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) -- Chief Judge S.V. 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) -- Chief Judge S.V. Kelley
Debtor not permitted to amend confirmed plan to reduce value of property and thereby reduce amount of secured creditor's claim.
In re Ward, et al (13-31965) (June 2014) -- Judge G.M. Halfenger
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.
In re Smith (14-20281) (June 2014) -- Judge G.M. Halfenger
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.
In re Joseph Miller, Case No. 12-32487, US Trustee v. Debtor, Adv. No. 14-2006 (June 2014) -- Judge M.D. McGarity
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.
In re Janice Renee Pugh, Case No. 13-23483 (May 2014) -- Judge M.D. McGarity
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).
In re James Matson & Kevin Mabry, Case No. 13-35361 (April 2014) -- Judge M.D. McGarity
A creditor filed a motion to dismiss the chapter 13 case filed by same-sex spouses, arguing the debtors were not "spouses" for purposes of sec. 302 because Wisconsin did not allow or recognize same-sex marriages. The Court denied the motion to dismiss and found that same-sex spouses married in a state that allows them to do so (Iowa), may file a joint bankruptcy case in a state that does not recognize their union as a marriage (Wisconsin) under the "place of celebration" rule, which requires the recognition of an out-of-state same-sex marriage as valid when interpreting the Bankruptcy Code.
Monroe v. Seaway Bank & Trust Company, et al (13-2747) (April 2014) -- Judge G.M. Halfenger
Chapter 13 debtors filed an adversary action against an entity holding a junior lien on their principal residence. The debtors are ineligible for a discharge because they received a discharge in a case filed three years before filing their chapter 13 case. The parties stipulated that the defendant's lien is "underwater"—that is, the value of the debtors' residence is less than the amount the debtors owe to the holder of the senior lien on the property—and there is no dispute that the debtors' personal liability to the defendant was discharged in their earlier chapter 7 case. The debtors' adversary complaint seeks a judgment that either (i) voids the defendant's lien under section 506(d) or (ii) declares that the defendant's claim is an "unsecured claim" for purposes of sections 506(a) and 1322(b)(2) so that the debtors may eliminate the lien through their chapter 13 plan. The defendant argued that its claim is not void under section 506(d) because the claim is a valid secured claim under state law and the debtors' chapter 13 plan cannot eliminate its lien because the debtors are ineligible for a discharge under section 1328(f).
Held: (1) section 506(d) does not allow a debtor to void a valid state-law lien based solely on the fact that there's no value in the property to which the lien can attach; and (2) the defendant's lien can be eliminated permanently by the full performance of a confirmed chapter 13 plan that so provides because the defendant's claim is an "unsecured claim" for purposes of sections 506(a), 1322(b)(2), and 1325(a)(5).
First National Bank - Fox Valley v. Gruber (13-2797) (April 2014) -- Judge G.M. Halfenger
Plaintiff purchased vacant land owned by the debtor at a pre-petition execution sale. When the debtor filed his bankruptcy petition, his right to redeem had expired, but lien-holding creditors still had one day to acquire the plaintiff's interest under Wis. Stat. §815.44. Because the §815.44 period had not expired, the plaintiff did not have the right to make a demand on the sheriff to issue a deed conveying the debtor's right, title, and interest in the land. The plaintiff filed an adversary proceeding seeking, in part, a declaration that the land purchased at the execution sale was not property of the debtor's bankruptcy estate, or in the alternative, a declaration that the bank did not need relief from the automatic stay to demand that the sheriff issue it a deed to the land.
The court ruled that (1) at the time the debtor filed his bankruptcy case he had both legal title and a possessory right in the land to use it in any manner that did not constitute waste; those interests were included in Gruber's bankruptcy estate pursuant to 11 U.S.C. §541(a)(1); and (2) the bank could not demand a deed conveying the debtor's right, title, and interest in the land without obtaining relief from the automatic stay under 11 U.S.C. §362(d), because any such demand by the bank would, at a minimum, violate 11 U.S.C. §362(a)(3) and would not be a ministerial act excepted from the automatic stay.