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Pleguar Corp. v. Debtors (In re Thomas and Mary Reilly) (October 2009) -- Judge Shapiro

Pleguar entered into an asset purchase agreement with debtors’ LLC to be paid over an 8-year period. Under the terms of the agreement, intangibles, rather than physical assets, comprised approximately 96% of the value. 6-years into the agreement, the debtors defaulted. When Pleguar sued both the LLC and the debtors personally in state court, the LLC ceased business operations, but in an effort to find re-employment for its employees,  transferred some of its intangibles to JHB, a competitor of Pleguar. The debtors then filed a joint personal voluntary petition for bankruptcy under Chapter 7. Pleguar instituted this adversary proceeding for denial of debtors’ discharge. The court held that debtors did not act with actual fraudulent intent in transferring to competitor LLC’s intangibles, precluding denial of discharge on grounds that debtors fraudulently transferred or concealed property. The court also held that omission from debtors’ bankruptcy schedules of such transfer did not warrant denial of discharge on grounds that debtors made false oath in relation to their bankruptcy case. Finally, the court held that denial of discharge was not warranted on grounds that debtor “gave, offered, received, or attempted to obtain money, property, or advantage, or a promise of money, property, or advantage, for acting or forbearing to act.” The adversary proceeding was dismissed, and the debtors were granted a discharge.

In re Brian & Patsy Morey, Case No. 09-26318 Published: In re Morey, 414 B.R. 473 (September 2009) -- Judge McGarity

Secured creditor filed an objection to confirmation of the chapter 13 debtors' plan, arguing the financing of the negative equity on the debtors' used trade-in vehicle was included in the financing of their new vehicle purchase, resulting in its claim being protected from cram down under sec. 1325(a).  The debtors argued the negative equity resulting from the trade-in of their old vehicle was not part of the purchase money security interest, and was thus not subject to the 910-day rule imposed by the hanging paragraph in sec. 1325(a).  The court sustained the creditor's objection, concluding the entire amount of the debt securing the new vehicle met the definition of purchase money security interest.

Christenson v. Lee (In re Lee), 415 B.R. 367 (September 2009) -- Judge Kelley

Debtor's discharge was not denied where records kept by Debtor were appropriate for types of business in which he engaged, and omissions from Schedules appeared inadvertent, but debt based on false representations made in inducing creditor to purchase nontransferable weapons was held not dischargeable under § 523(a)(2)(A).

Neary, UST v. Debtors (In re John and Jennifer McCarthy) (August 2009) -- Judge Shapiro

The UST objected to the debtors' discharge based on § 727(a)(4)A) (false oath), § 727(a)(5) (failure to explain loss of assets), and § 727(a)(2) (fraudulent transfer of property within one year of the filing of the bankruptcy). The court concluded that the debtors were the victims of a scam, orchestrated by a clever con artist, and lacked the requisite intent to defraud. The court also found that the debtors transfer of non-exempt funds into exempt funds, totaling approximately $9,900, shortly before filing bankruptcy, was a proper use of pre-petition bankruptcy planning under the particular facts and circumstances of this case. The adversary proceeding was dismissed, and the debtors were granted a discharge.

In re David Michael Larsen, Case No. 09-22963 Published: In re Larsen, 406 B.R. 821 (June 2009) -- Judge McGarity

Chapter 7 pro se debtor moved for the appointment of counsel pursuant to 28 U.S.C. sec. 1915(e)(1). The court denied the motion, finding no exceptional circumstances justified the appointment of pro bono counsel.

Scaffidi v. Barbosa, 08-2056 (June 2009) -- Judge Pepper

The Court granted the plaintiff trustee's motion for default judgment against the debtor's former husband. The Court agreed with the trustee that the debtor's 2007 transfer of her interest in the former marital homestead via a quitclaim deed was avoidable pursuant to 11 U.S.C. 549(a) as an unauthorized, post-petition transfer of estate property. The Court further found that the debtor's 2005 transfer of her interest in certain assets to the defendant via a Marital Settlement Agreement ("MSA") constituted a transfer in constructive fraud of her creditors pursuant to Wis. Stat. 242.04(1)(b), and therefore was avoidable under 11 U.S.C. 544(b)(1). The Court concluded that when the debtor signed the MSA and transferred to the defendant her interest in half of the marital homestead, as well as her interest in anything in the defendant's possession, she reasonably should have believed that this transfer would cause her to incur debts beyond her ability to pay as they became due. After the transfer, the debtor--unemployed and disabled--was left with no real estate, no assets other than a 14-year-old car, and only her disability income and a small maintenance payment from the defendant.

In Re Streckrich Petro Corporation, 08-31860 (June 2009) -- Judge Pepper

The Court granted the Chapter 11 creditor's motion to compel the debtor-in-possession to assume or reject a lease. The Court first agreed with the creditor that the agreement in question was, in fact, a lease under Missouri law, overruling the debtor-in-possession's objection that the agreement was something other than a lease. The Court then held that by filing the motion to compel before the expiration of the 120-day assumption period, the creditor had, in effect, tolled that period. The Court concluded that seven (7) days remained during which the debtor-in-possession could elect to assume or reject the lease, or could request that the Court extend the time for it to make that decision.

In re Thongta, 2009 Bankr. LEXIS 1428 (June 2009) -- Judge Kelley
Co-debtor stay of ยง 1301 did not serve to stay enforcement of the debt because it was not a debt "of the debtor." Further, the stay did not protect the non-filing spouse from collection activities stemming from her own personal liability.

Stanfield v. First Midwest Bank (In re Daniel and Sharon Stanfield) (June 2009) -- Judge Shapiro

Debtors commenced an adversary proceeding seeking a determination that the Bank’s mortgage was void because the debtor-husband did not sign the mortgage on a homestead that was collateral for a business loan. Wis. Stats. § 706.02 states that both married persons must join in a conveyance. The bank responded that the mortgage it held was valid due to the “substitute requirements” contained in the statute, which allow extrinsic documents to prove the validity of a mortgage so long as there is intent on the part of the non-signing spouse to mortgage his interest in the property. The court found that no such intent was present. The court also rejected the bank’s argument that it would be inequitable to invalidate the mortgage, noting that the bank is a sophisticated entity and has the obligation to check the requirements of Wisconsin law.

In re Nelsen, 404 B.R. 892 (April 2009) -- Judge Kelley
Debtor's age and downturn in economy did not constitute "exceptional circumstances" to justify discharge of student loan.

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