
Store B
Neighbor N
Florist F
Bank A’ unsecured claim is
N’s unsecured claim is
$
$
ALTERNATIVE III:
On May 1, Debtor pays Neighbor $10,000
What percent of their unsecured claims would each creditor have received if the transfer had
not been made?
bankruptcy)
ALTERNATIVE IV:
On May 1, Debtor pays Bank A $10,000 of A’s claim
not been made?
How much would A receive if no transfer was made?
After the transfer was made, what percentage of each remaining unsecured claim would
be paid?
As a result of the transfer, how much will A receive? (i.e., combine the amount A
received before bankruptcy and the amount A will receive after bankruptcy)
As a result of the transfer, did A receive more that he would have received had the
transfer not been made?
%
$
$
%
$
%
$
: ALTERNATIVE V: On May 1, Debtor grants F a security interest in his Household Goods. Note the definition
of transfer
not been made?
How much would F receive if no transfer was made?
After the transfer was made, what percentage of each remaining unsecured claim would
be paid?
As a result of the transfer, how much will F receive? (i.e., combine the amount F
received before bankruptcy and the amount F will receive after bankruptcy)
As a result of the transfer, did F receive more that he would have received had the
transfer not been made?
BK F16 SYL V01.DOCX
7/27/2016
PAGE 32
3.
. Problems involving §547 (c) (1), (2), (7), (8), (9)
a)
Debtor purchases heating oil from Carbona. Carbona’s invoices state that
bills must be paid within 5 days of delivery. Unfortunately Debtor has been unable
to pay the heating bills promptly and has paid each bill for the last 5 months 28
days after delivery. Can the trustee recover the payments to Carbona as
preferences?
Delivery
11/01/09
12/01/09
1/01/09
2/01/09
3/01/09
3/15/09
Amount
Payment
$1,000
11/28/09
$600
12/28/09
$400
1/28/09
$400
2/28/09
$800
Bankruptcy Petition Filed
b)
Debtor went to Lawyer and engaged her services to file his bankruptcy
petition, agreeing to pay her $800 for handling his case. She insisted on payment up
front, and he told her he could borrow that amount from his brother and have it in
her hands the next day. That same day the two of them sat in her office and filled
out the schedules using the computer program she had devised for this purpose,
though he was missing certain records that he had failed to bring with him. The
next day he brought in those records, along with a check for $800, and she finished
filling out his schedules. The petition was filed later that afternoon, immediately
after she had cashed his check. On learning this, the trustee in bankruptcy wanted
Angelina to cough up the $800, on the theory that she had received a preference. Is
the trustee right?
c)
Suppose a week before filing the petition Debtor paid his ex-wife the
amount he owed on their divorce court order.
Jurisdiction
Overview
Subsections (a) and (b) of 28 U.S.C. § 1334 govern the basic grant of jurisdiction in bankruptcy cases:
(a) Except as provided in subsection (b) of this section, the district courts shall have original and exclusive
jurisdiction of all cases under title 11.
(b) Except as provided in subsection (e)(2) and notwith standing any Act of Congress that confers exclusive
jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive
jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.
The apparent contradiction in these subsections (one providing that jurisdiction is exclusive and the other that it
is not) is explained by understanding the distinction between "cases" and "proceedings" in bankruptcy. The "case" is the
entire bankruptcy that adjudicates the whole financial relationship between a debtor and all of its creditors. A "proceeding"
is a subset of a case—a civil dispute that deals with particular legal issues and often involves the debtor and only an
individual creditor. Each bankruptcy "case" may involve many "proceedings."
"Note that the grant of jurisdiction is to district courts and not to bankruptcy courts. Bankruptcy courts originated
as an administrative branch of district courts, governed by "referees." Bankruptcy judges today are Article I judges;
they do not have the life tenure and protection from diminution in salary that is enjoyed by Article III judges, such as
those appointed to the district and appellate courts.
This distinction was critical in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50,
102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), in which a debtor-in-possession brought suit in bankruptcy court for breach of a
prepetition contract. The defendant asserted that the bankruptcy court lacked jurisdiction and that Congress could not
authorize the bankruptcy court to hear such cases. The Supreme Court agreed, holding that the Constitution does not
BK F16 SYL V01.DOCX
7/27/2016
PAGE 33
allow bankruptcy judges, who lack life tenure, to hear and determine cases such as the one at bar. The suit was neither
directly related to the bankruptcy proceeding, nor a case in which a third party was suing the bankruptcy estate.
For practical purposes, Marathon voided bankruptcy court jurisdiction under the 1978 Bankruptcy Code. Congress
had to amend the Code to revive the bankruptcy courts' power to hear bankruptcy cases. Simply making bankruptcy
judges Article III judges—the easiest solution—was not a politically viable option. Congress, therefore, solved the
Marathon dilemma by granting jurisdiction to the Article III judges of the district courts rather than to bankruptcy courts.
Congress then provided, in 28 U.S.C. § 157(a), that district courts can delegate jurisdiction to the bankruptcy courts in
"cases under" the Bankruptcy Code and in "proceedings arising under * * * or arising in or related to" the Code.
Subsection 157(b)(l) permits a bankruptcy judge to "hear and determine * * * all core proceedings arising under
title 11, or arising in a case under title 11." Subsection 157(b)(2) provides a nonexclusive list of "core proceedings."
The proceedings in the list, such as allowance of claims and objections to discharge, are ones that invoke substantial
rights under the Code or can only arise in conjunction with a bankruptcy case. In other words, a core proceeding is
"inextricably linked" to the bankruptcy case.
If a proceeding is "noncore," a bankruptcy judge may "hear and determine" it only if the parties consent. 28
U.S.C. § 157(c)(2). Otherwise, the bankruptcy judge may "hear" the matter, but cannot "determine" it; the bankruptcy
judge must submit proposed findings of fact and conclusions of law to the district judge, who may enter those findings
and conclusions "after consideration." The district judge must make a de novo review upon the record, or, if additional
evidence is submitted, of any part of the bankruptcy judge's findings of fact or conclusions of law to which a party
objected in accordance with Bankruptcy Rule 9033. The district judge may accept, reject, or modify the proposed findings
of fact or conclusions of law, receive further evidence, or recommit the matter to the bankruptcy judge with
instructions.
Congress determined that neither the district court nor the bankruptcy court should handle state law causes of
action that are related to a bankruptcy case but that do not arise under title 11. Accordingly, 28 U.S.C. § 1334(c)(2)
provides that a party to a proceeding based on a state law claim or cause of action may move the district court to abstain
from hearing the proceeding if an action is commenced and can be timely adjudicated in an appropriate state forum.
Section 1334(c) has been interpreted as a "clear congressional policy * * * to give state law claimants a right to have
claims heard in state court." Piombo Corp. v. Castlerock Properties (In re Castlerock Properties), 781 F.2d 159, 163 (9th
Cir. 1986).
Wood v. Wood
BK F16 SYL V01.DOCX
7/27/2016
PAGE 34
Interest Rate Table
MONTHS
1
APR
2%
3%
5%
6%
7%
8%
9%
9.59
10%
11%
12%
13%
14%
15%
20%
25%
30%
48%
YEARS
20
2
4
5
6
1
2
3
5
10
15
$100.17
50.13
25.10
20.10
16.76
8.42
4.25
2.86
1.75
0.92
0.64
0.37
$100.25
$100.42
$100.50
$100.58
$100.67
$100.75
50.19
50.31
50.38
50.44
50.50
50.56
25.16
25.26
25.31
25.37
25.42
25.47
20.15
20.25
20.30
20.35
20.40
20.45
16.81
16.91
16.96
17.01
17.06
17.11
8.47
8.56
8.61
8.65
8.70
8.75
4.30
4.39
4.43
4.48
4.52
4.57
2.91
3.00
3.04
3.09
3.13
3.18
1.80
1.89
1.93
1.98
2.03
2.08
0.69
0.79
0.84
0.90
0.96
1.01
$100.83
$100.92
$101.00
$101.08
$101.17
$101.25
$101.67
$102.08
$102.50
$104.00
50.63
50.69
50.75
50.81
50.88
50.94
51.25
51.57
51.88
53.02
25.52
25.58
25.63
25.68
25.73
25.79
26.05
26.32
26.58
27.55
20.50
20.55
20.60
20.65
20.71
20.76
21.01
21.27
21.52
22.46
17.16
17.21
17.25
17.30
17.35
17.40
17.65
17.90
18.15
19.08
8.79
8.84
8.88
8.93
8.98
9.03
9.26
9.50
9.75
10.66
4.61
4.66
4.71
4.75
4.80
4.85
5.09
5.34
5.59
6.56
3.23
3.27
3.32
3.37
3.42
3.47
3.72
3.98
4.25
5.29
2.12
2.17
2.22
2.28
2.33
2.38
2.65
2.94
3.24
4.42
0.97
1.06
1.11
1.16
1.21
1.27
1.3
1.32
1.38
1.43
1.49
1.55
1.61
1.93
2.27
2.64
4.04
0.42
0.54
0.60
0.67
0.73
0.80
.85
0.88
0.95
1.03
1.11
1.18
1.26
1.67
2.08
2.50
4.00
BK F16 SYL V01.DOCX
7/27/2016
1.07
1.14
1.20
1.27
1.33
1.40
1.76
2.14
2.53
4.00
.84
.90
.94
.97
30
PAGE 35

Syllabus - School of Law

Transcription

Similar documents

Kevyn Orr - Dallas Bar Association

NEED CASH NOW?

INVESTIGATION REQUEST FORM

READ THE EXCLUSIVE court documents HERE

Credit Report Import - Best Case - Best Case Bankruptcy Software

Former Raven Lewis not alone in bankruptcy

For advertising enquiries, call 088-230055

Mark R. Somerstein (MS 9721) Benjamin L. Schneider (BS 2004

Building Blocks: Bankruptcy Taxation Fundamentals