Oral ruling on creditor/landlord's motion to have its claim for the debtor's post-petition missed rent payments classified as an administrative priority claim. The debtor's original plan had proposed to assume the lease. Before the Court confirmed that plan, the creditor obtained relief from stay to evict the debtor. The debtor amended the plan to reject the lease, the creditor did not object, and the Court confirmed that plan. The Court found that the debtor never officially assumed the lease, because it was confirmation of the plan that solidified the debtor's proposed assumption or rejection. The Court found that because the debtor had not assumed the lease pre-petition, the post-petition rejection did not constitute a breach of the lease contract under section 365(g)(1), and therefore that the missed lease payments were to be characterized as a pre-petition, general, unsecured, non-priority debt.
11-20664, Thomas and Amy Pfister (September 2011) -- Judge P. Pepper
Court's oral ruling granting the United States Trustee's motion to dismiss under section 707(b)(3)(B) on the totality of the circumstances.
Lind, 11-22623 (August 2011) -- Judge P. Pepper
In a Chapter 7 case involving married, jointly-filing debtors, the United States Trustee filed a motion to dismiss the debtor/husband under § 707(a), alleging that the fact that he was not eligible for a Chapter 7 discharge constituted "cause" for dismissal, and in the alternative, that he had filed his petition in bad faith, for the sole purpose of allowing the debtors to exempt assets that the wife, filing alone, would not have been able to exempt. The Court denied the motion to dismiss, finding that ineligibility for a discharge did not constitute "cause" under § 707(a). The Court found that bad faith was not a basis for dismissal under § 707(a), given that Congress explicitly had provided for dismissal due to bad faith in § 707(b). The Court also found insufficient evidence to conclude that the debtor/husband had filed for the purpose of allowing the wife to exempt otherwise non-exempt assets
10-33790, James and Leslie Lippe (August 2011) -- Judge P. Pepper
Oral ruling sustaining Chapter 13 trustee's objection to confirmation of the plan. The Court held that debtors who would finish repaying a 401k loan before the expiration of the plan commitment period could not use the funds they had been devoting to repaying the loan to increase the amount they were contributing to the 401k plan.
Fair v. GMAC Mortgage, LLC, 10-2362 (July 2011) -- Judge P. Pepper
Debtor who had received a Chapter 7 discharge in a case commenced within the previous 8 years filed a Chapter 13. She then filed an adversary complaint, proposing to strip off the wholly unsecured, junior mortgage lien. When the defendant did not file an answer, the plaintiff/debtor filed a motion for default judgment. On October 26, 2010, the Court denied the motion for default judgment and dismissed the adversary complaint, holding that a debtor who was not eligible for a Chapter 13 discharge could not use the Chapter 13 case to strip off the wholly unsecured, junior mortgage lien. The debtor appealed, and on April 19, 2011, Judge Randa reversed the bankruptcy court's legal conclusion. In re Sandra Lee Fair, 10-C-1128. Judge Randa held that there was nothing in the Bankruptcy Code which tied modification of an unsecured lien to obtaining a Chapter 13 discharge. He noted, however, that bankruptcy courts had an obligation to determine whether debtors filed their Chapter 13 petitions in good faith, and that filing a Chapter 13 case "solely for the purpose of the lien avoidance" suggested manipulation of the Bankruptcy Code and constituted evidence of bad faith. He thus remanded the case to the bankruptcy court for a determination regarding whether the debtor filed her Chapter 13 case in good faith. On July 6, 2011, the bankruptcy court issued an oral ruling, finding that under the specific factual circumstances in this debtor's case, she had filed her Chapter 13 case in good faith. The Court found that she had filed the case for the purpose of paying the arrearage on her first mortgage and saving her home from foreclosure, and not just for the purpose of stripping off the wholly unsecured, junior mortgage lien.
In re Kohler, 09-35931, and Kohler v. U.S. Bank, et al., 10-2694 (June 2011) -- Judge P. Pepper
Chapter 13 debtors argued that the mortgage creditor who filed motions for relief from the automatic stay, who filed proofs of claim in the bankruptcy case, and who objected to confirmation of their Chapter 13 plan did not have standing to do any of these things. The creditor who filed the various objected-to pleadings was the trustee for a structured asset investment loan trust. The debtors argued that this creditor did not own the mortgage or the note on their home, and thus did not have standing to assert rights in the bankruptcy proceedings. At an evidentiary hearing, the creditor produced, through an employee of the company acting as custodian for the trust's records, the original note and an endorsement in blank. The Court concluded that under Article 3 of the UCC, the creditor had proven that it was the entity entitled to enforce the note, because it possessed the note and the endorsement in blank. Because the creditor was the entity entitled to enforce the note, the Court held, it had proven that it had standing to move for relief from stay (by asserting that it had not received payment on the note--a fact which the debtors did not dispute), standing to file a proof of claim (thus asserting that it was entitled to payment on the note through the bankruptcy), and standing to objection to confirmation of the plan (which did not propose to pay its claim). The Court further held that ownership of the mortgage was not relevant to the question of standing, as the mortgage followed the note, and the Court was not being asked to consider whether the creditor could foreclose on the collateral. The Court noted that the fact that the creditor had attached to its proofs of claim two signed, dated allonges which post-dated the bankruptcy court litigation seemed to indicate that the creditor had made some effort to grant itself standing after the fact, but found that because the endorsement in blank had been present in the loan file prior to the petition date, the later-signed allonges were not relevant.
MacDonald, et al. v. HSBC Mortgage Services, Inc., 10-2287 (October 2010) -- Judge P. Pepper
"Minutes from October 25, 2010 hearing in an adversary case, inwhich the Court held that debtors who were not eligible for a Chapter 13 discharge because they'd received a Chapter 7 discharge within four years of filing the Chapter 13 petitions could not use the Chapter 13 proceeding to avoid wholly-unsecured junior mortgage liens."
In Re Hanley, 09-21220 (October 2010) -- Judge P. Pepper
While the fact that a debt is "disputed" does not make it "unliquidated" for the purposes of determining whether a debtor has exceeded the Chapter 13 debt limit, a dispute over whether the debt ever existed or will exist can render the nature of the debt "unliquidated." Even applying that test, however, the Court found that the particular debt in question was "liquidated," and needed to be included in the calculation of the debt limits.
In Re Smith 06-20127 (October 2010) -- Judge P. Pepper
When a creditor files its proof of claim pre-petition and the debtor (a) proposes a plan that specifically articulates how it will treat that creditor's claim, (2) that treatment is different than the treatment in the proof of claim, and (3) the debtor serves the plan on that creditor, the treatment in the confirmed plan controls over the proof of claim if the creditor does not object to its treatment pre-confirmation.
Ganther Construction, Inc. v. Ward, 08-2242 (October 2010) -- Judge P. Pepper
In a nondischargeability action under §523(a)(4), the plaintiff failed to prove the element of defalcation in a fiduciary capacity, because it failed to prove that the defendant's violation of Wisconsin's theft-by-contractor (Wis. Stat. §779.02(5)) law involved more than mere negligence.