Shulman Hodges & Bastian LLP

September 2016 Archives

Only Generalized Alter Ego Claims Are Property of the Bankruptcy Estate

Our trustee clients as well as our creditor clients should keep in mind that alter ego claims are only property of the bankruptcy estate if there is a generalized injury to the debtor corporation and all of its creditors. See, In re Advanced Packaging & Prods. Co., 426 B.R. 806, 818-819 (C.D. Cal. 2010). "Under California law, a corporation in bankruptcy may pierce its own veil to seek recovery for its creditors if equity so demands." Id. at 818. If, however, the injury is a particularized injury to a particular creditor and no other claimant or creditor has an interest in the cause, the claim does not become property of the bankruptcy estate. Id. at 819.

Bankruptcy Court Must Consider Debtor's Intent with Respect to Future Residency in Homestead When Ruling on Exemption

In re Diaz, 547 B.R. 329 (9th Cir. BAP 2016), the Ninth Circuit Bankruptcy Appellate Panel ("BAP") held that the bankruptcy court incorrectly interpreted California law related to the homestead exemption. In particular, the BAP said the bankruptcy court failed to consider the Debtor's intent to reside in the property in the future and that physical occupancy of the property on the petition date was not central to the determination of whether the debtor can claim a homestead exemption. Further, a temporary absence from the home, even on the petition date, did not preclude the debtor from claiming a homestead exemption.

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