OpinionsA judgment lien creditor objected to the debtors’ claimed homestead exemption. The debtors acknowledged that they spent time at the home in Door County but also maintained residences in Dane County. Following other Wisconsin bankruptcy decisions, the Court overruled the objection. See In re Carter, 550 B.R. 433 (Bankr. W.D. Wis. 2016) (Martin, J.); In re Lackowski, No. 08-21496-pp, 2008 Bankr. LEXIS 5143 (Bankr. E.D. Wis. Sep. 24, 2008) (Pepper, J.); In re Broesch, 34 B.R. 554 (Bankr. E.D. Wis. 1983) (Clevert, J.). Wisconsin courts liberally construe the homestead exemption statute. The debtors’ part-time occupancy of their Door County property did not defeat the homestead exemption because the debtors’ absence was partially due to the demands of employment. The debtors’ maintenance of the Door County property was consistent with its use as a homestead. Additionally, the debtors’ use of the Dane County address on their tax returns and drivers’ licenses did not defeat their selected homestead. The statute and the case law do not prohibit one from occupying two residences – only from claiming both as homesteads. Because the Court found that the debtors’ homestead exemption was valid, the Court granted their motion to avoid the creditor’s judicial lien. As a result, the debtors had equity in the real estate and the Court denied the creditor’s motion for relief from stay pursuant to 11 U.S.C. § 362(d)(2) without needing to reach the question of whether the property was necessary to an effective reorganization. Finally, the Court denied the creditor’s motion requesting an order requiring the debtors to abandon potential fraudulent transfer claims against two mortgage holders. The debtors had not elected to pursue the claims, but there was no evidence the claims were burdensome to the estate. Further, if the claims had merit, they were not of inconsequential value and benefit to the estate. Contrary to the creditor’s argument that avoidance of the claims would create non-exempt equity to which the creditor’s judgment lien could attach, the effect of the avoidance would be to preserve value for the estate. This decision was affirmed on appeal. Wisconsin v. Hansen, 624 B.R. 204 (E.D. Wis. 2021) (January 2021) -- District Court Penalty imposed against debtors by the State of Wisconsin Department of Workforce Development for debtor’s company’s failure to maintain workers’ compensation insurance was nondischargeable under 11 U.S.C. § 523(a)(7). Verde Technologies v. C2R Global Manufacturing, Inc. (In re C2R), Case No. 18-30182-beh, Adv. No. 20-2028-beh, 2020 WL 7265867 (December 2020) -- Judge B.E. Hanan Both parties submitted various motions to seal, supplying some evidence to support the motions, namely, declarations of officers within the companies explaining why the information to be protected falls within the scope of 11 U.S.C. § 107(b). The Court reviewed the categories of documents to determine whether they constituted trade secrets or confidential research, development, or commercial information as contemplated under the Code. In instances where the Court determined the information to be subject to public disclosure, the parties were granted 21-days’ leave to supplement the record in favor of protection. In re Robinson, Case No. 19-22498-beh, 2020 WL 7234031 (December 2020) -- Judge B.E. Hanan The debtor sought to extend her total plan length from 60 months to 84 months, pursuant to the temporary amendment to the Bankruptcy Code at 11 U.S.C. § 1329(d), made possible by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Her plan, however, originally was confirmed after the enactment of the CARES Act—four days after enactment. The plain text reading of the eligibility period under § 1329(d) limits modifications to plans confirmed before March 27, 2020. In re Edward and Linda Tolliver, Case No. 20-22408 (September 2020) -- Chief Judge G.M. Halfenger A creditor objected that the chapter 13 plan could not be confirmed because it proposed to modify the creditor's rights as the holder of a claim secured only by a security interest in the debtors' principal residence, in violation of 11 U.S.C. §1322(b)(2). The debtors responded that the proposed modification of the creditor's rights was permissible under §1322(c)(2) because the last payment on the original payment schedule for the claim was due before the final payment under the plan was due. The creditor replied that the debtors had agreed to extend the original payment schedule for the claim to a date past when the final payment under the plan was due, making §1322(c)(2) inapplicable. The court sustained the creditor's objection to confirmation of the plan because, under Wisconsin law, the debtors' agreement to a new payment schedule on the debt, in exchange for being deemed current on payments, resulted in a new contract; that new contract gave rise to the creditor's "claim", defined in the Bankruptcy Code as a "right to payment"; and the original (and only) payment schedule for that claim ends after the final payment under the plan is due. George v. Anderson (In re Anderson), Case No. 17-29971-beh, Adv. No. 19-02165-beh, 2020 WL 4463055 (Bankr. E.D. Wis. July 31, 2020) (July 2020) -- Judge B.E. Hanan The Chapter 7 trustee moved for summary judgment in her adversary proceeding against debtor’s brother, the recipient of an alleged fraudulent transfer. The Court weighed the facts of the case against both actual fraud under sec. 548(a)(1)(A) and constructive fraud under sec. 548(a)(1)(B), and found that the trustee had not met her burden on summary judgment to show entitlement to judgment as a matter of law. In re Luedke, Case No. 20-20729-beh, 2020 WL 4342242 (July 2020) -- Judge B.E. Hanan The Chapter 7 debtors claimed federal homestead exemptions in their primary residence, which was held by a living revocable trust of which they were the settlors, beneficiaries, and trustees. The Chapter 7 trustee objected to the claimed exemptions, asserting that the trust was a separate legal entity, and therefore the debtors had no interest in the residence that they could claim as exempt. Looking to Wisconsin trust law, the Court concluded that the debtors’ living trust—unlike a corporation or an LLC—was not a separate legal entity, and that the debtors maintained equitable ownership of their residence. Because that equitable ownership, coupled with the debtors’ present possessory interest, was an “aggregate interest” in the residence that could be exempted under 11 U.S.C. section 522(d)(1), the Court overruled the trustee’s objection. In re Hefty, Case No. 19-31232-beh, 2020 WL 4289367 (July 2020) -- Judge B.E. Hanan The trustee objected to confirmation of the above-median debtor's proposed Chapter 13 plan, asserting that it failed to provide for all of the debtor's disposable income. Because the debtor had obtained a new and higher-paying job shortly before filing his case, the trustee and the debtor agreed that the means test—using its six-month look-back period—did not accurately reflect the debtor’s “projected disposable income” under 11 U.S.C. section 1325(b)(1). But the parties disagreed on the proper method for accurately calculating projected disposable income. The trustee argued that the amount should be calculated with an amended means test, using the debtor’s new income, while the debtor asserted that only Schedules I and J mattered. The Court concluded that the means test (adjusted to reflect the upward increase in the debtor’s income), and not Schedules I and J, should be used to calculate the debtor’s projected disposable income, and sustained the trustee’s objection. In re H2D Motorcycle Ventures, LLC and JHD Holdings, Inc., Case Nos. 19-26914-beh, 19-26915-beh, 617 B.R. 625 (Bankr. E.D. Wis. 2020) (June 2020) -- Judge B.E. Hanan The jointly-administered Chapter 11 debtors had proposed and been approved for two significant asset sales, and now ask the Court to use the proceeds of the sales to pay select administrative claimants. Simultaneously, the U.S. Trustee filed a motion to convert the Chapter 11 cases to separate Chapter 7 proceedings, and the largest secured creditor filed a motion for relief from the automatic stay. The Court considered the best sequence and means of handling the various motions against the debtors' admission that the Chapter 11 process is no longer an option for them, as well as other facts of record. Based on the best interests of the creditors and the estates under Sec. 1112(b), the Court converted the two cases to Chapter 7, and held the remaining motions in abeyance. In re Saul Limon, Case No. 20-23368 (June 2020) -- Chief Judge G.M. Halfenger A creditor objected to confirmation of the chapter 13 plan because the plan does not provide for the creditor's allowed secured claim. The court overruled the objection because no provision of the Bankruptcy Code requires that a chapter 13 plan provide for all allowed secured claims. |