New Cases For the Week of February 12, 2001 - February 16, 2001

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February 16, 2001

Case

Court

Holding

In re Orso
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5th Cir. Despite a State exemption for annuities, and a stream of payments (purchased by a liable tortfeasor to fund a settlement with the injured debtor) that nominally and technically was an annuity, the Court ruled that form cannot triumph over substance.  When a putative annuity is in fact an artificial form for another type of nonexempt asset, such as an account receivable or a debt owed by or tortfeasor to a victim, the annuity form will be disregarded, making the stream of payments property of the bankruptcy estate. 

February 14, 2001

Case

Court

Holding

In re: Jan Weilert R.V., Inc.,
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9th Cir. BAP In the recreational vehicle sale industry, it it is the ordinary course of business for a dealer to payoff an original lender of a trade-in vehicle within 45 days of trade-in or within 20 days of the resale by the dealer of the trade-in.  The bankruptcy court did not err in finding that payments made outside these periods were not in the ordinary course of business (as measured by objective industry standards), and such payments were recoverable as preferences.

February 13, 2001

Case

Court

Holding

In re Golant
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7th Cir. The bankruptcy court did not err in striking a debtor's pleadings entering a default judgment under 11 USC 727 against a debtor/attorney who willfully and in bad faith refused to fully comply with a bankruptcy court's discovery orders.
In re Zepecki
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8th Cir. BAP Although the attorney claimed he was engaged to assist the debtor in a tax-free exchange, the bankruptcy court did not err in ordering a Chapter 7 debtor's attorney to disgorge $32,840 of the $40,000 in attorneys' fees that the attorney had received in the few months prior to the filing of the bankruptcy petition.  The court found that the services were rendered "in contemplation of bankruptcy, within the meaning of 11 USC 329.  

February 12, 2001

Case

Court

Holding

Cox v. Zale Delaware, Inc.
(DBN Subscription Required)
7th Cir. When a debtor who signs a reaffirmation agreement which is not filed with the court is not represented by an attorney, relief under 11 USC 524(a) (the discharge injunction) is available only in the court that the injunction arises from, and only in the form of a contempt action.  In such an action, the debtor can seek recission of the contract and restoration of the status quo (including however, return of the subject collateral to the secured creditor and payment of the interim rental value of the collateral to the creditor).  Attorneys' fees are also recoverable, and punitive damages might be recoverable upon a finding of criminal contempt.  Class action treatment of such claims is not appropriate.

In cases where a debtor signing an unfiled reaffirmation agreement is represented by an attorney, there is no violation of 524(a) when the creditor seeks postdischarge payment of the reaffirmed debt, and the above-referenced relief is unwarranted.

In re Permaco
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unpublished
4th Cir. 11 USC 524(e) does not deprive a bankruptcy court of subject matter jurisdiction to modify the lien rights of a creditor as to property owned by a nondebtor where the creditor votes for, and consents to, the confirmed plan of reorganization.  When the bankruptcy court in a prior bankruptcy filed by the individual guarantors of a corporate secured debt conformed a plan that limited the creditor's claim to the principal amount, the creditor's successor in interest was bound by that plan even though: (i) the individuals' case had been dismissed postconfirmation for failure to perform, (ii) the individuals' bankruptcy case had not been substantively consolidated with that of the corporation,  and (iii) the provision limiting the creditor to its principal amount could have been (but was not) challenged by the creditor at confirmation.
 
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