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    In re Pansier, Case No. 18-22297-beh, 2019 WL 949898, amended in part on reconsideration, 2019 WL 1495100 (April 3, 2019) (February 2019) -- Judge B.E. Hanan
    The IRS moved for relief from stay to reinstate its monthly collection of the debtor’s pension income, claiming that its interest in the debtors' property, which was secured by federal tax liens of over $250,000 (attributable to tax liability for 1995 through 2006 and 2014), was not adequately protected because the debtors were spending their discretionary income rather than using it to pay their taxes. The debtors objected for a number or reasons, including that the Court lacked jurisdiction to lift the stay because the pension income had been claimed as exempt and that the IRS lacked standing to seek relief from stay. The Court rejected the debtors’ arguments, as well as the debtors’ assertion that the IRS’s tax liens alone were sufficient to provide adequate protection. The debtors’ sworn schedules showed over $2,300 in monthly discretionary income left after payment of expenses, none of which they had offered to use to make payments to the IRS on its secured claim during the 11 months their Chapter 7 case had been pending. After considering the equities of the case, the Court declined to allow the IRS to levy the full amount of the monthly pension income (approx. $4,050), and instead lifted the stay to allow the IRS to reinstate its monthly levy on only the debtors’ reported discretionary income (approx. $2,300). [Note: The Court amended this decision in part on reconsideration, see 2019 WL 1495100 (Bankr. E.D. Wis. Apr. 3, 2019).]


    In re Lettie, Case No. 18-24510-beh, 597 B.R. 637 (February 2019) -- Judge B.E. Hanan
    The debtors' counsel sought an order from the Court directing the Chapter 13 trustee to pay counsel's approved fees before the debtors proceeded with their imminent intent to convert their case to Chapter 7, prior to confirmation of a Chapter 13 plan. The Court denied the request, concluding that, under Harris v. Viegelahn, 135 S.Ct. 1829 (2015), a Chapter 13 trustee may not pay allowed administrative expenses, such as the allowed fees of the debtors' counsel, prior to the impending conversion of a case to Chapter 7 when no plan has been confirmed. The Court agreed with the majority of courts that have held Harris applies equally to cases converted from Chapter 13 to Chapter 7 after confirmation and prior to confirmation. The Court further noted that (1) 11 U.S.C. § 1326(a)(2) requires confirmation of the plan before a Chapter 13 trustee may begin distributing plan payments, and there is no other mechanism in Chapter 13 to allow the trustee to do so when a case is converted pre-confirmation; and (2) ordering the trustee to distribute funds in a manner that is not authorized by, and is inconsistent with, the Code's payment scheme is beyond the Court's equitable powers under § 105(a).


    In re Hampton, Case No. 16-29012 (February 2019) -- Chief Judge G.M. Halfenger
    The chapter 13 trustee moved to dismiss the case due to the debtor's failure to make plan payments and to pay one-half of her net income-tax refunds for 2016 and 2017. The parties agreed to resolve the trustee's motion on terms, including that the debtor would resume making plan payments and either pay one-half of the 2016 and 2017 refunds or modify the plan to provide for such payment. The court denied the trustee's motion on those terms. The debtor then filed a request to modify the plan, and the trustee objected, asserting that the modification did not comply with the court's order denying the motion to dismiss and that it was not proposed in good faith as required by 11 U.S.C. §§1325(a) & 1329(b). The court concluded that the modification satisfied the two applicable requirements of the order denying the trustee's motion to dismiss: (1) it provided for payment of one-half of the 2016 and 2017 tax refunds and (2) the plan as modified was feasible. The court also rejected the trustee's argument that the modification was not proposed in good faith, as that objection was based on terms that the trustee reportedly relied upon in settling the motion to dismiss but did not include in the parties' settlement agreement: namely, that the debtor could not modify the plan to require her to pay less than thirty-six months' worth of payments under the original plan terms (plus one-half of the net tax refunds received during the plan term, if any) or forgive plan payments already missed. Accordingly, the court overruled the trustee's objection.


    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 Morgan, 18-24459 (February 2019) -- Judge B.H. Ludwig
    The confirmed chapter 13 plan provided for payment to a secured creditor even though that creditor failed to file a proof of claim. The court denied the debtors’ motion to enlarge time to file a proof of claim on behalf of the creditor and sustained the trustee’s claim objection. The court rejected the debtors’ arguments that the plan should be deemed an informal proof of claim; the confirmed plan obviated the creditor’s need to file a proof of claim; and the time for the debtors to file a proof of claim on behalf of the creditors should be enlarged. The district’s local plan form specifically stated that “a timely proof of claim must be filed in order to receive payments from the trustee under the plan,” binding the debtors and the creditor to that requirement.


    In re Wulff, Case No. 17-31982 (February 2019) -- Judge B.H. Ludwig
    The confirmed chapter 12 plan provided for payments to a secured creditor even though that creditor filed untimely proofs of claim. The court denied the motions filed by the creditor and the debtor to extend time to file proofs of claim as moot and overruled the trustee's objection to the creditor’s late-filed proofs of claim. The creditor could not establish grounds for an extension of the Rule 3001(c) proof of claim deadline, and the debtor could not show excusable neglect necessary to enlarge the Rule 3004 deadline under Rule 9006(b)(1). Nevertheless, the chapter 12 trustee was bound by the confirmation order and could not re-litigate the plan's treatment of the claims.


    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 Schmitt, Case No. 18-21755-beh, 595 B.R. 564 (December 2018) -- Judge B.E. Hanan
    The trustee objected to the debtor’s exemption of a preferential prepetition payment made to satisfy a bench warrant, arguing that the payment was voluntary and therefore could not be exempted, citing 11 U.S.C. § 522(g). The debtor, on the other hand, claimed that the payment involved a heavy dose of coercion, so § 522(g) did not prohibit the exemption. The Court first noted that the preferential payment itself had not yet been recovered, meaning it was not property of the estate and the debtor’s exemption appeared premature. Nevertheless, because the relevant case law lacked clarity and consistency concerning the effectiveness of such an “early” exemption, the court considered the narrow question presented—whether the payment was “voluntary” within the meaning of § 522(g)—to provide guidance to the parties in pursuing recovery of the payment (a process the trustee already had begun). After analyzing other cases in which bankruptcy courts considered similarly coercive conduct as resulting in involuntary transfers, the Court concluded that the transfer at issue was not voluntary, but was the result of an operation of law. Section 522(g) therefore would not preclude the debtor from exempting the payment if it were recovered and became property of the estate under § 541(a)(3), so the Court overruled the trustee’s objection.