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This post assumes familiarity with my last three posts (Part 1, Part 2, and Part 3) this multi-part series.  Thus, while you can certainly read this post without reading those previous ones, you’ll get more out of it if you read those posts first. Lien Valuation We have already discussed motions to value liens.  What good are they? First, if the goal is to strip off a wholly unsecured junior lien, it is important to establish that the junior lien really is wholly unsecured.  Therefore, getting a determination of the value of the senior lien(s) and an appraisal of the… Read More →

This post assumes familiarity with my last two posts (Part 1 and Part 2) of this multi-part series.  Thus, while you can certainly read this post without reading those previous ones, you’ll get more out of it if you read those posts first. V.  Some Other Issues Associated With Liens A.  Is The Lien Perfected? Suppose the debtor and all the debt’s assets are in Los Angeles County at the time the creditor records a lien in Orange County against the debtor’s principal residence in Los Angeles.  Is the creditor’s claim secured?  No.  The lien must be recorded in the… Read More →

This post assumes familiarity with my last post (part 1) of this multi-part series.  Thus, while you can certainly read this post without reading that previous one, you’ll get more out of it if you read that post first. III.  Avoidance Of A Partially Or Wholly Unsecured Lien In Chapters 11 And 13 11 U.S.C. § 506 is used to determine the extent to which a claim is secured.  Rather than delving into the wording of the statute, let’s informally say that if the value of the collateral is less than the sum of the liens against it, then at… Read More →

This is the first of a four part series on lien avoidance.  I developed these notes for a presentation I gave to the Central District Consumer Bankruptcy Attorney’s Association, Los Angeles, California. A lien is a claim or legal right against assets that are typically used as collateral to satisfy a debt.  A lien serves to guarantee an underlying obligation.  If the underlying obligation is not satisfied, the creditor may can seize the asset that is the subject of the lien.  In essence, a lien creates an in rem claim against the assets of a debtor against whom the creditor… Read More →

Suppose you’re driving home from a New Year’s Eve celebration.  At the party you had one too many glasses of Krug Champagne.  Suddenly a light pole leaps in front of you and you hit it.  You’re badly injured.  You get fine treatment at the hospital, and later receive a bill for $100,000 for the care.  You can’t pay it, so you file for bankruptcy protection.  Is the medical debt dischargeable? Notice that the party who was physically injured in the accident is the bankrupt debtor ? not some third party.  But is the hospital a party that was also injured as… Read More →

In a recent issue of the L.A. Times, Liz Weston compared bankruptcy and debt settlement as ways to deal with overwhelming debt.  Her column was good, but given the limited space she had, it was a bit brief.  In this post I will expand on her discussion.   I.  Debt Settlement   The idea behind debt settlement is pretty simple:  You ask the creditor to accept less than you owe in full satisfaction of the debt.  You can do the negotiation yourself, or you can hire someone to negotiate on your behalf. If the creditor agrees to lower the balance, you… Read More →

There is an alarming trend facing us, and it is not the latest teen-age fashions. It is the filing of motions pursuant to 11 U.S.C. § 706(b), to convert individual nonconsumer Chapter 7 cases to Chapter 11. Because the topic of § 706(b) motions is a bit complicated, and requires some background information to understand it, my discussion will span a multi-part series of posts. In this first post I’ll set the stage by beginning with the more commonly seen terrain of 11 U.S.C. § 707 motions to dismiss. I. Section 707 – Dismissal Of An Individual Chapter 7 Case… Read More →

In my last post I began to set the stage for a discussion of § 706(b) motions to convert a Chapter 7 bankruptcy case to one under Chapter 11 by considering § 707 motions to dismiss. I noted that § 707(b)(2) only applies to individual cases in which the debtor’s debts are primarily consumer debts. In today’s post I’ll focus on the question of what kinds of debts are nonconsumer debts because in determining whether a Chapter 7 case should be dismissed, there can be a battle over which debts are nonconsumer and which are consumer. II. Nonconsumer Debts A.… Read More →

III. Dealing With A Motion To Convert Pursuant To Section 706(b) This post assumes familiarity with my last two posts (Part 1 and Part 2) of this multi-part series. Thus, while you can certainly read this post without reading those previous ones, you’ll get more out of it if you read those posts first. A. Oppose Any Motion To Extend The Time To Enter A Discharge If the Court has already granted a nonconsumer debtor a Chapter 7 discharge, the judge will probably not entertain a motion to convert the Chapter 7 case to one under Chapter 11, pursuant to… Read More →

IV. The Constitutional Problem With A § 706(b) Motion I thank Daniel Press, an attorney practicing in Virginia, Washington, DC, and Maryland, for giving me his notes, which served as an afflatus for some of today’s post. A. Historical Background  1. The Chapter 13 Context When Chapter 13 was enacted in 1978, it provided that only an individual could be a Chapter 13 debtor (11 U.S.C. § 109(e)), imposed limitations on the amount of debt a Chapter 13 debtor could have (11 U.S.C. § 109(e)), and — most important for today’s discussion — included postpetition earnings in the bankruptcy estate… Read More →