In re Thompson, 520 B.R. 713(October 2014) -- Judge Kelley
Creditor with disallowed claim required to refund all mortgage payments made on claim; debtors' requests for attorneys' fees and return of mortgage note denied.
The trustee objected to confirmation of the debtors’ proposed chapter 13 plan asserting that it failed to provide for all of debtors’ disposable income. The trustee argued that the debtors must pay into the plan (i) any increase in the cash surrender value of their whole life insurance policy, and (ii) an additional $25 per month representing a reduction of the debtors’ claimed recreation expense of $125 per month.
The court held that the cash surrender value was not “income.” And the trustee (i) did not contest current monthly income or reasonableness of the debtors’ expenditures (other than recreation), and (ii) failed to establish a basis for a Lanning adjustment.
The court concluded that the reasonableness of the recreation expense could not be determined as a matter of law, but the debtors have no disposable income even if the recreation expense is excluded in its entirety.
Consequently, the court ruled that the debtors’ plan did not offend 11 U.S.C. §1325(b)(1)(B)’s requirement that they devote all projected disposable income during the plan term to pay unsecured creditors.
In re Ryan, 517 B.R. 905(September 2014) -- Judge Kelley
In fee allowance dispute, Chapter 13 debtor's attorney bears burden of proving benefit of services to debtor, and in case that does not reach confirmation, the burden may be difficult to meet. Also, the disclosure requirements of § 329 and Rule 2016(b) are mandatory and strictly enforced.
The trustee objected to confirmation of the debtors’ proposed chapter 13 plan asserting that it failed to provide for all of the debtors’ disposable income. Debtors, who were repaying a 401k loan at the time their petition was filed, sought to commence making 401k contributions once their loan was fully repaid. The court held that because they were not making contributions during the look-back period, such contributions could not be factored into current monthly income. In theory, future contributions might justify a Lanning adjustment, but only if the expected contribution is both “reasonably necessary” for the debtors’ maintenance and support and “known and virtually certain to occur”. The court concluded that the record did not support a Lanning adjustment. Confirmation was denied.
Wan Ho Indus. Co., Ltd. v. Hemken (In re Hemken), 513 B.R. 344(July 2014) -- Judge Kelley
Creditors' complaints for discharge and dischargeability denied because creditors did not carry their burden of proving that debtor acted with requisite fraudulent intent.
In re Moncree, 511 B.R. 922(June 2014) -- Judge Kelley
Debtor not permitted to amend confirmed plan to reduce value of property and thereby reduce amount of secured creditor's claim.
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.
Court denied US Trustee's motion for partial summary judgment in action seeking denial of debtor's discharge. The court had previously ruled that creditors would be best served by converting debtor's chapter 11 case to chapter 7 due, in part, to debtor's lack of financial records. The prior ruling had focused on the effect of the proceeding on creditors; there was no "law of the case" regarding the elements of section 727.
IRS moved for relief from the automatic stay to allow setoff of the chapter 13 debtor's postpetition claim to tax overpayment against prepetition priority tax liability of the debtor due to the IRS. The court granted the motion, finding the nonbankruptcy right to setoff continued postconfirmation and the debtor only had right to a refund after the government had credited the tax overpayment against the tax liability under 26 U.S.C. sec. 6402(a).