3rd Circuit Court of Appeals

U.S. SUPREME COURT DECIDES THAT BANKRUPTCY LAWYERS ARE "DEBT RELIEF AGENCIES" UNDER BAPCPA AND SUBJECT TO THE BANKRUPTCY CODE PROVISIONS APPLICABLE TO DEBT RELIEF AGENCIES


Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S.Ct. 1324, 176 L.Ed.2d 79 (3/8/2010)

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) amended the Bankruptcy Code to define a class of bankruptcy professionals termed "debt relief agencies" (DRAs). That class includes "any person who provides any bankruptcy assistance to an assisted person...for...payment...or who is a bankruptcy petition preparer." 11 U.S.C. § 101(12A). This classification is significant under BAPCPA because DRAs are subject to multiple special rules under the Bankruptcy Code.

U.S. SUPREME COURT HOLDS THAT BANKRUPTCY COURT'S LEGAL ERROR IN CONFIRMING A PLAN THAT DISCHARGED ACCRUED INTEREST ON A STUDENT LOAN DEBT ABSENT AN ADVERSARY PROCEEDING, AND A FINDING OF UNDUE HARDSHIP DID NOT RENDER THE JUDGMENT ON THE CONFIRMATION ORDER VOID

United Student Aid Funds Inc. v. Espinosa, 130 S.Ct. 1367, 176 L.Ed.2d 158 (3/23/2010)

The U.S. Supreme Court granted certiorari to resolve disagreement among the appeals court as to whether an order confirming a chapter 13 plan of reorganization that discharges student loan debt, in the absence of a finding of undue hardship pursuant to 11 U.S.C. §§ 523(a)(8) and 1328 and in the absence of an adversary proceeding as required by Federal Rule of Bankruptcy Procedure 7001(6), is a void judgment for purposes of Federal Rule of Civil Procedure 60(b)(4).

THIRD CIRCUIT COURT OF APPEALS ALLOWS BID PROCEDURES THAT PROHIBIT SECURED LENDERS FROM CREDIT BIDDING

In re Philadelphia Newspapers LLC, 599 F.3d 298 (3d Cir.) (5/7/2010) (Fisher, J.)

The Third Circuit Court of Appeals affirmed the district court's approval of chapter 11 debtors' bid procedures that precluded secured creditors from credit bidding (i.e., offsetting their bids with the value of their secured interest in the collateral) for the assets to be sold under the chapter 11 plan free of any lien pursuant to 11 U.S.C. § 1123(a)(5)(D).


THIRD CIRCUIT COURT OF APPEALS OVERRULES IN RE FRENVILLE, REJECTING THE "ACCURAL TEST" AND INSTEAD ADOPTING THE POSITION THAT A CLAIM ARISES WHEN AN INDIVIDUAL IS EXPOSED PREPETITION TO A PRODUCT OR OTHER CONDUCT GIVING RISE TO AN INJURY, WHICH UNDERLIES A "RIGHT TO PAYMENT" UNDER THE BANKRUPTCY CODE

JELD-WEN Inc., f/k/a Grossman's Inc. v. Van Brunt (In re Grossman's Inc.), --F.3d--, 2010 WL 2181291 (3d Cir.) (6/2/2010) (Sloviter, J.)

The Court of Appeals for the Third Circuit overruled precedent from In re Frenville Co., 744 F.2d 332 (3d Cir. 1984), and explicitly rejected the longstanding "accrual test" for determining when a claim arises for bankruptcy purposes. The debtor, a home improvement retailer that previously sold asbestos containing products, filed a chapter 11 bankruptcy petition. The debtor provided notice of the claims bar date, but did not suggest possible future asbestos liability.


BANKRUPTCY COURT UPHOLDS DEBTOR'S EXEMPTION OF INJURY LITIGATION PROCEEDS NOT RESULTING FROM PERMANENT IMPAIRMENT

In re Shumac, 425 B.R. 139 (Bankr. M.D. Pa.) (3/4/2010) (Thomas, J.)

The U.S. Bankruptcy Court for the Middle District of Pennsylvania allowed a debtor to claim the unliquidated proceeds from an unfiled automobile accident lawsuit as exempt. The court held that no permanent injury or impairment was required to establish an exemption pursuant to 11 U.S.C. § 522(d)(11)(D) and found that any judgment or settlement for both personal injury and loss of consortium would qualify for exemption.

UPON DEATH OF DEBTOR, TRUSTEE HAS NO CLAIM TO PROPERTY THAT THE DEBTOR OWNED WITH HER NON-DEBTOR SPOUSE AS TENANTS BY THE ENTIRETY, AS DEBTOR'S INTEREST, AND THEREFORE ESTATE'S INTEREST, IN THE PROPERTY TERMINATED UPON DEBTOR'S DEATH

Straffi v. Etoll (In re Etoll), 425 B.R. 743 (Bankr. D. N.J.) (3/5/2010) (Lyons, J.)

The U.S. Bankruptcy Court for the District of New Jersey determined that the chapter 7 trustee could not compel the sale of entireties property under 11 U.S.C. § 363(h) that the debtor-wife possessed pre-petition when the debtor-wife died post-petition. The court determined that upon the death of the debtor-wife, the nondebtor husband became the sole owner of the entireties property, thereby removing the real property from property of the estate.

BANKRUPTCY COURT RULES THAT PROCEEDS OF A DIRECTORS AND OFFICERS LIABILITY INSURANCE POLICY ARE NOT PROPERTY OF THE ESTATE, AND EVEN IF THE POLICY PROCEEDS WERE PROPERTY OF THE ESTATE, CAUSE EXISTS TO LIFT THE AUTOMATIC STAY

In re Downey Financial Corp., 2010 WL 1838565 (Bankr. D. Del.) (5/7/2010) (Sontchi, J.)



BANKRUPTCY COURT FINDS THAT DOLLAR LIMITATION VENUE PROVISION OF 28 U.S.C. § 1409(b) IS APPLICABLE TO AVOIDANCE ACTIONS

Dynamerica Mfg. LLC v. Johnson Oil Co. (In re Dynamerica Mfg. LLC), 2010 WL 1930269 (Bankr. D. Del.) (5/10/2010) (Gross, J.)

Dynamerica Manufacturing LLC (the debtor) filed an adversary proceeding pursuant to 11 U.S.C. §§ 547 and 550 to avoid and recover an allegedly preferential transfer in the amount of $6,599.85. In response, Johnson Oil Co. (the defendant) filed a Rule 12(b)(3) motion seeking to dismiss the adversary proceeding for improper venue based on 28 U.S.C. § 1409(b), which restricts venue to the district in which the defendant resides for proceedings to recover money or property from a noninsider of less than $10,950.00.