Georgia Bankruptcy Blog

Georgia Bankruptcy Blog

Homestead Exemption: Double Exemption Available Where Debtor Does Not Have Sole Ownership Of Residence

In In re Antman, 2024 WL 4786241, Ch. 13 Case No. 23-60317-ejc (Bankr. S.D. Ga. Nov. 14, 2024), the debtor’s father died in 1996 and in his will left his house to debtor and her three siblings in equal shares. Debtor and her husband had lived in the house since 1999. Debtor filed a Chapter 13 case in 2023 and claimed a $43,000 homestead exemption (the “double exemption”) in the house pursuant to OCGA §44-13-100(a)(1). The Trustee objected to the exemption, arguing that she was only entitled to the $21,500 exemption because she only held a partial ownership interest in the house.

Section 44-13-100(a)(1) provides that a debtor may exempt: “(1) The debtor’s aggregate interest, not to exceed $21,500.00 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor. In the event title to property used for the exemption provided under this paragraph is in one of two spouses who is a debtor, the amount of the exemption hereunder shall be $43,000.00.”

The Trustee’s objection hinged on the argument that the title to the house was not in “one of two spouses who is a debtor;” rather, the debtor only owned a fractional interest with her siblings.

Here, the Debtor has claimed a $43,000.00 double exemption in the real property devised to her, and to her three siblings, by their late father. The Trustee does not dispute that the Debtor uses the property as her residence. Nor does he dispute that the Debtor is entitled to a $21,500.00 homestead exemption. Instead, the Trustee makes essentially two arguments. First, he argues that the plain language of the Georgia exemption statute prevents the Debtor from claiming the double exemption because she has only a partial ownership interest in the residence. Second, he argues that the purpose of the double exemption statute—which, he says, is to protect a debtor’s non-filing spouse’s equitable interest in a residence—is not implicated here because the Debtor’s husband has no equitable interest to protect… Thus, the question before the Court is whether O.C.G.A. §44-13-100(a)(1) requires sole ownership of the homestead or permits a debtor with only a partial interest to claim the double exemption.

Judge Coleman disagreed with the Trustee and held that the statute did not require that the property be titled solely in a debtor’s name to trigger the double exemption.

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Don’t Pay Fact Witnesses (With a Surprising Bankruptcy Twist)

I am straying off the strict topic of Bankruptcy law and into an area of general litigation and attorney ethics that has come up in one of my pending cases.  When it is OK for a lawyer to pay, or offer to pay, a witness in a pending case? The common sense answer that probably comes to mind immediately is “never.” Then we might consider some exceptions for witness fees and expenses that may be required by applicable law and expert fees and expenses.  Other payments are far more questionable. Read until the end of this long-winded post for a very common Bankruptcy scenario that may surprisingly run afoul of the ethical rules and federal criminal law.

In my case, we are litigating against a law firm and their client in Bankruptcy Court. The law firm is also acting as counsel in the litigation, thus making them lawyers, parties and witnesses for themselves and their client. The law firm also has an agreement with their client to pay any award of damages or sanctions that may be assessed against him in the case. Thus, they have an agreement to pay a client/co-party/witness whose testimony also bears upon the firm’s own potential liability.

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Bankruptcy Judge Calls Out Brown Rudnick’s 50% Increase In Hourly Fees

It is expensive to stay in Bankruptcy. Last month a Brown Rudnick lawyer tried to increase his hourly rate from $1,000 per hour to $1,500 per hour. Chief Judge Laurie Selber Silverstein in Delaware rejected the increase, “saying that no client would approve such a steep fee hike in the middle of a case.” See Reuters article.

“There may be a reason, but a 50% increase of someone’s rates is not something that any client I ever had would have accepted,” Silverstein said at a court hearing. “If he’s behind market, I don’t think he gets to catch it all up at one time.”

Judge Silverstein allowed $1,000 per hour for the lawyer. The case is In re Kidde-Fenwal, Inc. The highest hourly fees charged by Brown Rudnick partners is $2,250 per hour. As of February 2024, the Fee Examiner reported that 15 firms had billed over $20 million in the case, which was filed in May 2023.

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 30 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.

LaVie Care Centers (and 281 Related Entities) File Chapter 11 Petitions in the Northern District of Georgia

I don’t typically post about new Chapter 11 filings unless there is something compelling about them, but almost 300 Chapter 11 cases for Lavie Care Centers and related entities filed on the same day qualifies as news here in the Northern District of Georgia. The Motion for Joint Administration alone is 49 pages, most of which is just the list of related debtors.

The Chief Restructuring Officer as of the petition date was Benjamin Jones of Ankura Consulting Group, Inc. He stated in his 53-page Declaration In Support of First Day Motions:

At the time of the initial onset of the COVID-19 pandemic, the Company was one of the largest operators of skilled nursing facilities in the nation, operating approximately 140 skilled nursing facilities, assisted living facilities and independent living facilities. As a result of the impacts of the pandemic, and in order to try to stabilize the Debtors’ financial condition, the Company exited operations at more than 90 facilities. Today, the Debtors operate 43 licensed facilities across five states that care for more than 3,700 residents on a daily basis, with approximately 3,600 employees. The Debtors’ current portfolio of facilities produce positive cash flow; however, the substantial continuing impacts of the pandemic and resulting facility divestitures continue to plague the business.

The Declaration states that Covid-19 was a major factor in the filings, and secured and unsecured debt is well over $1 billion.

As I have already incurred the PACER fees for viewing the list of cases, I have pasted the list below.

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 30 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.

24-55504-pmb     Centennial HealthCare Corporation
24-55505-pmb     LV Operations I, LLC
24-55506-pmb     LV Operations II, LLC
24-55507-pmb     LaVie Care Centers, LLC (Main Case)
24-55508-pmb     Consulate Facility Leasing, LLC
24-55509-pmb     125 Alma Boulevard Operations LLC
24-55510-pmb     Hollywell HealthCare, LLC
24-55511-pmb     Alpha Health Care Properties, LLC
24-55512-pmb     195 Mattie M. Kelly Boulevard Operations LLC
24-55513-pmb     Ambassador Ancillary Services, LLC
24-55514-pmb     216 Santa Barbara Boulevard Operations LLC
24-55515-pmb     Oaks at Sweeten Creek HealthCare, LLC
24-55516-pmb     Consulate Management Company III, LLC
24-55517-pmb     Ambassador Rehabilitative Services, LLC
24-55518-pmb     500 South Hospital Drive Operations LLC
24-55519-pmb     Hunter Woods HealthCare, LLC
24-55520-pmb     Consulate MZHBS Leaseholdings, LLC
24-55521-pmb     518 West Fletcher Avenue Operations LLC
24-55522-pmb     Ashland Facility Operations, LLC
24-55523-pmb     Consulate NHCG Leaseholdings, LLC
24-55524-pmb     611 South 13th Street Operations LLC
24-55525-pmb     Hurstbourne HealthCare, LLC
24-55526-pmb     Ashton Court HealthCare, LLC
24-55527-pmb     Country Meadow Facility Operations, LLC
24-55528-pmb     THS Partners II, Inc.
24-55529-pmb     626 North Tyndall Parkway Operations LLC
24-55530-pmb     Omro HealthCare, LLC
24-55531-pmb     Jacksonville Facility Operations, LLC
24-55532-pmb     Assisted Living at Frostburg Village Facility Oper
24-55533-pmb     Crestline Facility Operations, LLC
24-55534-pmb     Jennings HealthCare, LLC
24-55535-pmb     650 Reed Canal Road Operations LLC
24-55536-pmb     Augusta Facility Operations, LLC
24-55537-pmb     Onetete, LLC
24-55538-pmb     Cypress Manor Health Care Associates, LLC
24-55539-pmb     Josera, LLC
24-55540-pmb     Augusta Health Care Properties, LLC
24-55542-pmb     702 South Kings Avenue Operations LLC
24-55543-pmb     Cypress Square Health Care Associates, LLC
24-55544-pmb     Kannapolis HealthCare, LLC
24-55545-pmb     Orange Park Facility Operations, LLC
24-55546-pmb     710 North Sun Drive Operations LLC
24-55547-pmb     D.C. Medical Investors Limited Partnership
24-55548-pmb     Tosturi, LLC
24-55549-pmb     KD HealthCare, LLC
24-55550-pmb     741 South Beneva Road Operations LLC
24-55551-pmb     Baya Nursing and Rehabilitation, LLC
24-55552-pmb     Kenton Facility Operations, LLC
24-55554-pmb     777 Ninth Street North Operations LLC
24-55555-pmb     Bayonet Point Facility Operations, LLC
24-55556-pmb     Kenwood View HealthCare, LLC
24-55557-pmb     Transitional Health Partners
24-55558-pmb     1010 Carpenters Way Operations LLC
24-55559-pmb     Bossier HealthCare, LLC
24-55560-pmb     Kimwell HealthCare, LLC
24-55561-pmb     Donegan Square Health Care Associates, LLC
24-55562-pmb     1026 Albee Farm Road Operations LLC
24-55563-pmb     Brandon Facility Operations, LLC
24-55564-pmb     Kings Daughters Facility Operations, LLC
24-55565-pmb     Transitional Health Services, Inc.
24-55566-pmb     Down East HealthCare, LLC
24-55567-pmb     1061 Virginia Street Operations LLC
24-55568-pmb     Brentwood Meadow Health Care Associates, LLC
24-55569-pmb     Kissimmee Facility Operations, LLC
24-55570-pmb     Edinborough Square Health Care Associates, LLC
24-55571-pmb     1111 Drury Lane Operations LLC
24-55572-pmb     Briley Facility Operations, LLC
24-55573-pmb     Valley View HealthCare, LLC
24-55574-pmb     Lake Parker Facility Operations, LLC
24-55575-pmb     1120 West Donegan Avenue Operations LLC
24-55576-pmb     Lakeland Facility Operations, LLC
24-55577-pmb     1445 Howell Avenue Operations LLC
24-55578-pmb     VAPAMT, LLC
24-55579-pmb     1465 Oakfield Drive Operations LLC
24-55580-pmb     Emerald Ridge HealthCare, LLC
24-55581-pmb     Legends Facility Operations, LLC
24-55582-pmb     Brownsboro Hills HealthCare, LLC
24-55583-pmb     1507 South Tuttle Avenue Operations LLC
24-55584-pmb     Osprey Nursing and Rehabilitation, LLC
24-55585-pmb     Envoy Health Care, LLC
24-55586-pmb     Level Up Staffing, LLC
24-55587-pmb     Vero Beach Facility Operations, LLC
24-55588-pmb     Canonsburg Property Investors, LLC
24-55589-pmb     1550 Jess Parrish Court Operations LLC
24-55590-pmb     Envoy Management Company, LLC
24-55591-pmb     Libby HealthCare, LLC
24-55592-pmb     Paloma Blanca Health Care Associates, LLC
24-55593-pmb     Capital Health Care Associates, LLC
24-55594-pmb     Envoy of Alexandria, LLC
24-55595-pmb     Lidenskab, LLC
24-55596-pmb     1615 Miami Road Operations LLC
24-55597-pmb     Parkside Facility Operations, LLC
24-55598-pmb     1820 Shore Drive Operations LLC
24-55599-pmb     Lincoln Center HealthCare, LLC
24-55600-pmb     Cardinal North Carolina HealthCare, LLC
24-55601-pmb     Envoy of Denton, LLC
24-55602-pmb     Locust Grove Facility Operations, LLC
24-55603-pmb     Parkview Facility Operations, LLC
24-55604-pmb     Envoy of Forest Hills, LLC
24-55605-pmb     1851 Elkcam Boulevard Operations LLC
24-55606-pmb     Carey Facility Operations, LLC
24-55607-pmb     LTC Insurance Associates, LLC
24-55608-pmb     Parkview HealthCare, LLC
24-55609-pmb     VNTG HD Master Tenant, LLC
24-55610-pmb     1937 Jenks Avenue Operations LLC
24-55611-pmb     Envoy of Fork Union, LLC
24-55612-pmb     Cary HealthCare, LLC
24-55613-pmb     Lucasville I Facility Operations, LLC
24-55614-pmb     Parkview Manor HealthCare, LLC
24-55615-pmb     Envoy of Goochland, LLC
24-55616-pmb     Catalina Gardens Health Care Associates, LLC
24-55617-pmb     Lucasville II Facility Operations, LLC
24-55618-pmb     Envoy of Lawrenceville, LLC
24-55619-pmb     Parkwell HealthCare, LLC
24-55620-pmb     Catalina Health Care Associates, LLC
24-55621-pmb     Walnut Cove HealthCare, LLC
24-55622-pmb     Envoy of Norfolk, LLC
24-55623-pmb     Pavilion at St. Luke Village Facility Operations,
24-55624-pmb     2333 North Brentwood Circle Operations LLC
24-55625-pmb     Envoy of Pikesville, LLC
24-55626-pmb     Wayne HealthCare, LLC
24-55627-pmb     Penn Village Facility Operations, LLC
24-55628-pmb     Envoy of Richmond, LLC
24-55629-pmb     2401 NE 2nd Street Operations LLC
24-55630-pmb     Centennial Acquisition Corporation
24-55631-pmb     Pennknoll Village Facility Operations, LLC
24-55632-pmb     Luther Ridge Facility Operations, LLC
24-55633-pmb     Envoy of Somerset, LLC
24-55634-pmb     2826 Cleveland Avenue Operations LLC
24-55635-pmb     Centennial Employee Management, LLC
24-55636-pmb     Wellington HealthCare, LLC
24-55637-pmb     Pensacola Facility Operations, LLC
24-55638-pmb     Envoy of Staunton, LLC
24-55639-pmb     LV CHC Holdings I, LLC
24-55640-pmb     Centennial Five Star Master Tenant, LLC
24-55641-pmb     2916 Habana Way Operations LLC
24-55642-pmb     LVE Holdco, LLC
24-55643-pmb     Envoy of Williamsburg, LLC
24-55644-pmb     Perry Facility Operations, LLC
24-55645-pmb     2939 South Haverhill Road Operations LLC
24-55646-pmb     Wellston Facility Operations, LLC
24-55647-pmb     Centennial HealthCare Holding Company, LLC
24-55648-pmb     LVE Master Tenant 1, LLC
24-55649-pmb     Envoy of Winchester, LLC
24-55650-pmb     Perry Village Facility Operations, LLC
24-55651-pmb     Centennial HealthCare Investment Corporation
24-55652-pmb     Envoy of Woodbridge, LLC
24-55653-pmb     3001 Palm Coast Parkway Operations LLC
24-55654-pmb     West Altamonte Facility Operations, LLC
24-55655-pmb     Centennial HealthCare Management Corporation
24-55656-pmb     3101 Ginger Drive Operations LLC
24-55657-pmb     3110 Oakbridge Boulevard Operations LLC
24-55658-pmb     West Palm Beach Facility Operations, LLC
24-55659-pmb     Centennial HealthCare Properties Corporation
24-55660-pmb     3735 Evans Avenue Operations LLC
24-55661-pmb     Pheasant Ridge Facility Operations, LLC
24-55662-pmb     Westerville Facility Operations, LLC
24-55663-pmb     Piketon Facility Operations, LLC
24-55664-pmb     3825 Countryside Boulevard Operations LLC
24-55665-pmb     Westwood HealthCare, LLC
24-55666-pmb     LVE Master Tenant 2, LLC
24-55667-pmb     Pine River HealthCare, LLC
24-55668-pmb     Epsilon Health Care Properties, LLC
24-55669-pmb     LVE Master Tenant 3, LLC
24-55670-pmb     Centennial HealthCare Properties, LLC
24-55671-pmb     LVE Master Tenant 4, LLC
24-55672-pmb     Ferriday HealthCare, LLC
24-55673-pmb     Centennial Management Investment, LLC
24-55674-pmb     LVFH Master Tenant, LLC
24-55675-pmb     3920 Rosewood Way Operations LLC
24-55676-pmb     Pinelake HealthCare, LLC
24-55677-pmb     FLLVMT, LLC
24-55678-pmb     Centennial Master Subtenant, LLC
24-55679-pmb     LVLUPH, LLC
24-55680-pmb     4200 Washington Street Operations LLC
24-55681-pmb     MA Healthcare Holding Company, LLC
24-55682-pmb     Centennial Master Tenant, LLC
24-55683-pmb     Florida Health Care Properties, LLC
24-55684-pmb     4641 Old Canoe Creek Road Operations LLC
24-55685-pmb     Manor at St. Luke Village Facility Operations, LLC
24-55686-pmb     5065 Wallis Road Operations LLC
24-55687-pmb     Centennial Newco Holding Company, LLC
24-55688-pmb     McComb HealthCare, LLC
24-55689-pmb     5405 Babcock Street Operations LLC
24-55690-pmb     Centennial Professional Therapy Services Corporation
24-55691-pmb     Melbourne Facility Operations, LLC
24-55692-pmb     Whispering Hills Facility Operations, LLC
24-55693-pmb     6305 Cortez Road West Operations LLC
24-55694-pmb     Pinewood HealthCare, LLC
24-55695-pmb     Miami Facility Operations, LLC
24-55696-pmb     6414 13th Road South Operations LLC
24-55697-pmb     Port Charlotte Facility Operations, LLC
24-55698-pmb     Milton HealthCare, LLC
24-55699-pmb     Centennial SEHC Master Tenant, LLC
24-55700-pmb     6700 NW 10th Place Operations LLC
24-55701-pmb     QCPMT, LLC
24-55702-pmb     Montclair HealthCare, LLC
24-55703-pmb     Centennial Service Corporation – Grant Park
24-55704-pmb     7950 Lake Underhill Road Operations LLC
24-55705-pmb     RAC Insurance Investors, LLC
24-55706-pmb     Mount Royal Facility Operations, LLC
24-55707-pmb     9035 Bryan Dairy Road Operations LLC
24-55708-pmb     Charlwell HealthCare, LLC
24-55709-pmb     NENC HealthCare Holding Company, LLC
24-55710-pmb     Reeders Facility Operations, LLC
24-55711-pmb     9311 South Orange Blossom Trail Operations LLC
24-55712-pmb     Chenal HealthCare, LLC
24-55713-pmb     New Harmonie HealthCare, LLC
24-55714-pmb     Floridian Facility Operations, LLC
24-55715-pmb     Retirement Village of North Strabane Facility Oper
24-55716-pmb     Whitehall of Ann Arbor Healthcare, LLC
24-55717-pmb     9355 San Jose Boulevard Operations LLC
24-55718-pmb     Cheswick Facility Operations, LLC
24-55719-pmb     New Port Richey Facility Operations, LLC
24-55720-pmb     Ridgewood Facility Operations, LLC
24-55721-pmb     10040 Hillview Road Operations LLC
24-55722-pmb     Newport News Facility Operations, LLC
24-55723-pmb     CHIC Holding Company, LLC
24-55724-pmb     Riley HealthCare, LLC
24-55725-pmb     11565 Harts Road Operations LLC
24-55726-pmb     Forrest Oakes HealthCare, LLC
24-55727-pmb     CHMC Holding Company, LLC
24-55728-pmb     Norfolk Facility Operations, LLC
24-55729-pmb     Rispetto, LLC
24-55730-pmb     12170 Cortez Boulevard Operations LLC
24-55731-pmb     North Carolina Master Tenant, LLC
24-55732-pmb     Franklinton HealthCare, LLC
24-55733-pmb     CHPC Holding Company, LLC
24-55734-pmb     15204 West Colonial Drive Operations LLC
24-55735-pmb     Riverbend HealthCare, LLC
24-55736-pmb     North Fort Myers Facility Operations, LLC
24-55737-pmb     Clay County HealthCare, LLC
24-55738-pmb     Riverview of Ann Arbor HealthCare, LLC
24-55739-pmb     Frostburg Facility Operations, LLC
24-55740-pmb     North Strabane Facility Operations, LLC
24-55741-pmb     Clearwater HealthCare, LLC
24-55742-pmb     Royal Terrace HealthCare, LLC
24-55743-pmb     Garden Court HealthCare, LLC
24-55744-pmb     Oak Grove HealthCare, LLC
24-55745-pmb     Coastal Administrative Services, LLC
24-55746-pmb     Gateway HealthCare, LLC
24-55747-pmb     Coastal Management Investment, LLC
24-55748-pmb     Safety Harbor Facility Operations, LLC
24-55749-pmb     Genoa Healthcare Consulting, LLC
24-55750-pmb     Consulate EV Acquisition, LLC
24-55751-pmb     Salus Management Investment, LLC
24-55752-pmb     Consulate EV Master Tenant, LLC
24-55753-pmb     Sarasota Facility Operations, LLC
24-55754-pmb     Consulate EV Operations I, LLC
24-55755-pmb     Sea Crest Management Investment, LLC
       
24-55756-pmb     Genoa Healthcare Group, LLC
24-55757-pmb     Sheridan Indiana HealthCare, LLC
24-55758-pmb     Shoreline Healthcare Management, LLC
24-55759-pmb     Skyline Facility Operations, LLC
24-55760-pmb     Southpoint Health Care Associates, LLC
24-55761-pmb     Glenburney HealthCare, LLC
24-55762-pmb     Grant Park Nursing Home Limited Partnership
24-55763-pmb     St. Petersburg Facility Operations, LLC
24-55764-pmb     Grayson Facility Operations, LLC
24-55765-pmb     Whitehall of Novi HealthCare, LLC
24-55766-pmb     Starkville Manor HealthCare, LLC
24-55767-pmb     Green Cove Facility Operations, LLC
24-55768-pmb     Stratford Facility Operations, LLC
24-55769-pmb     Greenfield Facility Operations, LLC
24-55770-pmb     Summit Facility Operations, LLC
24-55771-pmb     Williamsburg Facility Operations, LLC
24-55772-pmb     Harbor Pointe Facility Operations, LLC
24-55773-pmb     HFLLVMT, LLC
24-55774-pmb     Susquehanna Village Facility Operations, LLC
24-55775-pmb     Swan Pointe Facility Operations, LLC
24-55776-pmb     Hilltop Mississippi HealthCare, LLC
24-55777-pmb     Tallahassee Facility Operations, LLC
24-55778-pmb     Hilltopper Holding Corp.
24-55779-pmb     Tarpon Health Care Associates, LLC
24-55780-pmb     THS Partners I, Inc.
24-55781-pmb     Willowbrook HealthCare, LLC
24-55782-pmb     Wilora Lake HealthCare, LLC
24-55783-pmb     Windsor Facility Operations, LLC
24-55784-pmb     Winona Manor HealthCare, LLC
24-55785-pmb     Winter Haven Facility Operations, LLC
24-55786-pmb     Woodbine HealthCare, LLC
24-55787-pmb     Woodstock Facility Operations, LLC
 

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US Trustee Investigating Possible Scheme to Take Debtors’ Equity in Real Property in Multiple Cases; Lawyer Sanctioned

In a very detailed 91-page Order entered in the Northern District of Georgia- and adopted by all Judges in the District – Judge Sacca addressed serious concerns of the United States Trustee over the handling of a Chapter 13 case by the Debtor’s lawyer. The United States Trustee is also investigating several other cases with similar fact patterns, and it appears that multiple debtors in this District have potentially lost well over $1 million in equity in their homes. The case is In re Day, Ch. 13 Case No. 23-52197-jrs, 2024 WL 1506791 (Bankr. N.D. Ga., entered April 5, 2024) (click here for .pdf). I will attempt to summarize the lengthy order and the fact pattern that appears in several other cases the US Trustee has identified so far, but one really should read the Order to understand the scope of the issues that will likely be investigated beyond Bankruptcy Court.

The Debtor is an 80-year widower who worked as a union iron worker for 41 years before retiring. His physical and mental health are declining, he is still recovering from a heart attack, and he is still grieving the loss of his wife in December 2021. He requires assistance from his family for his daily needs. His residence was titled solely in his wife’s name and it was encumbered by a 2009 reverse mortgage. The death of his wife triggered a default in the reverse mortgage and a foreclosure was scheduled for December 2022. The Debtor was overwhelmed with mail and phone calls that typically arise from foreclosure advertisements.

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Terms of Confirmed Chapter 11 Plan Prohibit Malpractice Claim Against Debtor’s Counsel

The Third Circuit Court of Appeals issues a reminder to debtors’ counsel that they can protect themselves with beneficial (boilerplate) terms in a Chapter 11 Plan. In In re SC SJ Holdings, LLC, 2024 WL 1328233 (3rd. Cir. March 28, 2024), the Debtor was the owner of a hotel that was operated by Accor Management US, Inc. pursuant to a Hotel Management Agreement (“HMA”). After COVID related problems servicing its debt, Debtor consulted Law Firm for advice. Law Firm advised Debtor it should file a Chapter 11 petition and terminate the HMA with Accor, and it could emerge from the case in 100 days. Instead, the case lasted eight months and Debtor had to pay Accor more than $20 million in breach damages for rejecting the HMA. Debtor subsequently requested relief from certain terms of the confirmed Plan in order to pursue a malpractice claim against the Law Firm for the faulty advice.

The Plan contained provisions “for mutual releases among numerous parties as to any claims arising out of or related to the bankruptcy proceedings or to Debtors. Those release provisions cover Debtors’ ‘Related Persons,’ defined to include their ‘attorneys … and other professionals.‘”

More than six months after confirmation and three months after the Plan had been substantially consummated, Debtor filed its motion to modify the plan. The District Court held that the Debtor had not complied with §1127, which provides that a debtor may modify a plan at any time after confirmation and before substantial consummation, and §1144, which provides that a party may seek revocation of a confirmation order within six months after entry of the order “if an only if such order was procured by fraud.” Debtor could not satisfy the express requirements of either of the Code sections, the District Court found. The Third Circuit affirmed.

The lesson to Bankruptcy lawyers – review your boilerplate plan language and amend as appropriate.

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 30 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.

Bankruptcy and Divorce (Vol. 73) – Agreements to Transfer Property

An entire blog could be devoted to the intersection of Bankruptcy and divorce, but for this post we will look at what happens when a divorce decree (or final settlement agreement) requires that one of the spouses transfer his or her interest in real property to the other spouse, but before the actual transfer is executed and recorded in the county real estate records one of the (now former) spouses files a Bankruptcy petition. I have had two recent cases in which this scenario came up. Keep in mind, this is a cautionary example rather than a detailed treatise.

As an example, assume that Husband and Wife are co-owners of the marital residence, and the Decree requires that the Husband transfer his one-half, undivided interest in the property to the Wife within “xx days” of the date of the entry of the Decree. However, before the Husband transfers his interest and a deed is recorded, he files a Chapter 7 Bankruptcy case. The Trustee, in the position of bona fide purchaser for value, without notice of the Wife’s interest in the property via the Decree, takes priority. If there is sufficient equity in the property, the Trustee will probably sell it for the benefit of creditors or settle with the Wife for the estate’s interest in the equity. In our example, if the property is sold, the Wife would be paid the proceeds for her one-half interest and half of the proceeds would be property of the estate. If the Husband was the sole owner of the residence before the Bankruptcy was filed, the estate may get all the proceeds and the Wife could lose what she believed was solely her home.

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Section 523(a) Exceptions to Discharge Do Not Apply to Subchapter V Corporate Debtors

… at least in Judge Sigler’s Court in the Northern District of Georgia. Primary Investments Group, Inc. v. RA Custom Design Inc., 2024 WL 607716, Adv. Proc. No. 23-05193-sms (February 13, 2024). The holding is consistent with most courts that have ruled on the issue, with the exception of the Fourth Circuit Court of Appeals in In re Cleary Packaging, LLC, 36 F.4th 509 (4th Cir. 2022).

This Court agrees with fellow bankruptcy courts and the Ninth Circuit Bankruptcy Appellate Panel that § 1192 does not make § 523(a) exceptions to discharge applicable to corporate entities. While the Court appreciates the Fourth Circuit’s analysis of the plain language of § 1192, the Court agrees with a notable commentator that the 4th Circuit’s conclusion does not necessarily follow from the language of § 1192. Moreover, the Court does not read § 1192(2)’s reference to § 523(a) to eliminate the restriction inherent in §523(a) that it only applies to individuals.

Scott Riddle’s practice focuses on bankruptcy and reorganization. Scott has represented businesses and other parties in Bankruptcy cases for over 30 years.  You can contact Scott at 404-815-0164 or scott@scottriddlelaw.com.  For more information, click here.

The Discharge Injunction – Violations and Damages

It seems like violations of the discharge injunction get much less publicity than violations of the automatic stay.  Perhaps that is because by the time a discharge is entered the creditor has received the message.  When there is a violation the Eleventh Circuit has a good body of law on the issue and I happen to have a stack of these opinions due to a pending case.

When a Bankruptcy petition is filed it operates as a stay of virtually all efforts to collect a debt from a debtor or obtain possession or control over property of a debtor. A party may violate the stay even without the intent of doing so and actions taken in violation of the stay are usually void.  In a typical individual case, the automatic stay expires with the entry of an Order of Discharge.  Pursuant to 11 U.S.C. §524, the Discharge Order acts as an injunction against actions to collect a discharged debt.

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Obituary of Judge Walter Homer Drake, Jr.

The Honorable Walter Homer Drake, Jr.
November 21, 1932 – December 9, 2022.

Retired United States Bankruptcy Judge Walter Homer Drake, Jr., 90, passed away Friday, December 9, 2022 at his home in Newnan. He was born November 21, 1932 in Colquitt, Georgia to the late Walter Homer Drake and Mary Lois Cowart Drake. In addition to his parents, he was preceded in death by his beloved wife, Ruth Bridges Drake, and brother, Dr. Henry C. Drake.Judge Drake moved to Newnan when he was eight years old when his father became the Superintendent of Schools. He was the Valedictorian of the 1950 graduating class of Newnan High School. Judge Drake was a graduate of Mercer University Undergraduate and Law School, 1954 A.B. and 1956 LL.B. After graduating law school, he enrolled in the U.S. Army where he served as an officer in the Judge Advocate General’s Corps from 1956 to 1959. After his military service, he practiced law for several years before being appointed as United States Bankruptcy Judge in 1964 for the Northern District of Georgia. He served as Chief Judge from 1968 to 1976. Judge Drake left the bench in 1976 to become a partner in the law firm of Swift, Currie, McGhee & Hiers. In 1979, he felt the calling to return to the bench and desired to spend more time with his family, so he resumed his career as a bankruptcy judge for the Northern District of Georgia until his retirement in 2021. Judge Drake was the longest serving bankruptcy judge in United States history and one of the longest serving federal judges.

Judge Drake’s love of his alma mater was evident in his commitment of service to Mercer University. He served on the Mercer University Board of Trustees from 2009-2011 and received the designation of Life Trustee in 2013. Judge Drake received the Mercer University Outstanding Alumnus Award in 2017 and the Outstanding Alumnus Award from the Mercer Law School in 2003. Mercer recognized his commitment to the University in 2012 by naming the Athletic Field House for Homer and Ruth Drake.

Judge Drake and his family have been longtime members of Central Baptist Church where he served several terms as a Deacon and he was an Adult Sunday School Teacher for over thirty years. At the time of his death, he was a member of the Myrtle Arnal Mann Sunday School Class.

The funeral is 1:00 pm Wednesday, December 14, 2022 at Central Baptist Church, 14 West Broad Street, Newnan, GA with Rev. Matt Sapp and Dr. Joel Richardson officiating. Following the funeral, the family will greet friends in the church fellowship hall. A private family interment will be at Forest Lawn Memorial Park. Rather than flowers, the family respectfully requests memorial contributions to Mercer on Mission, 1501 Mercer University Drive, Macon, GA 31207 or https://www.mercer.edu/give/

Condolences may be expressed online at www.mckoon.com

Survivors include sons, Walter H. Drake, III (Tracie), Taylor Bridges Drake (Lori), and grandchildren, Harrison, Wesley, Wheeler, Ella Catherine, Taylor, Jr., and Henry.