Judge Janet S. Baer - Opinions / Outlines

Judge Janet S. Baer

In re Richard J. Klarchek
January 30, 2013

10 B 44866

The debtor moved for sanctions against TCF Bank pursuant to section 362(k) of the Bankruptcy Code, alleging that after he filed his bankruptcy petition, TCF willfully violated the automatic stay by proceeding with a state court lawsuit filed against him and other parties. The sole issue addressed by the Court was whether the debtor has standing to pursue the sanctions motion. The Court found that because the debtor’s claim for damages in the sanctions motion is property of his bankruptcy estate and has not been abandoned by the chapter 7 trustee, the trustee is the real party in interest with standing to pursue the cause of action against TCF. Accordingly, the Court denied the motion for sanctions due to the debtor’s lack of standing.

12 B 26203, 12 B 21218

Tax purchasers moved for relief from the automatic stay to continue with their petitions for issuance of a tax deed in the Circuit Court of Cook County. The issue before the Court was whether the debtors in these two cases could cure delinquent property taxes through their chapter 13 plans even though the redemption periods expired during pendency of the bankruptcy cases. The Court acknowledged the split of authority in this jurisdiction concerning the interplay between 11 U.S.C. § 1322(b)(2) and 11 U.S.C. § 108(b), as well as the nature of a tax purchaser’s interest arising out of the Illinois tax sale procedure. Agreeing with the recently issued opinion in La Mont, the Court found that the debtors could provide for payment of the purchasers’ claims in installments through their chapter 13 plans. Accordingly, the Court denied the tax purchasers’ motions.

12 B 12318

The debtors filed a motion to avoid a judicial lien pursuant to section 522(f)(1)(A). The parties did not dispute that the debtors could avoid the lien. The sole issue–one on which there is no binding case law in the Seventh Circuit–was whether the debtors must complete their chapter 13 plan and receive a discharge before the lien is avoided and the creditor is required to release the lien. Agreeing with the majority view, the Court found that in light of the creditor’s objection, the lien avoidance will not be effective until the debtors make all plan payments and obtain a discharge. Accordingly, the Court conditionally granted the debtors’ motion to avoid the judicial lien, provided that they completed their chapter 13 plan and received a discharge in the bankruptcy case.

11 B 45378

In re Nekessa Danyelle Johnson The debtor filed a motion to vacate the Court’s order of March 27, 2012, which disallowed her exemption in an adoption tax credit provided by the Internal Revenue Code (the “I.R.C.”) on the basis of the general “public assistance benefit” exemption in 735 Ill. Comp. Stat. 5/12-1001(g)(1). The issue of whether the adoption tax credit is a public assistance benefit for purposes of the Illinois exemption statute is one of first impression in this jurisdiction. The Court noted that because the debtor filed her petition and taxes and claimed the credit in tax year 2011, section 36C of the I.R.C., which was in effect for that tax year, governed the matter. Explaining that the adoption tax credit was enacted as a financial incentive to defray the high costs associated with the adoption process, the Court noted that the Patient Protection and Affordable Care Act, which amended the I.R.C. for tax years 2010 and 2011, made the adoption tax credit refundable, allowing lower-income adoptive families to receive, for the first time, a cash refund from the government for their adoption expenses. Because the credit was refundable for the tax year at issue and because the Seventh Circuit has instructed that an exemption statute should be liberally construed in favor of the debtor, the Court granted the debtor’s motion to vacate the order that had disallowed her exemption in the adoption tax credit and overruled the trustee’s objection to the exemption.

In re Tranise D. Rose
October 2, 2012

12 B 27635

In re Tranise D. Rose The debtor filed a motion for sanctions against the collections law firm representing debtor's judgment creditor, alleging a violation of the automatic stay. Prior to the bankruptcy case, the law firm caused a citation to discover assets to be served on the debtor's bank, which placed an administrative hold on debtor's bank accounts. The issue before the Court was whether the law firm willfully violated the automatic stay when it refused to take steps to release the hold on the bank accounts upon learning of the bankruptcy petition. The Court held that continuation of the citation proceeding violated § 362(a)(1) of the Bankruptcy Code. The Court further found that the law firm's violation was willful. The law firm refused to to take steps to release the funds, asked for case law in support of debtor's position, and demanded an order from the bankruptcy court before it would comply with debtor's request to dismiss the citation proceeding. Although the law firm eventually proceeded to get the funds released, it failed to communicate that decision to debtor's counsel even though it knew of counsel's intent to seek sanctions if steps were not immediately taken to release the hold on debtor's accounts. The law firm further exacerbated the situation by failing to appear the initial hearing on the motion for sanctions. The Court granted the motion and awarded attorneys' fees as a sanction against the law firm and in favor of Debtor's counsel pursuant to § 362(k)(1).

11 B 25828
Counsel for the Debtor filed an amended fee application in this small-business Chapter 13 case. Notwithstanding counsel’s agreement to the flat fee pursuant to the Court-Approved Retention Agreement, he sought approval of a fee of $14,550, which was $11,050 over the court-authorized flat fee. The issue before the Court was whether this case presented “extraordinary circumstances” that would warrant the additional fee. In reviewing both the history of activity in this case and counsel’s itemized time records, the Court found certain services to be extraordinary and others to be ordinary and within the scope of services contemplated by the Court-Approved Retention Agreement. The Court granted additional fees of $3,630 for extraordinary services and denied fees in excess of the $3,500 flat fee for the remaining services.