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A Texas Bankruptcy Lawyer's Blog

Case updates and commentary of interest to Texas bankruptcy lawyers.
By Stephen Sather

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Last Entry: November 14, 2009 at 20:05:00

Debtor Gets Mortgage Claim Denied. Now What?

Posted on November 14, 2009
I am in New York for the Commercial Law League conference, so it is appropriate to blog about a case from the Southern District of New York. While the Southern District of New York is known for its multi-billion dollar cases, a recent case highlights a consumer issue faced by courts nationwide...

Dispatches from a Hangdog Bankrupt

Posted on November 08, 2009
This morning I was listening to KUT, our local public radio affiliate, when I heard the story of a rare book dealer who filed for bankruptcy in Austin. His story is told in a series of dispatches which appear on McSweeneys.net, which you can access here...

Anonymity and Cyber-Bullying

Posted on October 29, 2009
This is somewhat off-topic. However, as a blogger, I am interested in cases about blogging. Recently, I have come across coverage of two cases dealing with people who wanted to say mean things on-line under the cloak of anonymity. One case involved postings which were merely libelous and nasty, while another involved a determined campaign of cyber-bullying against two female law students...

Random Thoughts From The National Conference of Bankruptcy Judges--Day 2

Posted on October 21, 2009
The most interesting programs I attended yesterday concerned consumer issues in the Post-BAPCPA world and real estate issues. I attended several other informative presentations (including a lunchtime history of the Constitution from former Judge Kenneth Starr), but will focus on these two in the interest of length...

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Random Thoughts from the National Conference of Bankruptcy Judges--Day 3

Posted on October 21, 2009
Today was the final day of the NCBJ annual meeting. Two interesting things today. Heard a good discussion of Rule 2019 and the highlight of the conference, Supreme Court Associate Justice John Paul Stevens.Rule 2019I had never thought too much about Rule 2019...

Random Thoughts from the National Conference of Bankruptcy Judges--Day 1

Posted on October 20, 2009
I am in Las Vegas for the National Conference of Bankruptcy Judges. The conference promises 2 1/2 days of events combining leading speakers and some frivolity.I started off Monday by attending the Commercial Law League of America's breakfast with Paul Begala...

Outrageous Creditor Behavior Leads to Small Damage Award

Posted on October 19, 2009
A debtor's suit against an abusive creditor seemed to have all the right elements: outrageous facts, creative legal theories and a sympathetic judge; but lacked just one thing, damages. Shane Eastman v. Baker Recovery Services, Adv. No. 08-5055 (Bankr...

IRS Loses Out on Inheritance Bait and Switch

Posted on October 02, 2009
While the government has many powers, the Fifth Circuit recently decided that the IRS had no remedy when proceedings in a Louisiana state court deprived it of the benefits it was supposed to receive under a confirmed chapter 11 plan. The opinion can be found here...

Tangled Financial Web Allows Assets to Escape Trustee's Reach

Posted on September 18, 2009
A recent opinion by Bankruptcy Judge Craig Gargotta demonstrates the problems arising from the use of cash management systems and also provides an object lesson in why lawyers should have more than a passing knowledge of accounting concepts. In Ingalls v...

Fifth Circuit Goes All In On Hanging Paragraph

Posted on September 11, 2009
Joining several other courts, the Fifth Circuit has ruled that the entire debt created by a purchase money transaction is protected from modification under the hanging of section 1325(a). The decision overrules several lower court decisions which had limited or denied protection to claims which included non-purchase money components...

Texas Chapter 11 Filings Continue to Soar

Posted on September 04, 2009
Texas chapter 11 filings continue to soar, with second quarter 2009 filings nearly triple the level from the same quarter in 2008. Filings in each of Texas's four districts were greater than in any of the previous five quarters.Statewide, there were 430 new chapter 11 cases filed from April 1, 2009 to June 30, 2009...

Judge to Investment Bankers: Pigs Get Fat and Hogs Get Their Employment Denied

Posted on August 03, 2009
Eye-popping professional fees have become more commonplace as larger and larger firms enter bankruptcy. However, one judge has drawn the line at a request to employ two investment banking firms with guaranteed upfront fees of $1 million to supplement the two valuations already obtained in the case...

Credit Slips Blogger Cited in Opinion

Posted on August 02, 2009
Blogging can be as personal as Ranger fans venting about why Glen Sather (no relation) must go or as mundane as someone's vacation photos. However, some legal blogs succeed in putting out thoughtful analysis in real time. One of the best legal blogs is Credit Slips...

Rule Amendment Proposes to Allow Objections to Exemptions After Conversion

Posted on July 30, 2009
The Committee on Rules and Practice has recommended that the Judicial Conference approve a series of changes to the Federal Rules of Bankruptcy Procedure. One proposal is to amend Rule 1019 to allow a new period of time to object to exemptions when a case is converted from chapters 11, 12 or 13 to chapter 7...

Fifth Circuit Holds That Projected Disposable Income Should Reflect Reality

Posted on July 19, 2009
In a new opinion, the Fifth Circuit ruled that the calculation of "projected disposable income" in a chapter 13 plan is not merely a mechanical calculation and may take note of events "reasonably certain" to occur. Matter of Nowlin, Non. 08-20066 (5th Cir...

Ninth Circuit Joins Consensus: 401k Loans Not Deductible As Secured Debt Under Means Test

Posted on July 15, 2009
Joining what has become the consensus position, the Ninth Circuit has held that payments on a 401k loan may not be deducted under the chapter 7 means test. Egebjerg v. Anderson, 2009 U.S. App. LEXIS 11651 (9th Cir. 5/29/09). The opinion highlights a major inconsistency in the way that BAPCPA treats retirement plan loans...

Circuit Court Denies Claim For Lack of Supporting Documentation

Posted on July 15, 2009
The 10th Circuit has ruled that a trustee's objection to an assigned proof of claim should be sustained based on lack of supporting documentation even though the debtor scheduled a similar claim. In re Kirkland, No. 08-2017 (10th Cir. 7/14/09). The opinion can be found here...

More About Judge Sotomayor and Bankruptcy

Posted on July 10, 2009
Supreme Court nominee Sonia Sotomayor?s questionnaire completed for the Senate Judiciary Committee contains a mind-numbing 173 pages of details about the prospective justice. If you need to know who she gave a speech to in 1993 or which single-sex club she belonged to until recently, this is the place to look...

Fifth Circuit Allows Ownership Expense on Paid For Vehicle

Posted on July 01, 2009
The Fifth Circuit has held that a debtor may claim an ownership expense on the chapter 7 means test even if the debtor does not have a loan or lease payment. In re Tate, No. 08-60953 (5th Cir. 6/10/09). In the Tate case, the debtors owned two paid for vehicles...

Supreme Court Grants Cert in Attorney Speech Case

Posted on June 19, 2009
The Supreme Court has granted certiorari in Milavetz, Gallop & Milavetz, P.A. v. United United States, 541 F.3d 785 (8th Cir. 2008), cert granted, 2009 U.S. LEXIS 4277 (6/8/09). The Milavetz case held that the provision in BAPCPA preventing attorneys from advising debtors to incur debt in contemplation of bankruptcy was an unconstitutional restriction on the right to free speech under the First Amendment...

Supreme Court Decides One Case and Hints At Result in Another

Posted on June 18, 2009
While many continuing legal education conferences consist of regurgitations of things you already know, every once in a while, you gain an insight which makes it all worthwhile. Today at the State Bar of Texas Bankruptcy Section Bench-Bar Conference, I was fortunate enough to hear Nashville Bankruptcy Judge Keith Lundin tie together today's decision in Travelers Indemnity Co...

Chapter 11 in Texas: Introduction to the 2008 Cases

Posted on June 15, 2009
Enron filed in the Southern District of New York. However, there are still chapter 11 cases being filed in Texas. During 2008, there were a total of 701 chapter 11 cases filed in Texas. This will be the first of a series of posts examining the Class of 2008...

Another View on Chrysler

Posted on June 12, 2009
The Chrysler deal has now closed, proving that it is possible to do a multi-billion dollar asset sale on an expedited timetable when the U.S. government is your DIP lender and is directing the pace. I am still scratching my head at the ease with which this deal went through...

The Bankruptcy Opinions of Sonia Sotomayor

Posted on May 27, 2009
Yesterday President Obama nominated Second Circuit judge Sonia Sotomayor to take David Souter's place on the Supreme Court. As a District Court Judge in the Southern District of New York and as a Judge on the Second Circuit Court of Appeals, Judge Sotomayor has come across bankruptcy issues from time to time...

Lawyers, Guns and Money

Posted on May 13, 2009
"Send lawyers, guns and money."--Warren Zevon (1978).A new opinion out of San Antonio (home to the Alamo) contains the elements of lawyers, guns and money in a decision about exempting firearms. In re Wilkinson, No. 07-50189 (Bankr. W.D. Tex. 4/10/09)...

Court Clears the Way for Simultantaneous Causes of Action Based on Discharge Violation

Posted on May 05, 2009
Nature abhors a vacuum. When Congress restricted access to bankruptcy in 2005, many debtor?s lawyers became plaintiff?s lawyers, filing suit over automatic stay and discharge violations which might have been allowed to pass in an earlier time. Not only are debtor?s lawyers suing more often, they are also asserting more causes of action as illustrated by a recent opinion from the Western District of Texas...

His English Teacher Would Be Proud

Posted on May 04, 2009
Many of us forgot the formal rules of grammatical construction as fast as we could, but not Justice Breyer. In an opinion today, he delivered a grammatical tour de force. There are strong textual reasons for rejecting the Government?s position. As a matter of ordinary English grammar, it seems natural to read the statute?s word ?knowingly? as applying to all the subsequently listed elements of the crime...

Chrysler Seeks the Ultimate 363 Sale as the Treasury Department Dictates the Pace

Posted on May 03, 2009
Chrysler, LLC filed for chapter 11 bankruptcy on April 30 with the United States Treasury firmly in the driver?s seat (pun intended). In its first day filings, Chrysler announced that it would be seeking $4.5 billion in DIP financing from the Treasury and that it intended to affect a sale of substantially all of its assets to a newly created entity within 60 days...

The Human Face of Bankruptcy

Posted on May 03, 2009
This week I received an unhappy call from the wife of a debtor whose case I had written about. Although the article was posted nearly two years ago, someone had recently told her that her husband's name was mentioned on the internet. She found this very distressing...

Pennsylvania Judge Writes Epic Opinion on Technology and Professional Responsibility

Posted on April 26, 2009
Technology has dramatically changed the practice of law. Thanks to Westlaw and Lexis, it is no longer necessary to keep large expensive libraries. PACER and ECF have made court filings and filing documents available 24/7. I recently observed a case where the parties used GoToMeeting to handle thousands of pages of exhibits electronically...

On Gunslingers, Presumptions and Burdens of Proof

Posted on April 24, 2009
There have been an increasing number of cases dealing with objections to assigned credit card debt. These cases are a bit like a showdown between gunfighters with bad aim: there is a lot of shooting, but no one hits anything. While a gunfight where no one gets shot is a good thing, the court must still decide whether to allow or disallow the claim even when there is little or no evidence introduced...

Sign Costs Creditor $21,800

Posted on April 16, 2009
Chuck Newton's blog, stayviolation.com, has the details on a case he recently tried in which a creditor posted a sign in a small town stating: "BRAD COLLIER OWES ME $984.23 WILL YOU PLEASE COME AND PAY ME!" The Court awarded $21,820.00 in damages for violation of the automatic stay...

10th Circuit Affirms Denial of Employment of Attorneys Who Were Too Expensive

Posted on April 08, 2009
In these days of exponentially increasing hourly rates, a bankruptcy court told a creditors' committee that its proposed counsel was too expensive when there were local firms competent to do the work for half the cost. That decision was recently affirmed by the 10th Circuit Court of Appeals...

Leif Clark on Reaffirmations: Six Short Clark Opinions on Reaffirmation and What They Mean

Posted on April 07, 2009
Leif Clark is one of the most prolific judges on the bankruptcy bench today. His opinions are generally both scholarly and entertaining to read. However, one adjective which is not usually applied to his opinions is short. Therefore, it is worthy of note that in the past year, Judge Clark his written no fewer than six opinions denying approval of reaffirmation agreements and giving guidance to the parties with regard to the unreaffirmed debt, none of which is longer than three pages...

When Is a Small Business Debtor Not a Small Business Debtor?

Posted on April 06, 2009
One of the changes that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made to small business bankruptcy cases was to eliminate the ability to opt in to treatment as a small business debtor. However, it appears that the Bankruptcy Rules may have given back the option which Congress intended to take away...

Texas Chapter 11 Filings Double

Posted on April 05, 2009
Chapter 11 filings are a good indicator of how the economy is doing as well as the market for bankruptcy lawyers. If the latest filings are any indication, Texas bankruptcy lawyers are going to be very busy. In the first quarter of 2009, chapter 11 filings doubled over their level from the same time during 2008...

Remembering Our Colleagues

Posted on March 26, 2009
Yesterday I heard that a bankruptcy lawyer I know had passed away. It turned out to be a case of mistaken identity, much to my relief. However, it got me thinking that we have lost several members of our bar in the past months and I wanted to take a moment to remember them...

The Bankruptcy Reform Rube Goldberg Device

Posted on March 19, 2009
The Bankruptcy Code of 1978 was intended to simplify the law and make it more functional. In most respects, it worked beautifully. The same cannot be said for the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Badly drafted is one of the kinder adjectives applied to it...

Exemption Cases Take a Campy Turn

Posted on March 16, 2009
When Bankruptcy Judge Craig Gargotta decided In re Camp, 396 B.R. 194 (Bankr. W.D. Tex. 2008), he staked out a unique position on how exemption laws should be applied when Sec. 522(b)(3)(A) requires application of the law of another state. Judge Gargotta concluded that Sec...

Accountant's Mistake on Financial Statement Leads to Non-Dischargeable Debt

Posted on February 11, 2009
A recent opinion from the Fifth Circuit demonstrates that non-dischargeable claims for false financial statements can extend beyond the traditional lender-borrower relationship and that a third party's error can create liability when it is knowingly adopted by the debtor...

Judge to Secured Creditor: The Loan has been PAID!!!!!

Posted on February 03, 2009
In the latest opinion from a single asset real estate case which has taken on the ferocity of a cage match brawl, the bankruptcy court has told a secured lender that it must treat its credit bid under Section 363(k) the same as if it had received a cash payment...

Texas Supreme Court Allows Malicious Prosecution Claim Based on Bankruptcy Adversary Proceeding to Proceed, Finds No Preemption

Posted on January 12, 2009
In an interesting case dealing with concurrent jurisdiction and preemption, the Texas Supreme Court has found that a state court had jurisdiction to consider a malicious prosecution action based upon an adversary proceeding. Graber v. Fuqua, No. 05-0303 (Tex...

What Do You Do With An Ombudsman?

Posted on January 08, 2009
Two of the new parties created by BAPCPA are the consumer privacy ombudsman and the patient care ombudsman authorized by sections 332 and 333 of title 11. In creating these positions, Congress acted to protect certain narrow constituencies deemed at risk in business bankruptcy cases...

2008 Was a Busy Bankruptcy Year for the Fifth Circuit

Posted on December 23, 2008
The Fifth Circuit has busy this year. They have been turning out bankruptcy opinions at a rate where they might consider changing the name of the court to the Fifth Circuit Court of Bankruptcy Appeals. So far I have written a dozen articles about their decisions this year...

Bankruptcy Court Limbers Up to Tackle Mental Gymnastics of Lien Avoidance

Posted on December 19, 2008
A Texas bankruptcy judge had to engage in some mental gymnastics to decide whether to avoid a lien on property exempted under the federal wildcard in emIn re Melissa Catherine Powell/em, No. 08-60204 (Bankr. W.D. Tex. 11/6/08). emPowell/em presented some interesting facts...

Fifth Circuit Relies on Constitutional Avoidance to Uphold Sec. 526(a)(4)

Posted on December 19, 2008
In a departure from rulings by the Eighth Circuit and several lower courts, the Fifth Circuit has held that Sec. 526(a)(4), which limits the advice debt relief agencies can give potential debtors "in contemplation of" bankruptcy, passes constitutional scrutiny...

Republic Windows & Doors Case Illustrates Gaps in Employee Protection

Posted on December 09, 2008
Republic Windows & Doors, the Chicago company which recently closed its doors, is not a debtor in bankruptcy, at least not yet. However, it illustrates the point that when laws designed to protect employees meet secured financing, the workers can come up short...

Employee Wage Motions Still Viable

Posted on November 28, 2008
The author of the Mirant and CoServ opinions limiting critical vendor motions has written to emphasize that his prior rulings do not preclude employee wage motions in chapter 11 cases. In re Tusa-Expo Holdings, Inc., No. 08-45057 (Bankr. N.D. Tex. 11/7/08)...

Fifth Circuit Reinstates Sanctions Award

Posted on November 14, 2008
The case of a Houston attorney sanctioned based on a brief representation of a debtor in 2001 took another turn as the Fifth Circuit reinstated the judgment of the Bankruptcy Court awarding sanctions. Matter of Cochener, No. 08-20048, 2008 WL 4681579 (5th Cir...

Fifth Circuit Explains Earmarking

Posted on November 06, 2008
In order for a payment to be recovered as a preference under 11 U.S.C. Sec. 547, there must be a transfer of "an interest of the debtor in property." The earmarking doctrine provides a means to negate this element where the debtor never had control over the transferred property...

BAPCPA At Three Years Old: Measuring the Statistical Impact on Texas Filings

Posted on October 17, 2008
Today is the third anniversary of the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which seemed like a good time to look at the lasting impact of this legislation on bankruptcy filings. At this point, filings remain substantially down from the period prior to adoption of the statute...

Bankruptcy Court Stakes Out Unique Position on Sec. 522(b)(3)(A) as Choice of Law Rule, Relies on Former State's Law Without Regard to Actual Residenc

Posted on October 16, 2008
A new decision from Bankruptcy Judge Craig Gargotta is likely to prompt discussion as the court held that a debtor could be prohibited from using federal exemptions based on the law of his prior residence even though that state's law only prohibited "residents" of the state from using the federal exemptions...

First Circuit Reverses Massive Damage Award Based on Application of Chapter 13 Mortgage Payments

Posted on October 08, 2008
Application of mortgage payments in chapter 13 is a thorny problem. Although the Debtor may not modify the terms of a mortgage on a primary residence, she may cure the arrearages while remaining current on the post-bankruptcy mortgage payments. However, if the Debtor defaults on the post-petition payments, those may be rolled into the plan as well...

Vice-Presidential Candidates Debate Bankruptcy Reform

Posted on October 03, 2008
Bankruptcy reform received attention at the Vice-Presidential debate last night as viewers witnessed a gaffe from the moderator and Sen. Biden staked out a bold position on modifying home mortgages.Moderator Gwen Ifill asked Gov. Palin about bankruptcy reform, but managed to muddle her question:IFILL: Next question, Governor Palin, still on the economy...

Equitable Mootness Fails to Prevent Disgorgement

Posted on October 02, 2008
The Schlotzsky's case got a little woolier as the Fifth Circuit ordered that an appeal over funds disbursed from a reserve account could not be dismissed based upon equitable mootness. Wooley v. Faulkner, No. 07-50912 (5th Cir. 8/28/08).The Schlotzsky's case involved disputes between John and Jeffrey Wooley and the Debtor...

Fifth Circuit Dismisses Gadzooks Appeal

Posted on October 02, 2008
Practitioners waiting for further illumination of the Fifth Circuit's Pro-Snax decision will have to continue waiting. The Gadzooks case involves whether Hughes & Luce will be compensated for nearly a million dollars worth of legal work done for an equity security holders' committee in a case where subsequent, unforeseen events negated the value of the committee's work...

Update on Possible Impeachment of U.S. District Judge for Bankruptcy Fraud

Posted on October 02, 2008
There has been a new development in the case of a U.S. District Judge facing possible impeachment based in part upon his conduct as a Chapter 13 debtor. On September 10, 2008, The Judicial Council of the Fifth Circuit issued an Order and Public Reprimand in Docket No...

Practicing Law and Having a Life

Posted on September 28, 2008
This weekend, the firms that I work for hosted a celebration for the 25th anniversary of Barbara Barron and Manny Newburger practicing together, as well as the 25th anniversary of the marriage of Caryn and Manny Newburger and the 2nd anniversary of Barron, Newburger, Sinsley & Wier, PLLC...

Fifth Circuit Answers Three Questions of First Impression on Violation of Automatic Stay

Posted on July 25, 2008
The Fifth Circuit answered at least three questions of first impression in a recent case regarding violation of the automatic stay. In re Repine, No. 06-20807 (5th Cir. 7/22/08).The facts of this case sound straight out of a made for TV movie, including love gone bad, prison and a renegade lawyer...

Trustee Avoids Judicial Estoppel Finding As Fifth Circuit Comes Full Circle

Posted on July 25, 2008
Good things come in threes. Think of the first Star Wars trilogy or Lord of the Rings. Now the Fifth Circuit has completed a trilogy of cases on judicial estoppel which brings its exposition of the doctrine full circle. Kane v. National Union Fire Insurance Company, No...

Tchaikovsky's Overture: How an Unremarkable Case Took on a Life of Its Own

Posted on July 19, 2008
Peter Tchaikovsky's 1812 Overture ends with a cannonade. Some commentators have viewed a recent opinion from Bankruptcy Judge Leslie Tchaikovsky as a cannon shot aimed at the irresponsible practices of the home mortgage industry. However, what is most remarkable about National City Mortgage vs...

In Memory of Gray Byron Jolink, 1946-2008

Posted on July 17, 2008
The Central Texas bankruptcy community lost a valued friend and colleague when Gray Byron Jolink passed away unexpectedly on June 23, 2008. Gray graduated from the University of Texas Law School in 1974 and was a solo practitioner in Austin. Much of his practice involved representing the debtor in small chapter 11 cases...

Fifth Circuit Clarifies Post-Confirmation Jurisdiction

Posted on July 11, 2008
The Fifth Circuit has written a new opinion in which it holds that once "related to" jurisdiction attaches, confirmation of the plan will not divest that jurisdiction. The opinion reconciles an apparent conflict with its holding in Craig's Stores that post-confirmation jurisdiction is limited to enforcing the plan...

On Judicial Selection

Posted on July 01, 2008
On my non-bankruptcy blog, I have written an article about the different approaches that the two presidential candidates take toward appointing judicial nominees. If you are interested in reading more, you can go to:http://satherthoughts.blogspot.com/2008/06/presidential-campaign-reveals-different...

5th Circuit Rejects Equitable Subordination Claim With Deepening Insolvency Aspect; Insiders Not Subordinated for Stoking the Fires of a Sinking Ship

Posted on July 01, 2008
The Fifth Circuit has ruled that insiders who ?grabbed for as much as they could get? were not subject to equitable subordination where the bankruptcy court did not find sufficient harm resulting from their conduct. The court rejected a theory of damages which it equated to deepening insolvency...

Northern District of Texas Releases En Banc Opinion on Early Completion of Chapter 13 Plan

Posted on June 23, 2008
The six judges of the Bankruptcy Court for the Northern District of Texas have released an opinion on when a debtor can pay off a chapter 13 plan prior to its scheduled completion date under BAPCPA. In re Howard L. McCarthy, Jr., No. 06-40127-DML-13 (Bankr...

Sources for Free Legal Research on Texas Bankruptcy Cases

Posted on June 08, 2008
It used to be that to keep up with the latest case law, it was necessary to review the advance sheets or keep up with the latest legal journals. Of course, this required expensive subscriptions and ran weeks or months behind the release date of the opinions...

New Opinion Illustrates the Dangers of Going to Trial

Posted on June 03, 2008
Trials are unpredictable things. That's why most cases settle. A recent opinion from Austin Bankruptcy Judge Frank Monroe illustrates how a case can go astray. In MARTNKIM Dining, LLC vs. Chaney, Adv. No. 07-1082 (Bankr. W.D. Tex. 5/29/08), the defendants won the case but in the process exposed themselves to new and potentially greater legal problems...

Debt Buyers Win Respect in New Opinion

Posted on May 29, 2008
Debt buyers are not the most popular people these days. However, their role as economic scavengers was acknowledged in a recent opinion from Judge Leif Clark of San Antonio. In re Salvador Santana, No. 07-30027 (Bankr. W.D. Tex. 5/21/08). In Santana, Portfolio Recovery Associates, LLC filed a Notice of Transfer of Claim with respect to a claim that they had acquired from Capital One in the amount of $604...

Bankruptcy Court Limits Texas Homestead Under 1,215 Day Rule

Posted on May 26, 2008
The Bankruptcy Court for the Western District of Texas was recently faced with several issues relating to the homestead limitations under 11 U.S.C. Sec. 522(o) and (p). In re Fehmel, No. 07-60831 (Bankr. W.D. Tex. 5/22/08)(Frank R. Monroe, B.J.). Judge Monroe's opinion decides what it means to acquire an "interest" in property within 1,215 days, as well as interpreting the rollover and fraud provisions of the exemption statute...

Obscure Provision Protects Local Taxing Authorities

Posted on May 21, 2008
Three years after the adoption of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, there are still opportunities to find something new in the statute. Under both the Bankruptcy Act and under the Code prior to BAPCPA, it was possible for a debtor to ask a court to redetermine the appraised values used to compute ad valorem taxes so long as the values had not been previously contested...

Plan Proposed by Environmental Advocate Save Our Springs Alliance Denied Based Upon Lack of Feasibility

Posted on April 13, 2008
Another chapter has unfolded in Austin?s development wars with the denial of the plan of reorganization proposed by the Save Our Springs Alliance. In re Save Our Springs (S.O.S.) Alliance, Inc., No. 07-10642 (Bankr. W.D. Tex. 4/11/08). While the case was a defeat for the debtor, it provides a wealth of useful case law for chapter 11 lawyers...

Fifth Circuit Clarifies Requirements of Rule 9011

Posted on April 09, 2008
The Fifth Circuit has written a new opinion requiring strict compliance with Rule 9011 prior to awarding sanctions. The Cadle Company v. Pratt, No. 07-10457 (4/8/08). Specifically, the Fifth Circuit held that prior to seeking sanctions under Rule 9011, the movant must serve a copy of the actual sanctions motion on the respondent 21 days prior to filing the motion and held that a mere letter threatening sanctions was inadequate...

Minority Position on Surrendering Vehicles Subject to Hanging Paragraph Gains Support; Automobile Lenders Allowed Deficiency Claims

Posted on April 03, 2008
Some of the architects of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) have said that they would not change a word of this complex legislation. However, some of those words have left judges scratching their heads. One of the more troublesome provisions has been the so-called ?hanging paragraph? of 11 U...

Fifth Circuit Releases Interest-ing Opinion on Chapter 13 Interest Rates

Posted on March 31, 2008
The Fifth Circuit has released a new opinion on interest rates in chapter 13 cases. Drive Financial Services, L.P. v. Jordan, 2008 U.S. App. LEXIS 5334 (5th Cir. 3/12/2008). While the opinion does not contain any earth-shattering conclusions, it provides an excellent starting point for a practitioner wanting to learn treatment of secured claims in chapter 13...

Sanctioned Lawyer Wins Reprieve From District Court; Court Clarifies Standards for Non-9011 Sanctions

Posted on March 21, 2008
This blog previously reported on In re Cochener, 360 B.R. 542 (Bankr. S.D. Tex. 2007), a case in which an attorney was sanctioned under 11 U.S.C. Sec. 105 and 28 U.S.C. Sec. 1927 based on events which had occurred years earlier. See "Brief Representation Comes Back to Haunt Attorney...

A Modest Proposal

Posted on March 03, 2008
There has been a lot of talk about the sub-prime mortgage crisis lately. The presidential candidates are very concerned about it, but don't seem to be offering a lot of specifics. One of the candidates wants to impose a 90 day moratorium on foreclosures...

How to Count Backwards

Posted on February 21, 2008
Deadlines are important. As a result, it is important to know when a deadline falls. Fed.R.Bankr.P. 9006(a) explains that the last day of a period is not counted if it falls on a Saturday, Sunday or legal holiday. In that instance, the time period ?runs until the end of the next day which is not one of the aforementioned days...

Ten Day Rule Protects Trustee

Posted on February 21, 2008
Most bankruptcy lawyers find the arcane details of the Federal Rules of Civil Procedure to be deadly dull. However, for Austin Bankruptcy Trustee Dan Roberts, the difference between Fed.R.Civ.P. 59 and 60 proved to be very important. In re Geneva Peterson Berg, No...

Impressions of Jury Duty

Posted on February 02, 2008
As a lawyer, I never expected to be selected for jury duty. Although I have gone through voir dire several times in the past, I had always been struck or not reached. As a result, when I was called for service in County Court at Law #7, I expected to be back in the office by the end of the afternoon...

Fifth Circuit Rules on Homestead Cap

Posted on January 30, 2008
The Fifth Circuit started off the new year with an opinion construing the homestead cap under 11 U.S.C. Sec. 522(p)(1). Matter of Rogers, 2008 U.S. App. LEXIS 129 (5th Cir. 1/4/08). While the case addresses a fairly narrow issue, it is significant because it appears to be the first appellate court opinion construing the new statute...

Judge Follows Legal Priority While Acknowledging "Moral Priority" Of Losing Parties

Posted on January 16, 2008
San Antonio Bankruptcy Judge Leif Clark is known as the master of the footnote. Thus, when faced with a relatively straightforward case requiring him to construe a confirmed chapter 11 plan, he held his nose and applied the law. In re Texas Pig Stands, Inc...

Fifth Circuit Recommends Impeachment of Federal Judge Based on Bankruptcy Misconduct

Posted on January 11, 2008
On December 20, 2007, the Judicial Council of the Fifth Circuit entered a Memorandum Order and Certification in which it certified to the Judicial Conference of the United States its determination that U.S. District Judge G. Thomas Porteous had engaged in conduct which might constitute grounds for impeachment...

Texas Supreme Court Limits Penalties for Invalid Home Equity Loan

Posted on January 10, 2008
Texas has a long tradition of protecting its homesteads. Texas was the last state in the nation to allow home equity lending. When it did, the loans came with a host of technical requirements and draconian penalties for failing to meet those requirements...

Interesting Cases That I Didn't Get Around To This Year

Posted on December 21, 2007
As we reach the end of another year, I have a few cases that I meant to blog about, but never quite found the time. Many of these cases are every bit as important as the ones that I did write about. Here are the best of the rest in capsule form. Maybe I will find time to write some more about them next year...

Update on Deductibility of 401k Loan Payments Under Means Test

Posted on December 21, 2007
This blog previously reported on Judge Larry Kelly's decision in In re Otero which allowed payments on 401k loans to be deducted under the chapter 7 means test. http://stevesathersbankruptcynews.blogspot.com/2006_11_01_archive.html. That decision was subsequently reversed on appeal by the U...

Gadzooks Update

Posted on December 21, 2007
This blog previously reported on an opinion by Judge Harlin Hale of the Northern District of Texas which limited the effect of the Fifth Circuit's opinion in Matter of Pro-Snax Distributors, Inc., 157 F.3d 414 (5th Cir. 1998). http://stevesathersbankruptcynews...

Dallas Judge Investigates Mortgage Rescue Scam; Urges Debtor's Bar to Warn Clients

Posted on December 20, 2007
Dallas Judge Stacey Jernigan recently issued an opinion concerning a mortgage protection scheme which the court found to prey upon both desperate debtors and mortgage lenders seeking to protect their legal rights. In re Michael White, No. 06-32324 (Bankr...

Pakistani Lawyers Risk Lives for Rule of Law

Posted on November 06, 2007
In Pakistan, thousands of lawyers dressed in black suits and ties took to the street to protest the dissolution of the supreme court and the suspension of the constitution. It is estimated that 500-700 were arrested. "Bush criticizes Musharraf," Austin American Statesman, November 6, 2007, p...

Timely Amended Claim Avoids Usury Penalty

Posted on October 24, 2007
After just sixteen days on the bench, Austin Bankruptcy Judge Craig Gargotta has penned his first opinion. In Ingalls vs. Cunningham, Adv. No. 06-1236 (Bankr. W.D. Tex. 10/16/07), Judge Gargotta considered whether a creditor which filed an arguably usurious claim could take advantage of Texas's usury cure provision when it amended the claim to delete the offending charges...

Court Protects Homestead Proceeds But Leaves Open Question on Tardy Objections

Posted on October 23, 2007
Texas has one of the most generous homestead exemptions in the country. However, a quirk in the law allows an exemption in homestead proceeds to be lost due to the passage of time. San Antonio Bankruptcy Judge Leif Clark recently found a creative solution to the problem created by an obstreperous creditor seeking to outlast the debtor and preclude reinvestment of the proceeds from sale of a homestead...

Creditor Trust Fails to Revive Claims Brought by Debtor; Creditors Found to Have Derivative Standing Only

Posted on October 17, 2007
While plan trusts have many uses, overcoming res judicata is not one of them. In Medlin, Trustee v. Wells Fargo Bank, N.A., Adv. No. 04-5041 (Bankr. W.D. Tex. 7/31/07), the Bankruptcy Court considered whether claims contributed to a plan trust by investors could overcome a prior take nothing judgment entered in a suit by the debtor?s trustee...

Fifth Circuit Rules on Bradley Appeal; Lazarus Trust Is Not Resurrected From Bankruptcy Court Judgment

Posted on September 24, 2007
?This is the way the world ends/Not with a bang but a whimper.?--T.S. ElliottThe long-running bankruptcy case of flamboyant Austin developer Gary Bradley came one step closer to its end with a dissertation by the Fifth Circuit Court of Appeals on . . ...

Cash Value of Surrendered Policy Not Exempt In Texas

Posted on August 08, 2007
The Fifth Circuit has held that proceeds from a surrendered whole-life policy are not exempt under Texas law. Trautman vs. Milligan, No. 06-50363 (5th Cir. 8/8/07). The Trautman decision relied on both interpretation of the Texas Insurance Code and policy considerations...

District Court Reverses Discharge Violation; Finds Some Violations Too Technical to Punish

Posted on July 23, 2007
Are some violations of the discharge injunction too technical or trivial to justify enforcement? According to a U.S. District Court Judge in Texas, the answer is yes, and the holding, if correct, may highlight an important distinction between the penalties for violation of the stay and the discharge...

Judge Isgur Refuses to Apply Vicarious Disqualification

Posted on June 26, 2007
Judge Marvin Isgur of the Southern District of Texas has rejected application of a per se vicarious disqualification rule in a case involving Bracewell Giuliani. No. 07-32417, In re Cygnus Oil and Gas Corporation, (Bankr. S.D. Tex. 5/29/07). In the Cygnus case, a Bracewell partner owed 100,000 shares of the debtor and has served as a director for four months during the year prior to bankruptcy...

Assigned Credit Card Debt: A Problem of Paper, Electronic Images and Faith

Posted on June 13, 2007
Two recent decisions from Texas Bankruptcy Courts highlight the practical problems inherent in proving up a claim based on assigned credit card debt. However, they also illustrate the tenuous connection between trust and value in the electronic age...

Bad Debtors Find Limited Homestead Protection

Posted on June 05, 2007
When Congress amended the bankruptcy laws, one of its goals was to eliminate the practice of pouring money into an exempt homestead prior to filing bankruptcy. Due to the inviolability of the homestead under Texas law, this had been a time-honored practice...

Texas State Court Strikes Down Ch. 11 Litigation Trust Agreement As Void Against Public Policy

Posted on May 11, 2007
A Texas Court of Appeals has ruled that a litigation trust created under a chapter 11 plan of reorganization was void as against public policy as a ?Mary Carter Agreement.? Turoff v. McCaslin, 2007 Tex. App. LEXIS 2343 (Tex. App.?Waco, 3/21/07). As a result, the court sustained a take-nothing summary judgment rendered against the plan trustee and in favor of the corporate officers and directors (D & O Defendants) and the corporate auditor who had been sued...

BAPCPA Allows Bad Faith Debtor To Escape Trustee Based on Failure To Make Necessary Filings

Posted on May 08, 2007
In a recent case described as ?the poster child for a bad faith debtor,? the debtor was allowed to escape bankruptcy over the objection of his chapter 7 trustee because he failed to file meaningful schedules within 45 days from the petition date. In re Walter Lee Hall, Jr...

Brief Representation Comes Back to Haunt Attorney Six Years Later

Posted on May 07, 2007
?The law has not been dead, though it has slept.? Shakespeare, Measure for Measure, Act. II, Scene ii, l. 90.A Houston lawyer recently discovered that the passage of time was not sufficient to protect him from the consequences of actions taken in a brief representation nearly six years earlier...

Mother-Daughter Debacle Plays Out in Waco; Family Debts Determined to Be Dischargeable

Posted on April 25, 2007
?Traditionally, trials of family conflicts often involve emotion and controversy, yet are short on reason, logic and admissible evidence. These adversary proceedings share these traits.? Thus, began Judge Larry Kelly?s Memorandum Opinion in which he sought to sort out the tangled mother-daughter disputes in Rose Douso Petro v...

Houston Judges Continue Inquiry Into Practices of Prominent Creditors' Firm

Posted on March 28, 2007
Proceedings involving a prominent Houston creditors? firm (hereafter referred to as the Firm)* heated up recently as two bankruptcy judges considered sanctions issues arising out of the Firm?s extensive bankruptcy practice. The Firm feuded publicly with the U...

Mental Incapacity Excuses Debtor From Credit Counseling; Prior History Proves Insufficient Grounds for Dismissal

Posted on March 24, 2007
Judge Robert Jones from the Northern District of Texas was recently faced with a situation which looked like an easy candidate for dismissal. The debtor filed pro se, did not obtain credit counseling, had previously filed ten unsuccessful bankruptcy cases and had filed over 100 suits against various parties...

Supreme Court Allows Recovery of Post-Petition Attorney's Fees Based On Pre-Petition Contract

Posted on March 20, 2007
In a unanimous opinion, the Supreme Court ruled that nothing in the Bankruptcy Code prohibits a creditor from asserting an unsecured claim for attorney's fees incurred post-petition where such fees would have been recoverable outside of bankruptcy. Travelers Casualty & Surety Co...

Judge Clark Protects the Brooklyn Bridge

Posted on March 20, 2007
The prolific Judge Leif Clark, who has written many memorable footnotes, including one quoted here yesterday, has written another one which is both quotable and addresses an important point. In In re Rendon, No. 06-52501 (Bankr. W.D. Tex. 3/15/07), a party who claimed to be purchasing a home from the debtors filed a Motion to Create Equitable Lien/Motion for Expedited or Emergency Hearing...

Forum Shopping Is Bad--Or Is It???

Posted on March 19, 2007
Judge Leif Clark recently wrote a very brief opinion with regard to jury demands and forum shopping. He ruled that the defendant's good or bad faith was not relevant to whether a jury could be demanded. Osherow v. Clonch Industries, Adv. No. 06-5200 (Bankr...