The Illinois Bankruptcy Lawyer Blog

3^rd cir

In Re: Mansaray-Ruffin, No. 05-4790 [June 24, 2008]

A debtor in a Chapter 13 bankruptcy case did not invalidate a lien on her property by providing for it as an unsecured claim in her confirmed plan, without initiating an adversary proceeding as required by the Federal Rules of Bankruptcy Procedure.

4^th cir

Tidewater Fin. Co. v. Kenney, No. 07-1664 [June 25, 2008]

In a Chapter 13 bankruptcy proceeding, an order confirming the debtor’s Chapter 13 bankruptcy plan is reversed and the case remanded for further proceedings where: 1) the parties are left to their contractual rights and obligations and a creditor may pursue an unsecured deficiency claim under state law after a debtor satisfies the requirements for plan confirmation under section 1325(a)(5)(C) by surrendering his 910 vehicle; and 2) the circuit court joints the Seventh Circuit Court of Appeals in further recognizing that such unsecured debt need not be paid in full any more than other unsecured debts, but it cannot be written off in toto while other unsecured creditors are paid some fraction of their entitlements.

6^th cir

Chase Manhattan Mortgage Corp. v. Shapiro, No. 06-1538 [June 26, 2008]

In bankruptcy proceedings, judgment rejecting a bankruptcy court’s decision that the earmarking doctrine did not apply to a new mortgage as a preferential transfer and that the estate was diminished by the perfection of the new mortgage is reversed where: 1) the trustee established the elements of an avoidable preference set forth in section 547; 2) plaintiff was not a “new creditor” which precluded it from invoking the earmarking doctrine since it refinanced its own loan with debtor; and 3) the lapsed perfection of the original mortgage and plaintiff’s late perfection of the new mortgage diminished debtor’s estate.

9^th cir

Espinosa v. United Student Aid Funds, Inc., No. 06-16421 [June 24, 2008]

In a case arising from bankruptcy proceedings in which plaintiff-debtor obtained a discharge order, but was later pursued by defendant-creditor for a student loan debt that debtor argued had been discharged, the matter is remanded for consideration of whether the bankruptcy court’s discharge order in the case was entered as a result of a clerical error and, if so, whether to correct it so as to conform to debtor’s Chapter 13 plan.

Cent. Valley AG Enters. v. US, No. 05-16177 [June 25, 2008]

In a bankruptcy appeal involving debtor’s objection to a government tax claim, dismissal of the action is reversed where: 1) the district court erred in ruling that the statutory res judicata provision in 11 U.S.C. section 505(a)(2)(A) deprived it of subject matter jurisdiction to review the tax treatment of any partnership item that has been administratively determined by the IRS and has become final pursuant to the Tax Equity And Fiscal Responsibility Act of 1982 (TEFRA); and 2) 11 U.S.C. section 505(a)(1) grants the district court subject matter jurisdiction to review the tax treatment of debtor’s partnership items, notwithstanding TEFRA.

NY court of appeals

AG Capital Funding Partners v. State Street Bank and Trust Co., No. 114 [June 25, 2008]

In an action alleging breach of contract, violation of federal Trust Indenture Act, breach of fiduciary duty, and negligence based on defendant’s alleged failure to deliver debt transaction registration statements required to secure a debt, the court of appeals finds that: 1) plaintiffs’ contract and Trust Indenture Act claims were barred by a release previously executed by plaintiffs as part of a bankruptcy settlement and that no fiduciary duties existed; however; 2) because negligence claims were not barred by the release and there were issues of fact as to whether defendant owed and violated a duty of care, plaintiffs’ cause of action for negligence is reinstated.