4th Cir. : Jackson v. Bankruptcy Administrator- Dismissal of Pro See Appeal Ed Boltz Thu, 07/17/2025 - 16:31 Summary: Carlos Andre Jackson, a pro se debtor, inexplicably filed a full-blown Chapter 11  without a lawyer  in March 2024. The filing was defective from the start: he failed to complete prepetition credit counseling  (violating § 109(h)), filed incomplete schedules, didn’t comply with § 343 at the § 341 meeting, and missed reporting deadlines. Despite numerous continuances and leniency from the court, he never retained counsel or cured the deficiencies. On June 11, 2024, the bankruptcy court dismissed the case with prejudice and barred Jackson from refiling for 180 days from that date, citing bad faith and likely refiling. Jackson appealed, but the Fourth Circuit dismissed the appeal for lack of jurisdiction. Commentary: Here’s the catch: the 180-day bar expired on December 8, 2024. Since the court didn’t tie the bar to the outcome of appeals, the restriction appears to have lapsed—even though Jackson was still litigating in mid-2025. Takeaway: While the court aimed to curb abuse, it could have extended the bar through the conclusion of appeals. As it stands, Jackson may now be eligible to refile—though any new case would certainly face serious scrutiny.  That said,  any creditors that have slept on their rights (since there was no stay pending appeal) for more than a year,  so perhaps Mr.  Jackson could propose, with the assistance of counsel, a Chapter 13 case. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_jackson-_dismissal_with_prejudice.pdf (171.32 KB) Document jackson_v._bankruptcy_administrator_circuit.pdf (109.99 KB) Document jackson_v._bankruptcy_administrator_district.pdf (125.81 KB) Category 4th Circuit Court of Appeals

If you are considering filing for bankruptcy, there are steps to take before you file.  You should call a lawyer early on in the process and talk to them about whether bankruptcy is right for you in the first place.  Then you must meet the requirements for credit counseling and other mandatory classes. Credit counseling and debtor education are both required for bankruptcy cases, and credit counseling comes before you can even file for bankruptcy in Pennsylvania.  They are usually low-cost classes you only have to take once, and you can typically sign up for a course and schedule it very quickly when you need to take it. For help with your potential case, call our Pennsylvania bankruptcy lawyers at Young, Marr, Mallis & Associates today at (215) 701-6519. What Credit Counseling Courses Are Required for Bankruptcy? Credit counseling is required for basically everyone applying for bankruptcy.  This must be completed before you can even file. The agency you do credit counseling with has to be approved by the Executive Office for U.S. Trustees, so you can essentially trust any approved agency to have a course that meets the requirements.  It is not on you to go through the available courses and check if they meet all the requirements. What Happens at Credit Counseling? Credit counseling gives you the information you need to make an informed decision about your debt, credit, bankruptcy, and the process ahead of you.  This is a complex issue to deal with, and the requirement to attend credit counseling helps prevent issues down the road. One goal is to simply prevent people from failing out of bankruptcy later.  If you get neck deep in a process you are not prepared for, it might push you to give up and potentially try again later.  In the meantime, that takes up your time as well as court time and resources, so limiting these issues is important. This education can also help you succeed in your bankruptcy petition and avoid future excessive debt. Classes are typically around an hour. When Do I Take Credit Counseling? Credit counseling must be done within 180 days before filing your bankruptcy petition.  When you call a Pennsylvania bankruptcy lawyer, we cannot file your petition until after you complete the required education, so this will be one of the things we discuss with you before filing. If you have taken credit counseling before, it doesn’t count if it was earlier than 180 days before you file.  This means you should usually call a lawyer first rather than taking the initiative to do your credit counseling on your own, just in case there are delays in filing your case. You can get the court’s permission to do your counseling after you file only if you meet all of these three requirements: You have “exigent circumstances” justifying a waiver of this 180-day rule. You applied with an approved agency but could not get the services within 7 days of your request. The court approves your excuses. We can file the proper certifications if you need to take advantage of this delay.  If you are in dire need of an automatic stay because you are about to lose your house or something similar, it might qualify.  However, the Eastern District of Pennsylvania’s Bankruptcy Court warns that counseling is quite readily available, so it is rare that you cannot get the counseling you need within a week. How Do I Find an Approved Credit Counseling Agency? You can find an approved credit counseling agency on the Treasury Department website. To use their lookup tool, you need to know which district you are in.  Pennsylvania has three judicial districts: the Western District, the Middle District, and the Eastern District.  The links above either show a map or list of the counties in each district, so you can find out which district you live in. From there, you just put the information into the Treasury Department website, and you can locate an agency near you. Can I Do Credit Counseling Online or By Phone? Most agencies do have options available for in-person, online, or phone counseling.  These convenient methods often allow you to get scheduled quickly and complete your credit counseling without delay. Is Credit Counseling Offered in Other Languages? Even if you can read our website, you might not be prepared to do credit counseling in English.  A number of agencies offer counseling in a broad range of languages, so you can take the courses in whatever language you understand best. What Debtor Education is Required for Bankruptcy? Debtor education is a separate class requirement.  Instead of coming before you file (like your credit counseling), debtor education comes after you file. The goal of this program is to set you up for success after your discharge with tips on handling money and debt so you avoid future bankruptcy. When Do I Do Debtor Education? Debtor education comes after your filing but before your discharge.  Technically, it has to be done within 45 days of the first creditors’ meeting, but our lawyers can guide you through the requirements. Can I Do Debtor Education at the Same Time as Credit Counseling? Credit counseling usually has to be done before you file, and debtor education has to be done after, so you cannot do them at the same time.  However, many agencies offer both programs, so you can do them with the same agency. Who Pays for Credit Counseling and Debtor Education? Usually, the debtor applying for bankruptcy pays, but you are typically allowed to have someone else pay for you if they are willing. How Much Does Credit Counseling and Debtor Education Cost? Fees are usually reasonable for both courses.  Usually, you won’t pay more than $50 for either course, and some are half that cost. If you are filing with a spouse, you can often take the course together for one price; you don’t necessarily need to each pay for your own course. Many people filing for bankruptcy simply cannot afford this, and you can often get the fee waived if your income is under 150% of the poverty line.  Our lawyers can help you calculate that value, as it depends on some factors like household size. Call Our Pennsylvania Bankruptcy Lawyers for Help Today For your free case review, call the Allentown, PA bankruptcy lawyers at Young, Marr, Mallis & Associates at (215) 701-6519.

Bankr. W.D.Va.: In re Sorrells- Modification of Chapter 13 plan following Inhertitance Stafford Patterson Tue, 07/15/2025 - 17:50 Summary: Steven and Christina Sorrells were near the end of their 50-month Chapter 13 plan, having made regular payments totaling a 39% dividend to unsecured creditors. After Steven Sorrells received a net $26,236 from an inherited IRA—funds he intended to use to pay off the plan early—the Chapter 13 trustee instead moved to modify the plan to require a 100% dividend to unsecured creditors, citing a substantial and unanticipated improvement in the debtors’ financial condition. The Bankruptcy Court, applying In re Murphy, 474 F.3d 143 (4th Cir. 2007), partially granted the trustee’s motion. The court found that receipt of the IRA funds was indeed a substantial and unanticipated change in financial condition, piercing the res judicata effect of the confirmed plan. However, the court rejected the trustee’s argument that the debtors’ unliquidated claim to a future inheritance also justified modification. Notably, the court did not rubber-stamp the trustee’s request for the full $30,000 lump sum. Recognizing the debtors’ modest lifestyle, deferred home maintenance, and legitimate household needs, the court limited the required modification to $14,986—deducting $11,250 for necessary repairs (truck inspection, furnace replacement, driveway repair) from the IRA funds. Commentary: In a decision that balances fidelity to the Bankruptcy Code with practical realism, Judge Connelly provides a nuanced roadmap for post-confirmation plan modifications under § 1329. While reaffirming Murphy’s substantial-and-unanticipated-change test, the court carefully distinguishes between liquid and illiquid post-confirmation assets—declining to modify the plan based on a mere inchoate expectancy in a probate estate. Of particular note is the court’s insistence that feasibility under §1325(a)(6) cannot be met through hypothetical access to assets. For example, the court noted that if the Sorrells "had the IRA remained in an illiquid form, it would not render the same effect on his financial condition". (Virginia,  unlike North Carolina,  does not appear to allow the   exemption of inherited IR As.  See  In re Hall, 559 B.R. 679 (Bankr. W.D. Va. 2016) versus N.C.G.S. § 1C-1601(a)(9) and In re Brooks.)  By crediting the debtors' actual household needs—car repairs, heat in winter, and safe ingress/egress—the court offers a reminder that bankruptcy is meant to rehabilitate, not punish. The opinion does also include a caution for Chapter 13 trustees,  as Judge Connelly (herself having served as a Chapter 13 Trustee before taking the bench)  describes the tenor of the Chapter 13 trustee's argument as "disproportionate to the facts".  While in this case that rhetoric did not cross the line,  it was still evaluated for whether it violated the obligation under  §1325(a)(3)  that a motion to modify be brought in good faith.  That expectation of good faith  applies to Trustees, not just debtors. Consumer bankruptcy practitioners should also take heed of this footnote-worthy clarification: § 1327 vests property in the debtor free and clear of claims, meaning postconfirmation asset acquisition does not ipso facto trigger modification. In rejecting the trustee’s overreach, the court reaffirms the Chapter 13 bargain—creditors get their due, but debtors retain some hope of financial stability. This case offers an excellent example of how careful recordkeeping, transparency, and updated schedules (even mid-plan) can inoculate debtors from trustee accusations of bad faith or nondisclosure. Debtor’s counsel did well to preserve credibility, enabling the court to adopt a measured approach rather than imposing the draconian remedy sought by the trustee.  It follows the logic from In re Adams,  where the debtors were, in addition to their exemptions,  entitled to keep the portion of the proceeds from the sale of their home resulting from the pay-down of the mortgage during their Chapter 13 case. It also offers a persuasive counterweight to Carroll v. Logan, 735 F.3d 147 (4th Cir. 2013), distinguishing between property-of-the-estate status and feasibility or necessity of modification. This is a valuable decision for Chapter 13 attorneys navigating the increasingly common terrain of post-confirmation inheritances and other windfalls. The court's refusal to apply a blanket rule in favor of 100% plan funding from such assets will resonate with consumer practitioners throughout the Fourth Circuit. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document in_re_sorrells.pdf (857.5 KB) Category Western District

Bankr. E.D.N.C: In re Ross-DeSantos- Homestead Exemption Allowed for Real Property Located outside of North Carolina Ed Boltz Fri, 07/11/2025 - 22:41 Summary: Judge Pamela McAfee overruled a Chapter 7 trustee’s objection to a North Carolina debtor’s homestead exemption claimed in real estate located not in Wake County, but in Corentyne Berbice, Guyana. The case highlights two recurring issues in exemption law:  (1) whether a spouse living abroad may qualify as a “dependent” for purposes of N.C.G.S. § 1C-1601(a)(1), and  (2) whether North Carolina’s homestead exemption applies extraterritorially. The debtor, Natoya Ross-DeSantos, filed Chapter 7 in the Eastern District of North Carolina, claiming a $30,000 homestead exemption in her interest in a property in Guyana, which she jointly owns with her non-filing spouse. While she lives in North Carolina as a public school teacher on a J-1 visa, her spouse and her mother (who pays the mortgage) reside in the Guyanese home, along with her minor nephew. The trustee objected, arguing (1) the spouse was not a “dependent” and (2) the exemption could not apply to property outside North Carolina. The court overruled the two bases for trustee’s objection, holding: Dependency Met – The debtor’s uncontroverted testimony that she sends financial support “when she can,” and that her husband is unemployed and living in the home due to medical issues, was sufficient to show “actual substantial dependence,” adopting the standard for a "dependent spouse" as  articulated in Suggs, Preston, and under N.C.G.S. § 50-16.1A(2). Dependency was determined based on actual financial and emotional support as of the petition date, not mere technical definitions or speculative future plans. Extraterritorial Application Allowed – The court found no language in § 1C-1601 limiting the exemption to in-state property and emphasized the statutory mandate to interpret exemptions liberally in favor of the debtor. Since the debtor resides in North Carolina and is the one claiming the exemption, the location of the property abroad was not disqualifying. Notably, the court cited Crawford and Davila as examples where the location of the homestead outside North Carolina had not precluded application of the state’s exemption. Commentary: Excellent job by Phillip Sasser,  particularly in the face of John Bircher's solid,  but fair and respectful,  objection. This decision is a well-grounded affirmation of the debtor-protective policies behind North Carolina’s exemption laws and demonstrates the flexibility bankruptcy courts maintain in evaluating real-life family and financial dynamics. In substance, Judge McAfee recognized that modern households — especially those involving immigration, work visas, and international families — may not conform neatly to the traditional “white picket fence” model. The court took a pragmatic approach: focusing not on the theoretical legal domicile or the ZIP code of the property, but on the reality of who lived there and who depended on whom. Dependency Doesn't Require Formal Support Agreements – Informal but credible testimony about support, even irregular remittances and non-monetary arrangements, may suffice to establish a spouse as a dependent for exemption purposes.   Having found most easily that Mr.  Ross-DeSantos met the statutory definition of a dependent spouse,  the court did not directly address whether Ms.  Ross-DeSantos'  mother and/or minor nephew were also dependents.  That notwithstanding,  it would seem that the standard for other asserted dependents  should be evaluated under the same standard as anyone  "who  is actually substantially dependent ... for his or her maintenance and support or is substantially in need of maintenance and support...."  (Emphasis added.) This should not require finding that the person meets the higher  IRS standard for a dependent but instead that the person is substantially  dependent on support and needs that support.  Allowing them to live in the house could by itself be sufficient to show the support,  although the debtor would need to show the need for that support. No Territorial Limitation in § 1C-1601(a)(1) – Until the North Carolina appellate courts say otherwise, nothing in the statute prevents the homestead exemption from being claimed in property outside the state, provided the debtor resides in North Carolina. Anticipate Equity Issues – Though the court noted the trustee's uncertainty about whether the Republic Bank of Guyana held a perfected lien, the trustee wisely sought a ruling on the exemption issue first. Practitioners should similarly bifurcate legal questions where valuation or enforceability is uncertain. In re Ross-DeSantos will likely become a citation staple for North Carolina debtors and their counsel facing objections based on “residence” and “dependency,” especially in cross-border or nontraditional family situations. It serves as a reminder that bankruptcy courts, even while operating under rigid statutes, can and do account for the lived realities of their debtors. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document in_re_ross-desantos.pdf (261.27 KB) Category Eastern District

In law enforcement, BOLO stands for Be On the Look Out. But even outside of law enforcement, BOLO alerts operate. In this case, we as bankruptcy lawyers need to be on the look out for community property. It’s easy to think that community property is an issue only for practitioners in the 9 community property […] The post BOLO Alert: Community Property in Unexpected Places appeared first on Bankruptcy Mastery.

Bankr. E.D.N.C.- In re J Smith- Arbitration in Bankruptcy Ed Boltz Wed, 07/09/2025 - 17:10 Summary: In this post-confirmation Chapter 11 dispute, the Bankruptcy Court for the Eastern District of North Carolina granted a motion by Fourth Elm Construction, LLC to compel arbitration and stay the adversary proceeding brought by the debtor, J Smith Civil, LLC. The adversary complaint asserted state-law claims for breach of contract and quantum meruit arising from a terminated subcontracting agreement. Fourth Elm relied on the contract’s Article 24 arbitration clause, invoking Section 3 of the Federal Arbitration Act (FAA). J Smith Civil resisted arbitration, arguing first that the contract’s damage-limiting clause (Article 22) rendered the arbitration agreement void under Lischwe v. Clearone Advantage (In re Erwin), a case involving impermissible waivers of claims under North Carolina’s UDTPA. Judge Callaway distinguished Erwin, finding that no such statutory or fraud claims were actually alleged—only garden-variety breach and quasi-contract. J Smith’s second argument—that compelling arbitration would impair bankruptcy case administration—also failed, as the claims did not arise under the Bankruptcy Code and were not core proceedings. The Court compelled arbitration but explicitly warned Fourth Elm that it could not file any counterclaims or assert a §553 setoff in the arbitration without first obtaining stay relief. Fourth Elm, through counsel, disavowed any intent to seek such relief, and the Court noted it would enforce that commitment under pain of sanctions. Commentary: This decision highlights the entrenched enforceability of arbitration clauses in bankruptcy, particularly when the debtor brings state-law claims post-confirmation and the dispute lacks any core bankruptcy component. Judge Callaway’s ruling reflects a straightforward application of the Federal Arbitration Act (FAA), even in the Chapter 11 context, and follows the familiar maxim that “[a]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” But what about in the consumer Chapter 13 context, where debtors frequently interact with contracts that contain arbitration clauses—credit card agreements, auto loans, rent-to-own contracts, and debt relief services? Unlike in business cases, a unique opportunity may exist for consumer debtors to proactively address arbitration in their Chapter 13 plan. Specifically, a nonstandard Chapter 13 plan provision may be used to expressly reject or eliminate arbitration clauses in executory contracts or to declare that the debtor does not consent to arbitration of any disputes related to a given agreement. Because Chapter 13 plans function as binding contracts between the debtor, creditors, and the trustee upon confirmation, and because 11 U.S.C. § 1322(b)(2), (b)(6), and (b)(11) permit substantial flexibility in how a debtor restructures obligations and provides for treatment of claims, courts may allow debtors to include such provisions. While not all courts will enforce such plan terms (and some creditors may object), there is a growing recognition that plan provisions may alter dispute resolution rights where the arbitration clause is part of a contract the debtor is assuming, modifying, or curing under the plan. In this way, the plan operates as both shield and sword, binding creditors who fail to object and thus creating a limited window to neutralize otherwise enforceable arbitration rights. Moreover, if a creditor fails to timely object to confirmation, courts may hold it bound by the plan under §1327(a), and therefore estopped from later enforcing arbitration provisions in an attempt to derail claims administration or fair debt relief remedies under the Code. Practice Tip for Consumer Debtors: Practitioners should consider whether their standard Chapter 13 plan templates adequately address arbitration—and if not, propose a nonstandard provision rejecting arbitration clauses in applicable agreements. For example: “Any arbitration provision in any prepetition agreement between the Debtor and any creditor is expressly rejected and shall be of no force or effect with respect to any dispute arising during the pendency of this bankruptcy case or relating to any claim provided for under this Plan." This may be particularly valuable where the debtor has viable claims under state consumer protection laws (e.g., UDTPA, FDCPA) or disputes related to vehicle repossession or predatory lending. It also reduces the risk of post-confirmation motion practice or removed arbitrations that sap the estate’s resources. To read a copy of the transcript, please see: Blog comments Attachment Document in_re_jsmith.pdf (279.94 KB) Category Eastern District

Law Review: Tavera, Daniel, The Benefits of Hindsight: Determining Whether a Receipt of Benefits Is a Necessary Element of the Fraud Exception to Discharge Ed Boltz Tue, 07/08/2025 - 15:10 Available at:   https://ssrn.com/abstract=5295095 Abstract: There is a circuit split on the meaning of the phrase “obtained by” under the Bankruptcy Code. Courts disagree on the proper interpretation of the portion of the statute relevant to this issue: whether a debtor needs to receive a benefit from the fraud to find the debt nondischargeable. Some courts have forgone a receipt of benefits test. Creditors now often argue that a debtor need not benefit from the asset obtained by fraud to except an underlying debt from discharge. But the fraud exception could include the requirement that a debtor receive a benefit from the assets “obtained” for certain frauds. This Article examines the history of the fraud exception and the split in the courts. This Article then analyzes the word “obtained” under the Code, and judicial interpretations of what it means to obtain assets. This Article summarizes the strengths and weaknesses on the different approaches of statutory construction applied to the word “obtained.” Based on the Supreme Court’s recent suggestion that a receipt of benefits is a necessary element of the fraud exception, this Article then concludes the exception for a willful and malicious injury appropriately addresses facts where nothing was “obtained.” Commentary: Tavera’s article will be of practical value to consumer bankruptcy attorneys litigating § 523(a)(2)(A) claims—especially in small business, guarantor, or insider-debtor scenarios where the money trail doesn’t end with the debtor. We’ve all seen cases where a debtor signs a loan for a struggling business, uses rosy projections, or co-signs a note to help a relative. When the creditor sues for nondischargeability, the debtor’s defense is often: “I didn’t benefit.” Under the logic that some courts have adopted, that could be enough to avoid a judgment under § 523(a)(2)(A). Tavera’s piece warns against that defense and provides an academic yet accessible explanation of why it should not be determinative. Fraud, not benefit, is the statutory touchstone. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document the_benefits_of_hindsight_determining_whether_a_receipt_of_benefits_is_a_necessary_element_of_the_fraud_exception_to_discharge.pdf (807.14 KB) Category Law Reviews & Studies

Law Review: Shachmurove, Amir, Last Rites and Licit Resurrections: The Problematic Pillars of Section 546(A)'S Oft-Presumed Preemption of Non-Bankruptcy Statutes of Repose (July 22, 2022). 30 Am. Bankr. Inst. L. Rev. 141 (2022) Ed Boltz Thu, 07/03/2025 - 16:06 Available at:   https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5265203 Abstract: When it comes to statutory limitations periods, Section 546(a) of the Bankruptcy Code (“Code”) at first exudes a bewitching simplicity, ascertainable without any need for more than a basic understanding of such terms as “preemption,” “statute of limitations,” and “statute of repose.” Employing somewhat plain prose, this subsection prescribes the deadline for any action under five substantive sections—§§ 544, 545, 547, 548, and 553 (collectively, “Avoidance Provisions” or “Avoidance Powers”)—by a trustee or debtor-in-possession as the earlier of: (1) two years “after the entry of the order for relief” or “1 year after” the appointment or election of a trustee if such appointment or election takes place “before” this two-year period’s expiration, whichever is later”; or (2) “the time the case is closed or dismissed.” As the Code necessarily preempts subordinate state law restrictions that would otherwise “impermissibly interfere with the federal purpose underlying the avoiding powers of a trustee ...,” this single subsection clearly overrides any period of time imposed by any state statute of limitation (“limitations period” or “prescriptive period”) bearing on such actions with a new federal window. Per this logic, as long as the relevant state-law claim exists on the date of the petition or order for relief (when the two diverge), a state statutes of limitations lacks “any continued effect” on the timeliness of any action under §§ 544, 545, 547, 548, and 553. Invoking this same ratiocination, bankruptcy and district courts have read § 546(a) to preempt related yet distinct bars—statutes of repose to state substantive causes of action prosecuted by a trustee per § 544 or § 545 or available as a defense to certain creditors under § 553—without undue focus on this prohibition’s quiddity. According to these jurists, assuming neither a statute of repose nor a statute of limitations (collectively, “limitations statutes” or “limitations provisions”) expired prepetition, § 546(a) nullifies either temporal constraint so as to allow the trustee “sufficient time to investigate for the existence of facts that would support actions under … [the] enumerated Code sections.” The statutory text, aptly perused, and preemption doctrine, correctly applied, support no other exegesis, a “general consensus” now maintains, though only few have probed the matter. In these opinions, the fact that § 547 and § 548, on the one hand, and §§ 544, 545, and 553, on the other, draw their substance from different headwaters matters not a whit. In four substantive parts, this article challenges the ramshackle foundations of this seemingly broad accord, as epitomized by the highest federal court—the U.S. Bankruptcy Appellate Panel of the Ninth Circuit in Rund v. Bank of America Corp. (In re EPD Inv. Co., LLC) (“Rund”)—to confront this oddly underexplored issue in a published opinion. Part II recounts the facts behind two cases in which the bankruptcy courts’ ultimate decisions severely impacted one or more stakeholders. Reviewing the relevant legal regimes, Part III précises the history and nature of non-bankruptcy law’s limitations provisions and the Avoidance Provisions and canvasses the precedent regarding the interplay between § 546(a) and statutory limitations periods, a motley neither as unambiguous nor as unanimous as many intone. Part IV starts with a summation of the interpretive tenets applicable to the Code and proceeds to demonstrate how the modern consensus has failed to fully account for the remarkably unremarkable prose, but the divergent impact, of § 546(a) and the essential character, but imprecision, of the manifold limitations provisions inscribed into state and federal tomes.  Commentary: Most consumer attorneys reflexively treat statutes of repose the same as statutes of limitation when objecting to claims. But as Last Rites argues, repose is not merely a deadline—it’s a substantive limitation on the right itself, and it operates independent of accrual, discovery, or procedural events like bankruptcy. That means: A claim that is still enforceable on the petition date might expire mid-Chapter 13 due to a state statute of repose. Conversely, a claim that expired under a statute of repose before the bankruptcy was filed may not be resurrected—even if the creditor files a timely proof of claim under Rule 3002(c). And unlike statutes of limitation, repose periods are not generally subject to tolling under: § 108 (because it refers only to statutes of limitation), or § 502(b)(1), which evaluates the claim’s enforceability as of the petition date—not whether it remains enforceable years into the plan. While North Carolina has no explicit statute of repose for enforcing debts (contract claims, credit card debt, etc.),  N.C.G.S § 58-70-115(1),  which has faced slight judicial interpretation,  could arguably be a statute of repose  as to a debt buyer as it bars from all collection activities,  including   filing suit or seeking arbitration,  for stale debts.  The affirmative denial of the right to act contrasts with a statute of limitations, which  only provides an affirmative defense.  Accordingly,  this statute  could be considered a statute of repose,  meaning that during the course of a Chapter 13 case it could become uncollectible. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document ssrn-5265203.pdf (1.39 MB) Category Law Reviews & Studies

E.D.N.C.: In re Port City Contracting Services, Inc.- Discovery Appeal Dismissed as Interlocutory Ed Boltz Wed, 07/02/2025 - 15:44 Summary: Pro se litigant Robert Paul Sharpe appealed two discovery-related denials from Bankruptcy Judge David M. Warren in the Chapter 11 proceedings of Port City Contracting Services, Inc. Specifically, Sharpe sought (1) to compel witness attendance at a hearing and (2) a judgment on the pleadings regarding that same motion, both of which were denied as procedurally improper. Judge Warren correctly pointed out that Federal Rule 45, not a motion to compel, governs witness subpoenas, and that Rule 12(c)—which applies to pleadings, not discovery—was inapplicable. Sharpe then attempted to appeal, not only those denials but also "any subsequent opinions or orders forthcoming." District Judge Richard E. Myers II dismissed the appeal for lack of jurisdiction. Because the denial was an interlocutory discovery ruling, it was not a final order appealable under 28 U.S.C. § 158(a)(1). Moreover, Sharpe failed to seek leave for an interlocutory appeal under § 158(a)(3), and even if he had, the court found no exceptional circumstances to justify such a departure from the final judgment rule. The court also denied Sharpe’s various procedural motions and declined to entertain his effort to preemptively appeal future orders. While stopping short of imposing sanctions due to Sharpe’s pro se status, the court warned that Rule 11 applies to all litigants and left future disciplinary matters to the discretion of the bankruptcy court. Commentary: This case serves as a textbook example of why pro se parties—especially those attempting aggressive litigation tactics—must carefully adhere to the procedural rules of both the Bankruptcy Code and the Federal Rules of Civil Procedure. First, Judge Warren's ruling was entirely routine: discovery matters are not resolved through Rule 12 motions, and if a party seeks attendance of witnesses, Rule 45 provides the proper tool. Attempting to shortcut that process with a motion to compel and then seeking judgment on those pleadings reflects a fundamental misunderstanding of procedure. Second, the appeal itself was doomed from the start. Bankruptcy discovery orders are well-settled as interlocutory, and without leave under § 158(a)(3)—which Sharpe failed even to request—the district court lacked jurisdiction. The court rightly invoked Bullard v. Blue Hills Bank and Bestwall, confirming that finality in bankruptcy turns on whether a discrete proceeding is concluded, not just whether a motion is denied. Finally, Sharpe’s attempt to prospectively appeal future, as-yet-unissued orders—and to do so while referencing irrelevant issues—was flagged as vexatious. The district court, while restrained in withholding sanctions, reminded Sharpe that Rule 11 binds even non-lawyers. Given the “contentious” litigation history noted by the court, this was a diplomatic but firm signal that further abuse could merit sanctions. Interlocutory appeals from bankruptcy court orders,  which are unfortunately often necessary following the denial of confirmation under Bullard v. Blue Hills,  are strictly limited and rarely granted. Under 28 U.S.C. § 158(a)(3), a party may seek leave to appeal an interlocutory order, but success requires clearing a high bar: To even be considered, the movant must timely file a motion for leave to appeal under Federal Rule of Bankruptcy Procedure 8004(a)—failure to do so is jurisdictionally fatal, as seen in In re Port City Contracting Services, Inc. Even if procedurally proper, the court applies the strict three-part test akin to 28 U.S.C. § 1292(b): Controlling Question of Law – The issue must involve a pure legal question that could substantially affect the outcome of the case. Substantial Ground for Difference of Opinion – There must be legitimate, competing interpretations of the law—not just disagreement by the appellant. Material Advancement of Litigation – Immediate resolution of the issue must materially speed up the proceedings, not merely settle a tangential matter. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document in_re_port_city_contracting_services.pdf (116.83 KB) Category Eastern District

4th Cir.: Martin v. Parker- No Denial of Discharge for embezzlement where debtor acted on good-faith advice from financial institutions despite conflicting estate documents Ed Boltz Wed, 07/02/2025 - 04:53 Summary: After prevailing in a Virginia state court breach of contract case, Dan Martin sought to except his $151,501 judgment from Deborah Parker’s Chapter 7 discharge. Martin alleged embezzlement under 11 U.S.C. § 523(a)(4), claiming Parker wrongfully liquidated financial accounts that, under a “Post-Marital Agreement” and mutual wills between her father (Morton) and Martin’s mother (Peggy), were partially due to him. Although the bankruptcy court agreed with Martin and deemed the debt nondischargeable, the district court reversed, finding Parker lacked the requisite fraudulent intent. The Fourth Circuit affirmed. The facts were largely undisputed. Morton and Peggy had agreed their combined estates would pass two-thirds to Dan and one-third to Morton’s children, including Deborah. However, after Peggy’s death, Morton retitled his financial accounts with Deborah as joint owner or beneficiary. When Morton died, Deborah liquidated the accounts. Upon learning of the agreement and will, Deborah sought guidance from banks, which told her the joint ownership and beneficiary designations overrode the agreement and the will. Relying on that advice, she kept the funds. The Fourth Circuit held that while the funds may have passed to Deborah under suspect circumstances, embezzlement under § 523(a)(4) requires proof of fraudulent intent. It is not enough that she took what may have legally belonged to someone else; she must have intended to defraud. The record showed she disclosed the will and agreement to the financial institutions and was told the accounts were hers. The bankruptcy court clearly erred in ignoring this undisputed evidence and inferring bad faith solely from her knowledge of the will. Without evidence of fraudulent intent, no embezzlement occurred, and the debt was dischargeable.  Commentary: This decision reinforces the high burden a creditor bears to except a debt from discharge, especially under § 523(a)(4)'s embezzlement provision. The Fourth Circuit emphasized that wrongful taking alone is insufficient—there must be actual fraudulent intent. Here, the debtor’s disclosure of the conflicting estate documents to banks and her reliance on their advice created a good-faith defense that could not be overcome by mere disagreement over the legal outcome. The court also indirectly reminded lower courts that they may not disregard undisputed record evidence in favor of inferences that support a preferred narrative—particularly when the discharge exception is construed narrowly and in favor of the debtor. Practice Pointer: For practitioners seeking to invoke § 523(a)(4), this case highlights the necessity of demonstrating fraudulent intent with concrete evidence. A mistaken belief—even if objectively unreasonable—can be a sufficient defense if it was held in good faith and informed by outside counsel or institutions. Consumer Bankruptcy Insight: For Chapter 7 and 13 debtor attorneys, Martin v. Parker provides a strong precedent supporting discharge where a debtor's actions were based on apparent authority or advice, even if a later court finds a breach or unjust enrichment. In Chapter 13, this case may also be instructive in objecting to claims based on alleged bad acts when there's no showing of fraudulent intent or where the debtor relied on professional advice.  See also Sugar/Sasser v. Burnett where the 4th Circuit also relied heavily on the defense of reliance on advice of counsel. Final Thought: Martin may have been wronged by a failure to uphold an estate plan, but bankruptcy courts cannot serve as probate courts. Without clear evidence of bad faith, the fresh start remains intact. With proper attribution,  please share this post.  To read a copy of the transcript, please see: Blog comments Attachment Document martin_v._parker.pdf (152.38 KB) Category 4th Circuit Court of Appeals