15B03414
Upon an objection to confirmation of the debtor’s chapter 13 plan, wherein a creditor alleged that the debtor could not comply with the requirements of “surrender” in section 1325(a)(5)(C) of the United States Bankruptcy Code as the debtor proposed to surrender a vehicle that had been previously stolen and that, therefore, could not be delivered to the creditor, held: “Surrender” in section 1325(a)(5)(C) does not always require the debtor to physically deliver the vehicle.  Because the Debtor proposes surrender in good faith, physical delivery is not required.  As a result, the creditor’s objection is overruled.

10 B 51428
Upon the creditor’s motion to allow claim under Federal Rule of Bankruptcy Procedure 9006, wherein the creditor sought to have the court allow its claim as a timely general unsecured claim when the claim was allegedly delivered directly to the office of the clerk of court rather than electronically filed and, despite being tendered to the clerk’s office prior to the claims deadline, not entered on the claims register until almost 4 years after the claims deadline, and where creditor sought to have the court enter an order amending the chapter 7 trustee’s previously approved final report, held:  Rule 9006 does not apply to the deadline to file claims in a chapter 7 case.  The claim was filed for purposes of Rule 3002 when the claim was entered on the claims register, almost 4 years after the claims deadline.  As a result, the claim is a tardily filed unsecured claim which would receive zero distribution even if the final report were to be amended and, thus, the creditor’s motion is denied.

13 B 30975,  13 A 01294
Upon the Defendant’s amended motion to dismiss the Plaintiff’s adversary complaint objecting to discharge of debt owed to A&H Caring Connections, Inc. (“A&H”) pursuant to 11 U.S.C. § 523(a)(2)(A) and (a)(6) and 11 U.S.C. § 727(a), the underlying interest having been assigned to the Plaintiff by A&H and the Defendant seeking dismissal of the complaint for failure to state a claim upon which relief can be granted on the grounds that the underlying assignment is void as a matter of public policy and in violation of Illinois law, held: For purposes of testing the sufficiency of the complaint under Federal Rule of Civil Procedure 12(b)(6), the Defendant has failed to satisfy his burden of showing the complaint is insufficient. The amended motion to dismiss is DENIED.

13 B 37655, 14 A 00100
Upon the creditor’s adversary complaint objecting to the Debtor’s discharge under 11 U.S.C. § 727(a)(7), wherein the creditor alleged that the Debtor violated 11 U.S.C. §§ 727(a)(2), (3) and (4)  in the bankruptcy case of the company of which the Debtor was sole member and president by permitting checks made out to the company to be deposited into the Debtor’s father’s account, by failing to secure the company’s books and records and by making false oaths for failing to list the same checks and other payments to the Debtor’s father on the company’s bankruptcy documents, held:  The creditor failed to prove the Debtor’s requisite intent, elements of 11 U.S.C. §§ 727(a)(2) and (4), by a preponderance of the evidence.  The creditor also failed to prove that the disappearance of the Debtor’s business records due to a break-in caused the trustee in the company’s bankruptcy case to be unable to ascertain the company’s financial condition, or that the destruction was unjustified under the circumstances of the case, elements of 11 U.S.C. § 727(a)(3).  As a result, judgment is entered in favor of the Debtor.

11 B 41555, 13 A 01243
Upon certain defendants’ motions to dismiss the Trustee’s fraudulent conveyance adversary complaint on statute of limitations grounds, the Trustee argues that it may rely on such longer statute of limitations as may be applicable to the IRS as an actual prepetition creditor of the bankruptcy estate.  In response, a limited number of the moving defendants jointly move for an order disallowing the IRS’s claim.
 
In considering the foregoing, held:  With respect to the motion to disallow the claim, adversary defendants qua adversary defendants lack standing to object to claims.  As such, the joint motion to disallow is DENIED.
 
With respect to the motions to dismiss, for the purposes of testing the sufficiency of the complaint under Federal Rule of Civil Procedure 12(b)(6), transfers occurring more than 2 years prior to the petition date are time-barred under section 548 of the Bankruptcy Code and the motions to dismiss will be GRANTED in this respect.  As to the remaining grounds, the court accepts the allegations in the complaint as true, wherein the Trustee has alleged that the IRS is a prepetition creditor of the bankruptcy estate.  That allegation is supported by the actual claim on file by the IRS at the commencement of the adversary.  As the trustee may act within the statute of limitations applicable to any creditor of the estate, including such longer statutes as apply to the IRS, and as the transfers sought to be avoided by the Trustee appear to fall within those longer periods, the court finds for these purposes that the Trustee’s actions are not conclusively time-barred.  The motions to dismiss are therefore DENIED in this respect.  The legal and factual predicates of the defendants’ statute of limitations affirmative defense, including, but not limited to, whether the IRS had an allowable claim against the estate on the petition date, remain issues to be determined on summary judgment or at trial, not in the limited scope of a motion to dismiss, and such arguments are preserved.
 

11 B 00701, 11 A 00966
Upon the Creditor’s commenced adversary complaint against Debtor seeking a determination that a debt allegedly owed by the Debtor to the Creditor is nondischargeable under 11 U.S.C. § 523(a)(2)(A) and (a)(6), wherein the Creditor alleged that the debtor obtained title insurance policies through false pretenses, false representation and/or actual fraud, and that the underlying loan from the bank, which debt was assigned to the Creditor, was also obtained through false pretenses, false representation and/or actual fraud, held: The Debtor is obligated on both debts to the Creditor, and the Creditor proved by a preponderance of the evidence that the debts were incurred by false pretenses, false representations and actual fraud. As a result, the debts are nondischargeable.

13 B 27271
Upon the court’s issuance, sua sponte, of an order to show cause as to why the bankruptcy case of debtor Violeta Jakovljevic-Ostojic should not be dismissed for cause pursuant to 11 U.S.C. § 707(a), held: the Debtor’s actions demonstrate a lack of good faith in filing this case and have resulted in an unreasonable delay that is prejudicial to creditors. The court therefore dismisses this case pursuant to 11 U.S.C. § 707(a).

11 B 38875, 12 A 00155

Upon the Debtor’s motion to vacate the court’s summary judgment order, held:  The Debtor failed to establish sufficient grounds under Federal Rule of Civil Procedure 59 or 60 to set aside or modify this court’s previous grant of summary judgment based, in part, on a state court judgment.  Further, the Debtor failed to show that a transfer of personal property made in alleged satisfaction of the state court judgment, but made prior to the Debtor entering into the judgment, satisfied the judgment for purposes of Federal Rule of Civil Procedure 60(b)(5).  The court therefore denies the Debtor’s motion to vacate.

13 B 39194
Upon the Motion of Leticia Zaragoza for Relief from the Automatic Stay Pending Arbitration, brought by Leticia Zaragoza (the “Movant”), held:  The Movant has failed to demonstrate cause for relief from stay under 11 U.S.C. § 362(d).  The Movant’s assertion that the Chicago Board of Trade (the “CBOT”) is better suited to determine the Movant’s claim against the bankruptcy estate is not supported by the arguments of the parties.  Further, the Movant’s assertion that a claim against the Debtor arising out of a pending arbitration matter before the CBOT is outside this court’s constitutional authority under the reasoning of Stern v. Marshall is inapposite to the actual holding of Stern and is not well taken.  Nothing within Stern’s holding stands for the proposition that this court may not determine the propriety of a claim asserted against the bankruptcy estate.  Such a function lies at the heart of bankruptcy jurisdiction, and is squarely within this court’s authority.  The court therefore denies the Movant’s request, without prejudice to the Movant’s ability to reassert the request, if appropriate, should the circumstances underlying the request have changed materially.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.