OpinionsThe chapter 7 debtors claimed an exemption in real property under Wisconsin's homestead exemption, Wis. Stat. §815.20. Judgment creditors Long Lee, Miana Lee, Unlimited Wealth, LLC, David Blong, and Mee Lee (the Lee Parties) objected to the exemption, arguing that the debtors obtained the property with converted funds and thus were not entitled to claim the exemption under Wisconsin law. The Lee Parties further argued that the court should disallow the exemption as a matter of law because the issue had already been determined in state-court proceedings. The court concluded that the state-court proceedings did not preclude the debtors from asserting the homestead exemption in their bankruptcy proceeding, and if the Lee Parties seek to argue that the debtors are not entitled to claim the exemption under Wisconsin law, they must adjudicate that issue anew in the bankruptcy proceeding. In re Landis, Case No. 23-25448 (March 2025) -- Chief Judge G.M. Halfenger Kathleen Hink filed a proof of claim asserting that the chapter 7 debtor, the former husband of Hink's daughter, owes her nearly $107 thousand, primarily because when the debtor and Hink's daughter were married and living together, Hink paid for new siding for their home and to construct an addition (a "mother-in-law suite"), where she lived. The debtor, who waived his discharge, objected to the portion of the claim related to the addition. Hink moved for summary judgment on the claim objection, arguing that issue preclusion or judicial estoppel, or both, bar the debtor from disputing the validity and amount of her claim in this case because the state court in the divorce case between the debtor and Hink's daughter ruled, and the final judgment in that case established, that they owe her marital debts totaling a bit more than $200 thousand for the siding and the addition and that the debtor is responsible for one half of the amount owed (a bit more than $100 thousand, the amount of the relevant portions of her claim). The court denied Hink's motion for summary judgment to the extent that the motion is based on issue preclusion, concluding that issue preclusion under Wisconsin law does not apply because most or all of the issues raised by the debtor's claim objection were not actually litigated in the divorce case and even if some of them were, it would be fundamentally unfair to apply issue preclusion under the circumstances, including that the relevant proceedings in the divorce case will likely differ substantially from those in this case and that the debtor was not incentivized to fully litigate the relevant issues in the divorce case due to the nature of the relevant proceedings in that case. The court also denied Hink's motion for summary judgment to the extent that the motion is based on judicial estoppel because Hink sought the application of that doctrine only with respect to the siding-related portion of her claim and the debtor has not objected to that portion of her claim. Brief v. Willcut, Adv. Proc. No. 24-02051 (March 2025) -- Chief Judge G.M. Halfenger The United States trustee filed an adversary proceeding seeking to revoke the debtor's chapter 7 discharge pursuant to 11 U.S.C. §727(d)(1). The defendant moved for summary judgment, and the court denied the motion, concluding that there were genuine issues of material fact that required a trial. Horton v. O'Keefe, Adv. Proc. No. 23-02072 (March 2025) -- Chief Judge G.M. Halfenger The plaintiff alleged that as a result of a physical confrontation in which the debtor-defendant punched the plaintiff three times in the head, the debtor owed him a debt for willful and malicious injuries, excepted from discharge pursuant to 11 U.S.C. §523(a)(6). After a trial, the court found that plaintiff failed to prove the necessary elements of injury (defined by precedent as a violation of a legal right) and malice (defined by precedent as acting with a conscious disregard of duties or without just cause or excuse) because the debtor acted in self-defense. In re Himes, Case No. 19-20183 (March 2025) -- Chief Judge G.M. Halfenger Flagstar Bank, N.A., filed a response to the chapter 13 trustee's notice of final cure payment pursuant to Rule 3002.1(g), asserting that the debtors were delinquent on postpetition payments. The debtors filed a motion pursuant to Rule 3002.1(h) requesting that the court determine the amount of the final cure payment owed to Flagstar Bank. The debtors also requested that the court award them attorney's fees and costs pursuant to Rule 3002.1(i), because Flagstar failed to provide them with the information required by Rule 3002.1(g). The court granted the debtor’s request for fees and costs, ruling that Flagstar Bank's Rule 3002.1(g) statement was inaccurate and failed to properly itemize the required amounts. The court also barred Flagstar from recovering any related fees or costs from the debtors. In re Gaddour, Case No. 23-22130 (January 2025) -- Judge B.E. Hanan The U.S. Trustee moved to dismiss the debtor's Chapter 7 case under § 707(b)(3)(A) (debtor's petition filed in bad faith) and § 707(b)(3)(B) (debtor's financial situation demonstrates abuse). The Court granted the motion on a finding of bad faith, but declined to find that the debtor's financial situation demonstrated abuse under a totality of the circumstances analysis. By a preponderance of the evidence, the Court found that the debtor filed inaccurate schedules which understated his income, failed to support large deductions for tax and entertainment expenses as reasonably necessary, used ongoing retirement savings funds for other purposes, and incurred significant consumer debt for gambling, entertainment, and home improvements on the eve of bankruptcy, showing bad faith. The Court, however, did not find that the debtor's financial situation as a whole demonstrated abuse—the debtor's age, employment uncertainty, and social security income weighed against a finding of abuse as social security income cannot be considered when assessing the debtor's future ability to pay. Universal Credit Advisors, LLC v. Aydt (In re Aydt), Case No. 23-24094-BEH, Adv. No. 23-02136, 2025 WL 297662 (on appeal) (January 2025) -- Judge B.E. Hanan The debtor-defendant solicited funds from the creditor-plaintiff to invest in a luxury car-export business run by an acquaintance of the debtor. The business later was revealed to be a Ponzi scheme. The creditor’s final loan remained unpaid, and it filed an adversary proceeding seeking to except its debt from discharge under 11 U.S.C. §§ 523(a)(2)(A) and (a)(4) (larceny). The debtor moved for summary judgment, arguing (among other things) that he was neither aware of nor actively participated in the underlying fraudulent scheme. The Court granted the debtor’s motion, concluding that the creditor had failed to meet its evidentiary burden of establishing a genuine issue for trial by citing to “particular parts of materials in the record,” Fed. R. Civ. P. 56(c)(1)(A). Although questions of credibility and intent often are unsuited for summary judgment, a nonmoving party who bears the burden of establishing fraudulent intent at trial still must come forward with at least circumstantial evidence that would allow a fact-finder to reasonably infer the relevant state of mind. Here, the creditor’s vague references to nonspecific statements allegedly made by the debtor, along with conjecture as to motive unsupported by any evidence of record (and contrary to the debtor’s prior sworn statements), were insufficient to allow a reasonable inference that the debtor intended to deceive or defraud the creditor. Goldman v. Becker (In re Becker), Case No. 23-25123-BEH, Adv. No. 24-2007, 2025 WL 272245 (January 2025) -- Judge B.E. Hanan A creditor who had been assigned a judgment debt owed by the debtor, a former correctional officer, for showing “deliberate indifference” to the health and safety of an inmate, sought to have the debt excepted from discharge under 11 U.S.C. section 532(a)(6) as one for willful and malicious injury. The creditor moved for summary judgment, arguing that the underlying jury verdict established all the elements of a claim under section 523(a)(6) as a matter of law. The Court disagreed. The jury’s finding that the debtor acted with deliberate indifference—meaning that she actually knew of a substantial risk of harm to the inmate and consciously disregarded that risk—did not equate to a finding of “willfulness.” Willfulness under section 523(a)(6) requires more than a reckless (even a criminally reckless) act; instead, the debtor either must intend the resulting injury, or believe that her actions are substantially certain to cause the injury. In re Rhodes, Case No. 24-20838 (January 2025) -- Judge B.E. Hanan The Chapter 13 trustee objected to the debtor's proposed modified plan on the grounds that it provided insufficient funds to pay the full amount of the secured vehicle claim with Till interest accruing from the petition date. The Court concurred with In re Hammond, Case No. 24-20428, and found that 11 U.S.C. § 1325(a)(5)(B)(ii) required only that interest accrue beginning from the effective date of the plan, which was the date that the debtor's original Chapter 13 plan was confirmed. In re Hammond, Case No. 24-20428 (January 2025) -- Chief Judge G.M. Halfenger The chapter 13 trustee objected to confirmation of the plan asserting that the plan does not propose payments by the debtor to the trustee in a sufficient amount to allow the trustee to pay the allowed secured claims provided for by the plan, if interest on those claims, pursuant to Till v. SCS Credit Corp., 541 U.S. 465 (2004), is calculated from the date on which the petition was filed. The court interpreted the plan, in accordance with 11 U.S.C. §1325(a)(5)(B)(ii), to provide for Till interest only from the effective date of the plan, which is the date on which the plan is confirmed, not from the petition date, and overruled the trustee's objection to confirmation. |