A criminal judgment was entered against the debtor for money laundering, mail fraud, possession of unauthorized access devices, and conspiracy to launder funds while subject to a release order. Thereafter, the Department audited the debtor and discovered that his tax returns significantly under-reported his criminal income. The debtor later initiated an adversary proceeding seeking a determination that his tax debt owed to the Department was discharged in his chapter 7 bankruptcy case. At trial, the debtor testified that his reported income had no relation to his actual income, and was aimed only at avoiding detection of his criminal enterprise. The court held that the debtor both filed a fraudulent return and willfully attempted to evade or defeat a tax and excepted the Department's debt from discharge under section 523(a)(1)(C).
Vieth v. Debtors (In Re Williams) (September 2012) -- Judge J.E. Shapiro
Debtors were the sole members of an LLC which operated a cocktail lounge. Plaintiff sought to purchase the LLC from the debtors, however, when the loan process was delayed, the parties decided to transfer a 38% interest in the LLC to the plaintiff in exchange for an $84,200 investment, with the expectation that the remaining interest would be transferred once the loan was approved. The relationship between the parties quickly deteriorated and ultimately, the remaining interest was never transferred. The debtors, as majority members, voted to cease business operations shortly after the partial transfer, causing plaintiff to lose his investment, as well as causing him to become personally liable for breach of the business lease. The plaintiff sought a determination that the debt owed to him was nondischargeable under § 523(a)(6). The court dismissed the complaint finding that there was no willful and malicious intent to injure on the part of the defendants.
Citizens Bank v. Debtors (In re Cramer) (August 2012) -- Judge J.E. Shapiro
Creditor obtained relief from stay during debtors' chapter 13 case and sold the collateral securing debtors' loan resulting in a deficiency balance of over $15,000. Debtors subsequently completed their plan and were granted a discharge. Creditor then initiated an adversary proceeding seeking a determination that the deficiency balance was a nondischargeable debt under § 1328(c)(1). The court held that it was a long term debt, but that the debtors' plan did not provide for it under § 1322(b)(5) such that it would be a nondischargeable debt under § 1328(c)(1). Creditor never objected to the debtors' chapter 13 plan, nor did it timely file a proof of claim for the deficiency balance after sale. The court denied creditor's motion for summary judgment and dismissed the complaint.
Mohns, Inc. v. Debtors (In re Wilson) (July 2012) -- Judge J.E. Shapiro
Creditor objected to debtors' discharge under §§ 727(a)(2), (4), and (5) based primarily on debtors' conversion of cash into an exempt IRA, and on debtors' termination of a collateral assignment agreement resulting in a loan to an insider becoming unsecured, shortly before filing. Following a trial, the court ruled that such acts were done on the advice of counsel and without an actual intent to defraud, and granted the debtors a discharge.
Debtors v. Asta (In re Myers) (June 2012) -- Judge J.E. Shapiro
The debtors operated a business through a limited liability company, which borrowed money from the defendants. The note was not personally guaranteed by either of the debtors. After the debtors filed bankruptcy and received a bankruptcy discharge, the defendants learned of the debtors' bankruptcy. They subsequently filed a lawsuit in state court, which was ultimately voluntarily dismissed as to the debtors. They also made numerous attempts to collect the debt through both texts and voicemails directed at the debtors. The debtors then filed an adversary proceeding against the defendants for willful violation of the discharge injunction. After trial, the court dismissed the adversary proceeding because the demands for payment did not involve a debt due by the debtors personally to the defendants, so such debt was not a debt which was discharged in the debtors' personal bankruptcy. The court stated that the debtors may have a claim for harassment, but that such a claim does not belong in the bankruptcy court.
Layng, UST v. Debtor (In re Benkowski) (June 2012) -- Judge J.E. Shapiro
The UST objected to the debtor's discharge based on § 727(a)(4)(A). The court found that the debtor's failure to disclose a $50,000 inheritance, large IRA withdraws, ownership of 5 guns, and a transfer of $66,000 to an insider within the 2 years prior to filing constituted a false oath and denied the debtor's discharge.
Zimmerman v. Debtor (In re Hying) (January 2012) -- Judge J.E. Shapiro
Plaintiff represented the defendant-debtor's ex-wife throughout various state court proceedings in connection with a divorce, and post-divorce custody disputes. During such proceedings, defendant-debtor was sanctioned and ordered to pay his ex-wife's attorney fees directly to the plaintiff. The court found such debts nondischargeable under 11 U.S.C. § 523(a)(5), finding the debts to be a domestic support obligation within BAPCPA's expanded definition. Further, the court found that even if the debt was not a domestic support obligation, it was nonetheless nondischargeable under 11 U.S.C. § 523(a)(15), as a debt incurred in the course of a divorce.
In re John and Christine Wilson (January 2012) -- Judge J.E. Shapiro
Creditor objected to debtor-Christine Wilson's claimed homestead exemption based on an “Agreement to Keep Property Separate” entered into between debtors John and Christine before their marriage. The court found that the subsequent marriage of the debtors did not terminate the agreement and therefore the homestead was the sole property of John. The court disallowed debtor-Christine's claimed exemption
In re John and Christine Wilson (November 2011) -- Judge J.E. Shapiro
Chapter 7 Trustee and creditor objected to the debtor-John Wilson's claim of exemption to a life insurance policy insuring the life of his ex-wife. The court sustained both objections and disallowed the exemption finding that debtor's payment of $1000/mo in maintenance to ex-wife did not render her a dependent of the debtor within the meaning of Wis. Stats. § 815.18(2)(d). Further, the court found that the debtor was not a member of the class intended to be protected by Wis. Stats. § 815.18(3)(f)(2).
Debtor v. M&I Bank FSB (In re Jeannie Lindskog) (April 2011) -- Judge J.E. Shapiro
Debtor filed a chapter 13 case in which she was ineligible to receive a discharge pursuant to § 1328(f), because the case was filed less than four years after she filed a chapter 7 case in which she received a discharge. Debtor commenced an adversary proceeding seeking to “strip off” her second mortgage because there was no equity for the lien to attach to. The creditor filed a motion to dismiss the adversary proceeding arguing that a discharge is a requirement for lien avoidance under § 506(d). An objection to confirmation of plan was filed on the same grounds. The court held that to allow a debtor in a no-discharge chapter 13 to avoid a junior lien would run afoul of § 1325(a)(5)(B)(i)(I)(aa) which provides that the holder of a secured claim shall retain such lien until the earlier of the payment of the underlying debt or discharge. The court further stated that permitting such action would be contrary to both the Congressional intent in enacting BAPCPA and the ruling of the U.S. Supreme Court in Dewsnup v. Timm. The court granted the motion to dismiss adversary proceeding and sustained the objection to confirmation of plan without prejudice to the right of the debtor to file an amended plan. **Affirmed on appeal**