New Cases For the Week of April 30, 2001 - May 4, 2001

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May 4, 2001

Case

Court

Holding

In re Morehead
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6th Cir. The bankruptcy court erred in holding that payment of a debtor's wages earned during the 90-day period to a creditor pursuant to a garnishment wage lien perfected outside the 90-day period was not a preference.  Although perfection of a lien outside the preference period usually insulates the grant of the lien from preference attack, 11 USC 547(e)(3) states that a transfer does not occur until the debtor has acquired rights in the subject property.  Since the debtor did not acquire rights in her wages until the services were performed (during the preference period), the bankruptcy court erred in finding that the attachment of the lien to such wages was not preferential.

May 2, 2001

Case

Court

Holding

Rhone-Poulenc v. IRS 3rd Cir. An appeal of an action initially filed by a debtor does not violate the automatic stay, which only applies to the continuation of actions filed against a debtor
Cinicola v. Scharffenberger 3rd Cir. An assumption and assignment under 11 USC 365 effected as part of a sale under 11 USC 363 is covered by the mootness protection of 363(m), unless the assumption/assignment could be reversed on appeal without materially impacting the sale transaction. 
Bachman v. Commercial Financial Services 10th Cir. To qualify for administrative priority, a claim must arise out of a transaction between the creditor and the bankrupt's trustee or debtor in possession and priority exists only to the extent that the consideration supporting the claimant's right to payment was both supplied to and beneficial to the debtor- in-possession in the operation of the business. A debt is not entitled to priority simply because the right to payment arises after the debtor in possession has begun managing the estate.  

The bankruptcy court did not err in finding that employees' severance bonus rights (arising under a prepetition employment contract rejected by the debtor) did not qualify as administrative expense claims, even though the debtor continued to employ the employees for a brief period postpetition.

US v. Magill 4th Cir. A debtor under investigation for bankruptcy fraud who asks one of his creditors to sign an affidavit stating that money  she delivered to him was a gift rather than a loan was properly convicted of obstruction of justice.
 
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