Aja v. Fitzgerald (In re Aja), 441 B.R. 173 (B.A.P. 1st Cir. 2011)
The United States Bankruptcy Appellate Panel for the First Circuit (BAP) denied an appeal by a debtor challenging the Bankruptcy Court’s denial of her request for reconsideration of an order converting her case from chapter 11 to chapter 7. The Bankruptcy Court set a date for the conversion motion hearing, but advanced the hearing date after the Trustee alleged that the debtor failed to acquire property insurance on her collateral property. The debtor failed to attend the hearing, and the Bankruptcy Court issued an order converting her case to chapter 7. The debtor moved the Bankruptcy Court to reconsider its order and on March 19, 2010, the Bankruptcy Court denied the relief sought by the motion to reconsider. On April 1, 2010, the debtor filed an appeal of the court’s denial of her request for reconsideration but did not appeal the denial of the conversion motion itself. By the time the BAP heard the appeal, the debtor’s estate was administratively insolvent.
As an initial matter, the BAP determined that the debtor’s appeal fell outside the scope of Fed. R. Civ. P. 59(e), made applicable to bankruptcy appeals by Fed. R. Bankr. P. 9023, because the debtor failed to bring the appeal within 14 days. However, Fed. R. Civ. P. 59(e) was amended on March 26, 2009, which amendment took effect December 1, 2009, to provide for a 28 day appeal period. The debtor brought her appeal within that 28 day period. However, because the BAP ruled that Fed. R. Civ. P. 59(e) was inapplicable, it applied the relatively stricter standard for relief set forth under Fed. R. Civ. P. 60(b), made applicable by Fed. R. Bankr. P. 9024.
The BAP addressed the issue of whether the debtor received sufficient notice of the conversion motion hearing. A bankruptcy court may convert a case after appropriate notice and a hearing, and Fed. R. Bankr. P. 2002(a)(4) provides that a court must provide the debtor with 21 days notice before a hearing on a motion to convert. However, Fed. R. Bankr. P. 9006(c)(1) gives a court the power to reduce the notice period for cause. Lack of property insurance on collateral gives cause for conversion, and the Bankruptcy Court found that the debtor had provided no evidence of insurance. The BAP agreed with the Bankruptcy Court, finding that the notice period of less than 21 days was sufficient under the circumstances.
The BAP also determined that even if the Bankruptcy Court had erred in denying reconsideration, such error was harmless because the debtor failed to appeal the conversion order itself, the debtor’s estate was administratively insolvent and the debtor failed to demonstrate an ability to reorganize under chapter 11. The BAP dismissed the appeal as moot, ruling alternatively that the debtor’s appeal was substantively without merit.
Aja v. Emigrant Funding Corp. (In re Aja), No. MB 10-019, 2011 Bankr. LEXIS 131 (B.A.P. 1st Cir. Jan. 19, 2011)
The United States Bankruptcy Appellate Panel for the First Circuit (BAP) dismissed an appeal by a pro se debtor challenging the Bankruptcy Court’s grant of a creditor’s motion for in rem relief from stay. The BAP ruled that the debtor lacked standing to appeal because the Bankruptcy Court had converted her case from chapter 11 to chapter 7. The BAP also rejected the debtor’s arguments as to the merits considered by the Bankruptcy Court in granting relief from stay.
The BAP first addressed the issue of whether the debtor had standing to appeal the Bankruptcy Court’s order. Persuasive authority provides that when a court converts a bankruptcy case to chapter 7, the trustee, not the debtor, represents the estate. Although there are exceptions where an appeal would provide a distribution to the debtor or would affect the debtor’s discharge, the BAP found those exceptions to be inapplicable because the debtor had no equity in the property that was subject to the motion for relief from stay.
Although the BAP dismissed the appeal for lack of standing, the panel also discussed the substantive merits of the case. Under Section 362(d)(1) of the Bankruptcy Code, relief from the automatic stay shall be granted for cause, including lack of adequate protection. Section 362(d)(2) permits a Bankruptcy Court to grant relief from the automatic stay when the debtor lacks equity in the collateral and the property is not necessary to the debtor’s reorganization. The BAP upheld the Bankruptcy Court’s finding that the debtor had no ability to reorganize, based on her failure to propose a viable reorganization plan in the case at hand and in each of the three prior bankruptcy cases filed by the limited liability company of which the debtor was the managing partner. Further, the BAP found that the debtor had no equity in the property. Accordingly, the BAP upheld the Bankruptcy Court’s grant of relief from the automatic stay.
Kirk and Janice Hundley, husband and wife, were equal in everything — home life, responsibilities. Everything except their tax refund when it came to bankruptcy court, according to the state Supreme Judicial Court. For more from The Boston Globe, click here.
Borders, the 40-year-old chain that helped define the age of the book superstore, filed for bankruptcy protection on Wednesday. For more from the NY Times, click here.
As part of the Bankruptcy Section’s continuing commitment to providing assistance to the Court with pro se filers, BBA Bankruptcy Section volunteers staff a “clinic” and provide advice to pro se debtors who have asked the Court’s permission to enter into a reaffirmation agreement with a creditor. The Pro Bono Committee coordinates the process; and, as there is no appearance by counsel, conflicts are not seen as an issue.
We invite you to Volunteer! The clinic is held each month for one hour just prior to the Court’s scheduled hearings. The up-coming dates are:
January 18, 2011
February 15, 2011
March 8, 2011
April 5, 2011
Contact: Elaine M. Benkoski, Co-chair of the Pro Bono Committee.
McDermott Will & Emery LLP is pleased to announce that Peter M. Acton, Jr. has been elected to partner effective January 1, 2011. Peter, a member of the BBA Bankruptcy Section and its steering committee, focuses his practice on commercial disputes. In addition to representing clients (ranging from Fortune 50 companies to smaller Massachusetts-based businesses) in federal and state courts as part of his general commercial litigation practice, Peter has substantial experience with government investigations and white-collar matters as well as insolvency-related disputes. He graduated from Fordham University School of Law in 2002.
Pamela Smith Holleman’s presentation outline and notes with respect to her December 14, 2010 presentation on Special Purpose Entities and Opinion Practice may be viewed by clicking here.
The year’s not quite over, but one financial trend is obvious: Bankruptcies in Boston were way up in 2010. For more from the Boston Business Journal, click here.
The number of Americans filing for personal bankruptcy topped 1.5 million last year, as high long-term jobless rates and depressed home prices drove more households to seek court protection. For more from the Wall Street Journal, click here.
The declining, little-known city of Prichard is now attracting the attention of bankruptcy lawyers, labor leaders, municipal credit analysts and local officials from across the country. They want to see if the situation in Prichard, like the continuing bankruptcy of Vallejo, Calif., ultimately creates a legal precedent on whether distressed cities can legally cut or reduce their pensions, and if so, how. For more from the NY Times, click here.