The debtors moved under 11 U.S.C. sec. 522(f)(1)(B) to avoid the fixing of a lien on their interests in certain household items. The court denied the motion without prejudice because most of the items described in the motion were not properly listed in the debtors' schedules of assets and exemptions, the motion otherwise sought relief that is not available under sec. 522(f)(1)(B), and the debtors did not provide proof that the motion was served on the lien holder in the manner provided by Rule 7004(b)(3).
In re Jones, Case No. 19-31539-beh, 2019 WL 7342455 (December 2019) -- Judge B.E. Hanan
The Chapter 13 debtor originally filed his bankruptcy petition without identifying a spouse, but eleven days later, he filed an “amended petition” to include a joint debtor spouse. Though Federal Rule of Bankruptcy Procedure 1009(a) allows a debtor to amend his or her petition “as a matter of course at any time before the case is closed,” the Rule does not trump the plain text prescriptions for filing joint cases under 11 U.S.C. section 302(a). Accordingly, the Court struck the amended petition and related documentation including the spouse.
Moon v. Iowa Student Loan Liquidity Corporation, Adv. Proc. No. 18-2249 (December 2019) -- Judge B.H. Ludwig
Nonprofit lender holding debtor’s consolidated student loan did not willfully violate the debtor’s discharge injunction by acting to collect on the debt post-discharge. The consolidated student loan was found to be nondischargeable under §523(a)(8)(A)(i) and thus was excepted from the debtor’s discharge issued in February 2012.
In re Kielman, Case No. 19-21900-beh, 2019 WL 6880082 (December 2019) -- Judge B.E. Hanan
The Chapter 13 debtor inadvertently failed to provide notice of her bankruptcy case to a creditor, the lender on her non-filing husband’s vehicle. As a result, the creditor filed its proof of claim after the bar date and the Court disallowed the claim as untimely. Later, upon default of post-petition payments, the creditor moved for relief from the automatic stay and co-debtor stay. In resolving the motion, the creditor and the debtor stipulated to allow the post-petition arrearage to be paid through the plan pursuant to a claim under 11 U.S.C. § 1305. The Court determined that post-petition default on a pre-petition car loan did not constitute consumer debt arising after the date of the order for relief, as required to constitute a claim under § 1305. The Court also declined to reconsider the prior disallowance of the creditor’s proof of claim, noting that the debtor’s invocation of 11 U.S.C. § 521(j) at a hearing was not procedurally proper, nor was it likely to succeed on the merits. Alternatively, the Court noted that an option not yet pursued by the parties was for the debtor to seek an extension of the deadline to file a claim under Rule 3004, which may be enlarged under Rule 9006(b)(1).
In re Zoromski, 19-20752-beh, 2019 WL 6869628 (December 2019) -- Judge B.E. Hanan
After the Chapter 7 debtors received their discharges, and before the assets of the estate were fully administered, the debtors moved to convert their case to a Chapter 13. The Court ordered the debtors to file a supporting brief establishing their right to convert in the circumstances. The debtors then moved to vacate the discharge order under Civil Rule 60(b). The debtors asserted, among other things, that their attorney’s failure to stipulate to an extension of the deadline to object to their discharge for a third time—and thus to prevent the entry of the discharge order—amounted to excusable neglect. The debtors wished to save their non-exempt vacant land, which was appraised post-petition at a value much higher than they anticipated, by paying unsecured creditors in full through a Chapter 13 plan. After weighing the equitable factors identified in Pioneer Inv. Servs. v. Brunswick Assocs., Ltd. P’ship, 507 U.S. 380, 395 (1993), the Court concluded that excusable neglect existed and granted the motion.
Braatz v. Check and Cash, LLC, Adv. Proc. No. 19-02088 (December 2019) -- Chief Judge G.M. Halfenger
The debtor-plaintiff alleged that the creditor-defendant violated the automatic stay and the Wisconsin Consumer Act when it garnished funds from her paycheck approximately two weeks after she filed her chapter 7 case. The debtor acknowledged that the creditor returned the garnished funds a few weeks after the debtor filed her adversary complaint, which the creditor did not answer.
In moving for default judgment, the debtor requested compensatory damages for financial and emotional injuries and punitive damages. The court ruled that the debtor was entitled to recover reasonable attorney's fees under 11 U.S.C. §362(k)(1) because the uncontested facts showed that the creditor willfully violated the automatic stay. The court further ruled that controlling precedent commands that §362(k)(1) does not afford a right to recover damages for emotional injury, and that the alleged conduct did not justify an award of punitive damages because it was not sufficiently egregious or reprehensible. Finally, the court ruled that the debtor failed to state a claim under the Wisconsin Consumer Act, Wis. Stat. §427.104(1)(h) & (j), because the alleged acts of garnishment could not "reasonably be expected to threaten or harass" and could not constitute a "[c]laim, or attempt or threaten to enforce a right with knowledge or reason to know that the right does not exist".
In re Ryan Ebert, Case No. 18-31065 (December 2019) -- Chief Judge G.M. Halfenger
AmeriCredit Financial Services, Inc. filed a motion for relief from the automatic stay and the co-debtor stay with respect to its collateral. The motion was without merit because the debtor's confirmed chapter 13 plan surrendered the collateral and entry of the order confirming the plan immediately terminated the automatic stay with respect to the collateral, terminated the co-debtor stay, and the collateral was deemed abandoned. The debtor filed a frivolous objection to the motion for relief, stating that his non-filing co-debtor had become current with payments to AmeriCredit. The court denied the motion as moot and ordered the parties and their counsel to show cause in writing why they should not be sanctioned under Federal Rule of Bankruptcy Procedure 9011(c)(1)(B). The court noted, "[i]f ever there were a time when parties could file meritless requests for relief and demands for hearing without risk of sanction, that time has passed."
Braun v. U.S. Dep’t of Educ. (In re Braun), Case No. 18-23655-beh, Adv. No. 18-02184-beh, 2019 WL 6463254 (November 2019) -- Judge B.E. Hanan
Chapter 7 debtors filed an adversary proceeding seeking to discharge $9,558.66 in student loan debt under 11 U.S.C. § 523(a)(8) because excepting such debt from a discharge would impose an undue hardship on them. Debtor Robert Braun had co-signed the loans for the benefit of the debtors’ son. The U.S. Department of Education (“DOE”) moved for summary judgment, arguing that the debtors could not meet the second prong of the undue hardship test set out in Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987), as adopted by In re Roberson, 999 F.2d 1132 (7th Cir. 1993), and somewhat softened by Krieger v. Educational Credit Mgmt. Corp., 713 F.3d 882 (7th Cir. 2013).
Applying the second Brunner prong, the Court considered whether additional circumstances exist to indicate that the debtors’ inability to pay while maintaining a minimum standard of living is likely to persist for a significant portion of the repayment period. Shortly after filing their bankruptcy case, the debtors signed three reaffirmation agreements to maintain loans on two vehicles. By the time they filed this adversary proceeding, they had satisfied one of the car loans. Moreover, debtors anticipated fully repaying the second loan within seven months, and repaying the third within fourteen months. This progress will, at the fourteen-month point, allow the debtors to enjoy a net monthly income of more than five times the monthly amount due on the student loans. These impending improved circumstances allowed the Court to confirm that the debtors can repay the loan during the repayment period while maintaining at least a minimum standard of living. Based on the debtors’ failure to meet their burden to establish that the obligation to pay the son’s student loans would impose an undue hardship under 11 U.S.C. § 523(a)(8), the Court granted the DOE’s motion for summary judgment.
In re Dawn Schroeder, Case No. 17-27289 (September 2019) -- Chief Judge G.M. Halfenger
Before confirmation Richard Voss filed proof of a claim secured by a mortgage on the chapter 13 debtor's residence. The confirmed plan provided for mediation to modify the mortgage and either payment on Voss's claim outside of the plan, if modified, or a plan modification to address the claim, if not. About a year after confirmation, after mediation failed, Voss filed an amended proof of claim, seeking to increase the amount of his secured claim based on a post-confirmation increase in the value of the debtor's residence. The debtor objected to Voss's claim and filed a request to modify the confirmed plan to pay Voss's allowed secured claim through the plan in the amount stated in his original proof of claim and to otherwise treat his claim as an allowed unsecured claim. The court concluded that the debtor's proposed modification of the plan is permissible under 11 U.S.C. §§1322(c)(2) & 1329, disallowed Voss's amended proof of claim based on insufficient cause to amend, and sustained the debtor's objection to Voss's claim.
In re Bruce, Case No. 18-21283-beh, 2019 WL 5887173 (September 2019) -- Judge B.E. Hanan
The Chapter 13 debtor filed a motion seeking sanctions for violations of the automatic stay, and for contempt against a county child support agency based on the agency’s continued collection of both pre-petition arrears and current child support payments from the debtor via payroll deductions, even after the debtor’s plan was confirmed. The debtor later dropped his request for stay-violation sanctions, after conceding that the agency’s post-petition collection activity was excepted from the stay per 11 U.S.C. § 362(b)(2)(C) and proceeded with a motion for contempt sanctions and attorney fees. The agency argued that a finding of contempt was not warranted because it was not notified that the debtor’s plan had been confirmed until four months after the order, and it stopped collecting child support arrearages as soon as it was given notice.
The Court determined that the agency’s continued garnishment of the debtor’s wages after plan confirmation and before it received actual notice of the confirmation order did not constitute contempt, warrant sanctions, or warrant granting attorney fees. The Court found that the agency, as a priority creditor, did not have a duty to monitor the debtor’s bankruptcy case for potential plan confirmation. Furthermore, the agency did not act in knowing or reckless disregard of the confirmation order because it had no actual knowledge of its existence during the time period in dispute. Additionally, the Court found that the debtor could not be awarded attorney fees because he failed to state an adequate basis for damages.