This decision grants debtor’s counsel’s motion for a stay pending appeal. Near the end of the objection period on the chapter 13 trustee’s motion to dismiss debtor’s case before plan confirmation, the debtor’s counsel filed, on 14-day notice, an application for fees to be paid out of estate funds held by the trustee. The court dismissed the case before the fee application was ripe for decision. The court then denied the fee application under 11 U.S.C. §§349(b)(3), which provides that “[u]nless the court for cause orders otherwise, dismissal . . . revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case”, and 1326(b), which directs the trustee to return payments to the debtor after deducing “any unpaid claim allowed under section 503(b).”
Counsel moved for reconsideration, which the court denied because counsel failed to show the ruling to be contrary to controlling authority or resulting in manifest injustice. Counsel appealed and asked the bankruptcy court to direct the trustee to continue holding the debtor’s funds until the appeal is resolved. The court granted that motion, ruling that although the chance of success on appeal is minimal, the underlying issue, if preserved for consideration on appeal, lacks a clear answer, and the balance of harms favors awarding the requested relief.
Section 1322(c)(2) allows a chapter 13 plan to provide for payment of a claim "as modified pursuant to section 1325(a)(5)" "notwithstanding (b)(2)" when the claim is secured only by a debtor's principal residence and the last originally scheduled payment is due before the final payment under the plan is due. Overruling creditor's objection to plan confirmation, the court held that section 1322(c)(2) allowed the plan to pay the claim at an appropriate Till interest rate, rather than requiring the plan to pay the claim at the interest rate due under nonbankruptcy law.
Chapter 13 debtors filed an adversary action against an entity holding a junior lien on their principal residence. The debtors are ineligible for a discharge because they received a discharge in a case filed three years before filing their chapter 13 case. The parties stipulated that the defendant's lien is "underwater"—that is, the value of the debtors' residence is less than the amount the debtors owe to the holder of the senior lien on the property—and there is no dispute that the debtors' personal liability to the defendant was discharged in their earlier chapter 7 case. The debtors' adversary complaint seeks a judgment that either (i) voids the defendant's lien under section 506(d) or (ii) declares that the defendant's claim is an "unsecured claim" for purposes of sections 506(a) and 1322(b)(2) so that the debtors may eliminate the lien through their chapter 13 plan. The defendant argued that its claim is not void under section 506(d) because the claim is a valid secured claim under state law and the debtors' chapter 13 plan cannot eliminate its lien because the debtors are ineligible for a discharge under section 1328(f).
Held: (1) section 506(d) does not allow a debtor to void a valid state-law lien based solely on the fact that there's no value in the property to which the lien can attach; and (2) the defendant's lien can be eliminated permanently by the full performance of a confirmed chapter 13 plan that so provides because the defendant's claim is an "unsecured claim" for purposes of sections 506(a), 1322(b)(2), and 1325(a)(5).
First National Bank - Fox Valley v. Gruber (13-2797)(April 2014) -- Judge Halfenger
Plaintiff purchased vacant land owned by the debtor at a pre-petition execution sale. When the debtor filed his bankruptcy petition, his right to redeem had expired, but lien-holding creditors still had one day to acquire the plaintiff's interest under Wis. Stat. §815.44. Because the §815.44 period had not expired, the plaintiff did not have the right to make a demand on the sheriff to issue a deed conveying the debtor's right, title, and interest in the land. The plaintiff filed an adversary proceeding seeking, in part, a declaration that the land purchased at the execution sale was not property of the debtor's bankruptcy estate, or in the alternative, a declaration that the bank did not need relief from the automatic stay to demand that the sheriff issue it a deed to the land.
The court ruled that (1) at the time the debtor filed his bankruptcy case he had both legal title and a possessory right in the land to use it in any manner that did not constitute waste; those interests were included in Gruber's bankruptcy estate pursuant to 11 U.S.C. §541(a)(1); and (2) the bank could not demand a deed conveying the debtor's right, title, and interest in the land without obtaining relief from the automatic stay under 11 U.S.C. §362(d), because any such demand by the bank would, at a minimum, violate 11 U.S.C. §362(a)(3) and would not be a ministerial act excepted from the automatic stay.
Debtors, with only one prior dismissal, who did not file motion to continue the automatic stay under 362(c)(3) in time to have it heard and decided within 30 days did not have standing to move to impose the automatic stay under 362(c)(4).
The court sustained, in part, the debtor's ex-wife's objection to confirmation of the debtor's chapter 13 plan and overruled the debtor's objection to his ex-wife's proof of claim, concluding that (i) the plan's proposed treatment of the maintenance arrears owed to the debtor's ex-wife did not comply with 11 U.S.C. §1322(a)(2), and (ii) the debtor did not have a right of setoff under Wisconsin law that would allow him to reduce the amount of his ex-wife's proof of claim.
The court denied chapter 13 debtor's application to employ special counsel as unnecessary, finding that 327 applies only to trustees.
Order overruling debtors' post-confirmation claim objections.
Order denying debtor's post-confirmation claim objection.
Order denying motion to shorten notice period for failure to demonstrate cause that also discusses claimed "ministerial act" exception to automatic stay.