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In re Derrick & Shannon Buchner, Case No. 03-37885 (August 2004) -- Judge McGarity

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 Linda L. Middaugh, Case No. 02-32054 (July 2004) -- Judge McGarity

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 Tracey Rene Turck, Case No. 03-34679 (July 2004) -- Judge McGarity

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 Donald P. Lomax, Case No. 99-28332, Bruce Lanser, Trustee v. Frank Balistreri, Adv. No. 01-2496 (March 2004) -- Judge McGarity

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 Richard & Barbara Fisher, Case No. 02-22055, Monroe Equipment, Inc. v. Debtors v. Milwaukee Western Bank, Adv. No. 02-2196 (May 2003) -- Judge McGarity

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 Arrowhead Systems, LLC, Case No. 02-20147 (April 2003) -- Judge McGarity

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 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 (February 2003) -- Judge McGarity

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 Steven & Mary Anderson, Case No. 01-33143, Andrew Herbach, Trustee v. Phyllis Anderson, Adv. No. 02-2163 (December 2002) -- Judge McGarity

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 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 (October 2002) -- Judge McGarity

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 Johnnie L. Brown, Case No. 98-31716 Published: In re Brown, 280 B.R. 231 (July 2002) -- Judge McGarity

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.

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