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Judge Jacqueline P. Cox

Pre-bankruptcy the Debtor defaulted on its obligation to pay real estate taxes on its commercial property.  The  real estate was sold via a scavenger tax sale to Cook County d/b/a the Cook County Land Bank Authority.

The Debtor is an Illinois land trust, an arrangement under which the legal and equitable title to real estate is held by a trustee and the interest of the beneficiary is personal property.  The beneficiary has power to direct the trustee in dealing with the property and the right to the property’s profits.

Bankruptcy Code section 109 covers who may be a debtor. Section 109(d)states only a “person” that may be a debtor under chapter 7 may be a debtor under chapter 11.  A “person” includes corporations as provided for in Bankruptcy Code section 101(41).  Bankruptcy Code section 101(9) informs that the term corporation includes certain associations, partnerships, joint-stock companies and business trusts.

The Debtor has not asserted that it conducted any business activities pre-bankruptcy; it stated that if it regains the property (through its adversary proceeding 22 AP 00037) it will lease it.

Case law generally holds that land trusts do not conduct business activity and for that reason are not eligible for chapter 11 bankruptcy relief as business trusts.

The bankruptcy case was dismissed for ineligibility and because its filing was a litigation tactic, lacking good faith. The related adversary proceeding was also dismissed.

Judge Janet S. Baer

17 B 11461
Harvey Edelstein and Kathleen Mastro-Edelstein (the “Debtors”) filed a motion seeking a determination, pursuant to Federal Rule of Bankruptcy Procedure 3002.1(h), that: (1) they cured their pre-petition mortgage arrears owed to Bank of America, N.A. (the “Bank”), and (2) the amount of their post-petition mortgage arrears was $5,494.96. The parties agreed on the amount of post-petition arrears owed; thus, the sole issue was whether the Debtors had cured their pre-petition arrearage. The Debtors argued that because their chapter 13 plan was confirmed after adequate notice to the Bank and they paid the amount of pre-petition arrears listed in that plan, the Bank was not entitled to recover any additional money for pre-petition arrears. The Bank, in turn, argued that the amount of pre-petition arrears owed was governed by the allowed proof of claim that it had filed, to which the Debtors had not objected. The Court held that its order confirming the Debtors’ plan was an enforceable, final judgment that bound the Bank to the plan’s terms, pursuant to the United States Supreme Court’s decision in United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010), as well as other applicable authority. As such, the Court ruled that the Debtors had cured their pre-petition mortgage arrears.

15 B 35358, 17 A 00390
The Official Committee of Unsecured Creditors (the “Committee”) of LB Steel, LLC (the “Debtor”) filed an adversary complaint against Steelcast Limited (“Steelcast”) under 11 U.S.C. §§ 547(b), 550(a), and 502(d), seeking avoidance and recovery of $252,393 in payments made by the Debtor to Steelcast in the ninety days leading up to the bankruptcy filing (the “preference period”), as well as disallowance of any claims that Steelcast may file against the Debtor unless or until those payments are returned to the Debtor’s estate. A three-day trial was held in December 2020, at which the only issue in dispute was the Debtor’s solvency during the preference period. Based on the documentary and testimonial evidence presented at the trial, the Court concluded that the Debtor was insolvent at the time the relevant payments were made. As such, the Court held that the Committee could avoid and recover the payments made by the Debtor to Steelcast during the preference period. The Court also found that the Committee’s disallowance claim was moot, because Steelcast did not file any claims—either pre- or post-petition—in the Debtor’s bankruptcy case, and the claims bar date for filing non-governmental claims had long passed.

Judge Donald R. Cassling

Judge LaShonda A. Hunt

Debtors voluntarily converted their case to chapter 7 prior to the Court confirming a chapter 13 plan or ruling on the fee application of chapter 13 counsel. The chapter 13 trustee and counsel disagreed over what should happen to the remaining funds in the now-terminated chapter 13 estate, with the Trustee arguing they belonged to Debtors, and counsel arguing they should first be used to satisfy the allowed chapter 13 fee award.  Applying the Supreme Court's decision in Harris v. Viegelahn, 575 U.S. 510, 135 S.Ct. 1829, 191 L. Ed. 2d 783 (2015), the Court agreed with the Trustee and ordered the funds be returned to Debtors.

Judge Deborah L. Thorne

22-00504, 22-00096

In re Eugene Nakhshin
September 28, 2022


Judge David D. Cleary

In re: Linda Stamps
September 30, 2022

19 B 21730
In accordance with section 3.1 of Debtor’s confirmed plan, the chapter 13 Trustee sought recovery of funds distributed to the City of Chicago after relief from stay as to the City’s collateral was granted to another creditor.  The City brought a motion to enforce the plan and for declaratory relief, seeking a finding that the Trustee wrongly interpreted the following language in section 3.1: “If relief from the automatic stay is ordered as to any item of collateral listed in this paragraph, then, unless otherwise ordered by the court, all payments under this paragraph as to that collateral will cease, and all secured claims based on that collateral will no longer be treated by the plan.”  HELD: The court has both inherent authority and a statutory basis to interpret and enforce a confirmed plan.  This language in section 3.1 is unambiguous.  The plain meaning of the language is that when relief from stay is granted, all secured claims based on that collateral – even those not listed in section 3.1 – are no longer treated by the plan.  This provision does not render the national form plan unconfirmable, and the history of the form plan’s drafting does not dictate a different result.  If parties prefer a different result, they may include a nonstandard provision in section 8.1, or request that the court “order otherwise” at the time stay relief is granted.  In this case, the Trustee was correct to stop making payments and to demand that the City return funds paid after the court granted relief from the stay.

21 B 11947, 22 A 8
Plaintiffs invested in a company for which Defendant was a managing member.  They have not received any return on their investment and brought a four count complaint seeking to except their claim from Defendant’s discharge.  HELD: Plaintiffs did not plead sufficient allegations to establish a plausible claim for relief under § 523(a)(2), although they will be allowed to amend the complaint to do so.  Among other issues, a document on which Plaintiffs allegedly relied was not provided to them by Defendant, and the complaint did not allege that the employee who did provide it was Defendant’s agent.  The complaint does state a claim under § 523(a)(4), but only with respect to actions taken after Plaintiffs had already invested in the company, and not for securities fraud.  Finally, the complaint does not state a claim for relief under § 523(a)(6).  Plaintiffs did not respond to Defendant’s argument that the § 523(a)(6) claim should be dismissed.

Judge Carol A. Doyle

Taylor St. John
September 30, 2022

22 B 02548