Rick Warren v. Alexander Bednar

Case Type:
Case Status:
Reversed and Remanded
United States Bankruptcy Appellate Panel of the Tenth Circuit BAP Nos. WO-20-041; WO-20-042 (10th Circuit, Apr 27,2021) Not Published
The BAP reversed the bankruptcy court's decision which denied the creditors' request to garnish funds held by the Chapter 13 Trustee post-dismissal, and the BAP remanded the matter to allow the bankruptcy court to conduct further proceedings on the Barton Doctrine matters.
Procedural context:
The Debtor filed bankruptcy three times to stop a foreclosure sale. The First Case dismissed due to the Debtor's failure to take credit counseling. The Second Case dismissed due to the Debtor's failure to attend the 341 Hearing. The issues appealed arose from the now-dismissed Third Case. Creditors moved for an order confirming that the automatic stay did not apply in the Third Case under section 362(c)(4)(A)(i) of the Bankruptcy Code. The bankruptcy court agreed that the stay did not apply, and an order issued. The Debtor failed to confirm a plan in the Third Case. Creditors of the Debtor moved for authority to garnish funds held by the Chapter 13 Trustee post-dismissal. The Chapter 13 Trustee responded that he opposed garnishment of funds, that the Barton Doctrine required the bankruptcy court to give permission for the garnishment to occur, and that section 1326(a)(2) required the return of any funds in the Chapter 13 Trustee's possession to the Debtor without any consideration of the Barton Doctrine. The bankruptcy court found that the relief sought by the Creditors was exactly the sort of relief the Barton Doctrine existed to avoid, and the bankruptcy court denied leave under the Barton Doctrine without establishing a record of what factors were weighed. Then the bankruptcy court denied the motion by applying section 1326(a)(2) as a per se bar to garnishment of a trustee following dismissal. The Creditors appealed.
A disbarred attorney (Debtor) filed a Chapter 13 bankruptcy to stop a foreclosure on the Debtor's interest in a piece of real estate in Oklahoma (First Case). The bankruptcy court dismissed the First Case immediately, because the Debtor failed to take the mandatory pre-filing credit counseling course. The foreclosure action was reset by the state court, and the Debtor refiled for bankruptcy (Second Case). The Debtor failed to attend the section 341 Meeting of Creditors, and the Second Case was dismissed. The state court again reset the foreclosure action, and again the Debtor refiled for bankruptcy (Third Case). Certain creditors, employees of the state court acting in their official capacities, entered their appearances in the Third Case. These creditors held four sanction judgments against the Debtor (Creditors). The Creditors received an order confirming the stay did not apply. The Debtor tried for over eight months to confirm a plan, but the bankruptcy court ultimately found the Debtor ineligible for Chapter 13. Confirmation was denied, and the Third Case was dismissed. At the time of dismissal the Chapter 13 Trustee held over $30,000 in funds representing plan payments made by the Debtor.
The Hons. Romero, Somers, and Parker

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