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Elllsworth -v- Ellsworth (In re Ellsworth) (September 2007) -- Judge Shapiro

Plaintiff, former wife of debtor, sought a judgment of nondischargeability against the debtor for failing to promptly notify her of a stock distribution he was to receive and which, under the terms of the parties' marital settlement agreement, was to be sold with the proceeds first to be used to pay certain debts and the balance to be divided by the parties. Instead of promptly notifying the plaintiff, the debtor placed the stock in a margin brokerage account in his sole name, which he used for his personal purposes. By the time the plaintiff finally received notice of the stock distribution, it had dramatically dropped in value (in excess of $442,000). The court found that the actions by the debtor constituted violations of 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(4) (for both defalcation by a fiduciary and embezzlement). The court declined to find that debtor’s conduct constituted a violation of 11 U.S.C. § 523(a)(6).


In Re Davis 07-24688 (September 2007) -- Judge Pepper

In a case in which the debtors' plan proposed to pay 100% to the unsecured creditors, the court overruled the Chapter 13 trustee's objection to the debtors' proposal to pay the consenting secured auto lender's claim outside the plan.


Kovacs -v- United States of America (In re Kovacs) (September 2007) -- Judge Shapiro

Kovacs entered into an offer in compromise (OIC) with the IRS resolving her income tax liabilities for the years 1990 to 1995. Kovacs subsequently defaulted in the terms of the IOC. The IRS terminated the OIC in 1999 and reinstated her liabilities for the tax years in question. On July 3, 2001, Kovacs filed a petition under Chapter 7 and listed the IRS as a creditor and obtained a discharge on October 10, 2001. After Kovacs received her discharge, the IRS mailed to her a series of notices of intent to levy on her assets with respect to these outstanding tax liabilities. The debtor filed an adversary proceeding. At the outset of the trial, the IRS conceded its mistake in determining the dischargeability of the tax liabilities for these years in question and acknowledged it had violated the discharge injunction under § 524 of the Bankruptcy Code. The court concluded that Kovacs was the prevailing party and that the IRS’ breach of § 524(a) was a proximate cause of her damages. However, the court also found that Kovacs Attorneys’ also were mistaken in the impact of her discharge on the tax liabilities, and, in addition, unreasonably protracted the court proceedings in the adversary proceeding. The court concluded that a fair portion of the total damages of $71,901.37 for which the IRS should be liable was $25,000 and stated that a cause of action for violation of the discharge injunction must not be utilized as a profit-making endeavor by the debtor’s attorneys. *NOTE - currently on appeal.


In re Linda & Timothy Hardin, Case No. 03-31539 Published: In re Hardin, 375 B.R. 506 (September 2007) -- Judge McGarity

Creditor with a security interest in chapter 13 debtors' motor vehicle moved for relief from stay after the vehicle was destroyed in an automobile accident postpetition and postconfirmation, in order to permit it to apply insurance proceeds paid by a third-party tortfeasor's insurer to its remaining secured and unsecured claims. The debtors and trustee objected, and disputed that the creditor had an interest in the insurance proceeds to the full extent of its remaining claims.  The court granted the creditor's motion in part and denied it in part. The creditor's recovery of insurance proceeds paid by third party's insurance carrier after debtors' collateral was destroyed was limited to its allowed secured claim.


In re John & Jean Sundstrom, Case No. 05-41463, Emerging Vision, Inc. v. Sundstrom, Adversary No. 06-2286 Published: In re Sundstrom, 374 B.R. 663 (August 2007) -- Judge McGarity

Creditor brought an adversary proceeding to deny the chapter 7 debtors a discharge based on the debtor-wife's alleged fraudulent prepetition transfer of assets. The court dismissed the complaint, finding the debtors' prepetition transfer of personal property into wholly-owned corporation did not evidence wrongful intent required for a denial of discharge under sec. 727(a)(2).


In Re Kirsch 07-20338 (August 2007) -- Judge Pepper

Contested Chapter 13 plan which was silent as to treatment of tax refunds in a case where below-median-income debtor listed the refund as income on Schedule I and utilized it for expenses on Schedule J could not be confirmed, because it violated the disposable income requirement of 11 U.S.C. 1325(b).


In Re Kiedrowski 06-24318 (August 2007) -- Judge Pepper

The district court's decision in In re Ross-Tousey effectively overrules this Court's decision in In re Sawdy, and therefore Chapter 13 debtors may deduct the vehicle ownership expense on their Form B22C only if they have a note or loan payment, and not if they own a vehicle outright.


In re McPike, 2007 WL 2317420 (August 2007) -- Judge Kelley
Trustee's Objection to Plan Modification based on disposable income was overruled. Debtor's modification was approved as having been filed in good faith.

In re FV Steel & Wire Co., 372 B.R. 446 (July 2007) -- Judge Kelley
Analyzing CERCLA's provisions for the cost of recovery and removal of environmental hazards at a contaminated site, there was no clear proof that the EPA viewed the site as an imminent threat, and the Court valued a claim filed by a co-debtor on behalf of the EPA in the amount of $75,000.

In re Erma L. Averhart (July 2007) -- Judge Shapiro

 The court held that where a secured creditor files a proof of claim before confirmation, which is at odds with the debtor’s plan as to rate of interest, and the secured creditor fails to object to confirmation, the interest rate in the confirmed plan is controlling. The court also decided that the secured creditor was not denied due process. The argument raised by the secured creditor that established past practice in the Eastern District of Wisconsin required finding that the confirmed plan must yield to the proof of claim was rejected. The court stated that the established past practice was not as firmly entrenched as secured creditor suggested.


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