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Opinions


    In re Patrick and Hope Souter, Case No. 19-21582 (September 2019) -- Chief Judge G.M. Halfenger
    The court ordered the debtors to show cause why their chapter 13 case should not be dismissed or converted based on their failure to file all applicable tax returns as required by 11 U.S.C. §1308, a requirement for plan confirmation specified in 11 U.S.C. §1325(a)(9). The debtors argued that some of §1325(a)'s requirements may be mandatory—including §1325(a)(1)'s requirement that the plan must comply with all applicable provisions of the Code, United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 277 (2010)—but others are discretionary, such as §1325(a)(9)'s requirement that the debtor must comply with §1308, and the court may confirm the plan even if such a requirement is not satisfied, if no one objects. The court held that the best construction of §1325(a), given Supreme Court and Seventh Circuit authority, is that all of its requirements are mandatory. The court denied confirmation and dismissed the case.


    In re Karl Boddy, Jr. and Theresa Boddy, Case No. 19-23004 (August 2019) -- Chief Judge G.M. Halfenger
    The chapter 13 debtors' amended plan provides for an allowed claim secured by a mortgage on their principal residence, stating that the debtors will seek a modification of the mortgage through the court’s mortgage modification mediation program; if mediation is successful, the debtors will pay the claim "outside of the plan"; if mediation is unsuccessful, the debtors "will file a feasible plan to address the mortgage claim." The mortgage creditor consented to mediation but objected to plan confirmation, asserting that the plan does not conform to 11 U.S.C. §1325(a)(5). The court denied confirmation.


    In re Velicia Buchanan, Case No. 16-30201 (August 2019) -- Chief Judge G.M. Halfenger
    A mortgage creditor filed an affidavit of default and debtor’s counsel filed an “objection” that explained that counsel had not been able to contact the debtor but that counsel believed that there may have been extenuating circumstances for the debtor’s failure to make mortgage payments. The court overruled the debtor’s objection as baseless and granted the mortgage creditor relief from the automatic stay. The debtor filed a letter requesting that the court “rescind” the order granting the creditor relief from the automatic stay. The court refused to act on the debtor’s request to rescind the order, noting that the request was not properly made because it was made by letter, rather than by motion on notice as required by Federal Rules of Bankruptcy Procedure 9013 and 9014. The court also noted that the letter did not state with particularity the grounds for the relief the debtor sought, nor did it state the authority on which it was based, as required by Federal Rule of Bankruptcy Procedure 9013 and Local Rule 9013, respectively.


    In re Victoria Toliver, Case No. 17-20724 (August 2019) -- Chief Judge G.M. Halfenger
    The confirmed chapter 13 plan provides for payment with interest by the trustee of Consumer Portfolio Services Inc.'s claim secured by the debtor's vehicle. The debtor filed a request to modify the plan to surrender the vehicle and discontinue payments on CPS's secured claim. CPS objected to the proposed modification asserting that 11 U.S.C. §1329(a) does not permit such a modification and that the modification was not proposed in good faith, as required by 11 U.S.C. §§1329(b) & 1325(a)(3). The court concluded that the debtor's proposed modification is to "reduce the amount of payments on claims of a particular class provided for by the plan", as allowed by §1329(a)(1), and that the good-faith inquiry requires an evidentiary hearing.


    In re Velma Lowe, Case No. 19-20287 (August 2019) -- Chief Judge G.M. Halfenger
    The debtor moved to enlarge the time to file a tax return required by 11 U.S.C. §1308(a) after the time to file the return expired, asserting that the debtor's failure to file the return was the result of "excusable neglect" and that an enlargement is, therefore, permitted by Federal Rule of Bankruptcy Procedure 9006(b). The court denied the motion because Rule 9006(b) only applies "when an act is required or allowed to be done at or within a specified period by these rules or by a notice given thereunder or by order of court". Fed. R. Bankr. P. 9006(b)(1) (emphasis added). Rule 9006(b) does not apply where, as here, the debtor was required to act within a period specified by a statute, such as §1308.


    In re Robert and Lois Long, Case No. 19-20186 (July 2019) -- Chief Judge G.M. Halfenger
    The trustee objected to confirmation of the chapter 13 debtors’ plan under 11 U.S.C. §1325(a)(9), which imposes a plan-confirmation requirement that the debtor file all tax returns “as required by” §1308. Section 1308(a) requires the debtor to file with appropriate tax authorities all tax returns for all taxable periods that ended during the four-year period preceding the filing of the petition by no later than the day before the date on which the meeting of creditors is first scheduled to be held “if the debtor was required to file a tax return under applicable nonbankruptcy law”. The court overruled the trustee’s objection, which was based on the debtors’ failure to file federal income-tax returns for the 2018 taxable year, holding that, because the meeting of creditors was first scheduled to be held before April 15, 2019, and applicable nonbankruptcy law did not require the debtors to file federal income-tax returns for 2018 until April 15, 2019, §1308(a) does not apply to those returns.


    In re Hoang and Kim Nguyen, Case No. 17-27906 (July 2019) -- Chief Judge G.M. Halfenger
    The debtors failed to confirm a debt management plan. Before the court dismissed the case, debtors’ counsel applied for an award of $9,645 in compensation, an amount approaching ten times the presumptively reasonable amount in a chapter 13 case dismissed before plan confirmation. The court found that (1) neither the application nor counsel’s record of time spent on the case demonstrated that this was “an unusually complex case” that “reasonably require[d] significantly more work than the presumptively reasonable fee contemplates”, see Local Rule 2016.1 app. at 1, and (2) counsel failed to show how the services rendered “were of value to the debtors,” given that the plan was never confirmed. In re Ward, 511 B.R. 909, 914 (Bankr. E.D. Wis. 2014). Considering all relevant factors, including the nature of the services rendered and the results obtained, the court concluded that the $2,000 directly paid to counsel pre-petition reasonably compensated counsel for all actual, necessary services rendered, awarded that amount as reasonable compensation under §330(a)(1)(A), allowed that amount as an administrative expense under 11 U.S.C. § 502(b)(2), and afforded counsel 14 days to request an evidentiary hearing with respect to the disallowed compensation.


    In re Michael Frantz, Case No. 19-23077 (July 2019) -- Chief Judge G.M. Halfenger
    Soon after the debtor commenced this chapter 7 case, James Raders moved under 11 U.S.C. §362(d) for relief from the stay imposed by 11 U.S.C. §362(a) to allow him to continue litigating against the debtor in the U.S. District Court for the Middle District of Florida or, in the alternative, for an order confirming that the §362(a) stay does not prevent him from deposing the debtor in connection with that litigation solely in his capacity as a member or manager of two limited liability companies that are defendants in the same action. The court denied Raders’s motion for relief from stay for lack of cause under §362(d). Although Raders would benefit from litigating in Florida, his preferred venue, the debtor faces similar claims to those asserted by Raders in other courts and the purpose of the §362(a) stay is to protect debtors from having to litigate claims by a multitude of creditors in several different forums. In addition, Raders has suggested that he intends to pursue a non-dischargeability claim under 11 U.S.C. §523(a)(2) against the debtor. Section 523(c) requires Raders to litigate his nondischargeability claim in the bankruptcy court; thus, Raders will have to litigate in this court to get full relief against the debtor in all events. Finally, the court denied Raders’s motion for an order confirming that the §362(a) does not prevent him from deposing the debtor in connection with the litigation pending in Florida as too amorphous to adjudicate. The court also explained that, although the §362(a) does not generally bar actions against non-debtors, courts recognize an exception to this rule where a judgment against a non-debtor would effectively be a judgment against the debtor given the degree of identity between them. The court observed that Raders’s amended complaint in the Florida litigation attributes to the debtor the conduct of which he complains. His complaint further alleges that one of the non-debtor companies is administratively dissolved and the other is the debtor’s alter ego. As a result, Raders’ acts to continue the litigation against these companies might be an “act to collect, assess, or recover a claim against the debtor” or to “exercise control over property of the estate” in violation of §362(a)(3) or (6). The bankruptcy court left these matter for the District Court in Florida to consider in the first instance.


    Schouten v. Jakubiak, Adv. Proc. No. 16-2141 (March 2019) -- Chief Judge G.M. Halfenger
    The plaintiff filed an adversary complaint against the debtor-defendant, asserting that the defendant's debt was excepted from discharge by several paragraphs of section 523(a). After summary judgment one claim remained: that section 523(a)(3) excepts the debt from discharge because the debtor-defendant did not list or schedule the plaintiff as a creditor in time to permit him to file a proof of claim or commence an adversary proceeding under section 523(c). After trial the court determined that the debt was dischargeable. The parties agreed that the debtor-defendant did not schedule the debt or list it, and the plaintiff did not have notice of the case, in time to file a proof of claim or file a section 523(c) adversary proceeding. The court noted that, while section 523(a)(3), by its terms, appeared to except the debt from discharge regardless of whether the debt was of a kind specified in section 523(a)(2), (4), or (6), precedent in the Seventh Circuit required the court to determine whether an equitable exception to section 523(a)(3) applied. After reviewing the facts of the case, the court concluded that the debtor-defendant met the requirements for the equitable exception and determined that the debt was dischargeable under section 523(a)(3)(A). With respect to section 523(a)(3)(B), the court concluded that the plaintiff did not meet his burden to prove that the debt was a debt covered by section 523(a)(2) or (6) and, accordingly, the court determined that the debt was dischargeable under section 523(a)(3)(B).


    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.