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CD Case Summary: Judge Maureen A. Tighe on Contempt for Violation of Discharge Injunction and Automatic Stay

The creditor here had three excuses. First, they did not have actual notice of the bankruptcy (so there was no willful violation of the stay); second, that the statute of limitations for violating the automatic stay had run; and third, that it was the former attorney’s fault. A violation of the automatic stay is willful […]

Chapter 11 Debtors Are Prohibited From Paying Taxes… Without a Notice and Hearing!

Before people worry too much, this is not as bad as it sounds but it is still pretty awful. Under Bankruptcy Code section 102, “notice and hearing” is a due process safeguard: “after such notice as is appropriate in the particular circumstances, and such opportunity for a hearing as is appropriate in the particular circumstances.” […]

Despite Lis Pendens, Subsequent Purchaser with Notice Prevails!

This is relevant to bankruptcy practitioners because before we can do anything, we need to know who owns what! Short version: In California, a notice of lis pendens gives constructive notice that an action has been filed affecting title or right to possession of the real property described in the notice. Any taker of a […]

A New Wrinkle in Negligent Infliction of Emotional Distress

In Thing v. La Chusa (1989) 48 Cal.3d 644, 667–68 (Thing), the California Supreme Court established three requirements that a plaintiff must satisfy to recover on a claim for negligent infliction of emotional distress to a bystander: (1) the plaintiff must be closely related to the injury victim; (2) the plaintiff must have been present […]

How Does the Sham Guarantor Defense Work?

Under California law, a lender may not pursue a deficiency judgment against a borrower where the sale of property securing a debt produces proceeds insufficient to cover the amount of the debt. Lenders may pursue deficiency judgments against guarantors, but only true guarantors. Where the borrower and the guarantor are the same, however, the guaranty […]

Secured Creditors Who Do Not File Continuation Statements Will Lose Their Secured Status, Despite a Bankruptcy

UCC-1 financing statements are effective for five years.  Before the five years has run, the creditor must renew the financing statement by filing what’s called a continuation statement.  This is essentially a UCC-1 with a check next to the box labeled “continuation statement.”  The only caveat is any continuation statement must be filed no sooner […]

California One-Action Rule Preempted by Federal Debt Collection Improvement Act

Cal. Code Civ. P. § 726, often referred to as the one-action rule, has many facets. Relevant to this article is the “security-first” rule which requires “a secured creditor to proceed against the security before enforcing the underlying debt”; the penalty for failing to do so is waiver of the security. In practical terms, this […]

Proposed Changes to the California Homestead Exemption

SB 308 is a new bill introduced by Senator Bob Wieckowski in the California State Senate that provides significant improvements to California’s current exemptions including: increasing the homestead to $300,000 for all individuals; removing the 6 month reinvestment requirement; increasing the exemption for vehicles to $6,000; establishing that bankruptcy alone is not an event of […]

Can I Reaffirm a Non-Recourse Debt?

This question was posed to a listserv in the Central District of California: “If  a debtor reaffirms an otherwise non-recourse mortgage, does the reaffirmation convert that into a recourse loan?” This question made me consider what reaffirmation really meant because, in the fact pattern above, reaffirmation could potentially put the creditor in a better position […]

What’s Not a Claim In Bankruptcy?

Before joining his firm, I visited Professor Hayes’ Bankruptcy class which he teaches at the University of West Los Angeles. The topic of the day was “claims.”  As we parsed through the case law, I gave the students a hint, if there is any question whether something is a claim, it’s a claim! In fact, […]