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In re Todd W. Hansen, Case No. 97-25273, Alan & Barbara Schroeder v. Debtor, Adv. No. 97-2459 (August 1999) -- Judge McGarity

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 Kenneth & Debra Beattie, Case No. 98-30856 (July 1999) -- Judge McGarity

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 United States Leather, Inc., Case No. 98-24997 (June 1999) -- Judge McGarity

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 Kathleen Pfalzgraf, Case No. 98-25982 Published: In re Pfalzgraf, 236 B.R. 390 (May 1999) -- Judge McGarity

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 Dynacon Development Corporation, Case No. 97-27874 (May 1999) -- Judge McGarity

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 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. (March 1999) -- Judge McGarity

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 Charles R. Cole, Case No. 94-27002 (February 1999) -- Judge McGarity

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 Frank Pio Crivello, Case No. 92-27252 (December 1998) -- Judge McGarity

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 Charlet M. Harmon, Case No. 96-20834 (July 1998) -- Judge McGarity

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 Milwaukee Engraving Co., Inc., Case No. 98-21027 Published: In re Milwaukee Engraving Co., Inc., 230 B.R. 370 (June 1998) -- Judge McGarity

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.


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