05 B 27545, 06 A 00412

Defendant corporation and its four shareholders moved to vacate a temporary restraining order and the appointment of a receiver. Movants argued that the court committed legal error in justifying the receivership by applying facts pertaining to the alleged misdeeds of the other three defendants and that the court lacked subject matter jurisdiction to appoint a receiver because an appointment is a “noncore proceeding” that is merely “related to” the bankruptcy case in chief because all aspects of such appointment are governed by Illinois law. The court held that the appointment of an Illinois equity receiver was a core matter and the appointment of a limited receivership with oversight, auditing, and clearance authority was warranted to preserve value for whomever is ultimately entitled to it. The court additionally dissolved the TRO and concluded that grounds did not exist for preliminary injunctive relief.

02 B 08699, 04 A 01322

Creditor’s Trust created under a confirmed chapter 11 plan moved for partial summary judgment on its adversary proceeding seeking avoidance under 11 U.S.C. § 547(b) of three pre-petition transfers the debtor made to the defendant. The defendant argued that the transfers fell within the “ordinary course of business” and “new value” exceptions of 11 U.S.C. § 547(c) and were not subject to avoidance. Finding that the “ordinary course of business” exception applied even though the payments were technically late according to a new contract negotiated during the preference period, the court denied the motion for summary judgment and entered judgment for the defendant on its motion for summary judgment.

04 B 45177

Creditor requested an award of costs and attorneys’ fees it incurred when the debtor-in -possession filed a notice of appeal without first seeking a modification of the automatic stay imposed by 11 U.S.C. § 362(a). The court held that a trustee, or a debtor-in-possession, has the authority to unilaterally waive the protections of the automatic stay to proceed with acts of estate administration that would otherwise violate 11 U.S.C. § 362(a) if performed by anyone else. Creditor’s request was denied.

05 B 13874

In re Otha Isaac Special Note: two related, successive opinions regarding Chapter 13 plan confirmation The holder of mortgages on three separate parcels of property owned by the debtor objected to confirmation of her chapter 13 plan because it incorrectly listed the amount of the arrears, failed to provide for the payment of property taxes and insurance premiums, failed to correctly list the monthly mortgage payments coming due during the term of the plan, and failed to make provisions for a balloon payment. Aside from the debtor’s willingness to correct discrepancies in the plan, the debtor argued that her plan was feasible because the balloon payment would be satisfied when due by either refinancing the mortgage or selling the property. The plan would also provide that the automatic stay would automatically be modified if the balloon payment was not made according to these terms. The court found the debtor’s plan to be unfeasible under 11 U.S.C. § 1325(a)(6) because its success hinged upon the occurrence of a speculative and contingent event in the distant future.

03 B 13825, 04 A 01861

In re Dianne Logan Creditor brought an adversary proceeding against this chapter 7 debtor requesting that the debt the debtor incurred borrowing money from it to purchase a car be excepted from her discharge under 11 U.S.C. §§ 523(a)(2), (a)(4) & (a)(6). The seller of the car never registered the car’s title showing that it was transferred from the prior owner to himself and then to the debtor. Neither was the seller able to produce the title during the trial. Debtor testified that an unidentified person or company towed the car to an unidentified location after she abandoned it on the side of a road near her home because of mechanical problems. The court’s ruling in favor of the Creditor was based, in part, on the gaping holes, inconsistencies, and implausible nature of the debtor’s evidence and theory of what happened to the car.

04 B 06663, 04 A 02415

Chapter 13 debtor sought to invalidate a mortgage on her residential real estate because she did not know or understand that she was entering into a mortgage transaction due to a medical condition. Court found against the debtor due to a lack of medical evidence relating to the debtor’s medical condition at the time the mortgage was created.

04 B 02682, 04 A 02054

The debtor’s former spouse initiated an adversary proceeding against the debtor to determine whether the debtor’s obligation under a marital settlement agreement to hold him harmless on certain joint liabilities was excepted from discharge under 11 U.S.C. §§ 523(a)(5) and (a)(15). On a motion for summary judgment, the court found that the debt owed by the debtor to her former spouse was nondischargeable under § 523(a)(5).

04 B 39514

Prior to the debtor’s bankruptcy filing, a “Consent Judgment of Foreclosure” was entered in a suit filed in state court to dispossess the debtor of his residence under the Illinois Mortgage Foreclosure Law. The property was purchased under an installment land contract. The debtor’s proposed chapter 13 plan attempted to cure his default under the installment land contract. The debtor filed a motion requesting the court to vacate its prior order denying confirmation of his chapter 13 plan. The debtor also moved to have his chapter 13 plan confirmed over the objection of the official title holders and the sellers under an installment land contract. The court denied the debtor’s motion and found that the debtor held merely a possessory interest in the property at the time of filing and did not possess a right to cure the default in a chapter 13 plan under 11 U.S.C. §§ 108(b) and 1322(c).

03 B 46296

After a corporate debtor’s chapter 7 case was dismissed on creditor’s motion, creditor moved under Bankruptcy Rule 9011 to be reimbursed from the debtor’s counsel for legal work its attorney performed in response to the debtor’s improperly filed voluntary petition. The court concluded that the debtor and its attorney violated Rule 9011(b)(1) of the Federal Rules of Bankruptcy Procedure by filing its chapter 7 case with the intent to delay, frustrate, and cause expense to the creditor. The court imposed a sanction under Bankruptcy Rule 9011(c) against the debtor’s counsel for the creditor’s attorneys fees.

04 B 13843

The United States Trustee filed a motion to dismiss or convert a chapter 11 case arguing that the case was not filed in good faith, that the debtor had no real need for bankruptcy reorganization, that the debtor’s plan was both unconfirmable and unfeasible, and that the true creditor body (as opposed to shareholders) would not be well served by continued prosecution of a trade-secret-misappropriation action in state court. The court concluded that “cause” existed under 11 U.S.C. §§ 1112(b)(1) and (b)(2) to dismiss the case due to the highly speculative nature of the state court action which was the debtor’s primary asset. The court alternatively found that “cause” existed that the chapter 11 case was filed in bad faith.

04 B 19670

Through counsel, the chapter 7 debtors moved to redeem a vehicle under § 722. The court granted the motion but requested that counsel provide the court with additional information on the fee arrangement between the debtors and the debtors’ counsel. Supplemental documents revealed that (1) although the bankruptcy case was not filed until May 20, 2004, counsel began billing for the motion on February 8, 2004; and (2) a tripartite arrangement existed between the debtors, debtors’ counsel and a third party where the third party made a post-petition loan to the debtors to pay counsel for the pre-petition debt created by counsel’s pre-petition retainer agreement with the debtors and to redeem the vehicle from the secured creditor. The court found that the additional revenue from the redemption motion was not voluntarily disclosed to the court. The court concluded that counsel was not entitled to a fee for bringing the motion to redeem.

04 A 02333, 04 B 09265

United States Trustee made a variety of legal challenges to a bankruptcy petition preparer’s conduct under various subsections of 11 U.S.C. § 110 in two separate chapter 7 cases. After conducting an evidentiary hearing, the court found that the bankruptcy petition preparer violated 11 U.S.C. § 110(b)(1), § 110(c)(1)-(2) and § 110(g)(1). The court imposed the maximum fine for each violation. The court also granted the United States Trustee’s request under 11 U.S.C. § 110(j) for an injunction permanently barring the defendant from operating as a bankruptcy petition preparer.

04 B 00114

Prior to the debtor filing a chapter 13 bankruptcy, the debtor’s personal residence was purchased by a third party at a foreclose sale initiated by the holder of the second mortgage against the property. The debtor and the successful bidder entered into an oral agreement whereby the debtor could retain the fee simple interest in her personal residence in exchange for the purchase price paid plus interest. Both parties agreed to extend the state court order for possession, which normally accompanies a sale-confirmation order, several times between August and December of 2003. The successful bidder alleged that the debtor filed her chapter 13 case for the sole purpose of delaying or thwarting its pursuit of an order for possession that was likely to be issued by the state court in the foreclosure proceeding. The successful bidder requested relief from the automatic stay pursuant to 11 U.S.C. § 362(d)(1) or an order of dismissal with a 180-day bar against refiling pursuant to 11 U.S.C. §§ 1307(c) and 349(a) so that it could seek to have the debtor dispossessed from the property. The court concluded that under the totality of the circumstances, dismissal under 11 U.S.C. § 1307(c) and 11 U.S.C. § 349(a) was not appropriate, as the debtor had not abused the bankruptcy process. However, the court did hold that “cause” existed to grant relief from the automatic stay because the debtor no longer held an interest in the property.

03 B 45189

The debtor filed for chapter 11 bankruptcy after MB Financial Bank unexpectedly set off funds in one of its bank accounts to satisfy an overdue loan obligation. While a settlement to return some of those funds was pending, the debtor’s president loaned the debtor “emergency advances” to ensure a construction project could proceed smoothly and to pay employee insurance premiums. The advances were made without notice to other parties or prior court approval. The debtor moved to repay the advances as an administrative expense. Two creditors objected. At issue was whether the advances qualified as valid post-petition extensions of credit to the debtor under 11 U.S.C. § 364. The Court held they were not since the advances were not incurred during the ordinary course of business as they were “emergency” advances. Also, the advances did not meet the vertical dimensions test that examines the reasonable expectations of creditors in light of their past relationship with the debtor and its incurrence of debt, including the amount, terms, frequency, sources, and timing of pre-petition extensions of credit from various sources. The Court also held that the debtor’s president did not hold a general unsecured claim since the advance was made post-petition.

03 B 46296

Plaintiff in a state court alter ego action against two principals (and a Judgment Creditor of the debtor) of a corporate chapter 7 debtor filed a motion to dismiss the debtor’s case or in the alternative, lift the automatic stay to permit the state court action to proceed. Noting that corporate chapter 7 cases have very limited purposes and that they do not demand the type of reorganizational analysis required in a chapter 11 or chapter 13 case, the court held that the debtor’s case was filed in “bad faith” and dismissed it for “cause.” The court concluded that the case served only to stay Plaintiff’s collection efforts, was an unfair litigation tactic designed to delay the Plaintiff’s state court alter-ego claim and that it was an attempt to shift the dispute, which could be resolved in state courts, to a bankruptcy forum.

03 B 29854, 03 A 03732

Ex-wife of a solvent chapter 11 debtor, who was a resident of Texas, moved to dismiss his case for “cause” pursuant to 11 U.S.C. § 1112(b), alleging that the debtor did not file his case in good faith. She also requested dismissal, or transfer of the case for improper and inconvenient venue under 28 U.S.C. § 1408(1) and Bankruptcy Rule 1014(a), to the more convenient forum of the Northern District of Texas. The court found that the debtor’s case was filed with the intent to delay his ex-wife from exercising traditional state law collection rights stemming from a state court judgment while he was attempting to collaterally attack the state court judgment underlying her claim. The court held that “cause” existed under 11 U.S.C. § 1112(b) to dismiss the bankruptcy case because it was not filed in “good faith.” The court additionally held that “cause” existed under 11 U.S.C. § 349(a) for dismissal with a one year bar to refiling a bankruptcy case because the debtor’s behavior showed a tendency toward recycling his contentions and interpretations of law rejected by one court to another court (in either the state or federal system) that lacked appellate jurisdiction over the rulings of which he complained.

02 B 36426

Although finance company’s allowed secured claim was paid in full in a prior chapter 13 case, which was later converted into a chapter 7, it refused to release the lien. After receiving a discharge in the chapter 7 case, the debtor filed another chapter 13 case but did not schedule the finance company as a creditor because it was her belief that the debt had been extinguished in the prior case. Having no notice of the new case, the finance company repossessed the vehicle and claimed that a fully secured balance still existed. The debtor filed a complaint against the finance company for damages and turnover of the car and alleged a willful violation of the stay pursuant to 11 U.S.C. § 362(h). The finance company filed a motion to annul the automatic stay and objected to confirmation of the debtor’s chapter 13 plan. The court held that the finance company’s refusal to expeditiously return the car to the debtor once notified of the pending chapter 13 case was a willful violation of the automatic stay. As such, the motion to annul the automatic stay was denied. The debtor was granted costs and awarded attorney fees along with compensatory and punitive damages. The issue involving the objection to confirmation was not litigated.

03 B 02687

Unsecured creditor moved to file a tardy proof of claim and to be included in the debtor’s chapter 13 plan. The creditor alleged that notice of the proof of claim filing deadline was sent to an incorrect address. The court held that it lacked authority under the Bankruptcy Code or the Bankruptcy Rules to grant the creditor’s request to file a late claim. The court further held that the Due Process Clause did not provide an equitable exception to the otherwise strict terms of the chapter 13 claims bar date because the Bankruptcy Code, when construed as a whole, provides other forms of relief to creditors who do not have actual knowledge of a bankruptcy case in time to exercise procedural rights essential for protecting their claims.

03 B 21660

Secured creditor filed a motion requesting relief from the automatic stay in order to pursue its state law rights and remedies with respect to the debtor’s car that was stolen and totaled pre-petition. It additionally requested an order pursuant to Bankruptcy Rule 9013 directing the insurance company to pay it the full settlement amount in order to fulfill the pre-petition state-court judgment denying declaratory relief in favor of the debtor. The debtor argued that the attorneys’ fees incurred due to her attempt to collect the insurance proceeds should be paid out of the proceeds because her attorney is entitled to a superior equitable lien against the proceeds as a result of their contingency-fee agreement. The court held that full faith and credit must be afforded to the state court judgment in favor of the secured creditor on the issue. The court lacked subject-matter jurisdiction to consider the argument under the Rooker-Feldman doctrine. The court also held that the debtor could not claim a wild-card exemption in the insurance proceeds; nor could the debtor attempt to avoid the lien under 11 U.S.C. § 522(f)(1). The motion to modify the stay was granted.

03 B 07231

A chapter 7 debtor moved to compel mortgagee to enter into a reaffirmation agreement that alleged, among other things, that his mortgage payments were current. Mortgagee filed a cross motion for modification of the automatic stay, which alleged a default on the mortgage, that the debtor had no equity in the real property and that the property was not necessary for an effective reorganization. The cross motions raised the legal issues of whether a chapter 7 debtor may retain his home against the objection of the mortgagee by simply remaining current on payments, or conversely, whether a mortgagee should be entitled to foreclose in pursuit of its in rem claim against real property only because the debtor-mortgagor obtained a chapter 7 discharge of personal liability. The court held that: (1) the debtor was required under 11 U.S.C. § 521 to elect between reaffirmation, redemption and surrender and then perform the intention within 45 days thereafter; (2) that the court could not force the Mortgagee to enter into a reaffirmation agreement; and (3) that relief from the automatic stay was appropriate and would not be much of an additional burden on the debtor.