Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

In 2007, Debtor purchased a manufactured home, borrowing the funds from Creditor and granting a security interest. Creditor filed an application for first title and a title lien statement in Whitley County, Kentucky. The seller of the manufactured home is located in Whitley County. Debtor resided at the time in Laurel County, Kentucky. Later, the Kentucky Transportation Cabinet issued a Certificate of Title for the Manufactured Home showing the lien as being filed in Whitley County. In 2010, Debtor filed his voluntary Chapter 7 bankruptcy petition. The Chapter 7 Trustee initiated an adversary proceeding. The Bankruptcy Court avoided the lien, 11 U.S.C. 544. The Sixth Circuit affirmed. The statute requires that title lien statements be filed in the county of the debtor’s residence even if the initial application for certificate of title or registration is filed in another county under KRS 186A.120(2)(a). View "In re: Pierce" on Justia Law

The Debtor filed a voluntary petition for relief under Chapter 7, listing no student loan debts. Notice of filing was sent to listed creditors. Weeks later, Debtor filed an amended Schedule F which listing a creditor holding a student loan in the amount of $76,654.86. One week later, the bankruptcy court issued a general Chapter 7 discharge. No adversary proceedings were commenced during the case and no determination of undue hardship was requested or made. About six months later, the Chapter 7 Trustee filed a no asset report, and the bankruptcy court entered a final decree and closed the case. Seven years later, the Debtor sought to pursue sanctions and damages against the holder of her student loans for an alleged violation of the discharge injunction. The bankruptcy court denied a motion to reopen. The Sixth Circuit. Student loans are not discharged in bankruptcy absent determination of undue hardship in an adversary proceeding, 11 U.S.C. 523(a)(8).

In Chapter 11 bankruptcy, the airline extracted concessions that resulted in an approximate 40 percent wage cut for pilots in return for an $888 million claim in bankruptcy to be disbursed as stock shares. The union first suggested that a pilot's share should reflect time that the pilot worked during the 85-month concessionary period, but ultimately adopted a cutoff date for determining which pilots would receive full shares. The cutoff assumed that any pilot employed on the effective date of the Restructuring Agreement would remain employed through its termination four years later. Any pilot who left before the date would receive a share based the number of months that the pilot worked during the concessionary period. All participants in the Early Retirement Program retired after the cutoff date. Plaintiffs, retirees who reached mandatory retirement age and left before the cutoff, received shares at least $100,000 less than expected. The union rejected appeals. The district court granted summary judgment to the union. The Sixth Circuit affirmed, rejecting claims that the union breached its duty of fair representation, Railway Labor Act, 45 U.S.C. 15, and discriminated based on age, Age Discrimination in Employment Act, 29 U.S.C. 623(c)(1), and Mich. Comp. Laws 37.2204(a).

Plaintiff's bank, Firstar, erroneously dishonored her check for her April 2002 monthly mortgage payment to Aames. Firstar issued an "official check" to Aames on April 8, 2002 but also failed to honor that check. Aames notified plaintiff of default on April 20 and assessed a late fee. Firstar ultimately honored her personal check as well as one of two official checks, resulting in two mortgage payments received for the month of April. Plaintiff did not submit a payment for May. Aames sent notice that it had assigned the mortgage to Ocwen, which began dunning plaintiff and her husband, who is not a co-borrower, for the May payment, despite proof of the double payment. No assignment was recorded. Ocwen made endless collection calls, despite cease and desist requests and registry on the federal “Do Not Call” directory; threatened foreclosure; assessed late fees; and reported derogatory information to the credit reporting agencies. Plaintiffs alleged violation of the Fair Debt Collection Practices Act, 15 U.S.C. 1692. The district court dismissed, concluding that neither defendant was covered under the Act as neither was a debt collector. The Sixth Circuit reversed, stating that defendants cannot "have it both ways."

In 2009, Debtor filed a chapter 13 petition that was dismissed for failure to file a plan or schedules. Two months later, she filed a pro se chapter 7 petition which was dismissed for failure to produce proper documentation. She soon filed another pro se petition, under chapter 11. Debtor is the owner of 10 parcels of real estate from which she earns $5,340.00 per month in rental income, although she asserts that most of the properties are currently vacant. One of her creditors asserted, and the court agreed, that she was using bankruptcy stays to prevent foreclosure and live rent free. In dismissing the petition the court ordered that: "Debtor, or anyone in contractual privity with the Debtor or anyone having or purporting to have a possessory interest in the real property located at… is permanently barred from ever listing said Property or the debt owed to Creditor in a future bankruptcy petition," 11 U.S.C. 105; 362(d)(4). The Sixth Circuit affirmed dismissal with prejudice for 180 days and the order granting in rem relief against the specific property, insofar as it applies to Debtor and anyone in contractual privity with the Debtor.

Reyes alleges that her home was foreclosed upon and that she and her children were forced to live in a motel. She agreed to pay debtor $22,000 for a mobile home and gave debtor $15,000 in cash. The closing never took place and Reyes claims that debtor was not the owner of the trailer at the time of the sale. Reyes filed suit and, just before trial, debtor filed a voluntary Chapter 7 petition. Reyes filed a complaint (11 U.S.C. 523(a)(2)(A)and (a)(6)), arguing that the debt was not dischargeable. The bankruptcy court found that the complaint met the heightened pleading standard for fraud. Debtor's attorney withdrew. After several continuances, Reyes sought voluntary dismissal without prejudice. The court dismissed with prejudice without explanation. The Sixth Circuit reversed.

In 2006 debtors sublet land from lessees on a 30-year recorded lease and purchased a three-story cottage on the land by bill of sale. The lease refers to removal of the structure upon termination of the lease and requires approval by the lessor of any liens or mortgages. The landowner consented to a mortgage on the cottage and leasehold. Two years later, debtors filed a voluntary Chapter 7 petition and listed the cottage as real property, with a secured claim of $235,000. The Trustee sought to avoid security interests held by the bank and landowner, arguing that the cottage was a chattel so that a lien could only be perfected by filing a financing statement with the Ohio Secretary of State. The bankruptcy court ruled that the mortgage was valid, concluding that the cottage was a fixture. The Sixth Circuit affirmed. To avoid the security interest (11 U.S.C. 544) the trustee had to show that the cottage was chattel. The cottage is highly integrated with the land and unlikely to be moved or dismantled; there was no proof that the parties intended that it be chattel. Security interests in both the cottage and leasehold were properly secured.

The debtor filed a voluntary bankruptcy petition and her Chapter 13 plan. A few weeks later, she filed her Michigan state income tax return, showing that she owed $4,900 for the 2008 tax year. She did not make payment, but later filed a proof-of-claim on behalf of the Michigan Department of Treasury, which meant that the tax debt would be paid through her Chapter 13 plan. Treasury objected, arguing that this was a post-petition claim under 11 U.S.C. 1305, which gives only a creditor the option of filing; debtor responded that the claim was permitted under section 501(c). The bankruptcy court overruled the objection; the district court affirmed The Sixth Circuit affirmed. The tax debt is entitled to priority under section 507(a)(8), (i) and (iii), so the post-petition protective claim on behalf of Treasury is treated under section 502(i) as a prepetition claim. A debtor is permitted to file a prepetition claim on behalf of a creditor that fails to timely file.

A Chapter 7 debtor instituted an adversary proceeding against Sallie Mae, Inc. (11 U.S.C. 523(a)(8)) to determine the dischargeability of a student loan (about $25,000). The bankruptcy court entered a default judgment against Sallie Mae and later denied a motion to set aside the judgment. The Sixth Circuit affirmed, holding that the district court acted within its discretion in rejecting an argument of excusable neglect. It is unclear whether Sallie Mae had no reasonable policy in place to see that mail was delivered to appropriate personnel or simply failed to apprise the court of that policy.Sallie Mae was not entitled to notice of a hearing on the motion for default judgment. Service was proper; it was an internal decision to have Sallie Mae's chief operating officer work at a location other than its listed principal address.

Debtors were eligible to participate in their employers' ERISA 401(k) qualified retirement plans, but were not making contributions to those plans when they filed Chapter 13 petitions, but were repaying 401(k) loans to the plans. Proposed Chapter 13 plans called for a five-year commitment period under 11 U.S.C. 1325 and for repayment of 401(k) loans before completion of the commitment periods. Rather than calling for an increase in plan payments to the Chapter 13 trustee for the benefit of unsecured creditors once that repayment was complete, the plans proposed that debtors begin making contributions to their 401(k) retirement plans. The trustee filed objections. The bankruptcy court held that because 11 U.S.C. 541(b)(7) excludes contributions to a 401(k) plan from property of the estate and disposable income, debtors were allowed to exclude proposed 401(k) contributions from disposable income. The Bankruptcy Appellate Panel ruled in favor of the Trustee. The Sixth Circuit affirmed. Post-petition income, available to debtors after 401(k) loans are fully repaid, is "projected disposable income" that must be turned over to the trustee for distribution to unsecured creditors under 11 U.S.C. 1325(b)(1)(B) and may not be used to fund voluntary 401(k) plans.