OpinionsThe 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. In re Kristopher and Jody Hill, Case No. 18-30063 (February 2019) -- Chief Judge G.M. Halfenger The debtors proposed a chapter 13 plan that proposed to value a secured claim. The debtors placed the plan language regarding the valuation of the secured claim in Section 8.1 of the model plan—the "nonstandard" provisions section—rather than in section 3.2—the section that includes a "request for valuation of security". The court denied confirmation of the debtors' chapter 13 plan because it did not conform with the model chapter 13 plan and because the record did not demonstrate that the debtors had served the plan on the secured creditor, as required by Federal Rule of Bankruptcy Procedure 3012(b). In re Valent, Case No. 17-21634 (January 2019) -- Chief Judge G.M. Halfenger The mortgage creditor filed an affidavit of default, asserting that the debtor failed to make monthly mortgage payments as required by the court's April 13, 2018 order. The debtor filed a response and asserted that she made the required mortgage payments. The court set an evidentiary hearing to determine whether the debtor defaulted under the terms of the April 13, 2018 order. The order setting the evidentiary hearing further stated that if the court determined that the creditor's affidavit was accurate, the court would consider whether the debtor had made a false representation to the court and whether sanctions should be issued. Conversely, the order stated that if the court determined that the creditor's affidavit was not accurate, then the court would consider whether the creditor had made false representations to the court and whether sanctions should be issued against it. Several days before the evidentiary hearing the mortgage creditor and debtor filed a letter informing the court that they had reached a verbal agreement to settle the matter and asked the court to cancel the evidentiary hearing. The court denied the request because the parties could not agree to resolve the issue of whether a false representation had been made to the court by one of the parties. The court emphasized that the court's practice of resolving motions with so-called "doomsday" orders "depends mightily on parties making accurate representations about compliance" with those orders. Accordingly, the court denied the parties' request to cancel the evidentiary hearing. In re Gary and Jody Huenerberg , Case No. 17-28645 (January 2019) -- Chief Judge G.M. Halfenger The Internal Revenue Service objected to confirmation of the debtors' amended chapter 13 plan asserting that its appeal of the court's earlier order disallowing a portion of its claim as a priority unsecured claim divested the court of jurisdiction necessary to confirm the plan. The court held that appeal of such an order does not generally divest the bankruptcy court of the jurisdiction needed to confirm a chapter 13 plan but that, in this instance, the principle underlying the divestiture doctrine cautions against confirming the amended plan, which contains language that is inconsistent with the court's order adjudicating the extent to which the IRS's claim is entitled to priority treatment and that directly concerns an open issue on appeal: whether the portion of the IRS's claim attributable to an outstanding shared responsibility payment imposed under 26 U.S.C. §5000A (enacted as part of the Affordable Care Act) is for a tax or a penalty for purposes of priority under 11 U.S.C. §507(a)(8). The court concluded that the problematic language in the amended plan is unnecessary and can therefore be removed through further amendment, thereby resolving the divestiture issue, to the extent one exists. |