Month: July 2011

Davidson County Chancery Court Case Information Now Online

For a few years now, all of the Davidson County Circuit Court’s records have been online at the Davidson County Caselink (subs. req’d).

Now, the case records of the Davidson County Chancery Court are online on the Court’s website. Although it doesn’t provide scanned copies of pleadings (yet), the website contains party information and the dates of relevant pleadings.

As the world moves entirely online, it’s great to see this move from Chancery Court. Will electronic filing of Court pleadings be next?

Santa Fe Holding Company Bankruptcy Case in Middle District of Tennessee Starts the Preference Recovery Process

Yesterday in the Middle District of Tennessee Bankruptcy Court, the Trust (DBMC Restaurants f/k/a DBMC Investments, LLC) created in the Santa Fe Holding Company, Inc. bankruptcy began the process of filing adversary proceedings to recover preferences. So far, about 30 cases have been filed.

This is a process that generally happens after a Chapter 11 Plan is confirmed, in which the post-confirmation entity takes action on the various lawsuits it held as of the bankruptcy filing.

Here, the pleadings, styled “Complaint to Avoid and Recover Avoidable Transfers,” make claims under 11 U.S.C. 547, which is a provision of the Bankruptcy Code that, under certain circumstances, allows a trustee to recover payments made to creditors within 90 days of the bankruptcy filing.

The basic theory is that, the debtor is presumed to be insolvent during those 90 days, and any payments made during that period were selective disbursements (a.k.a. preferential payments) to certain preferred creditors. By these actions, the trustee recovers these preference payments, puts the money into a big pot, and then distributes it evenly to all creditors.

Sounds pretty fair in theory, right? Well, in practice, these actions drive creditors crazy. “Not only did this company bankrupt on the debt, now, two years later, they’re suing me to take back some of the last money they paid me?” My response? “Yes.”

There are a number of defenses to these actions (see 11 USC 547(c)), and I’ll touch on those in a later post. Right now, I’m going to go look at the dockets to see who all is getting sued. So far, this includes: Continue reading “Santa Fe Holding Company Bankruptcy Case in Middle District of Tennessee Starts the Preference Recovery Process”

50 Cent and Young Buck are scheduled for a Big Fight next week in Nashville Bankruptcy Court

Young Buck has filed a Chapter 11 Bankruptcy Case in the Middle District of Tennessee, and the battle is heating up between Young Buck (David Brown) and 50 Cent’s G-Unit Records about what to do with the remainder of Young Buck’s recording contract with G-Unit.

Plus, Young Buck owes $170,983.00 to 50 Cent on a personal loan. Yikes.

The Wall Street Journal Bankruptcy Blog has a good summary of the issues set for hearing on July 19, 2011.

Here is a copy of the Objection to the Young Buck Chapter 11 Plan filed by G-Unit. An interesting excerpt:

…there is a significant question as to whether the Debtor can manage his business affairs throughout the course of the Plan to sustain any level of success going forward to fund the Plan. At the recent 2004 examination of the Debtor, he had trouble identifying where he had been on tour, who had booked his travel, how he had even gotten from one place to another…

Just another day in the Nashville Bankruptcy Courts.

Speaking Engagement: 5th Annual Law Conference for Tennessee Practitioners

The Tennessee Attorneys Memo is hosting the 5th Annual Law Conference for Tennessee Practitioners in Nashville on November 3 and 4, 2011.

They advertise it as “[f]eaturing an all-star cast of prominent Tennessee judges and attorneys and 15 hours of CLE credit, including 3 hours of DUAL credit.”

They’ve invited me to speak on issues surrounding Tennessee collections and Judgment Enforcement, and I always agree to anything where I can be described as an “all-star.”

I’ve spoken at this conference before, and it’s a good event, with tons of materials and smart presenters. I’m planning on jazzing up this year’s creditors rights presentation with a discussion of social media law and the interplay between social media and the Fair Debt Collections Practices act in collections.

You can sign up for one or both days here. I’ll be speaking on Friday.

Nashville Bankruptcy Court Ruling Finds That Delay in Foreclosure Can Lead to Waiver of Rights

The Tennessean wrote about Nashville Bankruptcy Judge Paine’s recent opinion that subordinated a senior lien-holder’s Deed of Trust where the bank delayed foreclosure on the property. The debtor sued the bank for resolution, because homeowners’ association dues were continuing to accrue in her name and, under the Bankruptcy Code, a debtor can remain liable for post-petition HOA dues on property.

In the case, In re Sheryl Lynn Pigg, U.S. Bankr. Adv. Case No. 10-00642A, BAC Home Loans took possession of and secured a flood damaged vacant home by changing the locks and posting notice of the possession. In her Chapter 7 Bankruptcy, the Debtor surrendered all interest in the property to the Bank. But, despite all that, the Bank never actually foreclosed–the property just sat vacant.

During that time, however, the HOA continued to accrue post-petition unpaid dues, which the Debtor continues to be liable for under 11 U.S.C. § 523(a)(16).

The Debtor filed the Bankruptcy lawsuit in order to cut off her liability for the dues, either by having the Judge rule that BOA is liable by virtue of its possession or by forcing BOA to foreclose.

The Bankruptcy Court ruled that the Bank had taken possession of the property and, as a result, was liable for the accruing HOA dues. But, rather than just using the text of the HOA obligations under the Master Deed (which supported the same result), the Court used its equitable powers under the Bankruptcy Code  to order a sale, under Section 363, of the property, with the Bank’s lien claim subordinated to the costs of the Trustee’s sale and to the HOA debts owed (and HOA attorney fees).  The Court expressly found that “the Bank and the HOA have consented to the sale by their inaction.”

This is an interesting ruling, because nothing in the Bankruptcy Code allows a Court to subvert the priority of a valid and properly perfected property lien. Here, using only its equitable powers, the Court fashioned a fair outcome, but a clear departure from state law lien priority statutes.

In light of this opinion, lenders may need to be aware of any delays in initiating the foreclosure process. Nothing in state law expressly requires that banks foreclose under any time deadline, but this opinion suggests that lenders open themselves up to attack where they wait. This is dangerous new precedent.

A copy of the full opinion is here: Pigg Opinion Bankruptcy Court

Debt Settlement Advice: Bring Proof that You’re Broke or Don’t Bother Making an Offer

I’m a creditor rights attorney, and, with the economy the way it is, I’m filing collection lawsuits left and right.

In most cases, the borrowers are too broke to hire a lawyer to respond, so they ignore the lawsuit and let a judgment be entered against them. In some cases, however, the borrowers are pro-active and call me to make a settlement proposal.

In the past, when property still had equity and people were just one loan application away from a $40,000 Home Equity Loan, creditors weren’t listening to low-ball offers. Even today, it’s still not true that banks will happily accept 10% of whatever they’re owed.

If you’re going to make a low-ball offer, support it with proof that you’re paying them the last pennies you have. You need to show the creditor:

  • A recent financial statement;
  • A list of all assets, such as cars, real property, cash, other bank accounts;
  • A list of all debts (which shows the creditor who else is chasing you);
  • Copies of recent bank statements;
  • Recent pay stubs;
  • A budget showing your monthly expenses; and
  • Anything else that proves that you don’t have the money to make a better offer.

Again, the rumors of debt settlements for pennies on the dollar are wildly exaggerated. Creditors will accept discounted payments, but they aren’t approaching these proposals blindly. When in doubt, they decline bad proposals.

If you want a steep discount, you have to work for it, and assembling the information listed above is step one in the process.

Creditor Issues in Memphis Bankruptcy of Rusty Hyneman Sound Like Law School Exam

Law school exams are a strange creature. Generally, they present a crazy set of facts with a dozen twists and turns, all of which raise different legal issues. The student’s goal is to spot and discuss those issues.

I thought I was reading a law school exam question when I read this Commercial Appeal article about the Bankruptcy filing by Memphis developer Rusty Hyneman.

Hyneman is real estate developer, who has fallen on hard times, and his creditors are aggressively coming after him. Last week, one bank showed up with the sheriff to seize all personal possessions.

But, Hyneman was ready: he had documents showing that he didn’t own any of the stuff in his 12,000 square foot house free and clear. He had pledged it as security to another creditor…his dad.

Now, the banks are in issue spotting mode. They are alleging that the lien granted to the elder Hyneman is a fraudulent conveyance. They are attacking the priority of the father’s lien. They are attacking Hyneman’s proposed sale of his assets to repay his dad. Finally, they are arguing that the proposed purchaser of the assets is a sham entity.

Man-o-man, that’s four legal issues right there, and you can bet there will be a few more.

The best part about the story? The Judge handling this case is Judge Paulette Delk, my former Article 9 professor in law school. This Hyneman case will be a breeze for her, since she’s dealt with law school exams questions with more issues raised than this.

Enforcement and Domestication of Foreign Judgments in Tennessee: Simple Under The Uniform Enforcement of Foreign Judgments Act

To creditors’ chagrin, judgments aren’t enforceable across state lines. Before a Tennessee judgment can be enforced against the debtor’s assets in Florida, the creditor has to “domesticate” that judgment, which requires that a second action be filed in the new state to recognize the out-of-state judgment.

Fortunately, this process is governed by a commonly adopted act, the Uniform Enforcement of Foreign Judgments Act (Tenn. Code Ann. § 26-6-101, et. seq.), which creates a stream-lined process for creditors to follow.

It’s generally just a two step process. The creditor must (1) file an authenticated copy of the judgment and (2) file a supporting Affidavit. In most cases, the judgment of the sister state will be entitled to “full faith and credit” by the new court.

There are limited grounds for attack on domestication. The defendant doesn’t get to re-litigate the case; instead, he or she can only contest procedural defects, like no service of process or fraud. These issues must be raised in the 30 days after service of the domestication action.

On June 30, 2011, the Tennessee Court of Appeals issued a new opinion, at Cadlerock, LLC v. Sheila R. Weber, which provides a good summary of the issues and law presented on foreign judgment enforcement actions. This Act isn’t often litigated, but this is a good case to have handy, just in case.