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Opinions


    In re Kristopher and Jody Hill, Case No. 18-30063 (February 2019) -- Chief Judge G.M. Halfenger
    The debtors proposed a chapter 13 plan that proposed to value a secured claim. The debtors placed the plan language regarding the valuation of the secured claim in Section 8.1 of the model plan—the "nonstandard" provisions section—rather than in section 3.2—the section that includes a "request for valuation of security". The court denied confirmation of the debtors' chapter 13 plan because it did not conform with the model chapter 13 plan and because the record did not demonstrate that the debtors had served the plan on the secured creditor, as required by Federal Rule of Bankruptcy Procedure 3012(b).


    In re Valent, Case No. 17-21634 (January 2019) -- Chief Judge G.M. Halfenger
    The mortgage creditor filed an affidavit of default, asserting that the debtor failed to make monthly mortgage payments as required by the court's April 13, 2018 order. The debtor filed a response and asserted that she made the required mortgage payments. The court set an evidentiary hearing to determine whether the debtor defaulted under the terms of the April 13, 2018 order. The order setting the evidentiary hearing further stated that if the court determined that the creditor's affidavit was accurate, the court would consider whether the debtor had made a false representation to the court and whether sanctions should be issued. Conversely, the order stated that if the court determined that the creditor's affidavit was not accurate, then the court would consider whether the creditor had made false representations to the court and whether sanctions should be issued against it. Several days before the evidentiary hearing the mortgage creditor and debtor filed a letter informing the court that they had reached a verbal agreement to settle the matter and asked the court to cancel the evidentiary hearing. The court denied the request because the parties could not agree to resolve the issue of whether a false representation had been made to the court by one of the parties. The court emphasized that the court's practice of resolving motions with so-called "doomsday" orders "depends mightily on parties making accurate representations about compliance" with those orders. Accordingly, the court denied the parties' request to cancel the evidentiary hearing.


    In re Gary and Jody Huenerberg , Case No. 17-28645 (January 2019) -- Chief Judge G.M. Halfenger
    The Internal Revenue Service objected to confirmation of the debtors' amended chapter 13 plan asserting that its appeal of the court's earlier order disallowing a portion of its claim as a priority unsecured claim divested the court of jurisdiction necessary to confirm the plan. The court held that appeal of such an order does not generally divest the bankruptcy court of the jurisdiction needed to confirm a chapter 13 plan but that, in this instance, the principle underlying the divestiture doctrine cautions against confirming the amended plan, which contains language that is inconsistent with the court's order adjudicating the extent to which the IRS's claim is entitled to priority treatment and that directly concerns an open issue on appeal: whether the portion of the IRS's claim attributable to an outstanding shared responsibility payment imposed under 26 U.S.C. §5000A (enacted as part of the Affordable Care Act) is for a tax or a penalty for purposes of priority under 11 U.S.C. §507(a)(8). The court concluded that the problematic language in the amended plan is unnecessary and can therefore be removed through further amendment, thereby resolving the divestiture issue, to the extent one exists.


    In re Michael J. Flynn, Case No. 18-24800 (December 2018) -- Chief Judge G.M. Halfenger
    After the debtor did not pay the first installment of the filing fee as ordered, the court dismissed the case. Months later, the debtor paid the balance of the filing fee and moved to vacate the dismissal order. The court denied the motion for three reasons. First, the motion stated no legal basis for relief, as required by Local Rule 9013(b). Second, although the motion might be construed as a motion for relief from a final order under Federal Rule of Bankruptcy Procedure 9024 and, by reference, Federal Rule of Civil Procedure 60, its statements do not state plausible grounds for relief under those rules. Third, given that the meeting of creditors was scheduled to occur months earlier, the creditors received notice of the dismissal, and 11 U.S.C. §349(a) allows a debtor to file a new case and seek a discharge of his past debts, the equitable circumstances did not support vacating the dismissal order.


    In re Patricia Reed, Case No. 18-26531 (November 2018) -- Chief Judge G.M. Halfenger
    The court ordered the debtor to file an amended chapter 13 plan by a stated deadline. The debtor failed to do so. After the deadline expired, debtor's counsel instead used the ECF withdrawal event and added text suggesting that the debtor was withdrawing her most recent pre-confirmation plan amendment because counsel determined that the "original plan was correct". In ordering the debtor to show cause why the court should not deny her the opportunity to file an amended plan and dismiss the case under 11 U.S.C. sec. 1307(c)(5), the court explained that a debtor cannot withdraw a pre-confirmation amendment—what 11 U.S.C. sec. 1323 refers to as a "modification"—because section 1323(b) provides that, once a pre-confirmation modification is filed, "the plan as modified becomes the plan." 11 U.S.C. sec. 1323(b). In order to change the terms of a pre-confirmation modification that has already been filed, the chapter 13 debtor must further amend the plan. The court also observed that the debtor's attempted pre-confirmation withdrawal of the plan amendment did not comply with Local Rule 3015(c)(1), because the debtor did not use the court's local form for pre-confirmation amendments.


    In re William Wester and Diana Miletich-Wester, Case No. 17-32315 (November 2018) -- Chief Judge G.M. Halfenger
    The City of Kenosha City Treasurer filed a proof of claim two days after the expiration of the deadline for governmental units to file proofs of claim. In response to the trustee's objection, the City argued that it mistakenly calculated the proof of claim deadline as being six months— rather than 180 days—from the petition date, as stated in Federal Rule of Bankruptcy Procedure 3002(c)(1). The City asked the court to allow its claim because the minimal delay was unintentional and not prejudicial to the debtors. Rule 9006(b) does not allow the court to enlarge the time under Rule 3002(c) for filing a proof of claim except as permitted by Rule 3002(c). There was no basis for (further) enlarging the time under Rule 3002(c), and, accordingly, the court sustained the trustee's objection and disallowed the claim in its entirety.


    In re Grunewald, Case No. 14-27529 (October 2018) -- Chief Judge G.M. Halfenger
    The court closed the debtors' case in August 2015 after granting them a chapter 7 discharge. In September 2018, the former chapter 7 trustee allegedly received a report that the joint debtor expects to receive a payment in settlement of a personal injury claim. Based on that report, the United States trustee moved to reopen the case contending that, because the debtors had not scheduled the personal injury claim, unadministered assets may be available for distribution. The motion's allegations, even if presumed true, do not demonstrate that the joint debtor's personal-injury claim accrued before the debtors filed their bankruptcy petition, and thus do not demonstrate that the claim is property of the bankruptcy estate. As a result, the court reopened the case for the limited purpose of determining whether the personal-injury claim, and thus the proceeds from the settlement of that claim, are property of the bankruptcy estate.


    Schonscheck v. Deere & Co., Adv. Proc. No. 18-2027 (October 2018) -- Chief Judge G.M. Halfenger
    Plaintiff, a former chapter 12 debtor, is obligated to defendant to repay two loans secured by certain farm collateral. Defendant filed a replevin action in state court in 2009. In January 2010, after defendant moved for default judgment in the state-court replevin action, plaintiff filed a joint chapter 12 case with her spouse. After the bankruptcy case was filed, but before Deere or the state court received notice of it, the state court entered a default judgment and issued a writ of replevin. The court dismissed the plaintiff's chapter 12 case in 2014 and dismissed plaintiff's two subsequent cases in 2016. Defendant then returned to state court to enforce its 2010 judgment. The state court issued a new writ of replevin based on the 2010 judgment, and the defendant seized the collateral based on the new writ. Before the defendant liquidated the collateral, plaintiff filed this adversary proceeding seeking a declaration that the 2010 state-court judgment was void and damages, alleging that the 2010 judgment was void ab initio by operation of 11 U.S.C. §362(a) in the 2010 chapter 12 case. The court annulled the stay and the co-debtor stay, denied the plaintiff's request for actual and punitive damages, and entered summary judgment in favor of defendant.


    Schouten v. Jakubiak (In re Jakubiak), Adv. Proc. No. 16-2141 (October 2018) -- Chief Judge G.M. Halfenger
    Creditor-plaintiff seeks a declaration that a confirmed FINRA arbitration award against debtor-defendant is excepted from discharge by 11 U.S.C. §523(a)(2), (3), (6), and (19). Both parties seek summary judgment.

    The decision grants summary judgment to the debtor-defendant on the §523(a)(2) and (6) claims because the creditor-plaintiff did not timely file an adversary proceeding as required by §523(c).

    The decision grants summary judgment to the debtor-defendant on creditor-plaintiff's §523(a)(19) claim because, as a matter of law, the confirmed arbitration award cannot be shown to be "for" a violation of a federal or state securities law.

    The decision denies summary judgment to both parties on creditor-plaintiff's §523(a)(3) claim. As to §523(a)(3)(A), the uncontested facts show that (i) the debtor-defendant did not list the creditor-plaintiff or schedule the debt to him in time allow him to file a timely claim under Federal Rule of Bankruptcy Procedure 3002(c), and (ii) the creditor-plaintiff did not have notice or actual knowledge of the bankruptcy in time to meet that deadline. The decision reads the plain language of §523(a)(3)(A) to render the debt excepted from discharge. But the decision construes the controlling case law to allow the debtor-defendant to avoid §523(a)(3)(A)'s discharge exception if (i) the clerk gave notice under Federal Rule of Bankruptcy Procedure 2002(e) that there appeared not to be assets available for distribution, (ii) the debt is a garden-variety debt, and (iii) the equities weigh in favor of discharge. The decision concluded neither party was entitled to summary judgment on whether §523(a)(3)(A) excepts the debt from discharge because there is a genuine dispute over the nature of the debt and the parties' summary judgment filings did not address the equities.

    As to §523(a)(3)(B), the decision denies summary judgment to both parties because, although the debtor-defendant failed to list or schedule the creditor-plaintiff's debt in time for the creditor-plaintiff to file an adversary proceeding for a determination of nondischargeability, and the creditor-plaintiff lacked notice or knowledge of the bankruptcy during that time, there are genuine disputed issues of material fact regarding whether the debt is of a kind covered by §523(a)(2) or (6).

    The decision also rejects the creditor-plaintiff's arguments that the Rooker-Feldman doctrine afforded him a right to summary judgment, and rejects both parties’ arguments that issue and claim preclusion apply.


    In re Huenerberg, Case No. 17-28645 (September 2018) -- Chief Judge G.M. Halfenger
    A portion of the Internal Revenue Service's proof of claim arises from an assessment for a shared responsibility payment. That payment is required as a result of the debtors' failure to comply with the Patient Protection and Affordable Care Act’s individual mandate to maintain health insurance. The IRS asserts that the unremitted shared responsibility payment is an excise-tax debt entitled to priority under 11 U.S.C. section 507(a)(8). The debtors objected to the claim, contending that the shared-responsibility-payment debt is not entitled to priority. The court sustained the objection, ruling that the shared responsibility payment is not an excise tax on a transaction as required by section 507(a)(8).