Should Escrow Accounts Funded by the Debtor be Property of the Estate

By: Meagan Mahar

St. John's Law Student

American Bankruptcy Institute Law Review Staff

Despite conflicting New York case law, the Delaware Bankruptcy Court in In re Atlantic Gulf Comtys. held that funds in an escrow account are not property of the estate even where the funds were deposited by the debtor.

[1]

  Only the debtor’s contingent right to recover the funds upon satisfying the escrow conditions is considered estate property.

[2]

Jewelry Retailer Debtor May Not Include Consignment Goods as Part of Section 363 Sale

By: Jonathan Borst

St. John's Law Student

American Bankruptcy Institute Law Review Staff

In In re Whitehall Jewelers Holdings, Inc.,

[1]

the court held against Whitehall Jewelers Holdings, Inc. (“Debtors”), in favor of approximately 124 consignment vendors (“Consignment Vendors”), where Debtors sought an order permitting the “free and clear” sale of all of their assets and inventory, including consigned goods from Consignment Vendors.

[2]

The Presumption Against Patient Care Ombudsman

By: Felicia Rovegno

St. John's Law Student

American Bankrupcty Institute Law Review Staff

Following a growing trend, the California Bankruptcy Court in In re Valley Health System

[1]

declined to appoint a patient care ombudsman under section 333(a)(1).

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  Although the “shall order the appointment … unless the court … finds” construction of section 330(a)(1) suggests that patient care ombudsmen should be the rule, courts appear to be avoiding such appointments.

[3]

  Consistent with this approach, the Valley Health opinion appears to place the burden on the proponent of the appointment to show that an ombudsman is needed because of specific problems at the facility.

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  More importantly, the Court overlooked the arguments that an ombudsman functions as an advocate to warn the court if patient care is being compromised and that because financial concerns drove the facility into bankruptcy, patients are placed at a greater risk.

[5]

Instead, the Court considered the “nine non-exclusive factors”

[6]

articulated in In re Alternate Family Care

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and four other factors listed

[8]

to hold that a patient care ombudsman was not needed under “the specific facts and circumstances of this case.”

[9]

  Applying the nine factor balancing test, the Court found that two factors favored appointment of an ombudsman, while seven factors weighed against the appointment.

[10]

Achieving Aims of Bankruptcy by Allowing Direct Payments under Chapter 13

By: Renton Persaud

St. John's Law Student

American Bankruptcy Institute Law Review Staff

In a decision of importance to chapter 13 debtors, the Bankruptcy Appellate Panel for the Ninth Circuit in In Re Lopez

[1]

held that chapter 13 debtors are permitted to pay post-petition mortgage payments directly to creditors outside of the plan even though the plan cures and reinstates the mortgage.  According to the court, the new provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) do not change the law with respect to such direct payments.

[2]

  The court drew a distinction between claims “impaired” by the debtor’s plan, which must be made through the chapter 13 trustee, and unimpaired claims, which need not be.

[3]

 The court bifurcated the mortgage debt between the cure payments and the regularly scheduled payments accruing post-petition.  Under the court’s view, only the cure amount was impaired and must be paid through the plan.

[4]

  The importance of the decision to debtors is that it avoids the chapter 13 trustee’s fee on the regular mortgage payment, an amount that was $308 per month in this case.

[5]

  Of special interest in light of the currently pending legislation that could permit modification of home mortgages in chapter 13, the court distinguishes Fulkrod v. Barmettler (In re Fulkrod)

[6]

and indicated that, where the mortgage is reamortized, as in chapter 12 cases, the payments must be made through the plan.

[7]

Can Software Be a Bankruptcy Petition Preparer

By: Thomas Szaniawski

St. John's Law Student

American Bankruptcy Institute Law Review Staff

In a case of first impression that addressed the intersection of cyberspace and bankruptcy, the Ninth Circuit, in Reynoso v. United States (In re Reynoso),

[1]

held that a provider of web-based bankruptcy software was a bankruptcy petition preparer (“BPP”)

[2]

under 11 U.S.C. section 110(a)(1),

[3]

and that, under California law, the features of the petition preparing software went beyond mere typesetting and constituted the unauthorized practice of law.

[4]