BANKRUPTCY CHAPTER 7 GETTING A FRESH START FROM CREDITORS BY BANKRUPTCY LAWYER 810-235-1970

Many people start a bankruptcy just to get the creditors off their back.
A chapter seven bankruptcy is by far the most popular. In Chapter 7 bankruptcy you fully disclose your property, debts, and financial activities. Three months later you receive a discharge or cancellation of debt.

FLINT BANKRUPTCY LAWYER TERRY BANKERT 810-235-170 POSTS BANKRUTPCY INFORMATION. CALL 810-235-1970 FOR MORE INFORMATION

You should emerge from Bankruptcy with all or most of the property you owned going in. Creditors cannot contact you about the old debt after the bankruptcy and no contact can be made about current debt after the bankruptcy filing.

In our Bankruptcy Practice clients often tell us how poorly they are treated by creditors. These bill collectors often violate federal and state law preventing unfair collection practices- such as contacting you when you have told them you cannot repay the debt. Laws let you take a law breaking creditor to Federal Court. You can get damages for harm to you . Emotional distress is one such damage.

A Bankruptcy Chapter 13 plan is designed with debtors with income who need time to get certain debt paid up to date and still discharge others. Chapter 13 requires a plan that with circumstances changing you may not be able to complete.

You may be able to convert your Chapter 13 case into a Chapter 7 case at any time as long as you qualify for Chapter 7 under the rules. The courts might not allow the conversion.

When you convert you do not have to file another filing fee. and your creditors are still prohibited from taking action against you. Unless the court objects you can always dismiss your case and file again.
One of the most powerful features of bankruptcy is that it stops most debt collectors from harassing you. Once you file for bankruptcy all collection activities with a few exceptions must stop. The creditors must go through the court to take any further action against you.

As stated there are a few exceptions to this automatic stay ; collection of child support, alimony, and certain enforcement actions of the IRS.

Sometimes even while you are in Bankruptcy creditors still attempt to collect using the courts procedures. A creditor who wants to collect from you directly may request relief from the automatic stay in order to do so. This is called a "relief from stay" hearing. This could come up for example if you are behind on your mortgage or car payments.

In a very simple chapter 7 case you will probably have to attend only one official proceeding the creditors meeting supervised by the trustee. The trustee may schedule a second meeting to get additional information. Other issues may require a meeting with the Judge.

Most importantly your creditors from these debts must stop harassing you.

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BANKRUPTY CHAPTER SEVEN COURT OPINION ON LANDLORD, RENT, SECURITY DEPOSIT BY FLINT BANKRUPTCY ATTORNEY TERRY BANKERT 235-1970

FEDERAL COURT ORDER REVERSING THE LOWER BANKRUPTCY COURT AND REMANDING ( SENDING IT BACK TO THE BANKRUPTCY COURT) FOR FURTHER PROCEEDINGS IN BANKRUPTCY COURT




I. BANKRUPTCY ISSUES





LANDLORD SAYS HE SHOULD NOT HAVE TO RETURN BANKRUPTY DEBTOR SECURITY DEPOSIT



Appellant challenges the Bankruptcy Court’s Order of May 26, 2011, compelling

him to return the full amount of security deposits paid by tenants Appellees Kristin

Zzz, Kelsea Zzz, and Cody Yyy in connection with the rental property located

at 274 E. St. Clair, Romeo, Michigan (the “Romeo property”). Appellees did not

respond to Appellant’s Brief, and the time to do so has passed.



FLINT BANKRUPTCY LAWYER 235-1970



This post by Flint Bankruptcy Attorney Terry R. Bankert , 235-1970, principally from the case cited below and for social media and SEO.. Bankert comments CAP or cited [trb] Read the entire original opinion and seek competent legal counsel before you rely on this content.



THE FEDERAL COURT TELLS THE BANKRUPTCY COURT IT WAS WRONG.



The Court REVERSES the Bankruptcy Court and REMANDS for further

proceedings consistent with this order.



II. FACTS OF THE CASE



A. Brief Background



THE CAUSE BEGAN AS A CHAPTER SEVEN BANKRUPTCY



On November 8, 2010, Appellant John Robert Iwanski filed for Chapter 7

bankruptcy jointly with his wife Kay Ellen Collins.



DEBTOR FELL BEHIND ON MORTGAGE PAYMENTS



Prior to filing for bankruptcy, Mr. Iwanski fell behind on mortgage payments for an investment property, the Romeo property.



THE HOME WAS FORECLOSED



On October 8, 2010, the Mortgagee bank foreclosed on the Romeo property.



HOMEOWNER FILED FOR BANKRUPTCY



Mr. Iwanski filed for bankruptcy on November 8, 2010, to protect himself from creditors,

including a potential deficiency owed to the mortgage creditor regarding the Romeo

property.



TENANTS REMAINED IN THE DEBTORS HOME



Appellees Cody Yyy, Kristin Zzz, and Kelsea Zzz (collectively, the

“Tenants”) continued to occupy the Romeo property after the foreclosure and Mr.

Iwanski’s bankruptcy filing.



TENANT HAD SIGNED A SIX MONTH LEASE



Mr. Iwanski had signed six-month leases with the Tenants

for the Romeo property in September 2010.



TENANTS LEASE EXPIRED THEY STAYED AS A HOLD OVER TENANT



After the expiration of the leases in March 2011, the Tenants remained at the Romeo property as month-to-month holdover tenants.



BANKRUPTCY DISCHARGE ON 02/06/11



Mr. Iwanski received his bankruptcy discharge on February 16, 2011.



04/08/12 REDEMPTION PERIOD EXPIRED



On April 8, 2011, the redemption period expired for the foreclosed Romeo property.



04/19/12 BANK FILED FOR RELIEF FROM STAY



Soon after, on April 19, 2011, the Mortgagee bank filed a motion for relief from the automatic stay to allow it to take possession of the Romeo property. The Tenants filed written responses to the motion.



The Bankruptcy Court scheduled the motion for hearing on May 16, 2011.



Mortgagee’s counsel, Mr. Iwanski’s counsel, and the Tenants appeared. However,

based on the fact that he was not opposing the motion, Mr. Iwanski did not attend.

Because Mr. Iwanski was not present, the Court adjourned the hearing to May 23, 2011.



B. May 23, 2011 Hearing



The Court held a hearing on May 23, 2011, to consider the motion of the

Mortgagee bank to lift the automatic stay.



All the parties who appeared at the May 16 hearing appeared at this hearing, plus Appellant Mr. Iwanski.





At the hearing, the Bankruptcy Court took no sworn testimony, and admitted no

evidence.



MOTION TO LIFT AUTOMATIC STAY WAS LIFTED



The Mortgagee’s motion to lift the automatic stay was not opposed and was

granted. In connection with the motion, the Court inquired into who was entitled to rents

due regarding the Romeo property after the sheriff sale but before the expiration of the

redemption period.



ARGUED MICHIGAN LAW SAYS FORMER OWNER HAS RIGHT TO RENT UNTIL REDEMPTION PERIOD EXPIRES



Mr. Xxx’s counsel and the Mortgagee’s counsel stated that they

had researched the issue, and that they agreed that under Michigan law the former

owner (i.e., Mr. Xxx) is entitled to all rents due until the expiration of the redemption

period. Tr. at 3.



TESTIMONY THAT TENANTS BEHIND ON RENT



At the hearing, Mr. Xxx stated that the Tenants were behind in their rent and

that eviction proceedings had been initiated in state court. Tr. at 13.



TENANTS DEMANDED SECURITY DEPOSIT BACK



He also stated that Tenants were asking for their security deposits back despite the fact that they were still occupying the premises. Tr. at 14.





Mr. Xxx stated that Tenants Kristin Zzz and Kelsey Zzz had last paid

$100 in March 2011 toward the monthly rent of $475, and that they had paid nothing for

April and May.



The Zzz Tenants denied these allegations, stating “there’s no past

due rent owed to [Mr. Xxx] at all,” and “we have receipts for all our rent.” Tr. at 12,

13.



SECURITY DEPOSIT RETURN DENIED



They also demanded refund of their security deposit of $712.50. Tr. at 17.

Tenant Cody Yyy said that he last paid rent in February 2011. Tr. at 20. He

said he did not pay because he was not aware who owned the building on account of

Mr. Xxx’s foreclosure. He also said he was entitled to return of his security deposit

in the amount of $787.50. Tr. at 17.



MICHIGAN LAW ON RENTS DISTRIBUTION TIMING



Mr. Xxx’s counsel admitted that under Michigan law Mr. Xxx is entitled to

rent only until the expiration of the redemption period on April 8, 2011. Tr. at 14. Any

rent owed after that date would be payable to the Mortgagee bank.



SECURITY DEPOSIT CAN BE USED FOR UNPAID RENT



However, he also maintained that under Michigan law, Mr. Xxx is entitled to apply the Tenants’ security deposits to unpaid rent. Tr. at 18. He mentioned that because there is unpaid rent for at least March and April, Mr. Xxx is entitled to apply the Tenants’ security deposits to the rent.



BANKRUPTCY COURT ORDERED RETURN OF FULL SECURITY DEPOSIT



At the end of the hearing, the Bankruptcy Court ruled: “Mr. Xxx, I hereby

order you to refund to these tenants their full security deposits within seven days . . . .”

Tr. at 21.



The Bankruptcy Court issued a one-sentence order on May 26, 2011,

compelling the return of the security deposits for the reasons stated on the record.



III. WHAT IS THE STANDARD OF REVIEW WHEN THE FEDERAL COURT REVIEWED THE BANKRUPTCY COURT



COURT WILL ASK WAS THERE CLEAR ERROR ON THE PARTY OF THE BANKRUPTCY JUDGE



The Court reviews the Bankruptcy Court’s findings of fact for clear error and its

conclusions of law de novo. Batie v. Investors Credit Corp., 995 F.2d 85, 88-89 (6th Cir.

1993). If the Bankruptcy Court’s factual findings are silent or ambiguous as to an

outcome determinative factual question, the district court may not engage in its own

factfinding but, instead, must remand the case to the Bankruptcy Court for the

necessary factual determination. Hardin v. Caldwell, 851 F.2d 852, 857 (6th Cir. 1988).



IV. THE PARTIES ARGUMENT



On appeal, Mr. Xxx argues that the Bankruptcy Court’s order ignores the fact

that he was entitled to apply security deposits to unpaid rent, and that he had no

obligation to return security deposits until 45 days after the termination of occupancy by

Tenants.



He also argues that the May 23, 2011 hearing involved a number of

procedural irregularities, including that the Bankruptcy Court ruled without any evidence because nobody at the hearing was sworn in, and there was no opportunity for cross examination or discovery. Therefore, he says the Court’s order lacks an evidentiary basis. This Court agrees.



V. THE FEDERAL COURT ANALYSIS



MORTGAGE HOLDER IN MICHIGAN STAYS IN PROPERTY UNTIL REDEMPTION PERIOD ENDS



Michigan law clearly states that a mortgagor is entitled to possession of the

mortgaged property, and all the benefits of possession, until the expiration of the

redemption period.



The Michigan Supreme Court says, “[T]he bank ha[s] no legal right

of possession during the [ ] redemption period. . . It has been the definite and

continuous policy of this State to save to mortgagors the possession and benefits of the

mortgaged premises, as against the mortgagees, until expiration of the period of

redemption.” Kubczak v. Chemical Bank & Trust Co., 575 N.W. 2d 745, 747-48 (Mich.

1998).



The benefits of possession include the right to collect rent. Bennos v.

Waderlow, 289 N.W. 267, 269 (Mich. 1939) (“[I]t is settled law that, until after the

expiration of the equity of redemption through foreclosure proceedings, a mortgagee is

not entitled to the rents and profits of the sold or mortgaged premises.”).





There is no dispute that the redemption period for the Romeo property expired on

April 8, 2011. Tr. at 15. There is also no dispute that the Tenants continued to occupy

the property as of this date, and, indeed, were still occupying the property as of the May

23, 2011 hearing. Therefore, Mr. Xxx is entitled to all rents due on the Romeo

property through April 8, 2011.



Additionally, under the Michigan Landlord and Tenant Relationship Act of 1972,

M.C.L. §§ 554.601 et seq., a security deposit may be used for “all rent in arrearage.” Id.

§ 554.607.



A landlord is also entitled to retain a security deposit for 45 days after

termination of the occupancy, and to begin an action for a money judgment against the

former tenants during that time. Id. § 554.613. The landlord may retain the portion of

the security deposit necessary to satisfy any money judgment against the tenant. Id.





Lastly, it appears that this matter may have been subject to mandatory

abstention by the Bankruptcy Court. See 28 U.S.C. § 1334. Mr. Xxx states that

eviction proceedings were ongoing in state court at the time of the Bankruptcy Court’s

order, but the Bankruptcy Court did not give him the opportunity to file a motion

requesting abstention.



Without making any factual findings or stating the legal basis for its ruling, the

Bankruptcy Court simply ordered Mr. Xxx to return Tenants’ security deposits within

seven days of its order.



The Bankruptcy Court’s order does not take into account clear

Michigan law which states that the mortgagor is entitled to all rent due until the

expiration of the redemption period, and that the mortgagor may apply money from a

security deposit to unpaid rent.



The Bankruptcy Court’s order is “silent or ambiguous as to an outcome

determinative factual question.” Caldwell, 851 F.2d at 857.



This Court remands this matter to the Bankruptcy Court to make the appropriate factual findings.



Specifically, the Bankruptcy Court must determine what rent, if any, was owed by Tenants to Mr. Xxx at the end of the expiration of the redemption period on April 8, 2011.



If the Bankruptcy Court determines that Tenants were in arrears as of that date, it must allow Mr. Xxx to apply the necessary portion of Tenants’ security deposits to the unpaid rent.



Additionally, the Bankruptcy Court must give Mr. Xxx the opportunity to file an

abstention motion before proceeding to adjudicate these matters.



VI. THE FEDERAL COURT CONCLUSION



The Bankruptcy Court’s Order of May 26, 2011, is REVERSED. The matter is

REMANDED for further proceedings. IT IS ORDERED.,S/Victoria A. Roberts Victoria A. Roberts United States District Judge



[1]



UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION,In Re: Chapter 7, John Robert Xxx, and, Case No. 10-74033, Kay Ellen Collins, Hon. Steven W. Rhodes,Debtors.

Case No. 11-12379,Appellant, Hon. Victoria A. Roberts,v.

Federal Home Loan Mortgage Corp., Cody Yyy, Kristin Zzz, and

Kelsea Zzz, Appellees.



[trb]

This post by Flint Bankruptcy Attorney Terry R. Bankert , 235-1970, principally from the case cited [1]. Bankert comments CAP or cited [trb] Read the entire original opinion and seek competent legal counsel before you rely on this content.

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FLINT BANKRUPTCY WILL NOT DISCHARGE JUDGEMENT AGAINST REALTOR WHO SELLS YOU A DEFECTIVE HOUSE WITHOUT DISCLOSUE AND FRAUD. THIS APPLIES TO TOXIC MOLD. CALL BANKERT BANKRUPTCY 810-235-1970 AND TOXIC MOLD LITIGATION

HOME SELLER ATTEMPTS TO DISCHARGE IN BANKRUPTCY HOME SALE FRAUD JUDGEMENT

After Robert and Gertrude Grenier sold their house to Craig and Donna Nehasil, the Nehasils discovered defects in the house that the Greniers had concealed from
them (and from a previous would-be buyer). [1]

This post by Flint Bankruptcy Attorney Terry Bankert . Flint Bankruptcy Lawyer Terry Bankert can be reached at 1-810-235-1970 or http://www.attorneybankert.com


The Nehasils sued for fraud in Michigan state court, winning nearly $300,000. When the Greniers sought to discharge that judgment in their Chapter  bankruptcy proceeding, the Nehasils sued to stop them. [1]


FRAUD JUDGEMENTS ARE NON DISCHARGABLE IN BANKRUPTCY

The bankruptcy and district courts sided with the Nehasils and deemed the fraud judgment nondischargeable. We affirm. No. 10-2242 [1] In re Grenier

I. BACKGROUND

In December 1997, the Nehasils expressed interest in buying the Greniers’ house in Canton,
Michigan. They asked the Greniers if there were any noteworthy defects in the house, and the
Greniers reported none. The Nehasils purchased the property. They soon discovered a variety of
problems with the house, including water damage, rotting floors, insect infestation, faulty electrical Wiring, and fake water fixtures not hooked up to the household plumbing system. When they investigated further, the Nehasils learned they were not the first ones to face this predicament. [1]

The Greniers had previously sold the house to Hilda Maxwell, who had sued them upon learning of the house’s poor condition and had ultimately gotten her money back. The Nehasils took the same tack, and in April 2004 a Michigan jury found the Greniers liable for fraud, awarding $294,563.74 in damages and costs.[1]

The Greniers filed for bankruptcy. They first sought to file under Chapter 13, but the
bankruptcy court found them ineligible because their debts exceeded the statutory limit. See 11
U.S.C. § 109(e). They then tried Chapter 7, filing a petition with the bankruptcy court in December 2008. Two months later, the Nehasils filed a complaint in the bankruptcy court, seeking a declaration that the Greniers could not discharge the judgment against them because it stemmed from fraud. See 11 U.S.C. § 523(a)(2)(A).[1]

The bankruptcy court agreed on collateral-estoppel grounds,
finding that the state-court fraud judgment entitled the Nehasils to summary judgment. The district court affirmed. In re Grenier, 430 B.R. 446 (E.D. Mich. 2010).
No. 10-2242 In re Grenier  [1]
II. THE LAW

THE BANKRUPTCY COURT HAS DEBTS THAT ARE NON DISCHARGABLE

At issue is a provision of the Bankruptcy Code that makes nondischargeable any debt for
money or property “obtained by . . . false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.” 11 U.S.C. § 523(a)(2)(A). [1]

The Nehasils argue, and the courts below held, that this provision applies to the state-court judgment against the Greniers. We agree. [1]

HOW CAN CREDITORS ACT TO MAKE YOUR DEBT TO THEM NON DISCHARGABLE IN BANKRUPTCY?

To exclude a debt from discharge under this provision, a creditor must establish four things:
(1) the debtor obtained money through a material misrepresentation that, at the time,
the debtor knew was false or made with gross recklessness as to its truth;
(2) the debtor intended to deceive the creditor;
(3) the creditor justifiably relied on the false representation; and (4) its reliance was the proximate cause of loss. In re Rembert, 141 F.3d 277, 280–81 (6th Cir. 1998).

DEFENDANT ARGUES THE STATE COURT STANDARD IS DIFFERENT THAN THRE FEDERAL STANDARD.

The Greniers claim that the first requirement is missing here, reasoning that Michigan law has a different mental-state standard from the Bankruptcy Code. [1]

MICHIGIAN TORT OF FRAUD CLAIM

While the state tort of fraud imposes liability on defendants who are reckless about the truth of the statements they make, the federal standard requires at least gross recklessness. [1]
Compare id. at 280 with Hi-Way Motor Co. v. Int’l Harvester Co., 247 N.W.2d 813, 816 (Mich.
1976). As a result, the Greniers urge, the Michigan fraud judgment against them does not suffice
under § 523(a)(2)(A), because the Michigan jury might have found them liable based only on
recklessly false statements, not statements made with gross recklessness or knowledge of their
falsity. [1]

That argument might have some force if all we had to go on were the fact of the Greniers’
liability for fraud. But we have more. In finding the Greniers liable, the Michigan jury made
specific factual findings. It answered “yes” to the question whether the Greniers had “actual
knowledge” of the material facts about the condition of their home that they failed to disclose. R.24 (Bankr. E.D. Mich. No. 09-04351) Ex. C at 29. [1]

MICHIGAN COLLATERAL  ESTOPPLE

Michigan collateral-estoppel law, applicable here, see Migra v. Warren City Sch. Dist. Bd.
of Educ., 465 U.S. 75, 81 (1984), “bars the relitigation of issues previously decided when such issues are raised in a subsequent suit by the same parties.” Knoblauch v. Kenyon, 415 N.W.2d 286, 288 (Mich. App. 1987).  [1]

HOW CAN COLLATERAL ESTOPPLE BE USED

The party invoking collateral estoppel must show four things:
(1) the same parties were involved in both proceedings;  
(2) the issue was litigated and resolved in the first proceeding;  
(3) the party against whom the issue was decided in the first proceeding “had a full and
fair opportunity to litigate the issue”; and  
(4) it must be “clear[ ], definite[ ], and unequivocal[ ]”
from the record of the first proceeding how the issue was decided. People v. Gates, 452 N.W.2d
627, 630–31 (Mich. 1990). [1]

The Nehasils have shown all four, and accordingly the jury’s finding that
the Greniers knew of the defects in their home prevents them from relitigating the issue now.
Indeed, we have previously recognized that, if the state court record “invoke[s] the [defendants’]
knowledge of their misrepresentations,” as is true here, collateral estoppel may apply even if the
Bankruptcy Code’s gross-recklessness standard is higher than its counterpart in Michigan common law fraud. See In re Livingston, 372 F. App’x 613, 619 (6th Cir. 2010).[1]

NOT NECESSARY TO PROVE MICHIGAN AND FEDERAL STANDARDS ARE THE SAME

 As in Livingston, we need not decide whether the Bankruptcy Code’s standard is identical to Michigan’s.

EXCHANGE OF MONEY NOT REQUIRED

The Greniers make one other argument: that the fraud exception does not apply because the
Nehasils did not show that the Greniers received any money from the fraud. Br. at 12–13; see
Rembert, 141 F.3d at 280 (creditor must show that “the debtor obtained money through a material misrepresentation”). But this claim, too, is undone by the Michigan verdict: the jury found that the Greniers’ misrepresentations and omissions were a proximate cause of the Nehasils’ decision to buy the house at the price they paid. R.24 (Bankr. E.D. Mich. No. 09-04351) Ex. C at 28–29.  [1]


There is no question that the Greniers obtained money from the Nehasils as a result of their fraud. [1]


As a result, we need not decide whether such a showing is required in the first place. Compare Rembert, 141 F.3d at 280, with Cohen v. de la Cruz, 523 U.S. 213, 215, 217–18 (1998).
Also unavailing is the Greniers’ appeal from the denial of their motion to dismiss for failure
to state a claim. Though the Nehasils’ complaint could have been more detailed, it made reference to and incorporated the state court judgment, providing sufficient notice to the Greniers of the nature of the fraud charge against them. See Fed. R. Civ. P. 9(b); Chesbrough v. VPA, P.C., 655 F.3d 461, 466 (6th Cir. 2011). [1]
III.
For these reasons, we affirm.

NOTE THE  COURT POST SAYS  filed 01/31/2012 NOT RECOMMENDED FOR FULL-TEXT PUBLICATION File Name: 12a0107n.06 No. 10-2242. Parts of this origional post has been modified for presentation here and should not be relied on with out the assistance of counsel.[trb]
---end---

[trb]CAPS ARE BY Terry Bankert , P49048, 1000 Beach St, Flint Mi 48503, 1-810-235-1970

[1]In re ROBERT M. GRENIER and GERTRUDE A. GRENIER, Debtors. CRAIG R. NEHASIL and DONNA E. NEHASIL, as Next Friend of Richard J. Nehasil, Timothy R. Nehasil and Christopher
P. Nehasil, Plaintiffs-Appellees, v. ROBERT M. GRENIER and GERTRUDE A. GRENIER,
Defendants-Appellants. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN Before: BOGGS, ROGERS and SUTTON, Circuit Judges. SUTTON, Circuit Judge.  filed 01/31/2012 NOT RECOMMENDED FOR FULL-TEXT PUBLICATION File Name: 12a0107n.06 No. 10-2242

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