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Judge Janet S. Baer

In re: Brenda K. Rogers
March 14, 2013

10 B 57906

Counsel for the Debtor filed an amended fee application in this 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 $23,379, which was $19,879 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 the case and counsel’s itemized time records, the Court found certain services to be extraordinary and granted fees of $14,140 in addition to the $3,500 flat fee, as well as $323 for reimbursement of expenses. The Court denied fees as to the remaining amounts requested in the amended fee application.

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.

Judge Pamela S. Hollis

08 B 31707, 11 A 02415

Debtors/Plaintiffs filed for relief under Chapter 13 and confirmed their plan. They fell behind on plan payments, attempted to catch up, then voluntarily dismissed their case. The Chapter 13 Trustee was left holding a sum of money at dismissal. Debtors filed an adversary proceeding seeking turnover of the funds. The Chapter 13 Trustee argued that she must distribute the funds to creditors. Debtors filed a motion for judgment on the pleadings, since no facts were in dispute. HELD: The funds must be returned to the Debtors. 11 U.S.C. 1326(a)(2), which instructs trustees to distribute certain payments to creditors in accordance with the plan, applies only to preconfirmation payments. Postconfirmation, trustees must make payments under the plan pursuant to 1326(c). At dismissal, however, 349(b)(3) revests property of the estate in the entity in which such property was vested immediately before the commencement of the case, which in the case of funds paid into the plan, held by the Chapter 13 Trustee and not yet distributed, is the Debtors.

09 B 26595, 09 A 01045

Debtor/Defendant had a successful remodeling and construction business. He and Plaintiff, a salaried and less-successful tool and die designer, became close friends. When Plaintiff sold his home and found himself with some extra cash, they agreed to invest in new construction. Defendant chose the location, acted as the general contractor and arranged for construction financing. Plaintiff put up the money and his name alone was on the title and loan. The house was completed just in time for the real estate market to crash. The bank foreclosed and got a deficiency judgment against Plaintiff, who asked Defendant where all the money had gone. Defendant could only account for about three-quarters of the funds. Plaintiff sought a finding that Defendant's debt was nondischargeable under 523(a)(2) and (a)(4). Following a multi-day trial, the parties briefed the issues and Plaintiff dropped the 523(a)(2) count. HELD: The parties had a fiduciary relationship because of the difference in knowledge and power which gave Defendant a position of ascendancy over Plaintiff. The debt was caused by Defendant's defalcation while acting in a fiduciary capacity, and is nondischargeable pursuant to 523(a)(4)

Judge Jack B. Schmetterer

Judge Timothy A. Barnes

In re Anthony P. Montalbano
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.

Judge Carol A. Doyle