OpinionsNonprofit lender holding debtor’s consolidated student loan did not willfully violate the debtor’s discharge injunction by acting to collect on the debt post-discharge. The consolidated student loan was found to be nondischargeable under §523(a)(8)(A)(i) and thus was excepted from the debtor’s discharge issued in February 2012. In re Kielman, Case No. 19-21900-beh, 2019 WL 6880082 (December 2019) -- Judge B.E. Hanan The Chapter 13 debtor inadvertently failed to provide notice of her bankruptcy case to a creditor, the lender on her non-filing husband’s vehicle. As a result, the creditor filed its proof of claim after the bar date and the Court disallowed the claim as untimely. Later, upon default of post-petition payments, the creditor moved for relief from the automatic stay and co-debtor stay. In resolving the motion, the creditor and the debtor stipulated to allow the post-petition arrearage to be paid through the plan pursuant to a claim under 11 U.S.C. § 1305. The Court determined that post-petition default on a pre-petition car loan did not constitute consumer debt arising after the date of the order for relief, as required to constitute a claim under § 1305. The Court also declined to reconsider the prior disallowance of the creditor’s proof of claim, noting that the debtor’s invocation of 11 U.S.C. § 521(j) at a hearing was not procedurally proper, nor was it likely to succeed on the merits. Alternatively, the Court noted that an option not yet pursued by the parties was for the debtor to seek an extension of the deadline to file a claim under Rule 3004, which may be enlarged under Rule 9006(b)(1). In re Zoromski, 19-20752-beh, 2019 WL 6869628 (December 2019) -- Judge B.E. Hanan After the Chapter 7 debtors received their discharges, and before the assets of the estate were fully administered, the debtors moved to convert their case to a Chapter 13. The Court ordered the debtors to file a supporting brief establishing their right to convert in the circumstances. The debtors then moved to vacate the discharge order under Civil Rule 60(b). The debtors asserted, among other things, that their attorney’s failure to stipulate to an extension of the deadline to object to their discharge for a third time—and thus to prevent the entry of the discharge order—amounted to excusable neglect. The debtors wished to save their non-exempt vacant land, which was appraised post-petition at a value much higher than they anticipated, by paying unsecured creditors in full through a Chapter 13 plan. After weighing the equitable factors identified in Pioneer Inv. Servs. v. Brunswick Assocs., Ltd. P’ship, 507 U.S. 380, 395 (1993), the Court concluded that excusable neglect existed and granted the motion. Braatz v. Check and Cash, LLC, Adv. Proc. No. 19-02088 (December 2019) -- Chief Judge G.M. Halfenger The debtor-plaintiff alleged that the creditor-defendant violated the automatic stay and the Wisconsin Consumer Act when it garnished funds from her paycheck approximately two weeks after she filed her chapter 7 case. The debtor acknowledged that the creditor returned the garnished funds a few weeks after the debtor filed her adversary complaint, which the creditor did not answer. In moving for default judgment, the debtor requested compensatory damages for financial and emotional injuries and punitive damages. The court ruled that the debtor was entitled to recover reasonable attorney's fees under 11 U.S.C. §362(k)(1) because the uncontested facts showed that the creditor willfully violated the automatic stay. The court further ruled that controlling precedent commands that §362(k)(1) does not afford a right to recover damages for emotional injury, and that the alleged conduct did not justify an award of punitive damages because it was not sufficiently egregious or reprehensible. Finally, the court ruled that the debtor failed to state a claim under the Wisconsin Consumer Act, Wis. Stat. §427.104(1)(h) & (j), because the alleged acts of garnishment could not "reasonably be expected to threaten or harass" and could not constitute a "[c]laim, or attempt or threaten to enforce a right with knowledge or reason to know that the right does not exist". In re Ryan Ebert, Case No. 18-31065 (December 2019) -- Chief Judge G.M. Halfenger AmeriCredit Financial Services, Inc. filed a motion for relief from the automatic stay and the co-debtor stay with respect to its collateral. The motion was without merit because the debtor's confirmed chapter 13 plan surrendered the collateral and entry of the order confirming the plan immediately terminated the automatic stay with respect to the collateral, terminated the co-debtor stay, and the collateral was deemed abandoned. The debtor filed a frivolous objection to the motion for relief, stating that his non-filing co-debtor had become current with payments to AmeriCredit. The court denied the motion as moot and ordered the parties and their counsel to show cause in writing why they should not be sanctioned under Federal Rule of Bankruptcy Procedure 9011(c)(1)(B). The court noted, "[i]f ever there were a time when parties could file meritless requests for relief and demands for hearing without risk of sanction, that time has passed." Braun v. U.S. Dep’t of Educ. (In re Braun), Case No. 18-23655-beh, Adv. No. 18-02184-beh, 2019 WL 6463254 (November 2019) -- Judge B.E. Hanan Chapter 7 debtors filed an adversary proceeding seeking to discharge $9,558.66 in student loan debt under 11 U.S.C. § 523(a)(8) because excepting such debt from a discharge would impose an undue hardship on them. Debtor Robert Braun had co-signed the loans for the benefit of the debtors’ son. The U.S. Department of Education (“DOE”) moved for summary judgment, arguing that the debtors could not meet the second prong of the undue hardship test set out in Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987), as adopted by In re Roberson, 999 F.2d 1132 (7th Cir. 1993), and somewhat softened by Krieger v. Educational Credit Mgmt. Corp., 713 F.3d 882 (7th Cir. 2013). Applying the second Brunner prong, the Court considered whether additional circumstances exist to indicate that the debtors’ inability to pay while maintaining a minimum standard of living is likely to persist for a significant portion of the repayment period. Shortly after filing their bankruptcy case, the debtors signed three reaffirmation agreements to maintain loans on two vehicles. By the time they filed this adversary proceeding, they had satisfied one of the car loans. Moreover, debtors anticipated fully repaying the second loan within seven months, and repaying the third within fourteen months. This progress will, at the fourteen-month point, allow the debtors to enjoy a net monthly income of more than five times the monthly amount due on the student loans. These impending improved circumstances allowed the Court to confirm that the debtors can repay the loan during the repayment period while maintaining at least a minimum standard of living. Based on the debtors’ failure to meet their burden to establish that the obligation to pay the son’s student loans would impose an undue hardship under 11 U.S.C. § 523(a)(8), the Court granted the DOE’s motion for summary judgment. 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. |