Author Archives: David A. Blansky, Esq.

New York’s Highest Court Rules on Rent-Stabilized Leases in Bankruptcy

Mary Santiago-Monteverde lived in her apartment, which was rent-stabilized, for over forty years. When her husband died, she was unable to pay her credit card debts and filed for Chapter 7 bankruptcy. She initially listed her apartment lease on Schedule G of her petition as a standard unexpired lease. Shortly thereafter, the owner of the apartment approached the Chapter 7 Trustee and offered to purchase the debtor’s interest in the lease. When the Trustee advised the debtor that he planned to accept the offer, she amended her filing to list the value of her lease on Schedule B as personal property exempt from the bankruptcy estate under DCL § 282 (2) as a “local public assistance benefit.”

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Supreme Court Clarifies “Stern Claims” in Key Decision on Bankruptcy Court Power

Bellingham Insurance Agency (“Bellingham”) ceased operations in 2006 and subsequently transferred assets and operations to a successor, Executive Benefit Insurance Agency, Inc. (“Executive”). Bellingham filed under Chapter 7 in the Western District of Washington later in 2006 . In 2008, the Bellingham trustee, Peter Arkison (the “Trustee”), filed an adversary proceeding against Executive and other insiders of Bellingham seeking the avoidance of fraudulent transfers, a declaratory judgment that Executive is a successor in interest to Bellingham and substantive consolidation of certain defendant entities. The Bankruptcy Court subsequently granted the Trustee’s motion for summary judgment. The District Court for the District of Washington then affirmed. Importantly, this was done by reviewing the Bankruptcy Court’s decision de novo.

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Law v. Siegel – SCOTUS Limits the Application of 11 U.S.C. § 105

An important issue that is often addressed in Chapter 7 bankruptcy cases is whether the debtor asserts a “homestead” exemption to attempt to protect their home equity from becoming property of the bankruptcy estate. Recently, an intriguing decision was handed down by the United States Supreme Court. The important message gleaned from the court was that 11 U.S.C. § 105 cannot be invoked while disregarding other express provisions of the Bankruptcy Code.

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Have you ever wondered if online ratings websites have bogus reviews? Cynics are now saying “I told you so” when it comes to Yelp, where attorneys at a bankruptcy firm in San Diego are being accused of creating accounts on the site and posting fake, positive reviews about their firm. The McMillan Law Group seems to have been caught posing as satisfied clients, as Yelp has cross-referenced those “clients” with the firm’s bankruptcy filings. Further, according to a report, many of the reviews were created by the same IP address, that of the Law Group.

You may be wondering how Yelp would have any knowledge of sham reviews on their site, but it turns out that they may have been monitoring McMillan for months now. In May of this year, the McMillan Law Group successfully sued Yelp in California state court based on a claim that Yelp decreased the firm’s online visibility because they did not purchase advertising space. Whether this was revenge or for another motive, the lesson here is that when choosing a law firm (or anything else), it is important to rely on personal testimonials and a proven track record.



Did you miss him? Irving Picard, the Trustee liquidating Bernard L. Madoff Investment Securities LLC, was back in the news recently. U.S. Bankruptcy Judge Burton Lifland of the Southern District of New York concluded that “time-based” damages to victims of the massive Ponzi scheme should not be awarded. The ruling means that Madoff victims who still stand to recover from the liquidation will not have their distributions adjusted for interest or inflation. In anticipation of the decision, Picard held approximately $1.36 billion in reserve that can now be distributed more quickly, albeit at his desired “discount.”

Although Picard has already recovered $9.35 billion and distributed more than $5.4 billion to former Madoff customers, Judge Lifland’s decision reflected his perception of “unfairness” that would result if interest and inflation were considered in the payout. The decision noted that adding those considerations improperly distinguishes between those who have recovered their principal and those who have not, and might provide a “windfall” for claims traders who were never victims of the massive fraud. In essence, Judge Lifland agreed with the Trustee’s method of calculating the distribution as the court did in 2011, when they decided to disregard the amounts listed on account statements and instead calculate losses by subtracting customer investments from the amount extracted from Madoff’s firm.

Further, in order to expedite the delivery of the $1.36 billion, Lifland voiced his support for a direct appeal to the Second Circuit, bypassing the Southern District. We will track this as it progresses through the appellate process and update with new information.

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