Creditor objected to confirmation of the debtor’s chapter 13 plan contending that the plan’s payment of its secured claim in pro rata distributions did not comply with 11 U.S.C. §1325(a)(5)(B)(iii)(I)’s requirement that periodic payments on secured claims be made in “equal monthly amounts”. The court sustained the objection.
The debtor filed a motion to reconsider the court’s denial of her post-conformation motion to modify a chapter 13 plan that would change payments on unsecured claims from 100% to 0%. She contended that she lacked a valuable interest in joint tenancy property, and, therefore, her proposed modification did not fail the best-interests-of-creditors test. Although the property deed lists her as a cotenant, she argued that her interest lacks liquidation value because she holds only “bare legal title” or, alternatively, that her interest in the property is impaired by an equitable lien.
The court denied the debtor’s motion for reconsideration and held that (1) as against a trustee representing the interests of creditors, the deed’s designation of ownership determines the allocation of real property rights and cannot be disregarded based on the debtor’s limited use of the property or lack of contribution to maintaining it; and (2) under Wisconsin law, the debtor could not employ the equitable lien doctrine to shield property from creditors.
Construing the language of § 707(b)(2)(D) that certain veterans are exempt from "any form of means testing," the Court dismissed the case under the totality of the circumstances because the wealthy debtors had a large surplus of income over their lavish expenses and they cited no factors such as a medical condition, calamity or inability to fund a Chapter 13 plan to demonstrate their need for Chapter 7 relief.
In re Guerrero, Case No. 15-26746, 536 B.R. 817(September 2015) -- Judge Hanan
Creditor and debtor were, respectively, vendor and vendee of the debtor's principal residence pursuant to a land contract. When the land contract matured, the debtor failed to make a “balloon” payment of the outstanding balance as required by the contract, and the creditor moved for strict foreclosure in state court. After the debtor filed her bankruptcy case, the creditor moved for relief from the automatic stay under sections 362(d)(1) and (2), and from the codebtor stay as to the debtor's non-filing spouse under section 1301(c), to continue the strict foreclosure action. The creditor argued that she was entitled to relief because: (1) she would be unable to pay off a second mortgage that her husband and his ex-wife took out on the creditor's own home if the debtor were allowed to spread the balloon payment over the life of her chapter 13 plan; (2) the land contract was either an executory contract that the debtor was required to accept in its entirety, or a security interest that the debtor could not modify pursuant to section 1322(b)(2); and (3) the debtor had no equity in the property until completion of the land contract. The court denied the motion. The court first looked to Wisconsin law to conclude that the land contract was a security device and not an executory contract within the meaning of the Code. The court then found that the creditor was not entitled to relief because: (1) the creditor failed to establish a decline in the value of the collateral; (2) the debtor was authorized to pay off the balloon payment through her plan under section 1322(c)(2); (3) the creditor failed to prove that the debtor lacked equity in the property; and (4) mere delay in payment does not constitute irreparable harm sufficient to lift the codebtor stay.
Failure to pay post-petition taxes was not cause for dismissal of Chapter 13 case where the Plan did not require the payment of § 1305 claims. The tax claims will survive the discharge, and the Debtor is liable for all applicable interest and penalties, but nonpayment did not constitute a violation of the confirmed Plan.
Homeowners Association Claim for attorneys' fees in litigating with Debtors was not allowed secured claim in Debtors' Chapter 13 case.
The debtor commenced an adversary proceeding against J.P. Morgan Chase Bank, N.A., (“Chase”) requesting a declaration that Chase’s claim secured by a junior lien on the debtor’s principal residence is only allowable as an unsecured claim because the residence’s value was less than the amount the debtor owes a senior lienholder. The parties entered into a stipulation to resolve the adversary proceeding and requested that the court approve the stipulation. The stipulation provided, in part, that once the court approved the stipulation Chase would be permitted to file an unsecured claim for its current outstanding loan balance, despite the fact that the claims bar deadline had expired and Chase had not filed a claim. Chase argued that it could file its unsecured claim after the claims bar deadline because Federal Rule of Bankruptcy Procedure 3002(c)(3) provided an exception to the general rule that proofs of claims in chapter 13 cases must be filed within 90 days after the first date set for the meeting of creditors. The court denied the parties’ request to approve the stipulation and held that Chase did not qualify for the exception set out in Fed. R. Bankr. P. 3002(c)(3). The court reasoned that Rule 3002(c)(3) only applies where a judgment both (i) gives rise to an unsecured claim or makes the claim allowable, and (ii) provides for the recovery of money or property or avoids an interest in property. The proposed judgment in the adversary proceeding would not avoid Chase’s lien; thus it would not satisfy criterion (ii). And the order confirming the plan, which, depending on the plan terms, might eliminate Chase’s lien, would not satisfy criterion (i).
The debtor filed an adversary complaint against the City of Milwaukee to avoid under 11 U.S.C. §§522 and 548 the City of Milwaukee’s tax foreclosure of her residence. The debtor moved for summary judgment. The City opposed the motion solely on the ground that the debtor had received reasonably equivalent value for her residence, even though the parties agreed that the property’s value was not reasonably equivalent to the delinquent tax debt satisfied by the foreclosure. The City argued that the foreclosure’s elimination of a mortgage that secured a $25,000 note was also value to the debtor. The court granted the debtor’s motion for summary judgment. It held that the elimination of the mortgage did not improve the debtor’s financial position because the debtor remained liable on the note. Therefore, the debtor did not receive value reasonably equivalent to the value of the foreclosed residence.
The debtor proposed a chapter 13 plan to modify the City of Milwaukee’s claim for back taxes on his principal residence by paying the City the value of the residence, which was less than the tax bill. The City of Milwaukee objected and argued that the debtor was not entitled to “cram down” its claim. The court concluded that section 1322(b)(2) did not apply to the City of Milwaukee’s tax claim because the tax claim is not secured by a consensual lien; rather, it is secured by a tax lien that arises by operation of law. Because of this, the court concluded that section 1322(b)(2) ‘s “anti-modification” clause does not apply to the City of Milwaukee’s tax claim.
In re Jodi L. Wagner, Case No. 09-33103(May 2015) -- Judge McGarity
The chapter 7 debtor opposed the trustee's motion to compromise a claim and administer the proceeds from a defective medical device MDL settlement award. The debtor underwent hip replacement surgery prepetition and, due to a recall of the device, hip revision surgery postpetition. The Court denied the trustee's motion for summary judgment, rejecting his argument that the claim existed prior to the debtor's filing because it was sufficiently rooted in the debtor's pre-bankruptcy past. Instead, the Court applied the "discovery rule" to determine whether or not the claim was property of the estate. Because the issue of whether or not the debtor knew of her injury or exercised reasonable diligence in discovering it prior to filing bankruptcy was a matter for trial, the debtor's motion for summary judgment was also denied.