Where a debtor converts the underlying bankruptcy case from one under Chapter 7 to one under Chapter 13 before the deadline for filing an answer to a 727 complaint objecting to discharge,the conversion does not moot the 727 cause of action. Rather, it renders that cause of action dormant. The appropriate disposition of the 727 adversary proceeding is for the court to stay the proceedings and close the adversary case, subject to a motion to reopen in the event that the underlying bankruptcy case reconverts to one under Chapter 7.
Equitable remand of removed state court litigation was not ordered when case involved core bankruptcy proceeding and interpretation of bankruptcy court's confirmation order. Plaintiff's request for a jury trial, if appropriate, could be accommodated.
Even though adversary proceeding involved alleged violation of state statute, mandatory abstention was not appropriate for core proceeding and when there was no pending state court action, and permissive abstention was denied when bankruptcy court would be called upon to interpret its confirmation order.
Chapter 13 debtor who voluntarily dismissed previous bankruptcy case in which secured creditors had moved for relief from the automatic stay was not eligible to be a debtor under sec. 109(g)(2). (This decision is a court minute decision, only.)
Chapter 7 trustee initiated an adversary proceeding seeking a determination that debtor’s interest in a trust was “property of the estate” and for turnover of the trust corpus for administration as an asset of the estate. The spendthrift provision restricted only involuntary transfer of debtor’s interest, not voluntary transfer of debtor’s interest, and therefore, the debtor had an absolute right to immediate payment of the principal, without restrictions. Accordingly, the court held that the trust did not contain a valid spendthrift clause under Arizona law, and, debtor’s interest in such trust was property of the bankruptcy estate. The adversary proceeding was dismissed and the trustee of the trust was ordered to turn over debtor’s beneficial interest in the trust corpus to the chapter 7 trustee for administration.
Court abstained from exercising jurisdiction over funds related to state court receivership.
Chapter 7 trustee objected to the debtor's claim of exemption in a lien on his former marital home, executed by his former spouse, in partial settlement of their divorce proceedings eight years prior to the bankruptcy filing. The court sustained the objection, finding the debtor lost his right to claim either a federal or state homestead exemption.
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.
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.