By: Preston C. Demouchet

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

Although section 541 includes within the property of the estate both equitable interests and property that is recovered pursuant to section 550, in cases where the estate’s equitable interest is based on the fact that the debtor fraudulently transferred the subject property, the estate includes only the equitable claim for its recovery and not the property itself.[1] The actual transferred asset does not become property of the estate until after the trustee successfully recovers it.[2]

 

By: Sabihul Alam

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

In In re Moore, the United States District Court for the Eastern District of Virginia found that Novus Law School violated a discharge injunction by refusing to issue a transcript or award a degree to Moore, a law student, until he paid his outstanding tuition balance, which had been discharged in Moore’s chapter 7 proceeding.[1] Moore successfully completed a two-year juris doctor program at Novus, a non-accredited web-based private law school, yet, at the time of completion, had an outstanding balance from unpaid tuition.[2] Moore’s obligation did not arise as a result of a government loan program, but instead was part of his tuition bill which he decided not to pay as it came due.[3] In May 2008, Moore filed for chapter 7 relief on account of his over $400,000 debt, approximately $6,000 of which was owed to Novus.[4] After receiving notification of Moore’s filing, Novus sent Moore an email stating that the law school would not grant Moore a degree nor certify his graduate status to employers if his debt was discharged through bankruptcy.[5] Subsequently, the court granted Moore a bankruptcy discharge.[6] The tuition owed to the law school was among those debts discharged.[7] In keeping with its prior warning, Novus refused to issue Moore his Juris Doctor degree or a transcript.[8] Moore then filed a motion seeking contempt sanctions against Novus for violating the discharge injunction for refusing to award Moore a degree or issue a transcript.[9]

 

By: Brandi Sinkovich

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

The Sixth Circuit recently held that a bankruptcy court had the equitable power under section 105(a) of the Bankruptcy Code (the “Code”) to retroactively convert a chapter 11 case to chapter 7.[1] In Mitan v. Duval (In re Mitan), debtor Kenneth Mitan filed a chapter 11 petition in the Bankruptcy Court for the Central District of California that unsecured creditors, which had been awarded judgments against debtor in connection with a fraudulent business scheme the debtor operated, successfully moved to transfer to the Bankruptcy Court for the Eastern District of Michigan, where debtor resided and several creditors’ businesses were located.[2] After none of the parties appeared at either the status conference or the subsequent hearing to show cause why the case should not be dismissed or converted to chapter 7, the court dismissed the case. Later the court granted the creditors’ reconsideration motion in which the creditors argued that their absence was inadvertent while debtor's absence was calculated to result in dismissal of the case, which had been previously denied to the debtor.[3] At the hearing on the reconsideration motion, the bankruptcy court reopened the case and sua sponte converted it to chapter 7 after finding that it was necessary for a trustee to investigate debtor’s affairs in light of debtor’s alleged scheme to avoid his obligations and abscond with assets hidden overseas.[4]