The Debtors in a no-asset Chapter 7 case filed a complaint against a private student loan lender seeking reformation of the loan contracts and to void any contract procured through forgery. Because the claim did not affect the allocation of property among creditors and would have no effect on creditors besides the student loan lender, the claim was not "related to" the bankruptcy case. The Court did not have jurisdiction over the complaint, and the Court granted the lender's motion to dismiss.
Lay v. Douyette (In re Douyette), Ch. 7 Case No. 19-26272-kmp, Adv. No. 19-2128 (Bankr. E.D. Wis. Feb. 11, 2020) (February 2020) -- Judge K.M. Perhach
The Plaintiffs filed a motion for summary judgment seeking a determination that a state court judgment on an intentional misrepresentation claim was preclusive in this 11 U.S.C. § 523(a)(6) nondischargeability action. Finding that the state court judgment did not establish that the Debtor-Defendants acted with an intent to injure the Plaintiffs, the Court denied the motion. Section 523(a)(6) does not encompass all intentional torts, and the Court also noted that debts resulting from fraud are covered in different sections of the Bankruptcy Code, like § 523(a)(2).
In re Dean, No. 19-30112-kmp (Bankr. E.D. Wis. Feb. 10, 2020) (February 2020) -- Judge K.M. Perhach
The Debtor had not filed past-due tax returns by the first date set for the meeting of creditors. She requested that the Trustee hold open the meeting pursuant to 11 U.S.C. § 1308(b)(1)(A) to allow her to file the returns. The Trustee continued the meeting for 35 days and made a docket entry stating, “The Meeting of Creditors has been held open pursuant to 11 U.S.C. §1308(b)(1).” After the continued date passed, the Trustee concluded the meeting. The Debtor still had not filed her tax returns, so she filed a motion requesting that the Court grant an extension of time pursuant to § 1308(b)(2). Because the Debtor did not file her motion until after the deadline established by the Trustee, the Court did not have the authority to enter an order granting a further extension. Since the Debtor had not filed the returns as required by § 1308, she could not satisfy § 1325(a)(9), and cause existed under § 1307(c) for conversion or dismissal of the case because the Court could not confirm a plan. See In re Long, 603 B.R. 812, 819-20 (Bankr. E.D. Wis. 2019).
In re Brewer, No. 15-29081-kmp (Bankr. E.D. Wis. Dec. 31, 2019) (December 2019) -- Judge K.M. Perhach
The Court overruled the Debtors’ objection to attorneys’ fees itemized on two Notices of Postpetition Mortgage Fees, Expenses, and Charges filed by the Debtors’ mortgage creditor. Bankruptcy Rule 3002.1(e) provides that within one year after service of a Notice, a debtor may request a determination of whether fees are required “by the underlying agreement and applicable nonbankruptcy law to cure a default or maintain payments in accordance with § 1322(b)(5).” The Debtors’ objection to the first Notice was filed more than one year after service of that Notice and as such was untimely. The Debtors’ objection to the second Notice was timely, and the Debtors requested a determination about a $200 charge for attorneys’ fees for the mortgage creditor’s review of a modified plan. The Court determined that these fees were required by the mortgage and applicable nonbankruptcy law and that they were reasonable.
Brisk v. Swinehart (In re Swinehart), Ch. 7 Case No. 18-25585-kmp, Adv. No. 18-2200, 2019 WL 5206267, 2019 Bankr. LEXIS 3267 (Bankr. E.D. Wis. Oct. 15, 2019) (October 2019) -- Judge K.M. Perhach
The Plaintiffs sought a determination that debt was non-dischargeable pursuant to 11 U.S.C. § 523(a)(4) based on fraud or defalcation by the Debtor as a fiduciary under Wisconsin’s theft by contractor statute. The Court denied the Debtor-Defendant’s motion for summary judgment. There were genuine issues of material fact regarding (1) the amount paid by the Plaintiffs and the amount held in trust for their home improvement project; (2) the amount paid to subcontractors and suppliers on the project; (3) whether the Debtor spent all of the funds that he received from the Plaintiffs on their project or used them for other personal or corporate purposes; (4) whether the Debtor paid the project subcontractors and suppliers proportionally; (5) whether the trust funds could be traced to the payments made to the subcontractors and suppliers; and (6) the Debtor’s state of mind while acting in a fiduciary capacity.
Sonnentag v. Swinehart (In re Swinehart), Ch. 7 Case No. 18-25585-kmp, Adv. No. 18-2198, 2019 WL 5204457, 2019 Bankr. LEXIS 3266 (Bankr. E.D. Wis. Oct. 15, 2019) (October 2019) -- Judge K.M. Perhach
The Plaintiffs sought a determination that debt was non-dischargeable pursuant to 11 U.S.C. § 523(a)(4) based on fraud or defalcation by the Debtor as a fiduciary under Wisconsin’s theft by contractor statute. The Court denied the Debtor-Defendant’s motion for summary judgment. There were genuine issues of material fact as to whether the Debtor spent the money paid by the Plaintiffs on labor and materials for their home improvement project without using any of it for other personal or corporate purposes. The Debtor implied that if he had used the Plaintiffs funds improperly, he only did so negligently, and this would not be sufficient to establish defalcation under § 523(a)(4). However, the Court could not make a determination about the Debtor’s state of mind from the summary judgment record.
In re Lowman, No. 16-20057-kmp (Bankr. E.D. Wis. Oct. 7, 2019) (October 2019) -- Judge K.M. Perhach
The Debtors sought and obtained two deferrals of the entry of discharge pursuant to Bankruptcy Rule 4004(c)(2) and corresponding extensions of time to file a reaffirmation agreement pursuant to Rule 4008(a). However, the Court was unable to grant the Debtors’ third, fourth, fifth, or sixth request for a deferral of discharge. Pursuant to Rule 4004(c)(2), the Court has the authority to defer discharge for a 30-day period, and if the debtor files another motion “within that period,” to defer the entry of discharge to “a date certain.” The rule does not authorize subsequent deferrals. See also In re Kropp, No. 16-29342-gmh (Bankr. E.D. Wis. June 5, 2017). By contrast, Rule 4008(a) permits a court “at any time and in its discretion, [to] enlarge the time to file a reaffirmation agreement,” so the Court granted the requested extension of time and stayed effectiveness of its order until expiration of the extension.
In re Edwards, No. 19-27975-kmp, 2019 Bankr. LEXIS 3156 (Bankr. E.D. Wis. Oct. 3, 2019) (October 2019) -- Judge K.M. Perhach
The Court sustained an objection by the Debtor’s mortgage creditor and denied the Debtor’s motion to continue the automatic stay in her fourth Chapter 13 bankruptcy case in the last three years. The Court found that the Debtor did not rebut the presumption that the case was not filed in good faith by clear and convincing evidence pursuant to 11 U.S.C. § 362(c)(3). The Debtor had filed all four of her bankruptcy cases on the eve of sheriff’s sale or a hearing on a motion to confirm the sheriff’s sale. Because the Debtor had not paid her mortgage creditor for the last four to five years, the arrearage on the Debtor’s mortgage debt had almost doubled. The Debtor also had a history of proposing plans hinging on participation in the Court’s Mortgage Modification Mediation program but failing to comply with the program requirements. Finally, there was a lack of evidence as to a substantial change in the Debtor’s personal or financial affairs.