Source: https://insolvencyintel.abi.org/fraud/ninth-and-fourth-circuits-issue-important-rulings-on-sanctions-and-exemptions
Timestamp: 2019-04-23 14:06:56+00:00

Document:
The Ninth Circuit refused to rehear an appeal, setting up an opportunity for the Supreme Court to decide whether bankruptcy judges have constitutional power to impose sanctions as robust as Article III judges.
Meanwhile, the Fourth Circuit aligned itself with the Fifth by holding that events after a chapter 7 filing cannot undermine a homestead exemption.
In the Ninth Circuit case, a debtor defied a turnover order by refusing to cough up $1.4 million belonging to the estate. The bankruptcy judge imposed civil contempt sanctions of $1.4 million and $1,000 a day until the debtor complied.
The district court upheld the sanctions except for $1,000 a day, ruling that sanctions could not exceed the amount to be turned over.
In July 2017, the Ninth Circuit reversed and reinstated all of the sanctions imposed by the bankruptcy court. On May 8, the Ninth Circuit denied motions for rehearing and rehearing en banc, setting up the possibility of a petition forcertiorari testing either constitutional limits on the severity of sanctions or the constitutional power of bankruptcy courts to impose sanctions far surpassing the amount in controversy.
To read ABI’s discussion of the July 2017 opinion by the Ninth Circuit, click here.
In a significant case involving the homestead exemption for chapter 7 debtors, the Fourth Circuit gave the highest compliment to District Judge James K. Bredar of Baltimore by affirming his decision for the reasons stated in his opinion from August 2017.
A husband owned a home with his wife as tenants by the entireties. The wife did not file. After filing, the wife died, prompting the chapter 7 trustee to argue that the home was no longer entireties property exempted under Section 522(b)(3)(B).
The bankruptcy court overruled the trustee’s objection and was upheld by Judge Bredar.
There still must be a provision in the Bankruptcy Code bringing the property into the estate.
Unlike chapters 11, 12 and 13, there is no provision in chapter 7 bringing after-acquired property into the estate. Therefore, Judge Bredar held that the home was not brought into the estate.
By upholding Judge Bredar, the Fourth Circuit has firmly aligned itself with the Fifth Circuit, which held in Hawk v. Engelhart (In re Hawk), 871 F.3d 287 (5th Cir. Sept. 5, 2017), that exempt property on the filing date does not lose its exempt status even if it is converted to nonexempt property after the filing of a chapter 7 petition.
The Fifth Circuit expanded Hawk six months later by holding that a chapter 7 debtor did not lose the exemption in his home even though he sold the property after filing and did not reinvest the proceeds in another home within the six-month window allowed by Texas law. Lowe v. DeBerry (In re DeBerry), 884 F.3d 526 (5th Cir. March 7, 2018). For ABI’s discussion of Hawk and DeBerry, click here and here.
We submit that the Fourth Circuit’s ruling and the opinions in Hawk and DeBerryare little more than a reaffirmation of the so-called snapshot test. Those opinions were necessitated by creative arguments designed to undermine the snapshot rule.
"the court limited the allowance of the substantial-contribution claim to those fees and expenses directly related to procuring contingency-fee counsel and the costs related to copying records"
BAP for 9th Cir. vacated and remanded bankruptcy court (CD Cal.) order denying creditor's motion to dismiss chapter 13 case.
Clientron Corp. v. Devon IT, Inc.
The Court of Appeals vacated the District Court's sanction order, and remanded to impose a new sanction.
"[SPV OSUS Ltd. v. UBS AG] is notable for its expression of the Second Circuit’s rather extraordinary view of “related to” bankruptcy jurisdiction."
Venezuela insisted that the Crystallex judgment would never be paid so it engineered a “reverse fraudulent transfer” to take assets out of the U.S. and back to Venezuela to avoid creditor claims.
A Feb. 27, 2018, decision by the U.S. Supreme Court resolved a split in the circuit courts by clarifying that a bankruptcy trustee[...] may claw back preferences and constructive fraudulent transfers.
Following a suggestion made by two Supreme Court justices, Tribune creditors ask the Second Circuit to recall the mandate and remand for reconsideration in district court.
Two justices recommend that the Second Circuit reconsider the ‘Tribune’ safe harbor decision in light of Merit Management.
In re DBSI Inc., offers new precedent that swings the balance back toward debtors and general unsecured creditors at the expense of the IRS.
ABI Deputy Executive Director Amy Quackenboss talks with David Cox of Cox Law Group and Elizabeth Gunn of the Office of the Virginia Attorney General about their new consumer book.
The debtor's debt for criminal restitution is not dischargeable under § 523(a)(7) where he had failed to preserve the argument that his former employers were not governmental units.
Doing a great forensic fraud analysis is meaningless unless the findings are reported effectively. Learn from the pros how to do it right the first time.
Circuit Split: Is a Deposit into a Debtor’s Bank Account a “Transfer” Under § 101(54)?
High court to decide whether a false oral statement about one asset results in nondischargeability.
Oral statement that company was in "very fine legally [sic] financial shape" & had "plenty of cash to operate" is within exception under 523(a)(2)(A) so the debt was dischargeable. Judgement reversed.
The 2d Circuit Court of Appeals affirmed the district court’s judgment, finding that five of the appellant’s arguments were meritless for the same reasons stated in the district court's order.
The issue of nonconsensual third-party releases in chapter 11 plans continues to generate litigation.
Creditors contemplating discharge proceeding pursuant to § 523(a)(2)(A)’s fraud provision should be mindful of several potential pitfalls before assuming prior state judgment applies.
Justices search for a ruling that limits Section 546(e) but isn’t too broad.

References: v. 
 v. 
 v. 
 v. 
 § 523
 § 101
 § 523