Recent Decisions in the First Circuit Regarding Insolvency

Equitable relief to restore lien mistakenly discharged:

Green Tree Servicing, LLC v. USA, 2011 DNH 56; 2011 U.S. Dist. Lexis 35997 (D.N.H. April 1, 2011)(Joseph N. Laplante, District Judge)(unpublished).  The case raised several questions about the availability of equitable relief to restore a mistakenly discharged mortgage to a position of priority over subsequent federal tax liens, the mortgagee seeking to restore its mortgage to its original priority.  Green Tree moved for summary judgment to restore its lien which was denied.  While the First Circuit has rejected the argument that federal law bars the equitable reinstatement of a mortgage to a position of seniority over federal tax liens, Green Tree had not conclusively shown that it was entitled to that relief as a matter of New Hampshire law, which, though not as circumscribed as the IRS argued, “views claims to circumvent the established order of priority, through resort to equity, with trepidation.”  Summary judgment denied as to USA, who did not separately move for it, as required under the Local rules.


Trustee abandonment of claims:

Furlong v. Donarumo (In re Furlong), 2011 U.S. Dist Lexis  36077 (Bankr. D. Mass. 4/1/11)(Patti B. Saris, District Judge).

District Court affirmed the Bankruptcy Court’s determination that the Chapter 7 Trustee properly abandoned legal claims against a creditor, which the debtors pursued once abandonment occurred.  The case turned on whether the scheduling of one claim, subsumed the other claims related to cause of action pursued, which it did.


Payment of adminis. claim per confirmed Chapter 13 Plan, not per prior business terms:

Fundacion v. Fundacion, 2011 Bankr. Lexis 953 (1^st BAP  March 22, 2011)(unpublished)(Before Judges Hillman, Kornreich and Bailey, opinion by Bailey).

Bankruptcy Appellate Panel affirmed the Bankruptcy Court’s order denying the appellant’s request for immediate payment of its allowed administrative claim and ruling that payments would be made in accordance with the confirmed plan.  Prior to confirmation of the Chapter 11 plan, the creditor was accustomed to being paid within 30 days, but the terms of the confirmed plan superseded this arrangement.


Trustee and abandoned claims:

Roggio v. City of Gardner, 2011 U.S. Dist Lexis 34731 (D. Mass. March 30, 2011)(F. Dennis Saylor, IV, District Judge).  Defendants, amongst other grounds, moved to dismiss on grounds that one of the plaintiffs lacked standing, as her claims were property of her Chapter 7 bankruptcy estate, and as such could not have been abandoned to her as the claims were not scheduled in her bankruptcy schedules.  The District Court stayed that portion of the motion, in the interests of justice and the bankruptcy estate’s creditors, referring the matter to the bankruptcy court to determine if the case should be reopened to have a trustee appointed/re-appointed to administer such claim or abandon it.

Remand to determine excusable neglect:


In re Concepcion, 2011 Bankr. Lexis 2018 (Bankr. D.P.R. March 10, 2011)(Brian, K. Tester, Bankruptcy Judge).  Ruling upon remand from the 1^st Circuit BAP, to determine whether excusable neglect existed for a late proof of claim filing, finding it did.

Christmas bonus part of Chapter 13 plan:


In re Miranda and Santiago, 2011 Bankr. Lexis 1007 (Bankr. D.P.R. March 9, 2011)(Enrique S. Lamoutte, Bankruptcy Judge).  Chapter 13 Trustee’s objection to confirmation of Chapter 13 plan sustained as it must include the debtors’ Christmas bonuses in their projected disposable income (PDI) as per 11 U.S.C. 1325(b)(1)(B) in the income funding the plan, and denied as to the above median debtor’s use of statutory expenses listed in the means test i.e. The debtors did not overstate their income, because as above median debtors they were entitled to take the full amount of certain specified expenses under the Standards per Section 1325(b)(3) and 707(b)(2)(A) and (B)  irrespective of whether their actual expenses were above or below the expenses used in the Standards.  Also, the debtors did not show they were entitled to take more for food and clothing than the Standards.

Debtor's obligation to pay former spouses legal fees not dishcharged:


Altman v. Johnson (In re Johnson), 2011 BAnkr. Lexis 1055 (Bankr. D. Mass. March 21, 2011)Joan N. Feeney, Bankruptcy Judge).  The adversary proceeding presented the issue of whether a debtor’s obligation, pursuant to a probate court judgment, to pay his former spouse’s attorney fees for defending a complaint for modification of child support is excepted from discharge under 11 U.S.C. 523(a)(5), (a)(15) or (a)(6). Court found it was a DSO (domestic support obligation) under (a)(5) and as such, was not a lien that could be stripped from the debtor’s home as impairing the homestead.  The lien was non-avoidable in bankruptcy.  In so finding, the court reviewed a split of authority in bankruptcy courts, finding support in First Circuit precedent.

TILA claims released:


Martin v. TD Bank,N.A., 2011 U.S. Dist. Lexis 28716 (D. Mass. March 21, 2011)(Rya W. Zobel, District Judge).  Debtor sued the bank under TILA, amongst other statutes.  The District Court granted summary judgment in the bank’s favor, noting the debtor had released all such claims in a prior stipulation approved between the parties before the bankruptcy court.

Wrongful foreclosure:


Schwartz v. Deutsche Bank, 2011 Bankr. Lexis 885 (March 14, 2011)(Melvin S. Hoffman, Bankruptcy Judge).  Chapter 7 debtor filed an action against the pre

Failure to plead elements of discharge denial leads to dismissal:


Franklin v. Franklin, 2011 Bankr. Lexis 867 (Bankr. D. Mass. March 15 2011)(Joan N. Feeney, Bankruptcy Judge)(discharge complaint dismissed as cause of action not pled with the requisite elements, and upon reconsideration still failed to do so making amending futile).

Each party to pay their own fees in discharge action:


Lussier v. Sullivan (In re Sullivan),2011 Bankr. Lexis 871 (Bankr. D. Mass. March 7, 2011)(Joan N. Feeney Bankruptcy Judge).  Creditor who succeeded in obtaining an exception to discharge for its debt under 727(a)(4)(A) not entitled to attorney fees, under the American Rule.  This did not fall under the “consumer debt” award under 523(d).

Foreclosure moves forward:


Sarner v. Dean Cooperative Bank, 2011 U.S. Dist. Lexis 32063 (Bankr. D. Mass. March 28, 2011) (Joseph L. Tauro, District Judge).  Bankruptcy Court granted stay relief to bank, allowing it to foreclose and sell the debtor’s home to a third party, thus mooting any stay pending appeal before the District Court.

TILA claims barred by s/l:


Riga v. Deutsche Bank (In re Riga), 2011 Bankr. Lexis 1051 (Bankr. D. Mass. March 25, 2011)(Frank J. Bailey, Bankruptcy Judge)(debtor’s claims against bank as to TILA dismissed as barred by the statute of limitations,