13 B 28123
The Chapter 7 trustee filed an objection to the exemption that the debtor claimed in her interest in her former husband’s retirement plan pursuant to section 12-1006 of the Illinois Code of Civil Procedure. The parties disagreed on whether the debtor had the right to obtain the funds for her immediate consumption. The debtor argued, alternatively, that the retirement plan was excluded from the bankruptcy estate under 11 U.S.C. § 541(c)(2). Held: The debtor’s interest in the retirement plan is property of the estate. However, the debtor satisfied the requirements for exemption under Illinois law. The debtor’s ability to take an immediate distribution did not defeat the retirement nature of the retirement plan, as the distribution is to be made pursuant to a qualified domestic relations order in a way as to preserve the retirement nature of the funds. The court therefore overrules the trustee’s objection to the claimed exemption.
Judge Timothy A. Barnes - Opinions / Outlines
Judge Timothy A. Barnes
March 26, 2014
13 B 28123
December 9, 2013
13 B 42168
The chapter 13 trustee filed a motion to dismiss the Debtor’s chapter 13 case pursuant to 11 U.S.C. § 1307. The Trustee alleged that the Debtor failed to meet the requirements under 11 U.S.C. § 109(h)(1) because the Debtor did not receive counseling during the 180-day period preceding the date of filing of the case. Held: The Debtor meets the requirements under 11 U.S.C. § 109(h)(1), as the Debtor received credit counseling the date of the filing of the petition. The plain language of section 109(h)(1) permits a debtor to receive credit counseling on the date of the petition. Credit counseling received on that date, though after the time of the filing of the petition, satisfies the requirements of section 109(h)(1). The court therefore denies the motion to dismiss.
November 26, 2013
13 B 18697
The Debtor brought a motion for contempt sanctions against Ahad Real Estate, LLC, Beach Business Bank, Macon Group, LLC and the receiver John Flanders Kennedy for alleged violations of the automatic stay of 3680 Riverside Drive, Macon, GA 31210. The court finds that the Debtor, as the movant and the party on whom the primary burden falls, failed to carry that burden as to establishing that an interest in 3680 Riverside Drive, Macon, GA 31210 became property of the Debtor’s bankruptcy estate, so as to afford that interest the protections of the automatic stay and allow the Debtor to seek damages arising from an alleged violation of those protections. The Debtor failed to show that the foreclosure and transfer of title of 3680 Riverside Drive, Macon, GA 31210 that occurred on February 5, 2013 did not divest the Debtor of its interests, if any. The court also finds that the Debtor’s allegations against the Receiver for coercion of funds are likewise unsubstantiated. The court therefore denies the motion for contempt sanctions against all parties.
November 15, 2013
11 B 12584 and 13 B 13374
11 A 01455 and 13 A 00687
Creditor commenced adversary proceedings against debtors husband and wife in their respective bankruptcy cases seeking a determination that a debt allegedly owed by each of the debtors to the creditor is nondischargeable under 11 U.S.C. § 523(a)(2)(A). The creditor alleged that the debtors obtained a loan from him through false pretenses, false representation and/or actual fraud. Held: Each of the debtors is obligated on the debt despite arguments to the contrary. Nonetheless, creditor failed to prove that either of the debtors obtained the loan by false pretenses, a false representation, or actual fraud, or that a third party’s fraudulent actions with respect to the debt should be imputed to either debtor under agency or other principles. As a result, the debt is dischargeable by each of the debtors.
August 8, 2013
12 B 26779
Secured judgment creditor brought motion for stay pending appeal of prior court order avoiding its judicial lien on debtor’s exempt retirement accounts and denying creditor’s motion for relief from stay. The Bankruptcy Court held that pursuant to the four factors balanced in analyzing a motion for stay pending appeal under Rule 8005 of the Federal Rules of Bankruptcy Procedure: (i) creditor failed to establish a likelihood of success on the merits by not raising a new issue or case law supporting its position not already addressed in the court’s previous opinion; (ii) creditor showed irreparable injury absent a stay due to lack of clarity as to the value of debtor’s assets and possibility that creditor might not be able to recover the full value of its judgment; (iii) substantial harm to other parties in the litigation existed where debtor’s pending motion to convert from chapter 7 to chapter 11 would not be possible without access to the retirement accounts in question; and (iv) harm to the public interest existed where prolonged litigation goes against the bankruptcy public policy of distribution to creditors within a reasonable time. Pursuant to its discretion to fashion an equitable remedy under Rule 8005 for the benefit of all parties in interest, the court granted the motion with instruction to debtor that the stay would be lifted upon its specific request to the court to use the exempt funds, as, until the court’s previous order became final, the funds were still property of the bankruptcy estate.
July 26, 2013
12 B 48031
Mortgagee bank brought a motion to dismiss for bad faith and a motion for relief from stay on three investment properties of the Debtor. Bank contended the infeasibility of the Debtor’s proposed plan, along with the Debtor’s conduct, including filing three bankruptcies within a year, established sufficient grounds to warrant cause for dismissal. In regards to the relief for stay, the bank alleged that the Debtor’s failure to pay delinquent taxes and the pending expiration of tax redemption period demonstrated that the bank inadequately protected. The bank also reasoned that with respect to two of the properties, grounds exists to grant relief from the stay because there was no equity in the properties and the Debtor did not have a reasonable possibility of confirming a reorganization plan. The Bankruptcy Court held that: (i) the Debtor’s conduct, while troubling, did not warrant cause for dismissal under section 1112(b); and (ii) the failure of the Debtor to confirm a plan that proposes to pay all delinquent taxes in full prior to expiration of the tax redemption period will result in the bank being inadequate protected and thus failure to do so will cause sufficient grounds to arise to grant relief from stay on the three investment properties.
June 26, 2013
12 B 26246
Condo association brought motion for relief from stay eight days after debtor’s chapter 13 plan was confirmed. Condo association alleged that an unexecuted prepetition order for possession and a default in postpetition, but preconfirmation, direct payments to creditor constituted lack of adequate protection. The court denied the motion and condo association filed a motion to reconsider.
The Bankruptcy Court held that: (i) the res judicata effect of the order confirming a plan precludes a creditor from seeking relief from stay immediately following confirmation of a plan when the basis of the relief is based on grounds that could have been raised preconfirmation; and (ii) the existence of a creditor’s unexecuted, prepetition order for possession does not extinguish a debtor’s actual possessory interest and does not constitute grounds for relief from stay.
11 B 27030, 12 A 01057
State court judgment creditor brought a complaint seeking declaratory judgment that three bank accounts that were the subject of or created by state court orders were not property of the Debtor’s estate. State court judgment creditor filed motioned for summary judgment. The Bankruptcy Court held that: (i) the parties consented to judgment on one account; (ii) summary judgment in favor of state court judgment creditor was appropriate as to a second account because funds were deposited to restore previously depleted trust funds, and as such were not property of the estate; and (iii) summary judgment in favor of bankruptcy estates was appropriate as to the third account because, even though the state court orders requiring the creation of the account described the account as an “escrow” account, the nature of such orders did not clearly indicate the precise legal obligation for which the account was established, the condition upon which the funds would be released, or the beneficiary of the account.
June 6, 2013
09 B 39937, 11 A 02236
The court considers whether the causes of action raised by the Plaintiff in this instance, matters of avoidance under sections 544 and 548 of title 11 of the United States Code, state fraudulent conveyance law and federal preference law, are properly brought by the Plaintiff in its second amended complaints. Given that the Plaintiff has not sufficiently addressed the badges of fraud in its second amended complaints and the Ponzi scheme presumption does not apply, the court grants the Plaintiff leave to further amend in order to meet the standards of Rule 9(b). The Defendants’ other grounds for dismissal are rejected for the reasons stated within.
February 12, 2013
09 B 30477
In considering the trustee’s objection with respect to claims pursuant to sections 502 of title 11, United States Code and Rule 3007 of the Federal Rules of Bankruptcy Procedure, the court addresses the sole issue – one on which there is no direct binding case law in the Seventh Circuit – as to whether the debtor, as the 100% shareholder, sole director, CEO and President of the corporation, is personally liable with respect to wage claims against the corporation under the Illinois Wage Payment and Collection Act. The Court finds that the trustee’s objection to the wage claims is well taken as the debtor is not be held personally liable for such claims solely because the debtor discontinued infusing personal funds into the corporation to keep it alive as a going concern. In so doing, the court notes that piercing the corporate veil is not favored, that deepening insolvency does not stand as an independent ground for relief, and that absent fraud, of which there is no indication, the claimant’s claims against the debtor individually are not well founded.