Supreme Court of the United States To Hear BG Law Case On Non-Existent Bankruptcy Lien

Washington, D.C. – January 10, 2014 – On Monday, January 13, 2014, the Supreme Court of the United States (“SCOTUS”) will hear a landmark case concerning a bankruptcy court’s power to protect the bankruptcy process from abuse.  In Stephen Law v. Alfred H. Siegel, Chapter 7 Trustee, Mr. Law forfeited the privilege of claiming a homestead exemption due to his attempt to retain non-exempt equity in his home.  Law listed a second mortgage on his residence held by a non-existent “Lili Lin of China.”  The Supreme Court’s interest in the almost 10 year old BG Law case, which has thus far seen 14 appeals in various venues, seems focused on a circuit split over the interpretation of 105(a), the section of the U.S. Code that grants courts equitable powers to implement court orders or rules.  The decision will certainly change the way Bankruptcy Courts operate going forward.

Mr. Law’s conduct forced the Bankruptcy Trustee, Alfred Siegel, to spend hundreds of hours (and approximately a million dollars) disproving the existence of the second mortgage, and defending against Law’s numerous appeals.  Bankruptcy courts have “broad authority” under Section 105(a) of the Code and their inherent powers to “take any action that is necessary or appropriate ‘to prevent an abuse of process.’”  The Bankruptcy Court acted within its statutory and inherent authority in finding that Mr. Law forfeited the privilege of claiming a homestead exemption.  It is up to SCOTUS to affirm this ruling.

Steven T. Gubner, Managing Partner at BG Law and Counsel of Record, in Stephen Law v. Alfred H. Siegel, Chapter 7 Trustee says “Despite defending over 14 appeals, I am proud that the Office of the United States Trustee, the Solicitor General, all the prior courts, and my client Alfred Siegel, have not wavered in their duty to ensure that Mr. Law’s conduct not go unpunished.”  Trustee Alfred Siegel adds “We are extremely happy that over the past eight years all the lower courts have agreed with us that Mr. Law’s conduct justified the surcharge of his homestead exemption.”  The two now hope SCOTUS will confirm every lower courts’ ruling.

Stephen Law v. Alfred H. Siegel, Chapter 7 Trustee (Case No. 12-5196) will be heard on January 13, 2014 at 11:30 AM EST.  Neal Kumar Katyal, Partner at Hogan Lovells and Co-Chair of its Appellate Practice, will be arguing the case.

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