Illinois Bankruptcy Lawyer Blog

Bright spots in the housing nightmare

By David Koeppel, MSN Money

The mortgage meltdown isn't messing with Texas -- much -- or with parts of Manhattan. Here are 3 categories of real estate that have gone mostly unscathed amid the pain. Finding reasons for optimism in a floundering housing market is no easy task. Nevada, Florida and California are among the states that have been devastated by foreclosures and tumbling home prices, and even the most elegant neighborhoods haven't been immune.

Foreclosures have hit from the Hamptons to Beverly Hills, and reports that celebrities such as Ed McMahon and boxer Evander Holyfield are in danger of defaulting on multimillion-dollar homes show that even wealthy Americans are vulnerable.

But economists and real-estate agents insist that if you look hard enough, there is indeed some good news. Texas' housing prices, buoyed by the state's thriving energy economy and strong job market forecast, have stayed even or posted gains, and in both the Carolinas and parts of the Rocky Mountain region, prices have been relatively stable compared with the huge declines recorded in many parts of the country. An economic boom in Texas?

See the full article here.

Credit Default Swaps: Next Phase of an Unravelling Crisis

By F. William Engdahl Global Research, June 5, 2008

The Sub Prime Meltdown is but the Tip of the Iceberg

While attention has been focused on the relatively tiny US "sub-prime" home mortgage default crisis as the center of the current financial and credit crisis impacting the Anglo-Saxon banking world, a far larger problem is now coming into focus. Sub-prime or high-risk Collateralized Mortgage Obligations, CMOs as they are called, are only the tip of a colossal iceberg of dodgy credits which are beginning to go sour. The next crisis is already beginning in the $62 TRILLION market for Credit Default Swaps. You never heard of them? It"s time to take a look, then.

The next phase of the unraveling crisis in the US-centered "revolution in finance" is emerging in the market for arcane instruments known as Credit Default Swaps or CDS. Wall Street bankers always have to have a short name for these things. [read more]

5th cir

Kane v. Nat'l Union Fire Ins. Co., 07-30611 (Jul 14)

A finding of summary judgment in a PI suit, as well as judicial estoppal of the plaintiffs/debtors due to their failure to list the suit in their Chapter 7 schedules, and denial of trustee's motion to be substituted in the case as the real party in interest, are reversed and the case is remanded because

+the PI claim became an asset of the estate upon filing of the petition

+the trustee is the real party in interest and never abandoned his right

+the debtors only benefit if a PI judgment yields a surplus to the estate

The Appellate Court also found that a prior circuit court determination in the case did not control in bankruptcy court, and the district court (which ruled that the circuit court decision controlled as a matter of law) abused its discretion.

6th cir

Phar-Mor, Inc. v. McKesson Corp., 05-4525, 05-4526 (Jul 17)

Vendor's administrative-expense priority on a reclamation claim is not extinguished when the goods to which that claim applies are sold and the proceeds used to satisfy a secured creditor's claim. The vendor retains it's priority in those proceeds of the estate that remain after secured creditors are satisfied.

10th cir

In re Tri-Valley Distrib., Inc., 06-4279, 06-4280 (Jul 15)

In suit alleging state claims for fraudulent transfer and negligent lending, the parties' motions to dismiss each other's appeals for lack of jurisdiction are granted where:

+ bankruptcy appellate panel's order was not final and appealable

+ denial of defendant's motion to dismiss was not a final collateral order entitled to review

+ bankruptcy appellate panel acted within its authority

+ there was no jurisdiction to review the merits of a section 1334(c)(1) abstention issue

In re: US Med., Inc., 07-1259 (Jul 15)

Creditor is not a non-statutory insider of the debtor for purposes of 547(b)(4)(B) and a transaction between that creditor and the debtor will not be avoided where

+ the transactions at issue were at arm's length

+ there is no undue influence or control by creditor

In sum, while creditor is only a "non-statutory insider" when its transaction of business with the debtor is not at arm's length or there is undue influence; no such requirements are needed if the creditor qualifies as an insider per statute ("statutory insider").

3rd cir

Windt v. Qwest Communications, 06-4662, 06-4808 [June 10, 2008]

In a lawsuit brought by bankruptcy trustees of a Dutch company asserting various claims against defendants who were allegedly responsible for the company's insolvency, judgment dismissing trustee-plaintiff's complaint on forum non-conveniens grounds is affirmed where the district court did not abuse its discretion in: 1) affording low deference to plaintiffs' choice of forum in view of Netherlands' substantial interest in resolving a dispute concerning alleged mismanagement of a Dutch company by board members and officers of that Dutch company; 2) concluding that avoiding problems in the application of foreign law favored dismissal; 3) balancing the public and private interest factors implicated in the case; and 4) determining that the convenience of litigating the dispute in New Jersey was outweighed by the oppressive or vexatious effect on defendants.

8th cir

US v. Mitchell, 07-3136 [June 10, 2008]

Conviction upon defendant's retrial for knowingly and fraudulently making a false statement under penalty of perjury in a bankruptcy case is affirmed where the circuit court declines to revisit a double jeopardy issue, and there was sufficient evidence to sustain his conviction.

ND IL ED

In re Weadley, 06-1854

Bibby Financial v. Weadley, 07-683

Issued June 11, 2008

Judge A. Benjamin Goldgar

GRETCHEN MORGENSON of the NY Times July 20, 2008

The collection agencies call at least 20 times a day. For a little quiet, Diane McLeod stashes her phone in the dishwasher. But right up until she hit the wall financially, Ms. McLeod was a dream customer for lenders. She juggled not one but two mortgages, both with interest rates that rose over time, and a car loan and high-cost credit card debt. Separated and living with her 20-year-old son, she worked two jobs so she could afford her small, two-bedroom ranch house in suburban Philadelphia, the Kia she drove to work, and the handbags and knickknacks she liked.

Then last year, back-to-back medical emergencies helped push her over the edge. She could no longer afford either her home payments or her credit card bills. Then she lost her job. Now her home is in foreclosure and her credit profile in ruins.

Ms. McLeod, who is 47, readily admits her money problems are largely of her own making. But as surely as it takes two to tango, she had partners in her financial demise. In recent years, those partners, including the financial giants Citigroup, Capital One and GE Capital, were collecting interest payments totaling more than 40 percent of her pretax income and thousands more in fees. [read more]

In re Fred S. Weiner, 05-54630

HC Processing Center v. Weiner, 06-00688

Issued July 03, 2008

Judge Pamela S. Hollis

View and download the opinion in PDF format here

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In re Oscarson, 05-52582

Green Bay Packaging v. Oscarson, 06-00511

Issued July 02, 2008

Judge Pamela S. Hollis

View and download the opinion in PDF format here

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In Re Casa de Cambio Majapara, 08-05230

Casa de Cambio v. Wachovia Bank, 08-00177

Issued July 09, 2008

Judge Bruce W. Black

View and download the opinion in PDF format here

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In re Carter, 05-31646

Structured Asset Services v. Carter, 05-02602

Issued June 4, 2008

Judge Susan Pierson Sonderby

View and download the opinion in PDF format here

9^th cir

Donell v. Kowell, 06-55544 [July 1, 2008]

District court required investor to disgorge profits from a Ponzi scheme pursuant to requirements of the UFTA. The judgment was affirmed by court of appeals, which:

1) adopted the standard 2-step analysis for determining liability;

2) found no error in the district court's application of the analysis;

3) determined court could require innocent investors to disgorge net profits; and

4) declined to permit good faith investors to claim offsets for expenses.

GE Capital v. Future Media, 07-55694 [July 3, 2008]

Bankruptcy court's order denying default interest and attorney's fees to a creditor is reversed and remanded where the appellate court found that

1) the bankruptcy court had improperly applied In re Entz-White Lumber and Supply, 850 F.2d 1338 (cir 9, 1988); and

2) the default rate is presumptively valid unless its application would violate non-bankruptcy law.

11^th cir

In Re: Donovan, 07-13046 [July 2, 2008]

The circuit court lacks jurisdiction to review a bankruptcy court's order denying an unsecured creditor's motion to dismiss a Chapter 7 case when the bankruptcy court neither conclusively resolved the bankruptcy case as a whole nor resolved any adversary proceeding or claim.