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    Richard A. Marshack to Speak on the Absolute Priority Rule in Individual Chapter 11 Cases

    March 20th, 2012

    On April 17, 2012, Richard Marshack will speak at a dinner program sponsored by the Commercial Law & Bankruptcy Section of the Orange County Bar Association (“OCBA”). The program begins at 5:30 p.m. and addresses the question—“How Absolute is the Absolute Priority Rule in Individual Chapter 11 Cases?”

    Richard is pleased to join a distinguished panel of experts, including the Honorable Alan M. Ahart, United States Bankruptcy Court, the Honorable Theodor C. Albert, United States Bankruptcy Court, the Honorable Scott C. Clarkson, United States Bankruptcy Court, Jeffery I. Golden, Weiland, Golden, Smiley, Wang Ekvall & Strok, LLP and Debra Grassgreen, Pachulski, Stang, Ziehl & Jones LLP.

    Richard has been a Chapter 7 Panel Trustee for 27 years. Richard also regularly represents Chapter 11 debtors and has successfully confirmed countless Chapter 11 plans, both before and since the 2005 enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act.

    The OCBA is a California State Bar approved provider of Mandatory Continuing Legal Education (“CLE”).  The program is approved for 2.0 hours of CLE credits.  More information about this and other CLE seminars is available at the OCBA website or interested parties may call the OCBA Education Dept. at 949-440-6700 ext. 125.

    D. Edward Hays to Appear in Southern California Super Lawyers 2012

    February 1st, 2012

    Marshack Hays LLP is pleased to announce that D. Edward Hays has been selected for inclusion in Southern California Super Lawyers 2012.  Recognition in this publication is a well-deserved honor attained by no more than 5% of the lawyers in California.  Super Lawyers magazine is distributed in all 50 states and Washington, D.C., reaching more than 13 million readers.

    Super Lawyers employs a rigorous selection process with standards that culminate in a rating service of outstanding lawyers from more than 70 practice areas—all of whom have attained a high degree of peer recognition and professional achievement.  The selection process is multi-phased and includes independent research, peer nominations, and peer evaluations.

    Super Lawyers has recognized Ed for his outstanding work in bankruptcy and creditor/debtor rights, including recent published cases such as In re Dick Cepek, 339 B.R. 730 (9th Cir. BAP 2006); In re Rinard, 451 B.R. 12 (Bankr. C.D. Cal. 2011); and In re Four Star Financial Services, Inc., 444 B.R. 428 (Bankr. C.D. Cal. 2011).

    Super Lawyers magazine is distributed to practitioners and to ABA-accredited law school libraries.  Super Lawyers is also published as a special section in leading city and regional magazines across the country.  You can find Ed’s profile on the Super Lawyers website here.

    We are proud of Ed’s achievement and this distinguished recognition.  Along with our clients and friends, we look forward to a productive and successful 2012—and we’re pleased to see Ed and the firm making such a great start to the year.

    Bankruptcy Basics For the Non-Bankruptcy Lawyer – Ed Hays and Richard Marshack Give MCLE Presentation at OCBA “Last Dash – 2012″ Event

    January 18th, 2012

    By D. Edward Hays:

    On January 14, 2012, Richard Marshack and I presented an hour-long program at the “20th Annual MCLE Last Dash & Trade Show″ Continuing Legal Education Marathon organized and sponsored by the Orange County Bar Association (OCBA).  Our presentation was titled: “Bankruptcy Basics for the Non-Bankruptcy Lawyer” and took place at Whittier Law School in Costa Mesa, California.

    We enjoy educating practitioners and enhancing the practice of bankruptcy law in our community.  Since bankruptcy law and its related areas of commercial litigation are highly specialized areas of practice, it’s not easy to present a coherent overview to non-bankruptcy practitioners in a single hour—even those experienced in other areas of law—and we find the challenge and the experience rewarding.  During our presentation, Richard and I used written materials in the form of an enhanced outline, which we promised our audience we would make available on our website. You will find the outline here: Last Dash – Bankruptcy Basics for the Non-Bankruptcy Lawyer.

    The OCBA is a California State Bar approved provider of Mandatory Continuing Legal Education.  The OCBA offers a wide variety of continuing legal education programs including a yearly “Last Dash” program designed to provide MCLE credit for lawyers who need to complete multiple hours of education prior to an upcoming deadline.  The OCBAs “Last Dash” programs are always fun and we look forward to our next opportunity to participate.

    Cynthia S. Conners Inaugurated Mayor of Laguna Woods

    December 16th, 2011

    We wish to congratulate Cynthia S. Conners on being inaugurated as Mayor of the City of Laguna Woods, California.  Her inauguration comes after serving as the Mayor Pro Tem for the preceding year.  Ms. Conners maintains a busy law practice as an associate attorney at our firm, and brings over twenty-eight years of experience to clients of Marshack Hays LLP.

    Although Ms. Conners has lived in the City of Laguna Woods for only a few years, when she moved there she jumped immediately into local governance issues.  Within a year, she was elected to be president of a 9,000-member homeowners’ association in the City, a high profile job with some contentious issues that drew media attention and regularly presented Ms. Conners with governance challenges.

    Ms. Conners was well-prepared by that experience to face the difficult public policy issues that have arisen during her term on the City Council, and she looks forward to bringing her experience and skill to the challenges of the Mayor’s office.  She is particularly focused on issues the City of Laguna Woods continues to deal with such as the state budget crisis, the source cost of water in the Sacramento-San Joaquin River Delta, the quality of waste-water runoff into the Pacific Ocean, and even use of energy from the San Onofre Nuclear Generating Station.

    As part of her duties, Ms. Conners has testified at a regional meeting in favor of the seawater desalination plant in Huntington Beach and has spoken to the Nuclear Regulatory Commission about safety at the San Onofre Nuclear Generating Station.  Those talks included a discussion of evacuation plans for south Orange County in the event of an incident at the plant.

    When asked about other issues she will focus on during her tenure, Ms. Conners said:

    As Mayor, I hope to focus the City and the residents more on green issues, expanding recycling opportunities, and reducing water and energy use.  I also want to encourage our residents, who have enormous expertise in many areas, to serve on county and Southern California commissions, to increase the visibility and impact of Laguna Woods in our region.

    Ms. Conners continues to represent Marshack Hays clients in business and bankruptcy litigation matters.  We are proud of her work for the City of Laguna Woods and wish her good fortune in her tenure as Mayor.

    Sarah C. Boone Joins Marshack Hays LLP

    November 9th, 2011

    Marshack Hays LLP is pleased to welcome Sarah C. Boone. Ms. Boone joined the firm in April 2011 as an associate attorney, and arrives with substantial experience in business and civil litigation as well as bankruptcy matters.

    She is an excellent writer and holds a Master of Fine Arts in Professional Writing from the University of Southern California. We also think clients of the firm find her to be focused on them as people and highly capable of dealing with the challenges of a busy practice.

    Of course, Ms. Boone’s legal experience is worth a quick review. She has represented Trustees on behalf of secured and unsecured creditors where disputes often involve lenders, trade creditors, landlords and individuals. She also has extensive litigation experience—including securities actions involving public companies’ violations of the Securities Act and the Securities Exchange Act—under the umbrella of the Private Securities Litigation Reform Act.

    Ms. Boone is an engaging presence and we are happy to add her valuable litigation, bankruptcy and writing skills to our practice. For more information you may visit her web profile here or download it in pdf form here.

    Ed Hays Will Speak at the OCBF Trial Advocacy Program on November 5, 2011

    November 2nd, 2011

    My partner, Ed Hays, will be presenting and speaking at the Orange County Bankruptcy Forum’s (OCBF) Trial Advocacy Program on Saturday, November 5, 2011, at the Chapman University School of Law. This program features, among other things, a mock non-dischargeability trial.

    As you may know, Ed has actively litigated bankruptcy adversary proceedings including non-dischargeability cases for 19 years. Of course, our focus at Marshack Hays LLP is always on achieving client-driven results in all forms of bankruptcy-related litigation, including non-dischargeability matters. We are proud of our litigation capabilities, and we aggressively pursue such matters when appropriate. This is a great opportunity for Ed to share his experience with other lawyers facing the challenges of taking cases to trial in our bankruptcy court system.

    This OCBF Program will also feature the Honorable Erithe Smith as presiding judge and moderator along with William Burd; Evan Smiley; and Cathrine Castaldi. The participants will focus on all aspects of trial practice in the context of a non-dischargeability case, including trial preparation, opening statements, direct and cross-examination of an expert, cross-examination of the debtor, closing arguments, final comments and questions.

    More information about the program is available through the Orange County Bankruptcy Forum.

    Keeping the Wolves from the Door: How Effective Are Third Party and Self-Settled Trusts in Protecting a Beneficiary’s Interest in a Trust from Creditors’ Claims and the Reach of the Bankruptcy Trustee?

    October 20th, 2011

    In just a few days, on October 27, 2011, Ed Hays and I will be presenting a program along with Barry S. Engel at the 31st Annual Southern California Tax & Estate Planning Forum (SCT&EP) in San Diego. The program focuses on the intersection of trust law and bankruptcy. Mr. Engel is a nationally recognized asset protection attorney based in Colorado and should offer an interesting counterpoint to our bankruptcy perspective on this topic. The title of our program offers insight into the basic tension that exists between estate planning and creditors’ collection rights.

    Trust laws offer tangible estate and tax planning benefits, not the least of which is protection from creditors and bankruptcy trustees, in certain circumstances and to a certain extent, through valid spendthrift provisions. The priorities of good estate planning, however, are sometimes at odds with the goals of the Bankruptcy Code, which not only limits the protections of spendthrift provisions in accordance with applicable non-bankruptcy law, but deals harshly with debtors’ efforts to protect their assets from creditors—even if those efforts took place long before the bankruptcy was filed. The state and federal laws which are meant to fairly balance the rights of creditors and debtors extend into bankruptcy, making trusts one of the more fascinating issues we face, both in our firm’s capacity as counsel for debtors and creditors and, for me, as a trustee.

    As a bankruptcy trustee—and “wolf” in the eyes of debtors hoping to rely on trust protections—I use these laws to test when and whether trust interests become property of a bankruptcy estate. See When Are Spendthrift Trust Interests Property of the Estate. I also analyze whether and to what extent any spendthrift provisions will protect such trust interests, shielding them from collection or turnover to a trustee in whole or in part. See When Are Spendthrift Trust Interests Property of the Estate? – Part 2. I’m also cognizant that self-settled trusts and revocable trusts present opportunities for a bankruptcy estate of which I am the representative to recover assets: such trusts generally do not offer significant protections in bankruptcy. E.g., see Schwarzkopf–The Ninth Circuit Allows Bankruptcy Trustee to Reach Assets Held in Two Weathered Trusts.

    This is a challenging niche in our insolvency laws, and we look forward to discussing it with one of the professionals who do their best to “keep the wolves from the door.” Ed and I have litigated these issues in the past and are honored to speak on these topics at the invitation of the SCT&EP.

    Are Inherited IRA Accounts Exempt Retirement Funds?

    June 10th, 2011

    Do inherited IRAs constitute “retirement funds” that may be exempted from a bankruptcy estate? This issue causes some consternation among bankruptcy trustees when debtors assert exemption claims on money they receive as an inheritance—money that they did not set aside themselves or accumulate from their own earnings over time.

    Inherited IRAs are allowed special tax treatment that may preserve some tax deferral benefits but they are treated differently than regular IRAs. In general, a beneficiary of an inherited IRA must (1) withdraw all of the funds within five years; or (2) make an election to take substantial and equal periodic distributions over their actuarial life expectancy. Under either scenario, the beneficiary’s age is irrelevant and there is no penalty for early withdrawal even if the beneficiary is less than 59 ½ years old.

    Yet when beneficiaries of such accounts file bankruptcy, they often assert that such accounts are  their retirement funds and are exempt as a result. Such exemption claims essentially bootstrap the actions and intent of the deceased (i.e., retirement planning and tax free earnings accumulation) and attempt to color the debtor’s inheritance with the character of such “retirement funding” for the debtor—for exemption purposes in the debtor’s bankruptcy. Debtors making such “bootstrapping” exemption claims often base them on exemption language added to 11 U.S.C. §522(b) in the 2005 amendments to the Bankruptcy Code.

    Most trustees seem to think these claims unfairly ignore the underlying statutory scheme of §522(b), as amended, and are unfair to creditors, particularly since the debtors are in fact taking withdrawals from these plans without regard to their age and working status. Instead, many trustees contend that Congress meant to clarify that IRAs and other tax exempt retirement plans would be exempt as to their taxpaying, retirement planning contributors under certain circumstances, even if the taxpaying contributors to such retirement plans transferred the funds to a different account. (more…)

    In re Rinard: Automatic Stay Continues For “Estate Property” After 30 Days In Debtor’s Second Case

    May 23rd, 2011

    By Ed Hays:

    When a debtor re-files a bankruptcy petition within a year of dismissal, §362(c)(3)(A)1 provides that the automatic stay “shall terminate with respect to the debtor” thirty days after the second petition. But does this extra measure of protection for creditors eviscerate the right of a Chapter 7 trustee to administer valuable estate property in the second case? Particularly where the plain meaning of §362(c)(1) provides for continued protection of the automatic stay for estate property until such property is abandoned.

    A new opinion from the Bankruptcy Court in the Central District of California, In re Rinard, holds, at least preliminarily, that a Chapter 7 trustee continues to benefit from the protection of the automatic stay for estate property after the expiration of the thirty day period referenced in §362(c)(3)(A).

    Chapter 7 trustees have been on high alert since a contrary holding of the Ninth Circuit Bankruptcy Appellate Panel was published in February, 2011. The BAP held in In re Reswick2 (a Chapter 13 case) that the neither the debtor nor the estate is entitled to any continued protection from the automatic stay after thirty days. A significant concern among Trustees is this—what if the second case has very valuable estate property and a secured creditor decides to foreclose on the property and wipe out equity for creditors without first seeking relief from stay (or at least after obtaining a comfort order from the bankruptcy court)?

    And that is exactly what happened in Rinard. (more…)

    1. Unless stated otherwise, all section references are to the Bankruptcy Code, 11 U.S.C. §§101-1330. [↩]
    2. 446 B.R. 362, (9th Cir. BAP 2011). [↩]

    In re Nicholson: Preponderance of Evidence Will Get Exemption Claim Denied When Filed in Bad Faith

    March 24th, 2011

    By Ed Hays:

    Trustee’s often face a procedural quagmire where debtors fail to accurately list or value assets and then seek to amend schedules and claims of exemption. Yet the Ninth Circuit BAP recently provided solace to trustees and creditors that must fall back on §105(a)1 to object to an amended claim of exemption. The Nicholson case2 confirms that the standard of proof for such an objection based on bad faith is the preponderance of evidence. The opinion should also serve as a reminder to debtors to be thorough and honest in disclosing facts regarding the existence and value of potential assets or risk losing the ability to claim some portion of that value as exempt.

    The Ninth Circuit has previously held that exemption claims may be surcharged based on the bankruptcy court’s equitable power under §105(a) as follows: (more…)

    1. Unless stated otherwise, all section references are to the Bankruptcy Code, 11 U.S.C. §§101-1330. [↩]
    2. Tyner v. Nicholson (In re Nicholson), 435 B.R. 622 (9th Cir. BAP 2010). [↩]
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