Creditors holding a large judgment debt against the debtor’s now ex-wife, attributable to the ex-wife’s theft-by-fraud, sought to retain their ability to collect the debt against the marital property the debtor retained in the parties’ subsequent divorce, and filed an action premised on 11 U.S.C. §§ 523(a)(2)(A) and (a)(15). The parties cross-moved for summary judgment. The Court granted summary judgment in favor of the debtor-defendant because (1) the complaint’s allegations under section 523(a)(2)(A) were premised solely on fraud committed by the debtor’s ex-wife, which could not be imputed to the debtor, and (2) the underlying judgment, which was assigned to the debtor’s ex-wife in the divorce, was not a debt owed to a spouse, former spouse or child, nor was it created by the parties’ divorce.
The Court also rejected a new factual theory that the creditors raised for the first time in their brief opposing the debtor’s motion for summary judgment—that the debtor engaged in a post-judgment fraudulent transfer scheme through the parties’ marital property division. First, the Court noted that it is improper for parties to raise new factual, rather than legal, theories in opposition to summary judgment briefing. Then, the Court rejected the new theory on the merits because it did not link the underlying judgment debt that the creditors sought to except from discharge to the later asserted fraudulent conduct. Finally, to the extent the plaintiffs were attempting to invoke their rights under 11 U.S.C. § 524(a)(3) to collect against post-petition martial property, that section of the Code did not apply because the debtors were no longer married and thus there could be no non-exempt post-petition marital property from which to collect.
Layng v. Pansier (In re Pansier), Adv. No. 18-2222, Case No. 18-22297, 2020 WL 268582 (January 2020) -- Judge B.E. Hanan
The U.S. Trustee filed a complaint to deny the discharges of a married debtor couple, based on their conduct in creating several trusts and entities into which they transferred their home, personal property and income, while continuing to live in the home and retaining control over the alleged trust property. The U.S. Trustee asserted causes of action under 11 U.S.C. sections 727(a)(2) (concealment of assets), (a)(3) (failure to maintain adequate books and records), (a)(4)(A) (false oaths), and (a)(5) (failure to explain a loss or diminution of assets), and sought summary judgment on all four causes of action. The Court granted summary judgment on two of those causes of action, denying the debtors’ discharges under sections 727(a)(2) and (a)(4)(A).
In re Brian and Katie Mulder, Case No. 19-30817 (January 2020) -- Chief Judge G.M. Halfenger
The debtors moved under 11 U.S.C. sec. 522(f)(1)(B) to avoid the fixing of a lien on their interests in certain household items. The court denied the motion without prejudice because most of the items described in the motion were not properly listed in the debtors' schedules of assets and exemptions, the motion otherwise sought relief that is not available under sec. 522(f)(1)(B), and the debtors did not provide proof that the motion was served on the lien holder in the manner provided by Rule 7004(b)(3).
In re Brewer, No. 15-29081-kmp (Bankr. E.D. Wis. Dec. 31, 2019) (December 2019) -- Judge K.M. Perhach
The Court overruled the Debtors’ objection to attorneys’ fees itemized on two Notices of Postpetition Mortgage Fees, Expenses, and Charges filed by the Debtors’ mortgage creditor. Bankruptcy Rule 3002.1(e) provides that within one year after service of a Notice, a debtor may request a determination of whether fees are required “by the underlying agreement and applicable nonbankruptcy law to cure a default or maintain payments in accordance with § 1322(b)(5).” The Debtors’ objection to the first Notice was filed more than one year after service of that Notice and as such was untimely. The Debtors’ objection to the second Notice was timely, and the Debtors requested a determination about a $200 charge for attorneys’ fees for the mortgage creditor’s review of a modified plan. The Court determined that these fees were required by the mortgage and applicable nonbankruptcy law and that they were reasonable.
In re Jones, Case No. 19-31539-beh, 2019 WL 7342455 (December 2019) -- Judge B.E. Hanan
The Chapter 13 debtor originally filed his bankruptcy petition without identifying a spouse, but eleven days later, he filed an “amended petition” to include a joint debtor spouse. Though Federal Rule of Bankruptcy Procedure 1009(a) allows a debtor to amend his or her petition “as a matter of course at any time before the case is closed,” the Rule does not trump the plain text prescriptions for filing joint cases under 11 U.S.C. section 302(a). Accordingly, the Court struck the amended petition and related documentation including the spouse.
Moon v. Iowa Student Loan Liquidity Corporation, Adv. Proc. No. 18-2249 (December 2019) -- Judge B.H. Ludwig
Nonprofit 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."