Ninth Circuit Dismisses Bankruptcy Appeal as Moot After Debtor Fails to Block Sale of All Relevant Assets and Dismissal of Underlying Bankruptcy

The Ninth Circuit U.S. Court of Appeals recently released an opinion that demonstrates the complexity and confusion that can accompany bankruptcy cases, and the necessary steps to protect a debtor’s property pending an appeal of a bankruptcy court order. The Ninth Circuit’s decision in the case of In the Matter of Castiac Partners II, LLC essentially dismissed a debtor’s appeal of a decision allowing the creditors to sell foreclosed property because the property had already been sold, and the debtors failed to seek a stay of the bankruptcy court’s order allowing the property to be sold pending the initial appeal. As a result of the Ninth Circuit’s ruling, the sale of the debtor’s assets cannot be challenged, and the debtor will be unable to pursue the bankruptcy case.

Dollar BillThe Debtor Appeals an Unfavorable Ruling that Allowed Creditors to Sell Their Assets

The debtor and petitioner in the case was a corporation that held several properties that had gone into foreclosure prior to the bankruptcy filing. The debtor filed a Chapter 11 bankruptcy case and was granted an automatic stay of the foreclosures pending the bankruptcy case resolution. The creditors then motioned and successfully argued to the bankruptcy court that the foreclosure sales should be permitted to proceed, and the debtor appealed the decision to the district court.

The Debtor Fails to Stay the Bankruptcy Court Order Pending the Appeal, Resulting in the Bankruptcy Being Dismissed

The debtor did not seek a stay of the bankruptcy court’s order allowing the foreclosures to proceed pending their appeal, and the creditors continued with the foreclosures, eventually taking possession of the properties at a foreclosure sale. After the properties had been sold, the U.S. bankruptcy trustee asked that the bankruptcy be dismissed, since the properties were the only assets that had been part of the bankruptcy estate. Concluding that the bankruptcy estate contained no property for it to make rulings upon, the bankruptcy court dismissed the bankruptcy cases without an objection from the debtor.

Debtor’s Initial Appeal Reaches the Ninth Circuit, But There Is No Case Left to Rule Upon

When the debtor’s initial appeal of the decision allowing the foreclosures to proceed reached the Ninth Circuit, the appellate court ruled that since the principal bankruptcy case had been dismissed without objection, they had no jurisdiction to grant the debtor relief. Since the debtor did not stay the foreclosures or object to the dismissal of the bankruptcy, the Ninth Circuit was unable to consider its arguments about why the foreclosures should have been stayed in the first place. Had the debtors asked the bankruptcy court to stay their relief order pending the initial appeal, or had they objected to the dismissal of the bankruptcy case at the bankruptcy court level, the Ninth Circuit ruling may have been different.

Hiring the Right Bankruptcy Attorney

If your family or company seems overwhelmed in debt, and you are considering bankruptcy, it’s essential to retain a qualified bankruptcy attorney to ensure that the proper procedures are followed to protect your assets pending the bankruptcy proceeding. A poorly advised decision can be fatal to a bankruptcy claim, and the lack of a swift response could eliminate your chance for relief entirely. The Louisville and Southern Indiana bankruptcy attorneys at the Schwartz Bankruptcy Law Center have the skill and experience that is needed to proceed with a complex bankruptcy case without missing a step that could eliminate your ability to seek bankruptcy protection. We advise and represent clients nationwide in many different types of bankruptcy proceedings. Call 866-366-3328 today to schedule a risk-free consultation or contact us through our website.

More Blog Posts:

Rapper “50 Cent” Submits Repayment Proposal as Part of Ongoing Bankruptcy, Kentucky Bankruptcy Lawyers Blog, published April 18, 2016.

Ninth Circuit Reverses Bankruptcy Panel’s Finding that Attorney’s Debt Was Not Dischargeable, Kentucky Bankruptcy Lawyers Blog, published May 12, 2016.

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