From The Top In Brief - March/April 2014

In its first bankruptcy decision of 2014 (October Term, 2013), the U.S. Supreme Court held on March 4, 2014, in Law v. Siegel, No. 12-5196 (Mar. 4, 2014) (available at http://www.supremecourt.gov/opinions/13pdf/12-5196_8mjp.pdf), that a bankruptcy court cannot impose a surcharge on exempt property due to a chapter 7 debtor's misconduct, acknowledging that the Supreme Court's decision may create "inequitable results" for trustees and creditors. In reversing a ruling by the Ninth Circuit Court of Appeals, Law v. Siegel (In re Law), 2011 BL 148411 (9th Cir. June 6, 2011), cert. granted, 133 S. Ct. 2824 (2013), the Supreme Court concluded that the bankruptcy court overstepped the bounds of its statutory authority (under section 105(a) of the Bankruptcy Code) and inherent authority when it imposed a $75,000 surcharge on the debtor, who engaged in litigation misconduct by falsely claiming, in an effort to defraud creditors, that his California homestead was encumbered by a lien securing a $168,000 purchase money loan provided by a personal friend. Litigation concerning the fabricated lien and the debtor's "egregious misconduct"...