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Opinions


    In re Kahle, Case No. 24-20054 (September 2025) -- Judge R.M. Blise
    Prior to filing bankruptcy, the married debtors each signed a commercial guaranty whereby they guaranteed repayment of a loan made by the bank to the debtor-husband’s company. After the debtors filed a joint chapter 7 bankruptcy case, the bank filed two proofs of claim, one for each of the guarantees. The trustee objected to the second claim, asserting that the debt owed by each debtor under the guaranties represented the same underlying unpaid loan, and the bank was entitled to just one distribution from the estate. The bank argued the claims were not duplicative because each debtor had separate liability under their separate guaranties. The Court concluded that the bank could not assert two claims because the bankruptcy estates of the married debtors were substantively consolidated pursuant to § 302(a) and Local Rule 1015, and the bank could be paid just once from the consolidated estate. The Court sustained the trustee’s objection to the second claim.

    Ramirez v. Knight (In re Knight), Case No. 24-22327, Adv. No. 24-2105 (September 2025) -- Judge R.M. Blise
    The plaintiff sought a determination that the debtor-defendant owed a nondischargeable debt for alleged misrepresentations in connection with the financing of a residential real estate "flipping" project. The plaintiff alleged the debtor misrepresented his plan regarding the sale of the property by failing to disclose his intent to refinance the debt and live in the property himself rather than offering it for sale on the open market. After trial, the Court concluded that the plaintiff had not sufficiently proven the required elements for nondischargeability under 11 U.S.C. § 523(a)(2)(A). The Court found that while the debtor knowingly created a false impression by omitting information about his intent and the plaintiff justifiably relied on that omission, the plaintiff failed to prove that the debtor intended to deceive him.

    Toscano v Kahle (In re Kahle), Case No. 24-20054, Adv. No. 24-2078 (August 2025) -- Judge R.M. Blise
    The plaintiff alleged that the debtor-defendant fraudulently induced her to loan funds for his company and that the debt owed to him as a result was nondischargeable under 11 U.S.C. §§ 523(a)(2)(A). The Court denied the debtor's motion for summary judgment. The debtor argued that he no longer owed a debt because the plaintiff released his liability under a Settlement Agreement with the debtor’s company. The Court determined that, while the plaintiff had granted a release to the debtor, there were genuine issues of material fact regarding the scope of that release. The Court also rejected the debtor’s argument that the plaintiff was judicially estopped from pursuing her claim against him based on the position she took in a state court action, where she obtained a judgment against his company. Since the plaintiff contended that the debtor and his company were both liable for the monies borrowed under the promissory notes, the plaintiff’s position in state court – that the debtor’s company breached the Settlement Agreement – was not clearly inconsistent with her position in the nondischargeability action.

    Ahmed v Pathan (In re Pathan), Case No. 24-23022, Adv. No. 24-2116 (July 2025) -- Judge R.M. Blise
    The plaintiff alleged that the debtor-defendant fraudulently induced him to loan funds for his company and that the debt owed to him as a result was nondischargeable under 11 U.S.C. §§ 523(a)(2) and (a)(6). The Court granted in part and denied in part the defendant's motion for summary judgment. The Court denied the motion for summary judgment as to the claim under § 523(a)(2)(A). The Court determined the plaintiff could proceed with his claim under § 523(a)(2)(A) based on the debtor's representation that the funds the plaintiff loaned the debtor would be used for business purposes. The debtor's oral representations regarding his intended use of the funds from the plaintiff were actionable under § 523(a)(2)(A) if the debtor had no intent to use the funds as he represented he would. The Court determined, however, that the plaintiff could not proceed with a claim under § 523(a)(2)(A) based on the debtor's oral representations that the loan would “save his failing businesses” or that the debtor would be able to repay the loan because the businesses would be profitable. Both statements were outside of the scope of § 523(a)(2)(A) because they were statements respecting the debtor's financial condition, and a false statement respecting a debtor’s financial condition must be made in writing for a debt induced by the false statement to be nondischargeable. In addition, because the plaintiff failed to present an argument on his claim under § 523(a)(6), the Court granted summary judgment and dismissed that claim.

    In re Lang, Case No. 23-20782 (September 2024) -- Judge R.M. Blise
    After reopening his chapter 7 case, the debtor moved to amend his schedules to disclose and exempt proceeds from a personal injury claim. As a matter of law, the Court determined that a debtor could amend his schedules after a case is reopened only if the debtor demonstrates that the time should be enlarged under Bankruptcy Rule 9006(b), which requires a showing of excusable neglect. The Court considered the factors set forth in Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 385 (1993) – (1) the danger of prejudice to the opposing party; (2) the length of the delay and its potential impact on the proceedings; (3) the reason for the delay, including whether the delay was within the reasonable control of the movant; and (4) whether the movant acted in good faith. The Court found that two factors (prejudice against non-moving party and debtor’s good faith) weighed in favor of excusable neglect, and two factors (length of delay and reason for delay) weighed against. The Court determined that the lack of prejudice should be given great weight under the circumstances of the case. The Court concluded that the debtor had demonstrated excusable neglect and could amend his schedules to disclose and exempt the claim.

    Huebner v Humphrey (In re Humphrey), Case No. 23-22884, Adv. No. 23-2112 (September 2024) -- Judge R.M. Blise
    The plaintiff sought a determination that the debtor-defendant owed a nondischargeable debt for alleged misrepresentations in connection with the sale of residential real estate. The plaintiff alleged the debtor misrepresented the condition of the house by failing to disclose defects related to water intrusion in the living room, basement, and kitchen. After trial, the Court concluded that the plaintiff had not sufficiently proven the required elements for nondischargeability under 11 U.S.C. § 523(a)(2)(A) for debt related to any misrepresentation related to water intrusion in the living room and basement. The Court also concluded that the debtor owed a debt to the buyer for a misrepresentation on the pre-sale Real Estate Condition Report (RECR) related to water problems in the kitchen ceiling and that the debt was nondischargeable under § 523(a)(2)(A).

    In re Thomas Orthodontics, SC, Case No. 23-25432 (September 2024) -- Judge R.M. Blise
    The only creditor in an impaired class did not return a ballot accepting or rejecting the debtors’ chapter 11 plan by the deadline, and the debtors requested that the Court deem the creditor to have accepted the plan by its silence. After the conclusion of an evidentiary hearing on plan confirmation, the debtors contacted the non-voting creditor and requested that it return a ballot. The creditor returned a ballot accepting the plan, and the debtors filed a motion to deem the creditor’s late ballot timely. The Court denied both motions. The Court held that the “excusable neglect” standard in Bankruptcy Rule 9006(b)(1) should be applied when a request to extend the deadline to submit a ballot is made after expiration of the original deadline. The Court found that the factors set forth in Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 385 (1993) – (1) the danger of prejudice to the opposing party; (2) the length of the delay and its potential impact on the proceedings; (3) the reason for the delay, including whether the delay was within the reasonable control of the movant; and (4) whether the movant acted in good faith – weighed against a finding of excusable neglect. In addition, the Court followed the majority view and concluded that an impaired class cannot accept a chapter 11 plan by silence. Because an impaired class of claims did not accept the plan, the plan could be confirmed only under § 1191(b).

    Layng v. Jackson (In re Bolden) Adv No. 23-2067 (July 2024) -- Judge R.M. Blise
    The U.S. Trustee filed an adversary complaint against Jeanine Jackson seeking to enjoin her from acting as a bankruptcy petition preparer (BPP) in the Eastern District of Wisconsin pursuant to 11 U.S.C. § 110. The Court found that Jackson repeatedly violated § 110(b) and (c) by failing to sign all documents she prepared for filing and failing to place her name, address, and identification number on all documents she prepared for filing. The Court also found that Jackson repeatedly violated § 110(e)(2), which prohibits BPPs from providing legal advice, when she characterized the nature of debts, chose the amount and applicable law for exemptions, completed means test forms, drafted chapter 13 plans, advocated on her clients' behalf with trustees and creditors, and prepared motions, letters, and an adversary complaint for her clients, all in violation of § 110(e)(2). Jackson was admonished by Judge Kelley in 2018 regarding the scope of permissible services that a BPP may provide. Based on Jackson's disregard of Judge Kelley's instruction and her apparent inability to distinguish between the unauthorized provision of legal advice and the scrivener's services permitted by the statute, the Court determined that a permanent injunction was appropriate.

    In re Higgins, Case No. 23-22024 (December 2023) -- Judge R.M. Blise
    The Court held that Matrix Financial Services Corporation did not have a security interest in property of the bankruptcy estate, and the Court sustained Matrix’s objection to the debtor’s chapter 13 plan and granted its motion for relief from stay. The debtor’s plan proposed to cure and maintain the mortgage on his deceased father’s house. The debtor’s father had died intestate, and his estate was never administered in probate court. The debtor and several siblings were entitled to equal shares of their father’s estate. The court held that a chapter 13 plan can provide for a mortgage under 11 U.S.C. § 1322(b)(5) where the debtor is not personally liable on the debt and is not in contractual privity with the creditor, but only if the underlying collateral is property of the bankruptcy estate. The debtor argued that the debtor’s interest in his parents’ probate estate, which included the house, was sufficient to draw the house into the bankruptcy estate pursuant to the definitions in 11 U.S.C. §§ 101(5) and 102(2). The creditor argued that the debtor’s interest was not in the house itself, but in the probate estate.

    The Court turned to Wisconsin probate law to determine the extent of the debtor’s interest in the house. The Court acknowledged that before the 1971 enactment of the Wisconsin probate code, legal title to a decedent’s real property passed automatically to the heirs, but since the probate code’s enactment a decedent’s interest in all property, including real property, passes to the personal representative of the decedent’s estate. Relying on Shovers v. Shovers, 2006 WI App 108, 718 N.W.2d 130, the Court held that legal title to a decedent’s property remains suspended until the appointment of a personal representative. Therefore, before property is transferred by an appointed personal representative, the heirs have an interest in the probate estate and at most have an equitable interest in the property that is part of the probate estate. The debtor was adamant the house would ultimately pass to him following probate, but such an outcome was not guaranteed. The Court held that Matrix’s security interest did not attach to whatever equitable interest the debtor may have in the house, so the house itself, as opposed to the debtor’s equitable interest, was not part of the bankruptcy estate for purposes of Matrix’s objection to confirmation and motion for relief from stay.

    In re Solis-Ocon, Case No. 19-27917 (December 2023) -- Judge R.M. Blise
    The Court granted the trustee’s motion to vacate a chapter 13 debtor’s discharge pursuant to Fed. R. Civ. P. 60(b)(1). An error by an employee of the chapter 13 trustee caused an unsecured claim to be incorrectly characterized as secured. The debtor paid the trustee an amount that the trustee represented would be sufficient to pay all unsecured claims. Thereafter, the trustee filed a notice of completion of plan payments and the Court entered an order discharging the debtor. The trustee discovered the error less than a month after the discharge order and filed a motion to vacate the discharge pursuant to Fed. R. Civ. P. 60(a). The debtor objected to the motion and the Court held that the discharge order did not contain the type of clerical error or mistake contemplated by Rule 60(a). The trustee then raised 60(b)(1) as a basis for vacating the discharge order, arguing the order was based on a factual mistake. The Court relied on In re Bethe, No. 11-25388-GMH, 2017 WL 3994813 (Bankr. E.D. Wis. Sept. 8, 2017), in holding that a discharge order could be vacated under Rule 60(b)(1) if it resulted from a mistake and if the equities of the case warranted relief. The Court concluded the discharge order was based on a factual mistake because the debtor had not made “all payments under the plan” as required for discharge pursuant to 11 U.S.C. § 1328(a) and that the equities of the case favored granting the trustee’s motion.