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Judge Jacqueline P. Cox - Opinions

Description Date Issued
In re Michael C. Brace

09 B 44558

The court granted the U.S. Trustee's Motion to Dismiss the Debtor's chapter 7 case pursuant to 11 U.S.C. section 707(b)(3) because granting the Debtor a chapter 7 discharge would result in substantial abuse of the Bankruptcy Code given the totality of the circumstances. The Trustee asserted that the Debtor and his wife's annual income was nearly double the applicable median family income for a comparable household in Illinois. Additionally, the Trustee argued that the Debtor could pay at least a portion of his unsecured debt through a chapter 13 plan by reducing or eliminating a number of expenses, including expenses in connection with a second home at which the Debtor and his family did not reside. The court also determined that the Debtor would not be allowed to deduct as necessary living expenses funds used to repay a loan from the Debtor's 401(k) plan. The court will dismiss the Debtor's chapter 7 case on July 16, 2010 unless the Debtor moves to convert to a case under chapter 13 within 14 days.

05/25/2010
In re Daniel and Roberta Fenn

09 B 49343

The court sustained Wells Fargo Bank's Objection to Confirmation of the Debtors' April 12, 2010 chapter 13 plan which proposed to avoid Wells Fargo's wholly unsecured junior lien on a residential property. The court found that while debtors may generally avoid wholly unsecured junior liens in a chapter 13 plan, these particular Debtors were not eligible for such relief because they were not eligible for a discharge because they had received a chapter 7 discharge in 2009. Additionally, the court denied confirmation of the Debtors' April 12, 2010 plan because the plan did not contain the appropriate lien retention language.

05/17/2010
In re Computer World Solution, Inc.; Computer World Solution, Inc. v. Apple Fund, L.P. and Astor Partners, LLC

07 B 21123, 08 A 00180

This is an amended opinion; the original opinion was signed on March 17, 2010. This case involved a preference action under 11 U.S.C. sec. 547 to recover three payments made to the Defendants during the pre-petition preference period. The court found that the Debtor met its burden under 11 U.S.C. sec. 547 and proved by a preponderance of the evidence that the payments at issue were in fact preferential. The Defendants set forth twelve affirmative defenses, most notably the ordinary course of business defense. The court determined that the Defendants failed to meet their burden with regard to any of the affirmative defenses. The court found that the Defendants' ordinary course of business defense failed because the fraud that the Debtor's officers engaged in pre-petition and during the preference period could not serve as an exception to preference liability because ordinary businesses do not defraud their customers and lenders.

04/15/2010
In re J.S. II, LLC, et al.

07 B 03856

This is an amended order; the original order was issued on April 1, 2010. The court found that two creditors willfully violated the automatic stay by pursuing a District Court action against several Debtors despite the creditors' knowledge of the ongoing bankruptcy case. The creditors had an opportunity to pursue their grievances in the bankruptcy court but decided to withdraw their proof of claim. At a hearing the creditors argued that the District Court action was based upon facts that were personal and peculiar to the creditors and that the District Court complaint was based upon facts that arose after the bankruptcy petition was filed. The court found that the creditors' claims were not personal and peculiar because they were similar to the other homeowners' claims against the Debtors. The court also determined that the entire District Court complaint was based upon events that occurred prior to the filing of the bankruptcy petition. The creditors' attorney was ordered to show cause why he has not violated Federal Rule of Bankruptcy Procedure 9011(b) by signing a pleading that might not be based upon legally and factually sound representations.

04/09/2010
In re IFC Credit Corporation

09 B 27094

The court granted the Trustee’s motion for a preliminary injunction staying various lawsuits pending against former directors and officers of the Debtor. The court found that the Trustee was entitled to a preliminary injunction because the pending lawsuits would likely deplete the Debtor’s entire directors and officers insurance policy, leaving nothing for the bankruptcy estate should the Trustee decide to pursue similar claims against former officers and directors. The Trustee also made a successful showing that the creditors' claims were not unique and personal, and that the creditors’ claims overlapped and were based in the same facts and circumstances as the Trustee’s potential claims against former directors and officers of the Debtor.

01/27/2010
In re IFC Credit Corporation

09 B 27094

The court denied a motion to dismiss the bankruptcy case due to the initial petition being filed by a non-lawyer on behalf of the corporation based upon laches and Federal Rule of Bankruptcy Procedure 1009 after the movants waited three months to file the motion once the preference period had passed.

12/16/2009
In re: Tekena USA, LLC

09 B 16969

The court dismissed this Chapter 11 case finding that it was not filed in good faith due to the Debtor's involvement in efforts that amounted to abuse of the judicial system.

11/19/2009
In re Local Union 722 International Brotherhood of Teamsters

09 B 20825

In this matter, a judgment creditor moved to dismiss the debtor’s chapter 11 case under 11 U.S.C. § 1112(b) arguing that the bankruptcy was really a two-party dispute between the debtor and the creditor. The Court granted the motion, after determining that the debtor could not propose a confirmable plan since the creditor held over two-thirds of the total amount of claims and would not vote for any plan that would impair his claim.

10/06/2009
In re Lancelot Investors Fund, L.P.; Peterson v. Ellerbrock Family Trust, LLC

08 B 28225, 09 A 00413

In this case, the chapter 7 trustee sought to enjoin a lawsuit brought by a group of investors who invested in the Debtors against a third non-debtor party accounting firm. The investors filed suit in Minnesota state court for negligent misrepresentation and professional negligence regarding the accounting firm’s financial reports concerning the Debtors’ financial position. The investors theory is that the accounting firm, with proper due diligence, would have uncovered an alleged Ponzi scheme. The Court agreed with the Trustee’s argument that the suit against the accounting firm was property belonging to the bankruptcy estate that only the Trustee could pursue and stayed the investors’ lawsuit.

07/17/2009
In re Lunkes

09 B 00583

In this matter, the debtor claimed his interest in a trust was exempt from inclusion in his bankruptcy estate under 11 U.S.C. § 541(c)(2) because the trust was a spendthrift trust. The chapter 7 trustee objected, arguing that the trust was not a spendthrift trust. The Court agreed with the chapter 7 trustee and sustained the objection.

07/02/2009
In re Howard

08 B 32998

The issue in this case was whether the hanging paragraph of 11 U.S.C. § 1325 applied to so-called “negative equity” in connection with the purchase of a motor vehicle that is subject to that provision. In this case, the debtor purchased a motor vehicle within 910 days of filing his bankruptcy petition for $29,798.00. Along with a $4,500.00 down payment, the debtor traded in his old car valued at $14,450.00. However, the debtor still owed $22,498.68 on the trade-in, leaving a difference of $8,048.68. This difference is referred to as “negative equity” in motor vehicle financing. The debtor entered into a financing agreement with Americredit Financial Services, Inc. (Americredit) to purchase the motor vehicle and for payment of the negative equity to pay off the debt owed on his trade-in. After the debtor filed his bankruptcy petition, Americredit filed its proof of secured claim for $34,698.07. However, the debtor’s proposed plan listed a secured claim for Americredit of $13,250.00, the motor vehicle’s current value. Americredit objected to the debtor’s plan, arguing that the debtor may not bifurcate the motor vehicle debt under the hanging paragraph of § 1325. The debtor argued that it may bifurcate the debt, stating that the negative equity component of the financing is not included under the hanging paragraph of § 1325. The Court held that the entire claim was a subject to the hanging paragraph of § 1325. The court certified the matter under 28 U.S.C. § 158 for direct appeal to the Circuit. The Seventh Circuit affirmed the ruling on March 1, 2010. See In re Howard, 597 F. 3d 852.

06/16/2009
In re Sharif;Wellness Int’l Network v. J.P. Morgan Chase, N.A.; Khan v. Wellness Int’l Network

09 B 05868, 09 A 00384, 09 A 00385

In this matter, the Debtor and two non-debtor parties (“Respondents”) were held jointly and severally liable for attorney’s fees awarded by the U.S. District Court for the Northern District of Texas after initiating a lawsuit and failing to conduct any discovery in the case. Ultimately, summary judgment was entered against them. The judgment creditors then commenced collection proceedings to satisfy the award in both a Texas state court and in the Texas U.S. District Court. The Debtor’s bankruptcy followed. The other two respondent parties each filed adversary proceedings before this Court in an attempt to remove the collection actions from the state and federal courts in Texas to this Court. The Court agreed with the judgment creditors that there was no basis to remove the Texas proceedings and dismissed both adversary proceedings.

06/02/2009
n re Oien; Regis Technologies, Inc. v. Oien

07 B 08526, 07 A 01058

In this case, the plaintiff moved to amend its adversary complaint. The original complaint sought to deny the debtor’s discharge under 11 U.S.C. § 727(a)(4)(A) alleging the debtor asserted a false oath at his § 341 creditors’ meeting. The amended complaint sought to add additional defendants and causes of action under 11 U.S.C. § 523(a), § 727(a)(3), civil conspiracy, and unjust enrichment. The motion was granted to amend the original § 727(a)(4)(A) count and the § 727(a)(3) count. The motion was denied as to amending the complaint to add the additional defendants and the § 523(a) claim, the civil conspiracy claim, and the unjust enrichment claim.

04/24/2009
In re Teknek, LLC

05 B 27545

Chapter 7 trustee sought approval of a settlement agreement resolving all litigation between the defendants in an adversary proceeding for recovery of pre-petition transfers. The settlement agreement was opposed by one of the administrative creditors who argued that the settlement amount was too low. The objecting creditor argued that little of the estate’s resources would be needed to realize a potentially $4 million dollar judgment. The Court approved the settlement agreement, finding the agreement to be in the best interests of the estate.

03/13/2009
In re Hunter;Herzog v. Countrywide Home Loans

07 B 19360, 08 A 00300

Prior to filing his chapter 7 bankruptcy petition, the debtor sought to rescind two mortgage loans from the defendants. After the bankruptcy case commenced, the chapter 7 trustee filed an adversary complaint requesting enforcement of the debtor's right to rescind the loans. The trustee alleged that the debtor did not receive two copies of the Notice of Right to Cancel in connection with each loan as was required by the Truth in Lending Act (“TILA”). The trustee asserted that the debtor properly exercised his right to rescission through written notice to the defendants within the three-year time limit provided in 15 U.S.C. § 1635(f) of TILA. The defendants filed a motion to dismiss the trustee's rescission claims as time-barred because he did not file those claims in court within three years after seeking rescission of the loans. At issue was whether a consumer who provides timely notice to a creditor is also required to file a lawsuit seeking to enforce rescission within the time limit set forth in § 1635(f). The Court found that TILA does not preclude the trustee’s suit to enforce the debtor’s right of rescission after the passing of the three-year period because the debtor timely exercised his right to rescind the loans within the three-year period. Therefore, the defendants’ motion to dismiss was denied.

03/10/2009
In re Hearthside Baking Co., Inc.; Official Unsecured Creditors’ Committee of Hearthside Baking Co., Inc., et al. v. Cohen, et al.

08 B 01187,08 A 00237

In this chapter 11 matter, the shares of the Debtor were held in a trust. Wayne and Terry Cohen were beneficiaries of the trust and two co-trustees were named as trustees of the trust. Wayne was the President of the Debtor and Terry was its CEO. Both were the sole directors of the Debtor. Beginning in 2000, Wayne suspected Terry of looting the Debtor’s assets and notified the co-trustees on several occasions. Pursuant to the trust agreement, the co-trustees had the ability to appoint or remove directors and officers. Despite numerous assurance that they would investigate, the co-trustees did not act. Wayne eventually filed a shareholder’s derivative suit in the Chancery Court of Cook County, Illinois against Terry and the co-trustees for breach of fiduciary duty and civil conspiracy. Eventually, the Debtor was placed into bankruptcy and a creditors’ committee was formed. The committee removed the derivative action to this Court and filed its own adversary proceeding against, inter alai, Terry, Wayne, and the co-trustees. The committee’s complaint also sought relief for breach of fiduciary duty, recovery of fraudulent transfers, and other relief. Wayne eventually amended his complaint to include a RICO cause of action against Terry. The co-trustees moved to dismiss Wayne’s complaint on standing, causation, damages, and mitigation grounds. The co-trustees similarly moved against the committee. Terry moved to dismiss Wayne’s complaint on standing grounds. Wayne moved for judgment on the pleadings regarding the committee’s complaint against him alleging fraudulent transfers. The Court granted the motions to dismiss in part and denied them in part. Wayne’s motion for judgment on the pleadings was denied.

02/27/2009
In re Orla Enterprises

08 B 27287

In this chapter 11 matter, the debtor-lessor sought to reject a non-residential lease to the extent that the lease remained unexpired. The issue focused on an option to purchase allegedly contained in the lease. The lessee alleged that an option to purchase the property existed in the lease and that it properly exercised the option. The debtor denied that the option ever existed and refused to sell the property to the lessee. The lessee then abandoned the property when the option term ended but before the end of the lease term. The issue on the option’s existence was being litigated in DuPage County Circuit Court before the filing of the bankruptcy petition and is now stayed. The Court denied the motion and held that option contract was not an executory contract since it did not meet that definition on the date of filing the bankruptcy petition. The option would have been breached at the expiration of the option term by the debtor if the option did exist. Conversely, the lease would have been terminated by the lessee when it abandoned the property before the lease term ended if no option existed. Further proceedings are needed to determine if the option existed.

01/08/2009
In re Hearthside Baking Co., Inc.

08 B 01187

The movant, the Official Committee of Unsecured Creditors of Hearthside Baking Co., Inc. (the “Committee”), sought entry of an order directing the Debtor to surrender an insurance policy indemnifying the life of one of the Debtor’s principals. After hearing, the Court held that the policy belonged to a third-party and not the Debtor, precluding the Committee’s requested relief. Further, it was noted that under Federal Rule of Bankruptcy Procedure 7001(2), such relief could not be granted via a motion. The Committee’s motion was denied.

12/03/2008
In re Teknek, LLC

05 B 27545

In this chapter 7 case, the chapter 7 trustee sought to employ Neal Levin of Freeborn Peters LLP as special counsel to pursue causes of action against certain parties affiliated with the debtor (“Teknek Parties”). Levin previously represented the chapter 7 trustee in this capacity and also represented the estate’s main creditor, Systems Division, Inc. (“SDI”) at a point during the bankruptcy case. Levin previously withdrew representation of both parties when the trustee initiated an adversary proceeding against SDI. Now, the trustee seeks to re-employ Levin for the limited purpose of pursuing causes of action against the Teknek Parties. Both the Teknek Parties and SDI object. SDI objected on the grounds that it previously withdrew its as of right and that alleged misconduct by Levin precluded his employment with the estate. The Court held that the Teknek Parties lacked standing to object to Levin’s re-employment and overruled SDI’s objection as it related to its assertion that it withdrew its claim and Levin’s alleged misconduct. However, the Court found that 11 U.S.C. 327(a) precluded Levin’s re-employment to the chapter 7 trustee in this case. Therefore, the objection was ultimately sustained.

10/20/2008
In re Marks

08 B 06743

A secured creditor objected to the plan of a chapter 13 debtor. The creditor’s claim was for a retail installment contract on a motor vehicle. The plan initially provided for adequate protection payments of approximately 1% of the collateral until payment to the creditor would begin April 2009 when the creditor would begin to receive payment on its claim at 6.25% annum. The creditor objected, arguing that the amount of adequate protection was incorrect, that the plan violated the equal monthly payment provision of § 1325 of the Bankruptcy Code, that it was entitled to attorney’s fees as provided by the original contract between the parties, and the interest rate under the plan was insufficient. The plan was later amended using a calculation for adequate protection that uses the difference between the value of the motor vehicle from the month the petition was filed and the value of the motor vehicle in the month immediately after filing. The Court sustained the creditor’s adequate protection argument but noted that the plan was amended to provide the correct amount. Next, the Court overruled the creditor’s § 1325 argument since it is adequately protected under the plan and that § 1325 does not specifically require the equal monthly payments to a creditor to begin with the first payment to the chapter 13 trustee made under the plan. The creditor’s attorney’s fees were sustained since they were provided for by the original contract. Lastly, the Court held that the creditor did not meet its burden of proving that it was entitled to a higher interest rate than the one provided by the plan.

09/25/2008

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