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.
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.
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.
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.
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.
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.
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.
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.
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).
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.