The U.S. Bankruptcy Court for the Eastern District of Wisconsin will be closed on
Friday July 3, 2015 in observance of the Independence Day Holiday
Creditor's motion to dismiss chapter 13 debtor's adversary proceeding alleging violation of the discharge injunction was denied. The complaint stated a cause of action and unresolved issues remained regarding the discharge of student loans in the debtor's 1994 case. In re Audrey Daniels, Case No. 94-20144, Debtor v. Collection Technology, Inc., Adv. No. 11-2150
Bankruptcy petition preparers were sanctioned for violating sec. 110. In re Robert McCoy, et al. Case No. 11-24652 (court minutes and order only)
Plaintiff's motion for summary judgment was denied because prior default judgment against debtor did not have preclusive effect under state (Minn.) or federal (8th Cir.) law. In re James & Christine Putman, Case No. 10-32980, Tony P. Trimble, Trustee v. James Putman, Adv. No. 10-2484
Debtor's counsel was sanctioned $500 for filing chapter 7 petition for debtor who was ineligible for discharge, for sole purpose of delaying garnishment creditor until such time as debtor was eligible for discharge. In re Jerimiah Snyder, Case No. 10-32042
Because law firm LLC had not been dissolved, chapter 7 debtor husband's former law firm retained liens in contingent fee contracts the debtor took with him when he left the firm. In re John & Shellie Schomisch, Case No. 09-34022
State Department of Corrections did not violate the automatic stay when it deducted funds from chapter 7 debtor's prisoner trust account postpetition and applied them against an obligation to pay for medical services received while he was in prison.The obligation was a nondischargeable penalty, as well. In re Thomas William Reimann, Case No. 09-37695 Published: In re Reimann, 436 B.R. 564 (Bankr. E.D. Wis. 2010).
Debtors were not eligible for chapter 13 because their unsecured debts exceeded cap set forth in section 109(e). The debtors' liabilities relating to their personal guarantees of corporate debt were not contingent. In re Dwight & Robecca Glaubitz, Case No. 09-38348 Published: In re Glaubitz, 436 B.R. 99 (Bankr. E.D. Wis. 2010).
Under doctrine of judicial estoppel, chapter 13 debtor was prohibited from arguing his conduct did not result in a willful and/or malicious injury pursuant to sec. 1328(a)(4), due to his previous state court stipulation that obligation was nondischargeable based on the willful and malicious injury to plaintiff. In re Scott & Annabelle Wettstein, Case No. 09-36498, Tammy Montonati v. Scott Wettstein, Adv. No. 10-2124
Certain electronic fund transfers and credit card receivables received prepetition by the chapter 11 debtor's fuel supplier were avoidable preferences. Because payment terms for new fuel shipments changed from being due 10 days after delivery to cash-in-advance, the additional payments on the balance owed the supplier were neither contemporaneous exchanges for new value nor made in the ordinary course of the parties' business. In re Valley Petroleum, LLC, Case No. 09-28869, Debtor v. Garrow Oil Corp., Adv. No. 09-2328
Court overruled chapter 11 debtor's objections to claims of former employees. Employees were entitled to wages earned but not paid pursuant to doctrine of quantum meruit. In re Share Building Products, Inc., Case No. 09-21553
Because chapter 13 debtor failed to establish the untimely filing of claim on behalf of omitted creditor was the result of his excusable neglect, his motion for enlargement of time in which to file a claim was denied. Even if excusable neglect had been established, any amount still due and owing to omitted creditor upon debtor's discharge would remain nondischargeable. In re Vance Robert Schuster, Case No. 08-20892 Published: In re Schuster, 428 B.R. 833 (Bankr. E.D. Wis. 2010).
Court sustained chapter 13 trustee's objection to confirmation of plan based upon debtors' erroneous calculation of tax obligations. In re Todd & Kathryn Brennecke, Case No. 09-34193
Secured creditor opposed confirmation of chapter 13 plan which required creditor to notify debtor annually of accrued postpetition fees, expenses or charges. The court overruled the objection, finding the annual notice requirement was not onerous. In re Federico Teran, Case No. 09-37858
Minority owner and major creditor of chapter 7 corporate debtor objected to the proofs of claim of the debtor's majority owner and former employee. The court sustained the objections and found the claimants were not entitled to compensation under the doctrine of quantum meruit. In re CAM Recycling & Materials, Inc., Case No. 09-25303
Chapter 13 trustee opposed confirmation of plan because it limited contribution of one half of the debtor's tax refund to shorten the length of the plan rather than to pay unsecured creditors. The court sustained the objection, finding if a below-median income debtor elects to propose a longer term than three years and the court for cause approves such longer term, the requirements for payment of disposable income (which includes tax refunds), in years four and five of the plan remain the same as those in the first three years of the plan. In re Mary Nunez, Case No 09-32442
In a "double debtor" scenario, secured creditor's perfected security interest in collateral in possession of debtor lapsed one year after collateral was transferred from secured creditor manufacturer to debtor. Because the manufacturer had filed its financing statement in an incorrect location, its security interest was unperfected, as well. Consequently, first and second secured creditors' interests were subordinate to third secured creditor with perfected security interest in debtor's collateral. (This decision is a court minute decision, only.) In re Wolverine_Fire Apparatus Co. of Sherwood Michigan, Case No. 09-32985
Plaintiff filed a motion for summary judgment seeking a determination that obligations owed it were excepted from the debtors’ discharge, as well as a denial of the debtors’ discharge. The debtors had allegedly converted the plaintiff’s collateral by failing to account for missing livestock and feed. The court granted the motion, in part, finding the debtor husband’s judgment of nondischargeability in a prior bankruptcy case was nondischargeable in the current case. The court denied the motion, in part, finding issues of material fact, namely the debtors’ subjective intent, precluded the entry of summary judgment on the other counts. In re DuWayne & Faith Kirchoff, Case No. 09-21188, USA v. Debtors, Adv. No. 09-2159
Issue preclusion barred relitigation of state court judgments against chapter 7 debtor for assault and battery, as well as derivative claims for loss of society and companionship, making the judgments nondischargeable under sec. 523(a)(6). In re David M. Larsen, Case No. 09-22963, Teri Jendusa-Nicolai, et al. v. Debtor, Adv. No. 09-2231 Published: In re Larsen, 422 B.R. 913 (Bankr. E.D. Wis. 2010).
Chapter 13 debtor who voluntarily dismissed previous bankruptcy case in which secured creditors had moved for relief from the automatic stay was not eligible to be a debtor under sec. 109(g)(2). (This decision is a court minute decision, only.) In re Mazen N. Khoury, Case No. 09-31074
Court abstained from exercising jurisdiction over funds related to state court receivership. In re David Michael Larsen, Case No. 09-22963
Chapter 7 trustee objected to the debtor's claim of exemption in a lien on his former marital home, executed by his former spouse, in partial settlement of their divorce proceedings eight years prior to the bankruptcy filing. The court sustained the objection, finding the debtor lost his right to claim either a federal or state homestead exemption. In re Daniel A. Fink, Case No. 09-23299 Published: In re Fink, 417 B.R. 786 (Bankr. E.D. Wis. 2009).
Secured creditor filed an objection to confirmation of the chapter 13 debtors' plan, arguing the financing of the negative equity on the debtors' used trade-in vehicle was included in the financing of their new vehicle purchase, resulting in its claim being protected from cram down under sec. 1325(a). The debtors argued the negative equity resulting from the trade-in of their old vehicle was not part of the purchase money security interest, and was thus not subject to the 910-day rule imposed by the hanging paragraph in sec. 1325(a). The court sustained the creditor's objection, concluding the entire amount of the debt securing the new vehicle met the definition of purchase money security interest. In re Brian & Patsy Morey, Case No. 09-26318 Published: In re Morey, 414 B.R. 473 (Bankr. E.D. Wis. 2009).
Chapter 7 pro se debtor moved for the appointment of counsel pursuant to 28 U.S.C. sec. 1915(e)(1). The court denied the motion, finding no exceptional circumstances justified the appointment of pro bono counsel. In re David Michael Larsen, Case No. 09-22963 Published: In re Larsen, 406 B.R. 821 (Bankr. E.D. Wis. 2009).
The chapter 13 trustee opposed confirmation of plan which treated student loan creditor as separately classified creditor, arguing it unfairly discriminated against the other unsecured creditors. The court overruled the trustee's objection, finding the specific provisions of sec. 1322(b)(5) for the cure of arrearages and maintenance of regular payments on long term indebtedness applied and superceded the general unfair discrimination provisions of sec. 1322(b)(1). In re Timothy & LeAnn Truss, Case No. 08-21626 Published: In re Truss, 404 B.R. 329 (Bankr. E.D. Wis. 2009).
The plaintiffs in theft by contractor cause of action were entitled to judgment of nondischargeability under sec. 523(a)(4). The court found the services performed for the debtor's construction company fell within the provisions of both the old and new versions of Wis. Stat. sec. 779.02(5). In re Robert & Sandra Ecker, Case No. 07-29439, Fischer Construction, et al. v. Robert Ecker, Adv. No. 08-2059 Published: In re Ecker, 400 B.R. 669 (Bankr. E. D. Wis. 2009).
The chapter 13 trustee opposed confirmation of the debtor's plan because she included non-escrow homeowners' insurance and real estate taxes on Line 47 of Form 22C. The court overruled the trustee's objection as it related to the deduction for insurance and property taxes because, even though those expenses were not paid into an escrow account, such payments were required by the contract that created the security interest. In re Christine C. Bermann, Case No. 08-28387 Published: In re Bermann, 399 B.R. 213 (Bankr. E. D. Wis. 2009).
Creditor opposed the chapter 11 debtors' proposed disclosure statement on the grounds that it did not adequately describe the cross-collateralization of the debtors' obligations to it. The court determined the debtors' original mortgage on their homestead did not secure the subsequent business notes. In re Charles & Mary Kay Becker, Case No. 07-26001 Published: In re Becker, 400 B.R. 221 (Bankr. E.D. Wis. 2009), rev'd in part, 09-C-170 (W.D. Wis. 2009).
Debtor who was currently incarcerated in a prison that was experiencing difficulties with its telephone service moved for at least a temporary waiver of the prepetition credit counseling requirement. Prisoner's motion for exemption from credit counseling was denied by the court because no "exigent circumstances" existed, of a kind entitling the debtor to a temporary waiver of the requirement. Furthermore, the debtor's incarceration did not rise to the level of "disability," of a kind warranting a permanent waiver of the credit counseling requirement. In re David Michael Larsen, Case No. 08-33993 Published: In re Larsen, 399 B.R. 634 (Bankr. E.D. Wis. 2009).
Trustee's objection to debtor's motion for modification of confirmed chapter 13 plan was sustained. Although debtor failed to remit one-half of tax refunds as required by confirmed plan, she proposed to cease payments to unsecured creditors, arguing they had already received the dividend provided for in the confirmed plan. The court concluded the debtor's attempt to receive a discharge after defaulting on the plan and violating the terms of the confirmation order was impermissible. In re Willie Mae Carson, Case No. 04-26733 Published: In re Carson, 397 B.R. 911 (Bankr. E.D. Wis. 2008).
Lender's security interest, perfected within 90 days of the debtor's petition date, was avoided under s. 547 of the Code. The lender's defenses of equity and equitable subrogation were rejected by the court. In re Vission, Inc., Case No. 07-21957, Paul G. Swanson, Trustee v. Trasino Park-Hudsons, LLC, et al., Adv. No. 07-2111 Published: In re Vission, Inc., 400 B.R. 215 (Bankr. E.D. Wis. 2008).
Secured creditors' objections to chapter 13 plans were sustained, in part, and overruled, in part. The plan provision providing for separate treatment of prepetition arrearage(s) as contractually current was allowed, as interpreted by the court. The plan provision providing the mortgage(s) was current upon discharge was not allowed. In re Mary & Vernell Patton, et al., Case Nos. 08-23038, 08-24709, 07-28262
Chapter 13 debtors who experienced a reduction in income immediately preceeding the filing of their bankruptcy petition proposed to pay unsecured creditors less than the distribution required under the means test. The trustee opposed confirmation of the plan. The court determined that the term "projected disposable income" should not always be based solely on a historical perspective of income from Form B22C alone, but rather other evidence could be considered when a debtor experiences a significant change in circumstances reducing income at or around the time of the bankruptcy filing. In re Daniel & Eleanor Hilton, Case No. 08-25440 Published: In re Hilton, 395 B.R. 433 (Bankr. E.D. Wis. 2008).
Creditor filed a motion to have its adversary complaint objecting to the dischargeability of an obligation, which was filed before the deadline to file proofs of claim in the debtor's chapter 13 case, construed as an informal proof of claim. The court denied the motion. Although the complaint evidenced the creditor's intent to hold the debtor liable for the obligation, it did not express an intent to hold the chapter 13 estate liable. In re Kelly Ann Wood, Case No. 08-21191
After the chapter 13 debtors defaulted under the terms of their prepetition lease and the automatic stay was lifted, the vehicle was repossessed by the creditor and sold. The creditor asserted an administrative claim for the amounts remaining due under the lease. The court granted the creditor’s motion, finding the obligation was beneficial to the estate. In re James & Judith Michalek, Case No. 06-23355 Published: In re Michalek, 393 B.R. 642 (Bankr. E. D. Wis. 2008).
Below-median income chapter 13 debtor's plan, which proposed to limit contribution of one half of debtor's tax refunds to the first three years of the plan and use the funds to shorten the length of the plan, was not proposed in good faith. In re Sonya D. Simpson, Case No. 08-21251
The state brought an adversary proceeding against the debtor, seeking a determination that an obligation for child care overpayments was nondischargeable. The court granted summary judgment to the state, finding Wisconsin Works (W2) Child Care Subsidy overpayments to chapter 7 debtor were domestic support obligations within the meaning of sec. 101(14A) and thus nondischargeable pursuant to sec. 523(a)(5). In re Stephanie Schauer, Case No. 07-26758, State of Wisconsin v. Debtor, Adv. No. 07-2317 Published: In re Schauer, 391 B.R. 430 (Bankr. E.D. Wis. 2008).
Chapter 13 debtors' attorney was "unsecured creditor" entitled to share in the unsecured creditors' pool of monthly disposable income under sec. 1325(b)(1)(B). In re Robert & Gladys Nething, Case No. 07-27145
Chapter 13 debtor could not deduct student loan payment as an additional expense claim on Line 59 of Form 22C due to "special circumstances." In re Jason Zahringer, Case No. 07-30217
Chapter 7 debtor owed plaintiff insurance company a subrogation claim resulting from damages to vehicle driven by debtor without permission of owner. Because previous state court action did not litigate the issue of intent, the plaintiff's motion for summary judgment in sec. 523(a)(6) proceeding was denied. In re Brian Whitelaw, Case No. 07-27846, American Standard Ins. Co. v. Debtor, Adv. No. 07-2282
In adversary proceeding involving the conflicting legal rights of two creditors in the business assets of the debtor, summary judgment was granted, in part, and denied, in part. Although bank had knowledge of debtor's previous pledge of assets to creditor, bank perfected its security interest first, making its lien superior. The creditor's request, in the alternative, for marshaling of assets could not be granted, as a matter of law, at the summary judgment stage. In re Vission, Inc., Case No. 07-21957, Trustee v. Trasino Park-Hudsons, LLC, et al., Adv. No. 07-2111
Chapter 13 debtor objection to proof of claim filed by mortgage lender, on ground that deficiency had been rolled into total amount owed, as set forth in previous reaffirmation agreement. The court sustained the objection and concluded the reaffirmation agreement changed the terms of mortgage note as it pertained to the calculation and collectability of arrearages incurred prior to when the reaffirmation agreement was entered into. In re Tyrone & Tammy Eiler, Case No. 07-26168 Published: In re Eiler, 390 B.R. 920 (Bankr. E.D. Wis. 2008).
U.S. Trustee's motion to dismiss pursuant to sec. 707(b) was granted. Chapter 7 debtors were not entitled to additional transportation expense on Line 22 of Form 22A for each of their vehicles after the loan was paid off. In re Jaime & Guadalupe Martinez, Case No. 07-26673 Published: In re Martinez, 391 B.R. 424 (Bankr. E.D. Wis. 2008).
Chapter 7 trustee objected to exemption claimed by debtors in cash surrender values of their life insurance policies. The court sustained the objection, finding debtors' exemption of the value of contracts of life insurance policies were limited by sec. 815.18(3)(f)3.b, Wis. Stat., with respect to funding any increase in such value that took place within 24 months of filing. In re James & Michelle Bork, Case No. 07-27105 Published: In re Bork, 389 B.R. 823 (Bankr. E.D. Wis. 2008).
County's actions in attempting to collect, post-discharge, interest on property taxes which was not paid through the chapter 13 plan was not a violation of the discharge injunction. (This decision is a court minute decision, only.) In re Gerald & Margaret Tevz, Case No. 01-30923, Debtors v. Milwaukee County, Adv. No. 07-2146
In pre-BAPCPA case, chapter 13 debtor was not allowed to modify plan to limited payments of one half of tax refunds to only the first three years of the newly-extended plan. In re Lacey K. Rither, Case No. 05-23558
Chapter 13 debtor was not allowed to take a deduction on Means Test for "future payments on secured claims" for surrendered residence. In re Melvin M. Kalata, Case No. 07-21710
Chapter 13 debtors were allowed to take a vehicle ownership expense deduction for a vehicle they owned free and clear. In re Roger & Roberta Clark, Case No. 07-23390
Chapter 11 debtor, the holder of patent for a non-dichroic signal mirror, brought an adversary proceeding against a competitor that had filed a proof of claim against the estate for the competitor's alleged infringement of its patent, alleged breach of alliance agreement between the parties, and tortious interference with its contractual relations, and the competitor counterclaimed against the debtor. The court held the debtors' patent was invalid and the competitor's product did not infringe that patent. The competitor did, however, breach the parties' alliance agreement, causing the debtor to suffer damages. In re Muth Mirror Systems, LLC, et al., Case No. 06-25609, Muth Mirror Systems, LLC, et al. v. Gentex Corp. v. Muth Mirror Systems, LLC, et al., Adv. No. 06-2470 Published: In re Muth Mirror Systems, LLC, 379 B.R. 805 (Bankr. E.D. Wis. 2007).
Creditor with a security interest in chapter 13 debtors' motor vehicle moved for relief from stay after the vehicle was destroyed in an automobile accident postpetition and postconfirmation, in order to permit it to apply insurance proceeds paid by a third-party tortfeasor's insurer to its remaining secured and unsecured claims. The debtors and trustee objected, and disputed that the creditor had an interest in the insurance proceeds to the full extent of its remaining claims. The court granted the creditor's motion in part and denied it in part. The creditor's recovery of insurance proceeds paid by third party's insurance carrier after debtors' collateral was destroyed was limited to its allowed secured claim. In re Linda & Timothy Hardin, Case No. 03-31539 Published: In re Hardin, 375 B.R. 506 (Bankr. E.D. Wis. 2007).
Creditor brought an adversary proceeding to deny the chapter 7 debtors a discharge based on the debtor-wife's alleged fraudulent prepetition transfer of assets. The court dismissed the complaint, finding the debtors' prepetition transfer of personal property into wholly-owned corporation did not evidence wrongful intent required for a denial of discharge under sec. 727(a)(2). In re John & Jean Sundstrom, Case No. 05-41463, Emerging Vision, Inc. v. Sundstrom, Adversary No. 06-2286 Published: In re Sundstrom, 374 B.R. 663 (Bankr. E.D. Wis. 2007).
Chapter 13 debtors sought to modify their confirmed plan, after experiencing significant medical expenses and a reduction in the debtor-husband's pay. The court sustained the trustee's objection to the modification, in part. The chapter 13 debtors were not allowed to retroactively modify their confirmed plan to retain one-half of their tax refunds previously committed to their creditors. Because the tax refunds were necessary for the maintenance and support of the debtors, they were allowed to prospectively retain their entire tax refunds. In re Vincent & Paquita Young, Case No. 03-31975 Published: In re Young, 370 B.R. 799 (Bankr. E.D. Wis. 2007).
Chapter 13 trustee was compelled to remit plan payments to the creditor holding a secured claim in the debtors' vehicle pending resolution of the motion for relief from the automatic stay. In re Paul & Marsha Christensen, Case No. 03-32627
Chapter 13 debtor objected to her former landlord's proof of claim. The court sustained the objection, in part, finding the residential landlord's claim for prepetition and postpetition rent did not qualify as an administrative expense under sec. 503(b). In re Lisa Perry, Case No. 06-26132 Published: In re Perry, 369 B.R. 402 (Bankr. E.D. Wis. 2007).
Following completion of the chapter 13 debtors' payments under their confirmed plan, the trustee moved to dismiss, on the ground that secured creditors had not been paid in full and the debtors could not feasibly satisfy the secured debts within the maximum five-year term. The court denied the motion, finding the debtors were entitled to a discharge under the confirmed plan, even though secured claims had not been paid in full, because creditors received adequate notice of their rights under the plan and plan clearly spelled out the longer amortization periods of the secured claims. In re Brad & Leanna Westenberg, Case No. 03-21749 Published: In re Westenberg, 365 B.R. 895 (Bankr. E.D. Wis. 2007).
Chapter 7 trustee brought an adversary proceeding to avoid a mortgage lien. The court denied the trustee's motion for summary judgment; because no bona fide purchaser could have acquired a lien superior to the secured creditor, the perfection of the mortgage was not a preferential transfer. In re Snezana & Boban Ljubic, Case No. 03-32636, Virginia E. George, Trustee v. Guaranty Mortgage Co., Adv. No. 04-2213 Published: In re Ljubic, 362 B.R. 914 (Bankr. E.D. Wis. 2007).
Chapter 7 trustee filed an adversary proceeding to avoid a mortgage lien. The court denied the trustee's motion for partial summary judgment; issue of fact remained regarding whether or not perfection of secured interest was substantially contemporaneous with execution of mortgage. In re Richard S. Radbil, Case No. 04-25643, Virginia E. George, Trustee v. Argent Mortgage Co., et al., Adv. No. 05-2311 Published: In re Radbil, 364 B.R. 355 (Bankr. E.D. Wis. 2007).
Player who was injured during prepetition hockey game when he was punched by the chapter 7 debtor in head, face, and nose brought an adversary proceeding for a determination that potential obligations owed him by the debtor were excepted from the discharge. The court granted the player's motion for summary judgment. The debtor's no contest plea to charges of misdemeanor battery and disorderly conduct did not have an issue preclusive effect under Wisconsin law. Nevertheless, the state court's findings in a separate personal injury action about the intentional nature of the debtor's conduct, along with the debtor's statements to his insurer established the willful and malicious nature of the debtor's actions. In re Matthew J. Blair, Case No. 05-41949, Dustin Elbing v. Debtor, Adv. No. 06-2135 Published: In re Blair, 359 B.R. 233 (Bankr. E.D. Wis. 2007).
Chapter 13 trustee filed an objection to confirmation of the debtor's plan, arguing it did not comply with the equal payment requirement of sec. 1325(a)(5)((B)(iii)(I). The plan provided for monthy payments at the rate due under the mortgage with a balloon payment at the end of the 60-month term. The court overruled the objection because the secured creditor accepted the plan. In re Darrin J. Schultz, Case No. 06-24781 Published: In re Schultz, 363 B.R. 902 (Bankr. E.D. Wis. 2007).
Because hearing was not held within 30 days of petition date, automatic stay was not extended in debtor's second bankruptcy case. (This decision is a court minute decision, only.) In re Douglas C. Wilke, Case No. 06-26904
Chapter 7 trustee brought an adversary proceeding to set aside alleged fraudulent transfers. The debtor's principal was found liable for avoided transfer, but bank that structured the complex prepetition sales transaction was not. In re Art Unlimited, Case No. 02-23992, Neil McKloskey, Trustee v. Galva Foundry Co., et al., Adversary No. 04-2098 Published: In re Art Unlimited, LLC, 356 B.R. 700 (Bankr. E. D. Wis. 2006).
Creditor whose claim was secured by purcahse-money security interest in motor vehicle that chapter 13 debtors had acquired for their personal use by debt incurred within 910 days of petition date objected to confirmation of the debtors' plan. The court sustained the objection, finding the Till analysis applied to establish the interest rate on the secured claim at "prime rate plus risk factor" over the life of the plan, even though the original contract provided for 0% interest. In re John D. Brill & Kimberly M. Quass-Brill, Case No. 06-21600 Published: In re Brill, 350 B.R. 853 (Bankr. E.D. Wis. 2006).
State court judgment deemed nondischargeable pursuant to s. 523(a)(4) due to issue preclusion. In re Tina Dawn Hilbelink, Case No. 05-30111, Alma P. Leach v. Debtor, Adv. No. 06-2178
Trustee filed complaint to avoid mortgage as preferential transfer under s. 547(b). Trustee entitled to judgment; avoided mortgage was preserved for benefit of estate. Trustee was not entitled to recover the amount of payments received by defendant postpetition. In re Anthony & Jennifer Rodriguez, Case No. 05-34551, Michael F. Dubis, Trustee v. Homecomings Financial Network, et al., Adv. No. 06-2028
Debtor was allowed to exempt his interest in Simplified Money Purchase Keogh Plan under Wis. Stat. s. 815.18(3)(j). In re Boden & Lundi Perry, Case No. 05-24027
Chapter 7 trustee brought an adversary proceeding to avoid lender's mortgage lien. The court granted the lender's motion for summary judgment. The prepetition mortgage was invalid due to the failure of the debtor's spouse to sign the mortgage. Nevertheless, the secured creditor was equitably subrogated to the earlier mortgage, and the trustee as a hypothetical bona fide purchaser did not defeat its rights under that mortgage. In re Rick E. Larson, Case No. 04-34605, Larry Liebzeit, Trustee v. Universal Mortgage Corporation v. Debtor, Adversary No. 05-2030 Published: In re Larson, 346 B.R. 486 (Bankr. E. D. Wis. 2006).
Due to court's findings of fact regarding value of debtors' real estate and amount due under land contract, debtors' objection to trustee's intent to sell property was overruled. In re Bernard & Mary Guelig, Case No. 05-33634
Debtors plan, which proposed to contribute such portion of $15,000 proceeds of sale of real estate as necessary to complete the plan, failed to meet the requirements of 11 U.S.C. s. 1325(b)(1)(B). In re David & Christine LeFeber, Case No. 05-28540
Defendant bank was granted summary judgment on fraudulent transfer cause of action; defense of accord and satisfaction was inapplicable because the amount the debtors owed the bank at the time of the prepetition transfer was not in dispute. In re Jeffrey & Penny Munsch, Case No. 05-23178, Neil McKloskey, Trustee v. Guaranty Bank, Adversary No. 05-2437
Debtors' claim of exemption of land contract payments as business property was disallowed. Debtors were allowed an exemption in 75% of the interest, but not principal due and owing under land contract as of the petition date; instead limited to interest due for one week and to extent reasonably necessary for support of debtors. Any claimed amount in excess was disallowed. In re Russell & Donna Nelson, Case No. 05-40908
Chapter 7 debtor, an inmate at correctional facility that had filed his petition pro se, sought a determination that the petition was "filed" prior to the effective date of BAPCPA, so that he did not have to comply with the credit counseling requirement. The court found the "prison mailbox rule" applied to the filing of a bankruptcy petition; thus, the pro se prisoner's petition was deemed "filed" on that date he delivered the petition and related documents to prison authorities for forwarding to the bankruptcy clerk. In re Michael R. Luedtke, Case No. 05-45087 Published: In re Luedtke, 337 B.R. 918 (Bankr. E.D. Wis. 2006).
Chapter 7 trustee brought an adversary proceeding to avoid, on a preference theory, loan payments that the debtors had made to their parents during the one-year preference period. The court granted summary judgment to the parents because the prepetition transfers met the requirements for the new value defense. In re Ronald & Deanne Schabel, Case No. 04-35733, Neil McKloskey, Trustee v. Henry & Diane Schabel, Adv. No. 05-2270 Published: In re Schabel, 338 B.R. 376 (Bankr. E.D. Wis. 2005).
Judgment for restitution was nondischargeable obligation pursuant to 11 U.S.C. s. 523(a)(7). In re Dennis Gerard Etzel, Case No. 05-24211, American Standard Ins. Co. v. Debtor, Adv. No. 05-2337
Damages assessed against defendant for violation of automatic stay. In re Mark & Marlene Brewer, Case No. 03-33181, Debtors v. QC Financial Services, Inc., Adv. No. 03-2532
Because secured creditor did not give up its right to foreclose on the mortgage when it sought and obtained a personal judgment against the debtors, the debtor's objection to the creditor's proof of claim was overruled. In re Peggie Mae Bolton, Case No. 05-26436
Chapter 13 debtors objected to the proof of claim filed by a creditor, based on the retail value of the vehicle securing it when the petition was filed. The court sustained the objection in part. For purposes of determining the creditor's secured claim, the value of the vehicle damaged in a postpetition accident was established at liquidation value as of the petition date. In re John & Jennifer Engebregtsen, Case No. 05-27818 Published: In re Engebregtsen, 337 B.R. 677 (Bankr. E.D. Wis. 2006).
Chapter 13 Trustee's objection to priority claim filed by debtor on behalf of city for unpaid municipal services was sustained. In re Gertrude Walker, Case No. 04-23123
Debtor refinanced mortgage with defendant and subsequently filed for relief six days later. Defendant perfected mortgage twelve days after petition date. As mortgage was not perfected with the time allowed under sec. 547(e)(2)(A), the recording violated the automatic stay. Acts done in violation of the stay are void; therefore, the mortgage was unperfected at the time of filing. In re Dana Voelske, Case No. 03-28533, Glenn Givens, Jr., Trustee v. Franlkin Mortgage Funding Corp., Adv. No. 05-2327
In preference adversary filed under sec. 547 and sec. 548, defendant transferee's motion for summary judgment was granted, in part, and denied, in part. In re Art Unlimited, Case No. 02-23992, Neil McKloskey, Trustee v. Galva Foundry Co, Inc., Walter Nocito, & Wells Fargo Bank Wisconsin, Adv. No. 04-2098
Because plaintiff architects were not beneficiaries under state theft by contractor statute, the debtor's obligations to them were dischargeable. In re Paul F. Dinkins, Case No. 04, 28251, Romes Design, Inc. v. Paul F. Dinkins, Adv. No. 04-2229 and Central Consulting Engineers, Ltd. v. Paul F. Dinkins, Adv. No. 04-2230 Published: In re Dinkins, 327 B.R. 918 (Bankr. E.D. Wis. 2005).
In same case, the court previously determined presentation of post-dated check by the payee after payor filed bankruptcy, and resulting receipt of proceeds, was excepted from the automatic stay (see below). In this decision, the court found the retention of the proceeds after demand by the debtors was a violation of the stay. Because the creditor's conduct was egregious and intentional, the debtors were entitled to punitive damages. In re Mark & Marlene Brewer, Case No. 03-33181, Debtors v. QC Financial Services, Inc., Adv. No. 03-2532
Chapter 7 debtors could recover from lienholder postpetition payments made on truck loan prior to avoidance of security interest by trustee. In re Daniel P. & Miranda J. Huitema, Case No. 03-33310
Because debtor’s future interest in spendthrift trust was not property of the estate, the chapter 7 trustee’s motion for turnover was denied. In re Casey R. Wilbur, Case No. 03-37383
Chapter 7 trustee was granted relief from order of abandonment. Personal property annexed to land was improvement subject to mortgage, precluding avoidance of the creditor’s security interest. In re Chad M. Koenigs, Case No. 04-23111, Paul G. Swanson, Trustee v. Chase Manhattan Mortgage Corporation, Adv. No. 04-2263
Plaintiffs’ causes of action under the Truth in Lending Act (TILA) survived defendants’ motions to dismiss. In re Paul & Veronique Madel, Case No. 03-32367, Debtors v. GMAC Mortgage Corporation, et al., Adv. No. 04-2060
Chapter 13 debtors brought an adversary proceeding to recover for the creditor's alleged violations of the automatic stay. The court granted the creditor's motion for summary judgment in part. The creditor's postpetition presentment of a check written prepetition was not a violation of the automatic stay. Genuine issues of fact precluded entry of summary judgment on whether the creditor's refusal to turn over proceeds of the transfer was an exercise of control over property of the estate. In re Mark & Marlene Brewer, Case No. 03-33181, Debtors v. QC Financial Services, Inc., Adv. No. 03-2532 Published: In re Brewer, 313 B.R. 795 (Bankr. E.D. Wis. 2004).
Chapter 7 debtors refinanced their 1996 Harley Davidson motorcycle prepetition. Perfection of the motorcycle was untimely during the preference period. The trustee filed a motion to turn over property for the benefit of the estate. The lien granted by the debtors to the bank was an avoidable preference and because the debtors had not made any payments to the trustee to satisfy the lien, the trustee was entitled to possession. In re Derrick & Shannon Buchner, Case No. 03-37885
Chapter 13 debtor had two loans with the Farmers Home Administration ("FHA"), which she obtained as part of a divorce settlement. One loan was subsequently paid in full. Debtor had not made payments on the second loan for over a year, as she thought the loan had been paid in full. The debtor objected to both the FHA's proof of claim and motion for relief from the automatic stay. The Court allowed the claim for the pre- and postpetition amounts and further allowed the filing of a supplemental claim for postpetition arrearages. The motion for relief was denied because the debtor had equity in the property and the property was necessary for effective reorganization, subject to the debtor maintaining current payments to the creditors and trustee. In re Linda L. Middaugh, Case No. 02-32054
The chapter 7 trustee filed a no asset report in November 2003, and the discharge was granted and case closed in January 2004. In March 2004, debtor's counsel advised the trustee that the debtor was to receive previously undisclosed state and federal tax refunds. The trustee filed a motion to reopen and a motion for turnover of property. The debtor objected, stating the majority of the refund was generated by earned income credit and child tax credit. The court found that both types of credit were property of the estate and as such, subject to turnover. In re Tracey Rene Turck, Case No. 03-34679
On remand, the chapter 7 trustee was required to prove the debtor received less than reasonably equivalent value in exchange for relevant transfers and the debtor was insolvent on the date the transfers were made or became insolvent as a result of the transfers. The evidence supported the court's previous findings in favor of the trustee and the court denied the defendant's motion for return of the proceeds. In re Donald P. Lomax, Case No. 99-28332, Bruce Lanser, Trustee v. Frank Balistreri, Adv. No. 01-2496
Debtors claimed any recovery they received from third party complaint was not part of the bankruptcy estate, but rather for the beneficiaries of a trust. The bank argued, and the court agreed, that based on the debtors' claim, the court did not have subject matter jurisdiction; therefore, the third party complaint was dismissed. In re Richard & Barbara Fisher, Case No. 02-22055, Monroe Equipment, Inc. v. Debtors v. Milwaukee Western Bank, Adv. No. 02-2196
The State of Minnesota Department of Revenue amended its claim requesting unpaid state sales tax, accrued interest and penalties. The debtor objected to the penalty portion of the claim, stating the punitive aspect of the claim should not take priority over the allowed claims of unsecured creditors. The court overruled the debtor's objection, finding the doctrine of equitable subordination was inapplicable. In re Arrowhead Systems, LLC, Case No. 02-20147
Debtor purchased a motor vehicle prepetition and GMAC was granted a security interest. The title application listed GMAC as the secured party. Baird, Inc., a third party agent under contract with the Wisconsin Department of Transportation, entered the title information into the state's database, omitting GMAC as the secured party. The chapter 7 trustee sought to avoid the unperfected security interest, recover payments made to GMAC postpetition, and preserve the remaining amount due for the benefit of the estate. The court granted GMAC's motion for summary judgment, finding because an agent of the state made the mistake, the savings clause was implicated and GMAC's lien was perfected under state law. In re Julie A. Kahl, Case No. 01-32245, Paul G. Swanson, Trustee v. GMAC, Adv. No. 02-2207 Published: In re Kahl, 316 B.R. 919 (Bankr. E.D. Wis. 2003).
In May 2000, the defendant loaned $25,000 to an LLC, of which the debtors were the sole members. A key loan provision stated that if the loan was not paid in full, on demand, the defendant had to option to acquire a 99% equity interest in the LLC. In June 2000, the defendant demanded payment in full. Because the debtors were unable to pay in full, the defendant acquired a 99% equity interest in the LLC. Over a year later, the debtors filed chapter 7 and the trustee sought to recover the interest as a preferential or fraudulent transfer. The defendant moved for summary judgment, arguing the loans were made to the LLC, not the debtors. The court denied the motion, finding genuine issues of material fact existed; namely, when the transfer was made, whether the debtors were insolvent at the time of transfer, whether the transfer could be avoided as a preference, the intent of the debtors, and the fair market value of the interest. In re Steven & Mary Anderson, Case No. 01-33143, Andrew Herbach, Trustee v. Phyllis Anderson, Adv. No. 02-2163
Chapter 7 debtor, who owned a home in Wisconsin with his wife, filed his case in the Southern District of Florida, where he resided. Divorce commenced post-bankruptcy filing. The debtor claimed no exemptions in the Wisconsin home in which his wife and children still lived. The trustee filed an adversary proceeding to obtain approval to sell the interests of both the estate and spouse. The adversary proceeding was transferred to Wisconsin and the court found the trustee was authorized to sell the former Wisconsin community property of the debtor and non-filing spouse, as well as administer proceeds. The court further held that any transfer of the property pursuant to a decree of dissolution was void. In re Teddy Hubert Morgan, Case No. 01-21216-BKC-RBR, Soneet R. Kapila, Trustee v. Moritta Wilson Morgan, Adv. No. 01-2963 Published: In re Morgan, 286 B.R. 678 (Bankr. E. D. Wis. 2002).
Because the chapter 13 trustee was unable to return funds to the debtor after his case was dismissed without confirmation of a plan, the funds were paid to the Clerk of Bankruptcy Court. Over two years later, an entity filed a petition for payment of the unclaimed monies on behalf of the debtor. The IRS opposed the release of the funds to the debtor, asserting it was entitled to turnover of the funds due to the debtor's outstanding tax liens. The court agreed and directed payment of the unclaimed funds to the IRS. In re Johnnie L. Brown, Case No. 98-31716 Published: In re Brown, 280 B.R. 231 (Bankr. E. D. Wis. 2002).
Prior to the filing of an involuntary chapter 7, debtor and its affiliate had entered into an agreement to sell the debtor's assets as a going concern. As a result of the involuntary petition, the purchaser refused to close the sale. The court suspended the case to allow the debtor to convey substantially all of its assets to the purchaser. Upon completion of the sale, the order for relief was entered. During the gap period, the claimant entered into a retainer agreement with the debtor for the purpose of conducting negotiations for the sale. The trustee opposed the claimant's priority claim, arguing the debt was not incurred in the ordinary course. The court found because the debtor was not in the business of selling substantially all of its assets, the sale of assets was not in the ordinary course and the claimant was not entitled to priority under sec. 502(f). In re Lappin Electric Co., Case No. 97-26130
Plaintiff filed a motion for summary judgment, arguing res judicata and collateral estoppel prevented litigation in the sec. 523(a)(2)(A) proceeding of the issues raised in prior actions. With respect to collateral estoppel, the court determined the debtor had been provided an adequate opportunity to obtain full and fair adjudication of the merits in the state court actions, thereby giving the prior judgments preclusive effect. The court further found prior litigation had established the debtor made a representation to the plaintiff and the plaintiff justifiably relief on the representation to its detriment. Whether or not the representation was false or that the debtor intended to deceive the plaintiff were not subject to issue preclusion and had to be litigated. In re Crazy Jim, Case No. 01-24180, Auction Associates v. Crazy Jim, Adv. No. 01-2616
The chapter 11 debtor commenced an adversary proceeding against the City, seeking a declaratory judgment that certain prepetition obligations of the debtor for the payment of water and sewer charges were unsecured claims pursuant to sec. 545(2). The City asserted the prepetition charges were a lien upon the debtor's property at the time the services were incurred under state law. The court determined the prepetition charges were not a lien on the date of filing, and any purported lien on the real estate sold by the debtor could be avoided. In re United States Leather, Inc., Case No. 00-21375, United States Leather, Inc. v. City of Milwaukee, Adv. No. 01-2556 Published: In re U.S. Leather, Inc., 271 B.R. 306 (Bankr. E.D. Wis. 2001).
Defendant was hired to tear down and replace debtor's garage. Debtor never paid for the work and the defendant obtained an unsecured construction lien. After the debtor filed a chapter 7 petition, he commenced an adversary proceeding to declare the lien void under sec. 506(d). On summary judgment, the debtor argued he was not seeking avoidance of the lien, but rather wanted the lien declared void as a matter of law. The court dismissed the adversary proceeding, finding under Dewnup v. Timm, the lien passed through bankruptcy unaffected. In re Larry M. Watts, Case No. 01-21368, Larry M. Watts v. J.D. Griffiths Co., Adv. No. 01-2583
The chapter 7 trustee filed an adversary proceeding seeking to avoid an alleged preferential payment to an insider pursuant to sec. 547(b). The defendant filed for summary judgment on the issue of whether the doctrine of earmarking applied to defeat avoidance by the trustee, as a matter of law. Prepetition, the defendant had loaned the debtor $50,000, to be repaid with the proceeds from the sale of coffee shop business. Two months later, the sale closed and the defendant was repaid. The defendant argued the loan payment did not constitute a preferential transfer due to the equitable doctrine of earmarking. The trustee argued earmarking was not application because the sale proceeds were paid to the president and majority shareholder of the debtor in his individual capacity, who in turn deposited the proceeds into the debtor's account before paying the defendant. The trustee also argued the payment to the defendant diminished the estate. The court found the estate was not diminished by payment of the debt as the money would never have come into the estate had it not been targeted for the debt to the defendant. Because the trustee failed to meet his burden that there was a transfer of the debtor's interest in property to the creditor, the adversary proceeding was dismissed. In re Fox Bay Entertainment, Inc., Case No. 99-22637, John M. Scaffidi, Trustee v. Bonnie K. Smith, Adv. No. 00-2149
In this sec. 523(a)(4) action, the plaintiff, a material supplier, alleged the debtor, a general contractor, diverted funds due the plaintiff for goods and services rendered for a construction project, in violation of the theft by contractor statute, sec. 799.02(5), Wis. Stats. The court was satisfied that a relationship between the contractor and supplier existed and that funds for improvements passed from the owners to the contractor and did not reach the plaintiff. The plaintiff was entitled to the same percentage of its claim as the percentage of the contract that the debtor received from the owners and was granted a nondischargeable judgment for that amount. In re Thomas & Laura Von Eiff, Case No. 99-29495, Christiansen Building Center, Inc. v. Thomas Von Eiff, Adv. No. 99-2528
The plaintiff, an owner of a shopping center, alleged the debtor, a real estate developer, participated in intentional acts of conspiracy and antitrust violations to deprive it of its property or to cause great damage to its property, resulting in a nondischargeable obligation under sec. 523(a)(6). The debtor contended the plaintiff's per se analysis of the parties' business arrangement should be rejected in favor of a "rule of reason" analysis of antitrust violations and an analysis of competition enhancing factors. Based on the debtor's own statements, the court deemed his actions against the plaintiff were willful and showed clear malice. The court was also satisfied that the debtor's deliberate side deal with the plaintiff's anchor tenant to leave the space but retain the lease, and the resulting reduction of value of the satellite space, constituted price fixing and a per se violation of antitrust laws; therefore, the debtor's liability to the plaintiff was excepted from discharge. In re Frank Pio Crivello, Case No. 92-27252, Century Shopping Center Fund I Ltd. P'ship v. Debtor, Adv. No. 94-2346
Plaintiffs brought an adversary proceeding against the chapter 7 debtor to except from discharge under sec. 523(a)(2)(B) an unsecured obligation arising from the sale of the plaintiffs' real estate to the debtor's LLC. The court determined that (1) a written financial statement from the debtor was provided to the plaintiffs and was used to procure financing for the LLC from the plaintiffs, (2) the financial statement painted a substantially untruthful picture of the debtor's financial condition, (3) the plaintiffs' reliance on the financial statement was reasonable, (4) the debtor caused the financial statement to be made, and (5) the financial disclosure was provided with the intent to deceive. The debtor's liability to the plaintiffs was excepted from discharge. In re Joseph & Mary Setnicar, Case No. 99-22360, Carol Hartson & Charlotte Nelson v. Joseph Setnicar, Adv. No. 99-2280
Plaintiffs, homeowners, alleged the chapter 7 debtors, doing business as a construction company, used monies paid to the latter for purposes other than paying the material supplier, in violation of the theft by contractor statute, sec. 799.02(5), Wis. Stats., resulting in a nondischargeable obligation under section 523(a)(4). The court found that because there was no contract between the plaintiffs and the material supplier, the plaintiffs had no right to sue on the material supplier's behalf. Although the plaintiffs may have had a claim for defective product against the debtors, such a claim was dischargeable. The adversary proceeding was dismissed. In re Harry & Bernice Pegelow, Case No. 99-25383, Scott & Kerry Mason v. Debtors, Adv. No. 99-2407
Court entered, sua sponte, an order modifying the stay to all the plaintiffs to proceed with an action against the chapter 7 debtors in state court. The order allowed the state court to determine liability, if any, but the plaintiffs could not execute on a judgment until the bankruptcy court determined dischargeability. Plaintiffs subsequently filed a motion to vacate the sua sponte order and have the action heard by the bankruptcy court. The court denied the motion as the facts pointed to the plaintiffs' forum shopping and dissatisfaction with the state court judge, which were not grounds for revoking the abstention order. In re Albert & Sylvia Toeller, Case No. 98-31721, Edward & Cindy Graff v. Debtors, Adv. No. 99-2072
Chapter 7 trustee filed notice of his intent to compromise marshaling claim and creditors objected. The court held that the trustee's proposed compromise of marshaling claims against secured creditor was in the best interests of the estate. The creditor's claims were secured both by interest in assets of debtor and interest in assets of sister company, pursuant to which trustee, in return for $15,000 payment from sister company, gave up any claim he had to compel creditor to look first to assets of sister company before it tried to recover from assets of debtor's estate. In re Universal Electric Sign Co., Case No. 99-30673 Published: In re Universal Electric Sign Co., 255 B.R. 732 (Bankr. E.D. Wis. 2000).
Chapter 7 trustee commenced adversary proceeding alleging a payment to the debtor's father was a preferential payment under sec. 547. Pursuant to a family court order, a workers' compensation award to the debtor was transferred the debtor's father, in exchange for his release of a lien on a vehicle awarded to the debtor's ex-spouse. The only element of sec. 547(b) the father disputed was whether the funds transferred constituted "an interest of the debtor in property." The father reasoned that because the workers' compensation award twas never available to the debtor, she did not have an interest in the property transferred. The court found in favor of the trustee, determining that an interest in the debtor's property was transferred when the father was paid. The court also found that none of the defenses available under sec. 547(c) applied as the consideration given by the father at the time the transfer was given to the debtor's former spouse, not to the debtor. The father's claim that the proceeds were exempt was irrelevant because that was not a defense under sec. 547(c) and only a debtor could claim exemptions. In re Krystal Papcke, Case No. 99-24700, Bruce Lanser, Trustee v. Russell Papcke, Adv. No. 99-2381
In sec. 523(a) nondischargeability action, plaintiff alleged the chapter 7 debtor violated the Uniform Trade Secrets Act, sec. 134.90, Wis. Stats., in connection with his employment with the plaintiff, a pizza franchise. The court found the plaintiff lacked standing to prosecute a cause of action with respect to the pizza dough recipe because the debtor obtained the recipe prior to his employment with the plaintiff. The court also found the plaintiff failed to prove it was entitled to relief with respect to the misappropriation of its business manuals and cost calculations. [Previously, on summary judgment, damages related to the plaintiff's cause of action for breach of fiduciary duty were excepted from the debtor's discharge under sec. 523(a)(4).] In re Kenneth & Deborah Szostek, Case No. 99-23910, Bayoff Enterprises, Inc. v. Kenneth Szostek, Adv. No. 99-2206
Chapter 7 trustee filed adversary proceeding seeking to avoid the debtor's transfer of a lien on a her vehicle to the defendant. The trustee also sought turnover of the lien and postpetition payments made by the debtor to the defendant. Within 90 days prepetition, the debtor borrowed funds from the defendant to obtain the vehicle. The defendant's lien interest was not perfected until more than 20 days after the debtor took possession of the vehicle. The court avoided the defendant's security interest; however, the defendant was not required to turn over the postpetition payments made by the debtor. Additionally, the parties' defective reaffirmation agreement did not effect the outcome of the proceeding. In re Tamera Rich, Case No. 97-27648, Todd Esser, Trustee v. Arcadia Financial, Ltd., Adv. No. 99-2131
Creditor filed a motion for relief from the automatic stay. The chapter 7 trustee objected to the motion, as well as to the creditor's secured claim. The trustee alleged the creditor did not properly perfect its lien in the debtor's vehicle and that the lien was void as to the trustee. The creditor argued its security interest was valid because a properly perfected security interest was assigned to it from the prior lender and that perfection remained on the vehicle's title. The court found that since the release of the prior lender's lien was held by the creditor and never recorded, it was insufficient to provide notice of perfection. Because the obligation to perfect a security interest is wholly upon the secured party, the creditor's defense that the debtor failed to deliver the certificate of title was rejected. Because the lien was unperfected, it was avoidable by the trustee and the claim was deemed unsecured. In re Cezary Zawadzinski, Case No. 98-31738
Chapter 7 trustee brought adversary proceeding against oversecured creditor, alleging an early termination fee of $225,000 provided for in parties' loan agreement for debtor's line of credit and paid by the purchaser of debtor's assets was an unreasonable charge and, thus, a voidable transfer. On cross-motions for summary judgment, the court held (2) early termination fee was a reasonable calculation of potential damages, satisfying the requirements of Illinois law and (2) early termination fee, which represented approximately 5.9% of the principal loan amount and which had been negotiated by sophisticated parties represented by competent counsel, was reasonably under the applicable provision of the Code. In re Lappin Electric Co., Inc., Case No. 97-26130, Patrick Noonan, Trustee v. Fremont Financial, Adv. No. 99-2204 Published: In re Lappin Elec. Co., 245 B.R. 326 (Bankr. E.D. Wis. 2000).
Counsel for chapter 12 oversecured creditors filed a claim for attorney's fees and other charges under sec. 506(b) and pursuant to existing loan agreements. The debtors objected to the claim, arguing they attempted to cooperate with the creditors despite the creditors' unreasonably demands for inspection of collateral and production of non-existent documents. While the court agreed with the creditors that the debtors lacked responsiveness to reasonable requests and lacked an explanation for the loss of assets or acquisition of funds, counsel for the creditors responded in a hyperactive and unproductive manner. The court reduced the attorney's fees by 50%. In re Randy & Kristine Gomm, Case No. 97-30695
Plaintiff moved to reopen adversary proceeding and debtor objected, claiming the doctrine of res judicata or claim preclusion prevented the plaintiff from seeking judgment against him. The court found the previous order dismissing the adversary only required a judgment in state court and a motion before the bankruptcy court. The court further found issue preclusion did not apply because no issues had been litigated in state court. The court rejected the debtor's argument that the plaintiff should have included the debtor in the state court action because the debtor had no right to dictate the plaintiff's strategy or choice of forum. In re Frank Pio Crivello, Case No. 92-27252, Century Shopping Center Fund I Ltd. P'ship v. Debtor, Adv. No. 94-2346
Chapter 13 debtor objected to the secured status of a claim based on a judgment lien. The creditor argued the debtor could not claim a homestead exemption in property he did not reside in at the time judgment was obtained and the judgment superceded the debtor's exempt interest at the petition date. The debtor argued the creditor was precluded from objecting to the exemption since no timely objection was filed by the creditor or trustee. The court determined the debtor's homestead exemption superceded the judgment lien. Under sec. 506(a), the claim was an allowed secured claim to the extent of the creditor's interest in the property, and was an allowed unsecured claim for the balance. In re Shevan C. Joseph, Case No. 98-28086
The parties filed post-trial requests for reconsideration of the court's ruling on nondischargeable damages under sec. 523(a)(2)(A). The plaintiffs requested the court reconsider its denial of recovery of attorney's fees incurred as a result of the wrongful conduct of the debtor. The debtor requested the court amend its previous award for damages. The court held that the plaintiffs' legal fees, incurred in the fraud litigation, was not recoverable. Because a portion of the damage award was a derivative of the debtor's acts against the plaintiffs' corporation, it could not be awarded to them personally and the judgment against the debtor was reduced. In re Todd W. Hansen, Case No. 97-25273, Alan & Barbara Schroeder v. Debtor, Adv. No. 97-2459
Chapter 7 trustee objected to the debtors' exemption in potential proceeds of a personal injury lawsuit or settlement under sec. 522(d)(11)(E), stating "any loss of future earnings" should be calculated as of the date of the bankruptcy filing. The debtors contended that the debtor-wife suffered a loss of future earnings as of her date of injury. Under Wisconsin law, lost future earnings are determined as of the date the damages are assessed, either by verdict or settlement. Loss of past earnings are calculated from the date of injury to the time of verdict or settlement. In this case, the debtors' schedules reflected that the debtor-wife was not working prior to her injury. The debtors' schedules also reflected expenses exceeded income. The statute only allowed an exemption "to the extent reasonably necessary for the support of the debtor or any dependent of the debtor." As that amount could not be determined until the amount of the award was known, the trustee's objection was held in abeyance pending the outcome of the debtor's personal injury claim. In re Kenneth & Debra Beattie, Case No. 98-30856
Chapter 7 debtor moved for contempt and sanctions against judgment creditors for their alleged violation of the discharge injunction in failing to release a lien creating a cloud on the debtor's title to community property awarded to her by the divorce court. The bankruptcy court held that while the creditors having community claims against both the debtor and her nonfiling spouse may have received a technically deficient notice of the debtor's bankruptcy, inasmuch as the notice failed to identify the debtor's estranged husband as a nonfiling spouse, the creditors nevertheless had sufficient notice of the relationship between the parties, and were barred by the debtor's discharge from proceeding against after-acquired community property of the debtor and her spouse. However, no sanctions were imposed for the creditors' alleged violation of the discharge injunction. In re Michelle Schmiedel, Case No. 94-21332 Published: In re Schmiedel, 236 B.R. 393 (Bankr. E.D. Wis. 1999).
Chapter 11 debtor filed a motion for an order determining the debtor's "disbursements" for purposes of calculating the amount of post-confirmation fees owed under 28 U.S.C. sec. 1930(a)(6) included only payments made by the reorganized debtor pursuant to the plan and not any other post-confirmation payments. The U.S. Trustee objected, asserting fees due were based on all disbursements, including all operating costs, of the reorganized debtor. The debtor countered that charging it for post-confirmation operations actually undermined its chances for future success. The court indicated the debtor may have been correct, however Congress was within its policy making authority to raise funds in the manner afforded under sec. 1930(a)(6). The fees imposed by sec. 1930(a)(6) were thus determined by reference to all disbursements of any kind made by the debtor until the case was closed. In re United States Leather, Inc., Case No. 98-24997
Chapter 13 trustee objected to confirmation of the debtor's proposed debt adjustment plan. The court held that the ex-wife of the debtor's spouse had an allowable claim for past due child support against the debtor's estate, by virtue of her state law right to enforce the claim against the debtor's property, i.e., against the debtor's marital property interest in income of the spouse. However, the fact that the ex-wife had an allowable claim for child support against the debtor's estate did not make the ex-wife's child, with respect to whom support was owed, a "child of the debtor," so as to make the ex-wife's claim a priority claim and to render the debtor's plan infeasible. The trustee's objection was overruled. In re Kathleen Pfalzgraf, Case No. 98-25982 Published: In re Pfalzgraf, 236 B.R. 390 (Bankr. E. D. Wis. 1999).
Chapter 7 debtor's counsel filed an application for approval of attorney's fees and expenses. The U.S. Trustee objected to the amount of fees, the failure to provide sufficient detail of certain charges, counsel's nondisclosure of its creditor status or sufficient detail on the fee arrangement. Counsel argued it never considered itself a creditor as it agreed from the inception of the representation and disclosed that debtor's principal, personally, would pay the fees. The court was satisfied there was sufficient disclosure of the payment arrangement by counsel and imposed no impediment to the retention of the law firm. The court allowed the postpetition fees as requested. However, because counsel failed to disclose the payment arrangement for prepetition fees, those amounts were disallowed. In re Dynacon Development Corporation, Case No. 97-27874
Chapter 11 debtor commenced an adversary proceeding for breach of construction contracts in connection with five condominium projects. Each party to each contract alleged the other parties breached first, most and worst; although all parties breached at some point. On the Bouraxis properties, the debtor breached by failing to pay subcontractors; Boraxis breached by allowing the insurance to lapse on a project and by terminating the debtor on all projects after the latter exercised its right to demand assurance of payment. On the Zignego projects, the debtor breached by failing to pay subcontractors and not completing projects timely; Zignego breached by bypassing the debtor and paying the subcontractors directly. Ultimately, the court found that Zignego had allowed claims against the debtor and the debtor was entitled to a judgment against the Bouraxis defendants. In re Russ James & Associates, Case No. 97-25972, Debtor v. River Park Meadows Ltd. P'ship, et al., Adv. No. 97-2474 and Adv. No. 97-2474 supplement.
Prepetition, the uninsured chapter 13 debtor was involved in a collision involving multiple vehicles. While litigation was pending in state court to determine damages and liabilities, an injured party and his insurance company filed claims against the debtor's estate. The injured party settled with a third party's insurer for $250,000, but preserved his rights against its uninsured motorist insurance carrier and the debtor. The claim against the injured party's insurer went to arbitration wherein it was determined that total damages were only $131,000. While the claimant asserted he was entitled to assert his claim against the estate, the debtor argued the claimant was overpaid and payments made during the plan should be returned. The bankruptcy court was unable to quantify the claim without knowing the percentage of the debtor's negligence and matters were set for further proceedings. In re Charles R. Cole, Case No. 94-27002
The matter was remanded from the Seventh Circuit Court of Appeals. Upon the hearing for final compensation, the bankruptcy court had revoked the employment order for chapter 7 debtor's counsel and denied compensation in its entirety, finding that counsel was not a disinterested person and that the firm willfully failed to disclose critical facts and connections with the debtor. After appeals, the case was remanded for a new hearing on whether counsel was entitled to any compensation under sec. 328(c). The bankruptcy court concluded the original ruling revoking the appointment of counsel was correct and counsel was not entitled to any fees. In re Frank Pio Crivello, Case No. 92-27252
Chapter 13 debtor filed a motion for contempt against a creditor for violating the permanent injunction under sec. 524(a)(2) by continuing collection activities with respect to a prepetition discharged debt. The creditor took efforts to recover its collateral post-discharge when it believed it had retained a valid lien in the debtor's vehicle. The court denied the motion because the creditor did not have actual knowledge of the bankruptcy in order to file a proof of claim. The other unsecured creditors received 100% of their filed claims, but this creditor did not have a similar opportunity. Therefore, the lien survived the discharge and the unsecured claim was not discharged. In re Charlet M. Harmon, Case No. 96-20834
After its application for employment was denied on the ground that it was disinterested, counsel filed a motion for compensation for services it provided to the chapter 11 debtor before its application was denied. The bankruptcy court held that services provided by counsel could be compensated as necessary costs of preserving the estate. In re Milwaukee Engraving Co., Inc., Case No. 98-21027 Published: In re Milwaukee Engraving Co., Inc., 230 B.R. 370 (Bankr. E.D. Wis. 1998).
The U.S. Trustee objected to counsel for the chapter 11 official committee of unsecured creditors' application for an order approving a compromise and settlement of its amended claim. The claim was for post-confirmation fees totaling $205,607, incurred in finalizing a settlement, preparing its final fee application, defending its final fee application, and for other "supplemental administrative services." After objections to the claim were filed, the banks and post-confirmation committee agreed to settle the matter with the unsecured creditors committee counsel by allowing an administrative claim in the amount of $36,800. The court approved the settlement, finding the integrity of the negotiation process had not been compromised and all of the parties had been effectively represented. In re J H Collectibles, Inc., Case No. 96-28214
Neighbor brought an adversary proceeding against the chapter 7 debtor-property owner, seeking determinations of liability and nondischargeability with respect to potential obligations arising from the debtor's conduct in a state court property dispute. The bankruptcy court dismissed the complaint. Under Wisconsin law, the debtor was entitled to absolute witness immunity for statements he made in an affidavit submitted in a third-party's state court against against the neighbor seeking to enjoin the neighbor from building a two-story home. There was no exception to the discharge, notwithstanding the debtor's willful and malicious harm to the neighbor's interest and the substantial damage that resulted. In re Richard & Kay Rieger, Case No. 96-22013, Gerald Niedert v. Richard Rieger, Adversary No. 96-2440
Chapter 7 debtor filed a motion for contempt against credit card company for violating the permanent injunction under sec. 524(a)(2) by continuing with collection activities relating to a prepetition debt. The creditor contended it was seeking to collect a postpetition obligation. The debtor had filed her petition on October 9th at 9:57 am. Also on October 9th, the debtor deposited a $750 cash advance check from the creditor at her bank. The check was honored October 11th. The court determined the transfer occurred postpetition, making the obligation postpetition, as well. Because the creditor did not violate the discharge injunction, the debtor's motion for contempt was denied. In re Denise Harrison, Case No. 96-28304
Counsel for the chapter 11 official committee of unsecured creditors filed its final fee application in the total amount of $840,119.24, a portion of which had been approved on an interim basis. A trial was held on the creditors' and U.S. Trustee's objections. The court determined that the fees requested for committee meetings and relations was bordering on the ridiculous and reduced the amount requested by 50%. Second, the fees requested for work done on the plan and disclosure statement was reduced by 40% due to the abrasiveness of committee counsel and its unwillingness to negotiate terms. Third, the fees requested for work done on cash collateral issues was reduced by 20% as the court felt the amount requested was excessive. Fourth, the fees requested in connection with the sale and sale procedures was reduced by 20% as there were more efficient ways to have reached the end result. Finally, the court reduced counsel's blended rate on the remaining fees by 15% to put it in line with the blended rate of debtor's counsel. After the aforementioned reductions, the court awarded committee counsel final fees and costs in the amount of $641,832.22. In re J H Collectibles, Inc., Case No. 96-28214
Chapter 7 debtor's ex-employee brought an adversary proceeding to except a debt from discharge as one for the debtor's "willful and malicious injury" to her person. On the ex-employee's motion for summary judgment based on the preclusive effect of a state agency action, the court held that the mere fact that the debtor was not represented by an attorney in the administrative proceedings before the Equal Rights Division of the Wisconsin Department of Industry, Labor and Human Relations did not prevent the bankruptcy court from giving preclusive effect the the final agency decision that the debtor had sexually harassed his former employee. The agency action collaterally estopped the debtor from disputing the "willful and malicious" nature of his acts, for debt dischargeability purposes. In re Isaac Wilson, Case No. 96-29993, Gaile Biggers v. Debtor, Adversary No. 97-2094 Published: In re Wilson, 216 B.R. 258 (Bankr. E.D. Wis. 1997).
Chapter 7 debtors filed a motion for turnover of funds which the trustee had recovered as a preference from the bank, arguing the funds were exempt under sec. 522(g) because the bank's application of the funds to various unsecured debts was involuntary. The trustee argued the preferential prepetition transfers to the bank had been voluntary, even though the application was not. The debtors had sold a vacant lot prepetition with the understanding the sale proceeds would be used to pay down their mortgage. The court was satisfied that the allocation of the lot sale proceeds to the unsecured debt was an involuntary payment under sec. 522(g) and that the proceeds could be claimed as exempt, less the reasonable costs of collection by the trustee. In re Douglas & Ramona Hill, Case No. 96-22423
Creditors initiated two separate adversary proceedings seeking to have the chapter 7 debtor's obligations declared nondischargeable. In the first adversary, the creditor claimed the debtor made misrepresentations which caused the creditor to invest $310,000 in the debtor's business. The court found the obligation nondischargeable under sec. 523(a)(2)(A) and (a)(2)(B). In the second adversary, the creditor alleged the debtor diverted corporate funds for his own personal use. Due to the debtor's clear and callous violation of his fiduciary duty to the creditor, the obligation was deemed nondischargeable under sec. 523(a)(4). In re Debra & Matthew West, Case No. 96-25374, Alby Materials, Inc. v. Debtor, Adv. No. 96-2633, Nienow Engineering Assoc., Inc. v. Debtor, Adv. No. 96-2634
A few months prior to the plan's completion, the chapter 13 debtors moved for an order establishing the extent of the bank's secured claim and for a determination that the secured portion of the claim had been paid in full. The bank objected to the form of the court's subsequent order, which, after finding that the secured claim had been paid in full, implied that the bank was obligated to release the mortgage lien before receiving payment of the unsecured claim under the plan. The court held that it would not be fair to deprive the bank of its security at such a late date and, thus, the bank was not required to release its lien. In re Paul & Linda Zakowski, Case No. 92-23686 Published: In re Zakowski, 213 B.R. 1003 (Bankr. E. D. Wis. 1997).
Chapter 7 trustee brought an adversary proceeding against the mortgagee-bank, seeking to avoid an alleged preference received by the bank when it applied proceeds from the sale of a portion of the debtors' real property to the debtors' other outstanding loans with the bank instead of applying the entire proceeds to their mortgage note. The bank moved for summary judgment. The court held that the debtors' credit card debt was not secured by the real estate and thus, the bank's application of the sale proceeds to that debt was an avoidable preference. The debtors' ready reserve accounts were included in the mortgage's dragnet clause, so that the bank's application of the sale proceeds to the reserve accounts was not an avoidable preference. Finally, the bank's application of the sale proceeds toward the debtors' vehicle loan was not an avoidable preference. In re Douglas & Ramona Hill, Case No. 96-22423, Paul G. Swanson, Trustee v. Montello State Bank, Adv. No. 96-2615 Published: In re Hill, 210 B.R. 1016 (Bankr. E. D. Wis. 1997).
A lumber supplier filed an adversary proceeding against the chapter 7 debtors seeking a determination that a stipulated state court judgment was nondischargeable. The debtors used the lumber in construction projects for which the owners had fully paid for, however the debtors failed to remit full payment to the supplier. The court found the amount due for the unpaid invoices was nondischargeable under sec. 523(a)(4). The attorney's fees and punitive damages portions of the judgment were nondischargeable, as well, under the doctrine of claim preclusion. In re Richard & Mary Ellen Waite, Case No. 95-28196, Virfran, Inc. v. Debtors, Adv. No. 96-2326
Chapter 7 debtor moved to avoid the lien on certain personal goods under section 522(f)(1)(B), and the secured creditor objected. The court held that the debtor's bicycle was not a "household good" subject to lien avoidance; however, the debtor's extra television set was a "household good" subject to lien avoidance. In re Carrie E. Elst, Case No. 97-20038 Published: In re Elst, 210 B.R. 790 (Bankr. E. D. Wis. 1997).
Creditor commenced an adversary proceeding seeking to have a loan made to the chapter 7 debtor declared nondischargeable. The creditor had loaned the funds to the debtor to enable him to purchase a home when sale proceeds of his old home were inadequate. As realtor on both home sales, the creditor made the loan to save the sales. The creditor alleged the debtor misrepresented the amount of the mortgage on his old home and the creditor lent the money because he believed the debtor would realize sufficient proceeds from the sale of the home. The court found the obligation was dischargeable because the creditor's reliance on the debtor's estimate of the sale proceeds was not justified. The court also granted the debtor's motion for reasonable attorney's fees because the creditor's cause of action was not substantially justified. In re Timothy Brahm, Case No. 96-22890, Kevin Hibl v. Debtor, Adv. No. 96-2506
Chapter 11 debtor commenced an adversary proceeding to subordinate the defendant's claim, which arose from a guaranteed consulting agreement. After the parties had agreed to sever their business relationship, the debtor agreed to pay the defendant, a former officer of the debtor, for advisory and consulting services. The debtor argued the agreement rendered the debtor insolvent, the defendant's unfair competition after the claim arose led to the debtor's inability to make payments pursuant to the agreement, and the defendant provided no consideration to the debtor in connection with his claim. The court concluded the debtor received no benefit in entering into the consulting agreement with the defendant and subordinated the claim to other general unsecured creditors. In re Concrete Raising Corp., Case No. 95-26272, Debtor v. Tony Zidar, Jr., et al., Adv. No. 96-2028
Chapter 7 trustee brought an adversary proceeding against the debtor's motion and brother, seeking to avoid a prepetition transfer of title to a one-third undivided interest in the property, given to the debtor when he was still a minor. The court granted the defendants' motion for summary judgment, finding the debtor received only bare legal title to the property as a minor. The estate's interest was therefore subject to the mother's equitable lien. In re Jonathan Stoffregen, Case No. 96-22055, Paul G. Swanson, Trustee v. Gertrude & Nathan Stoffregen, Adv. No. 96-2713 Published: In re Stoffregen, 206 B.R. 939 (Bankr. E.D. Wis. 1997).
Bank filed a motion for allowance and payment of a superpriority administrative claim under secs. 507(b), 507(a)(1), and 503(b). The chapter 7 trustee objected, arguing the bank was not entitled to superpriority because the claim did not arise under sec. 503(b). The court granted the bank's motion, finding the claim was entitled to priority due to the bank having provided new value to the estate by way of providing cash collateral to the debtor, albeit involuntarily. In re American Toy & Furniture Co., Inc., Case No. 92-27686
Chapter 7 trustee commenced an adversary proceeding against two defendants to recover an account receivable. Because the debtor owed the first defendant certain sums and that defendant owed monies to the second defendant, the second defendant argued the amount it owed the debtor should be set off. The court determined that the second defendant failed to prove that the triangular setoff rights fell under the mutuality requirement of sec. 553. The trustee was granted a judgment for the full amount owed the debtor. In re Matrix Interior Supply, Inc., Case No. 95-21120, Paul G. Swanson, Trustee v. First and Portland Corp,, et al, Adv. No. 95-2516
US Trustee moved for reconsideration of the court's order converting the case from chapter 11 to chapter 7 upon the debtor's motion under sec. 1112(a). The UST argued that, as the debtor was no longer a "debtor in possession" post-confirmation, it no longer had the right to convert the case under sec. 1112(a). The court found that because the post-confirmation debtor was the same entity as the debtor in possession, the debtor was allowed to convert, post-confirmation, to a chapter 7. In re Imperial Plants, Inc., Case No. 94-21818
Creditor commenced an adversary proceeding seeking to deny the chapter 7 debtor's discharge due to his non-disclosure of personal and financial assets, as well as corporate assets under his control. The court determined the totality of the debtor's mismanagement of both his personal and corporate financial affairs, the debtor 's lack of records, the debtor's concealment of assets, and the debtor's false statements on his schedules and at his meeting of creditors justified the denial of discharge under sec. 727(a)(2), (3), (4)(A), and (7). In re Max Kevin Chulew, Case No. 95-23801, Sierra Center 24, Inc. v. Debtor, Adv. No. 95-2406
Creditor moved for relief from the automatic stay and for an order of payment of secured proceeds held by the chapter 7 trustee. The trustee objected, asking the court to require the creditor to marshal assets of the debtor's principals before resorting to proceeds that were property of the estate. The court sustained the objection. The common debtor requirement of the doctrine of marshaling was met where the principals secured the debtor's note to the creditor with mortgages on their homesteads. The creditor was required to marshal assets with respect to the principals' personal note and was required to satisfy its claim through foreclosure of the principals' real estate even though it was environmentally contaminated. In re Wm. Pietsch Co., Inc., Case No. 95-21279 Published: In re Wm. Pietsch Co., 200 B.R. 207 (Bankr. E.D. Wis. 1996).
Law firm that had represented the chapter 11 debtor moved for approval of its representation of a defendant in the chapter 7 trustee's preference proceeding after the case was converted. The court held that the firm could not represent the defendant. In re Peck Foods, Case No. 93-24416, John F. Waldschmidt, Trustee v. Compcare Health Services Ins. Corp., Adv. No. 96-2132 Published: In re Peck Foods, 196 B.R. 434 (Bankr. E. D. Wis. 1996).
US Trustee filed a motion for an order vacating and voiding the court's order approving employment of chapter 11 debtors' counsel for failure to make full disclosure as required under Rules 2014(a) and 2016(b). The firm had required the debtors to pay counsel $3,000 per month which would then be placed into trust to ensure there would be available funds to pay the attorney's fees once approved by the court. The court found the fee arrangement was improper and the firm's initial nondisclosure of the arrangement was an intentional omission; therefore, the firm was disqualified from representing the debtors ab initio. In re Plymouth Creameries, Inc., Case No. 96-20017 & Plymouth Land, Inc., Case No. 96-20018
Chapter 7 trustee filed a motion requesting the court order the trustee of the debtor's family trust to turn over cash assets equal to the debtor's present interest in the value of the trust. The trust trustee argued the express primary purpose of the trust, which was to provide and maintain a residence for the debtor's mother, had to be satisfied prior to a distribution of the trust's assets. The court determined the chapter 7 trustee was entitled to an order directing the trust trustee to turn over the debtor's proportionate contribution to the trust, which was a 1/7 interest in the trust cash and a 1/14 interest in the trust real estate. In re John Michael Flynn, Case No. 94-24931
Chapter 7 debtors brought an adversary proceeding for an order requiring the IRS to reallocate their tax overpayments to the trust fund portion of their tax liability and for a determination that their tax debts had been discharged. The court held that the individual debtor-partners continued to be liable for all taxes incurred by the debtor-partnership following conversion of its chapter 11 case to chapter 7. Penalties and interest assessed against the debtor-partnership for failing to file partnership informational returns were excepted from the discharge of the individual partners. The court further found no appropriate bankruptcy purpose would be served by requiring the IRS to allocate payments made by the debtor-partnership during its chapter 7 case to the trust fund portion of the taxes, and the debtor were not entitled to designate the application of their income tax overpayments. In re Roger & Iris Kiesner, Case No. 92-23581, Debtors v. IRS, Adv. No. 95-2070; Peggy Kiesner, Case No. 92-23582, Debtor v. IRS, Adv. No. 95-2069 Published: In re Kiesner, 194 B.R. 452 (Bankr. E. D. Wis. 1996).