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.
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.
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.
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.
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 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.
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.
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.
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).
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.