On November 15, 2018, the Florida Supreme Court held that “an allegation that a trial judge is a Facebook ‘friend’ with an attorney appearing before the judge, standing alone, does not constitute a legally sufficient basis for disqualification.”

The statute which governs a motion to disqualify requires that the moving party file an affidavit in good faith stating fear that he or she will not receive a fair trial…on account of the prejudice of the judge as well as the facts and the reasons for the belief that any such bias or prejudice exists.

In finding that Facebook “friendship” alone falls below the threshold for disqualification, the Court reasoned, that the mere fact that a Facebook “friendship” exists provides no significant information about the nature of any relationship between the Facebook ‘”friends.”  The Court further noted that “[n]o reasonably prudent person would fear that she could not receive a fair and impartial trial based solely on the fact that a judge and an attorney appearing before the judge are Facebook “friends” with a relationship of an indeterminate nature.”

Florida courts, including the Supreme Court, have long recognized the general principle of law that an allegation of mere friendship between a judge and a litigant or attorney appearing before the judge, standing alone, does not constitute a legally sufficient basis for disqualification.  Why should Facebook “friendships” be any different?


  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

 

Debtors generally file a bankruptcy petition seeking a fresh start, free from their personal debts.  Debtors have the option to agree to pay certain debts to retain a car or other property through reaffirmation agreements and lease assumption.  Reaffirmation or lease assumption may seem like a good option at the time – when for instance a debtor wants to keep his current car.   However, whether he should enter into such an agreement should be given careful consideration as to the debtor’s ability to make payments going forward.  Once a pre-petition debt is reaffirmed or a lease is assumed, a debtor is bound to make the payments and if the debtor defaults, the debt is not included in the debtor’s fresh start – the coveted discharge.

By example, the debtor in a recent South Florida bankruptcy case,  entered into a assumption agreement for his leased vehicle.  At some point thereafter, the debtor determined that he could not continue to make the lease payments and turned the car over to the lessor.  Not wishing to be personally liable for the remainder of the payments under the lease, the debtor argued that he should not have any personal liability under the lease because he did not reaffirm his obligations under the lease in accordance with subsection 524(c) and thus the personal liability will be discharged when he receives his discharge.  Alternatively, he argued that because he “rescinded assumption” prior to discharge, his personal liability under the lease should be discharged.

The bankruptcy court considered in its decision on the matter, whether the safeguards contained within 11 U.S.C. 524 must be satisfied when a debtor assumes a lease pursuant to subsection 365(p) in order for a debtor’s personal liability under the assumed lease to survive the debtor’s discharge.

The court held that in personam liability under an assumed lease is not dependent on adherence to the reaffirmation provisions of subsection 524(c) and that Toyota may proceed against the car and has the right, subject to the provisions of the lease and applicable non-bankruptcy law, to seek from the debtor any remaining amounts due under the lease.  However, the lessor could not proceed against the debtor until after the debtor received his discharge, or the lessor sought stay relief against the debtor.

Whether to assume a lease or reaffirm a debt in bankruptcy requires careful consideration!  Debtors should ask themselves – can I foresee having any trouble making the payments going forward?  If the answer is maybe – just say no to assumption and reaffirmation!


  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

In my November and December posts, I discussed the basics regarding protection of your Florida Homestead from forced sale by creditors and some of the exceptions.

A recent decision from the Second District Court of Appeal of Florida provides a good reminder of another Florida Homestead pitfall.

The Florida Constitution, Article X, Section 4 provides as follows: “There shall be exempt from forced sale under process of any court, and no judgment, decree[,] or execution shall be a lien thereon, … property owned by a natural person.”  As such, the plain language of the Florida Constitution requires that the owner of the property be a natural person to claim the homestead exemption.

While there is case authority which provides that property held in a revocable living trust may qualify for homestead protection, property titled in the name of a corporation, a limited liability company, or a partnership doesn’t qualify.  This is because an individual must have an ownership interest in a residence that gives the individual the right to use and occupy it as his or her place of abode, to qualify for Florida’s homestead exemption.  Be careful how you title your home!


  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

In the case of Mantiply v. Horne (In re Horne), 876 F.3d 1076 (11th Cir. 2017) the Eleventh Circuit decided an issue of first impression in the Circuit: Whether the Bankruptcy Code authorizes payment of attorneys’ fees and costs incurred by debtors in successfully pursuing an action for damages resulting from the violation of the automatic stay and in defending the damages award on appeal.

The stay violator argued on appeal that the debtors were not entitled to appellate fees as a matter of law under Section 362(k)(1) of the Bankruptcy Code because the statute only provides for mandatory fees for damages and attorneys’ fees incurred in ending a stay violation, not incurred in pursuing a damages award nor fees incurred in defending a damages award on appeal.

The Eleventh Circuit disagreed with the stay violator and held that Section 362(k)(1) of the Bankruptcy Code specifically departs from the American Rule and authorizes costs and attorneys’ fees incurred by the debtor in ending a willful violation of an automatic stay, prosecuting a damages violation, and defending those judgements on appeal.

Specifically, the Court reasoned that, unlike Section 330, Section 362(k) specifically and explicitly provides for the recovery of “costs and attorneys’ fees” in the measure of damages arising from a willful violation of the automatic stay, allowing for a departure from the American Rule.  Moreover, nothing in the text of Section 362(k)(1) limits the scope of attorneys’ fees to solely ending a stay violation.  Instead, Section 362(k)(1) speaks to full recovery of damages including fees and cost incurred from violating the stay.  The Court noted that this result makes sense in the context of bankruptcy litigation where the lion’s share of damages from violations of the automatic stay are attorneys’ fees and the debtors are least able to afford them.

The Takeaway?  While there are always exceptions to the rule, it is generally best to attempt to settle “willful” stay violations early on.  The damages in what may seem like a simple matter, escalate quickly.  If you choose to litigate and lose, you could be responsible for paying “actual damages, including costs and attorneys’ fees” to the debtor(s) for all the proceedings related to the stay violation dispute and, to add insult to injury, your own attorneys’ fees and costs.


 

  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

In my November post, I discussed the basics regarding protection of your Florida Homestead from forced sale by creditors and alluded to exceptions to the rule.  Let’s discuss some of those exceptions as it relates to a bankruptcy filing.

If you have acquired an ownership interest in your Florida Homestead within 1,215 of the date you file for bankruptcy, your exemption is subject to a homestead exemption cap under section 522(p) of Title 11 (the “Bankruptcy Code”).  If you bought a house for the first time within the 1,215 day period, your Florida Homestead exemption is limited the amount of $160,375.00 for single debtors and $320,750.00 for married Debtors.  If you bought a new residence within the 1,215 day period, you may add any equity transferred to the previous residence to the exemption limit.  For instance, if you are a single Debtor, sold your home, and used $100,000.00 of equity from your old home to buy your new one, your allowed exemption would be $260,375.00.  As you can see, if you have more than the exemption limit in your Florida Homestead, it is important to consider and calculate the length of time you have owned your home before contemplating a bankruptcy filing.  In addition, if you have been chased by one or more creditora for several years prior to contemplating bankruptcy, you should consider what, if any, funds you have used to purchase the property, prepay your mortgage or improve the property.  Creditors may look to 522(o) of the Bankruptcy Code to attempt to recover those funds based on your intent to hinder, delay or defraud them.

Another risk to your Florida Homestead exemption is the dreaded “Ponzi Scheme”.  In a June, 2017 decision from the Middle District of Florida Bankruptcy Court, the Court awarded an equitable lien and constructive trust on the homestead of a Ponzi scheme investor’s Florida Homestead.  The Ponzi scheme investor, who had filed for bankruptcy and was not involved in or aware of the fraud, “passively received the fraudulent transfers” which he used to purchased the Florida Homestead.  The Court held that the Ponzi scheme investor’s lack of participation in the fraud was not determinative; the focus must be on the fraudulent nature of the funds and unjust enrichment.  The Ponzi scheme investor had been unjustly enriched by the receipt of the fraudulent transfers that he and his wife invested in their home.  Accordingly, the Court determined that an equitable lien and constructive trust should be imposed on the Florida Homestead to the extent the Ponzi scheme distributions were traceable into the Florida Homestead.   The take away – be wary of investment schemes (if it is too good to be true, it probably is) and be thoughtful about the source of funds you invest in your homestead.


  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

Your primary residence in Florida (“Homestead”) can be a very useful tool for protection of assets from creditors during your life, and after your death for the benefit or your spouse and heirs.

The Florida Constitution, Article X, Section 4 sets forth the applicable restrictions on forced sale and the devise of your Homestead.  If your Homestead is one-half acre or less within a municipality or 160 acres or less outside a municipality, the entire Homestead is generally protected from forced sale by someone that sues you and obtains a judgment.  This same protection from judgment creditors will also benefit your spouse and/or heirs who inherit your Homestead after you’re gone.

However, there are exceptions to every rule and your actions could unwittingly subject your Homestead to the claims of creditors.  Have I peaked your interest?  If so, you won’t want to miss my series of blog posts discussing Homestead issues in Florida.  Stay tuned!


  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

 

Americans generally cherish their right to a jury trial under the Sixth and Seventh Amendments to the United States Constitution and the media certainly perpetuate the idea that jury trials are the norm.  However, there are instances where a party may prefer that a judge, rather than a jury, decide the dispute(s) between the parties.

In a recent bankruptcy adversary proceeding out of the S.D. of Florida, the defendant moved to strike the Chapter 7 bankruptcy trustee‘s jury trial demand related to the trustee’s fraudulent transfer claims.  Defendant raised three arguments: (1) the trustee is bound by a contractual waiver of jury trial rights entered into by the debtor prior to the filing of its bankruptcy petition; (2) a trustee in bankruptcy is never entitled to a jury trial in connection with a fraudulent transfer or other avoidance action under the Bankruptcy Code; and (3) the present adversary proceeding is “integral to the claims resolution process,” thus equitable in nature, and so there is no right to jury trial.

The Court determined that none of the arguments had merit and the Trustee was in fact entitled to a jury trial, in a nutshell, as follows:

(1) Even if the debtor was bound by a jury trial waiver, that agreement is binding on the bankruptcy estate only with regard to those claims owned by the estate that were previously held by the debtor.  The bankruptcy estate’s claims derived from the Bankruptcy Code itself, such as fraudulent transfer claims, are not covered by the debtor’s pre-petition jury trial waiver.

(2) Fraudulent transfer claims seeking monetary recovery are actions at law and are subject to jury trial on the timely request of a party pursuant to Granfinanciera v. Nordberg, 493 U.S. 33 (1989).

(3) The defendant did not file a proof of claim and therefore, the trustee’s fraudulent transfer action was not part of the claims allowance process.

The Court noted that when a defendant files a proof of claim, an avoidance action becomes part of the claims process as a result and neither the creditor or the bankruptcy estate has a right to a trial by jury citing to Langenkamp v. Culp, 498 U.S. 42 (1990) and Katchen v. Landy, 382 U.S. 323 (1966).  However, the defendant had not filed a claim because it apparently did not have a claim against the estate.

The Takeaway:  If you have a claim against the bankruptcy estate and do not wish to have a jury trial on any avoidance claims you suspect will be filed against you, you may want to file a proof of claim.


  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

 

When an individual files for bankruptcy protection, he/she is entitled to certain wonderful benefits.  For example, a Chapter 13 bankruptcy filing will stop (at least temporarily) a home foreclosure or car repossession and provide the individual with an opportunity to resolve financial difficulties, including time to cure arrearages.

However, with these wonderful benefits, also come duties that the individual must fulfill to the Bankruptcy Court and its creditors.  Bankruptcy cases are frequently dismissed because these same individuals that sought the protection and benefits of bankruptcy, fail to live up to their end of the bargain!

One of the requirements to stay in bankruptcy under Section 521 of the Bankruptcy Code requires bankruptcy filers (“Debtors”) to file a schedule of his/her assets and liabilities, current income and current expenditures, and statement of the debtor’s financial affairs – all under penalties of perjury.  Bankruptcy cases are frequently dismissed because the Debtor fails to properly complete and timely file these schedules and statement of financial affairs.

By example, former Miami Marlin and World Series Pitcher, Livan Hernandez recently had his Chapter 13 bankruptcy case dismissed after he failed to file his required schedules and statement of financial affairs after his initial deadline (Strike One!), his first request for extension (Strike Two!) and his second request for extension (Strike 3) and the Bankruptcy Court said – You’re Outta Here! – by entering it Order dismissing Hernandez’s Chapter 13 case, with prejudice for 180 days!

What happens when a bankruptcy case is dismissed under these circumstances?  The Debtor loses all those wonderful benefits of bankruptcy and is barred from filing bankruptcy again for 180 days (with a few exceptions).  The automatic stay is terminated and the Debtor returns to his pre-bankruptcy status with all of his creditors.  This means that creditors may legally pursue all collection efforts against him, including foreclosure, repossession, and lawsuits.


  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.