Category Archives: creditor

Ultimate Electronics seeks $420K from Apple

Ultimate Electronics was recently forced into bankruptcy.  Now they are seeking $420,00 back from Apple as preferential transfers.  Those reading this blog are probably all too familiar with preferences.  No creditor wants to have to give back money, especially after they have probably lost money to the debtor.  Original article can be found here.

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In re Netzel, 08-046723 (ND IL ED) (J. Doyle)

Bankruptcy_court_logo

Issued: January 20, 2011 by Judge Doyle

Case #: 09 B 46723, 10 A 01292

The Issue: Whether an individual creditor has  standing under  § 523(a)(4) to bring a direct action against directors of an insolvent corporation for breach of fiduciary duty.

The Story: Debtor owned a plumbing company.  Plaintiff claimed that Debtor breached his fiduciary duty to creditors after the plumbing company became insolvent due to the diversion of company funds to pay for the Debtor’s personal debts.  Creditor claimed that the debt was non-dischargeable in bankruptcy under Rule 523(a)(4).  The court held that the individual creditor lacked standing.   Also a good walk thru on Illinois law about “Special Circumstances Fiduciary Duty.”

Click here to view and download the opinion in .pdf format.

In re Louis Jones Enterprises, Inc. (Bkrtcy.N.D.Ill.)

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The Facts: Chapter 11 Debtor failed to segregate its employee’s wages and apply a portion toward a group health insurance premium. When those funds were seized later by a creditor, the employees left with a 5th priority wage claim and a lapsed insurance policy.

The Issue
: Employee alleged that the funds taken should be classified as a contribution to an employee benefit plan arising from services rendered within 180 days before the filing date of the case.

The Upshot: The Court agreed that the funds had been earned with the 180 days before the case was filed, and also ruled that employees also had an administrative expense claim for wages that were withheld but not applied during the post-petition. Finally, the Court ruled that employees had a claim for un-reimbursed medical expenses that would have been covered under the policy, had it not expired.

 

Satan’s Credit Cards

This article in CNNMoney identifies 9 credit cards industry experts told CNNMoney were among the worst in America for nose-bleed interest rates and ridiculous fees. Here’s the list:

  1. Applied Bank Unsecured Visa Gold Card
  2. First Premier Bank MasterCard
  3. Baby Phat Prepaid Visa RushCard
  4. Hooters MasterCard
  5. The Shack Credit Card
  6. Shell Select Member Card
  7. Visa Black Card
  8. JCPenney Rewards Credit Card
  9. Household Bank Premium Platinum MasterCard

 

Harris v. Gander Partners (ND IL)

Harris N.A. v. Gander Partners LLC ,(N.D.Ill.)

Issue: When an LLC is in Chapter 11 reorganization, can a creditor collect directly from the principals of the company instead?

Answer: Apparently not in the Northern District of Illinois

Upshot: Here, the Court upheld an injunction entered by the Bankruptcy Court after determining that

  • The participation of these principles was essential to the company’s reorganization
  • If these principles were distracted by this lawsuit the reorganization would likely fail
  • Many other creditors would be harmed financially if this reorganization failed; and
  • The creditor seeking to collect only faced only a temporary stay, anyway.

In the immortal words of Spockcirca Star Trek IIthe needs of the many outweigh the needs of the few.

 

Ransom v. FIA Card Services (U.S. S.Ct.)

Ransom v. FIA Card Services, N.A., f/k/a MBNA America Bank, N.A.
Certiorari from the U.S. Court of Appeals for the 9th Cir., Case 09–907
Argued October 4, 2010—Decided January 11, 2011

The Issue: Here the question was whether a Chapter 13 debtor could deduct the allowable auto payment from his monthly budget even though he did not have a car payment (i.e the vehicle was paid for). Put another way, is it fair for all debtors to be entitled to the maximum allowable deduction from their monthly disposable income, or must debtors establish what they actually pay?

The Answer: The Court ruled 8 to 1 (Scalia J. dissenting) that if a debtor makes more than the median income for his State then he must establish that he incurrs the amounts deducted from his monthly living expenses. No more automatic deductions if debtor cannot prove what he pays.

The Gist: To determine “disposable income” BAPCPA gave us the Means Test, which starts with gross monthly income then deducts living expenses – i.e. “amounts reasonably necessary for maintenance or support” of the debtor. In a Chapter 13 case the expenses considered “reasonably necessary” are identified in 11 U.S.C. §1325(b)(2)(A)(i) and include “applicable monthly expense amounts” as specified in National and Local IRS standards. Since BAPCPA was adopted, it has become common practice to include expenses at the maximum allowable level even if the debtor does not have, or pay for, that type of asset. This case appears to say that the party is over for Chapter 13 debtors.

See Also: this post from Chicago Attorney Steve Jacobowski on the Bankruptcy Litigation Blog regarding the Scalia dissent.

 

I knew they Government was up to something …