Robert Rael, et ux. v. Patrick S. Layng, United States Trustee, Region 19

This case presents a conflict as to the subject matter jurisdiction of bankruptcy courts. It also presents conflicts as to whether an order entered by a court without subject matter jurisdiction is enforceable and the standard for determining what constitutes a willful disobeyance of a “lawful” order under 11 U.S.C. § 727(a)(6)(A). In the Tenth Circuit, a bankruptcy court’s subject matter jurisdiction now includes the allowance of sales of property of the bankruptcy estate free and clear of liens after a Chapter 11 plan has been confirmed (even though the plan vested said property in the debtor).

1. Whether a bankruptcy court’s subject matter jurisdiction over what was property of the bankruptcy estate continues after the confirmation of a Chapter 11 plan, which plan vested said property in the debtor?

2. Whether matters under 11 U.S.C. § 727(a)(6)(A) are to be construed strictly against the party objecting to the bankruptcy discharge and liberally in favor of the debtor such that the debtor must be shown to have willfully and intentionally disobeyed an order?

3. If a bankruptcy court entered an order on a matter that it did not have subject matter jurisdiction, is the order void only if the bankruptcy court plainly usurped its power?