12 B 49658
Upon the Motion for Allowance of Secured Claim and Turnover of Collateral Proceeds, brought by United Central Bank (“UCB”), and the Cross Motion for Partial Turnover of Proceeds of Sales, brought by the Illinois Department of Revenue (“IDOR”), to determine the higher priority claim in the proceeds from a section 363 sale, held: UCB is entitled to a claim secured in the entire amount of the proceeds of the sale. IDOR has secured, priority unsecured and general unsecured claims, all of which are lower in priority to UCB’s secured claim. IDOR’s right to assert transferee liability is an “interest” for purposes of a section 363(f) sale, potentially entitling IDOR to adequate protection under section 363(e). As IDOR’s interest is, however, subordinate to that of UCB’s secured claim and IDOR’s claim is therefore “out of the money,” there is no harm from which IDOR is entitled to protection. The court therefore grants UCB’s request for allowance of secured claims and turnover of collateral proceeds and denies the IDOR’s request for partial turnover.
Judge Timothy A. Barnes - Opinions / Outlines
Judge Timothy A. Barnes
May 21, 2014
12 B 49658
May 8, 2014
13 B 31265
Upon the Construction and General Laborers’ District Council of Chicago and Vicinity’s and the Laborers’ Pension and Welfare Funds’ objection to the Debtor’s application pursuant to 11 U.S.C. § 1113 to reject all collective bargaining agreements to which it was a party, held: The Debtor, having sold substantially all of its assets prior to commencing bankruptcy, has demonstrated sufficiently that rejection of all collective bargaining agreements is necessary for a valid “reorganization,” as that term must be interpreted in section 1113 in a liquidating chapter 11 case. The court therefore grants the Debtor’s motion to reject its collective bargaining agreements.
April 10, 2014
10 B 44866, 13 A 01048
Petitioners, as trustees for a family trust created by the debtor, move for abstention or remand of an Illinois state court proceeding to dissolve the family trust that had been previously removed to this court by the chapter 7 trustee. The chapter 7 trustee, in turn, seeks a determination from this court that the state court proceeding is void, as the proceeding was commenced after the commencement of the bankruptcy case and without relief from the automatic stay. Held: While the dissolution of a trust against which an estate has a claim may not violate the automatic stay, per se, under the facts of this case, a stay violation did occur. While the state court, not this court, is the proper tribunal with authority to order the dissolution of the family trust, the state court proceeding is invalid as having been commenced in violation of the automatic stay and the request for abstention or remand is therefore moot.
10 B 44866, 13 A 00631
After the trustee filed a motion for default judgment against one of multiple adversary defendants for failure to file a timely answer in response to an amended complaint, the defendant filed two answers; one to the original complaint and another one to the amended complaint. The trustee moved for the court to strike both answers as untimely and filed without leave or excuse. The bankruptcy court held that: (i) the defendant failed to file an answer within the prescribed time period; (ii) the defendant failed to challenge service in its first responsive pleading and thus has waived the defense of insufficient service; (iii) the defendant failed to show that its untimely answer is excusable pursuant to Federal Rule of Bankruptcy Procedure 9006(b)(1); (iv) the answers will therefore be stricken; (v) service of the motion for default judgment satisfies the due process requirement; and (vi) after having held three hearings on the motion for default judgment and having stricken the answers, it is proper to enter a default judgment against the defendant. Accordingly, the court grants both of the trustee’s motions.
March 26, 2014
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.
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.