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Judge Donald R. Cassling

13 B 22702

Judge LaShonda A. Hunt

14bk33271, 14ap00859
Following trial on an adversary complaint objecting to dischargeability under 11 U.S.C. § 523(a)(2)(A) and § 523 (a)(6), the court held that the creditor failed to meet its burden of establishing that the defendant/debtor acted with intent to defraud or harm creditors.

Judge Carol A. Doyle

19 B 03734

Judge Janet S. Baer

13 B 10864, 16 A 00552
Chapter 7 trustee and plaintiff Brenda P. Helms filed an adversary complaint against Metropolitan Life Insurance Company, debtor Michael K. O’Malley, his spouse Tracy Zellmer, and Zellmer’s company TAMO, LLC, seeking: a declaratory judgment that O’Malley’s interest in an excess benefit retirement plan was non-exempt property of the estate (Count I), turnover of the proceeds of the retirement plan (Count II), avoidance and recovery of certain post-petition transfers related to the retirement plan (Counts III and IV), an award of damages for willful violations of the automatic stay (Count V), and disallowance of any claims filed by Zellmer or TAMO (Count VI).  Helms subsequently filed a motion for summary judgment on Counts I–V, and O’Malley filed a cross-motion for summary judgment on all six counts of the complaint.  At the outset, O’Malley argued that the complaint was barred because the Trustee failed to file a timely objection to the exemption of the retirement plan and that the Trustee was judicially estopped from challenging the validity of the exemption.  The Court found that the Trustee had no obligation to file an objection because O’Malley failed to properly claim the exemption in the plan in the first instance.  The Court further found that the Trustee was not judicially estopped from bringing the adversary proceeding because pursuit of the action would not give the Trustee an unfair advantage or impose on O’Malley an unfair detriment and applying judicial estoppel would adversely affect O’Malley’s creditors.  As for the cross-motions for summary judgment, the Court found that there were no genuine issues of material fact in dispute, that the Trustee was entitled to judgment as a matter of law on Counts I–IV, and that O’Malley was entitled to judgment as a matter of law on Count V.  Regarding Counts I–IV, the Court found that: the retirement plan was non-exempt, and the plan and related proceeds constituted property of the estate (Count I); O’Malley’s unauthorized payment election under the plan was an avoidable post-petition transfer which restored the payment election right to the estate (Count III); the Trustee was entitled to both avoidance and recovery post-petition transfers made under the plan (Count IV); and the Trustee was entitled to turnover of those proceeds (Count II).  As to Count V, the Court found as a matter of law that a trustee cannot recover damages under § 362(k) and that the circumstances of the case did not warrant the exercise of the Court’s civil contempt power under § 105(a).  Because neither Zellmer nor TAMO filed any proofs of claim, Count VI was dismissed by the Court sua sponte.

16 A 00223, 15 B 04436
Plaintiff Christopher Salgado filed an adversary complaint against debtor-defendant David E. Lenoci, II, seeking a determination that a state court judgment debt for battery is not dischargeable under 11 U.S.C. § 523(a)(6).  Salgado alleged that Lenoci struck him in the face with a baseball bat during a fight, while Lenoci claimed that someone else struck Salgado with a bicycle kickstand.  At a bench trial, the Court admitted various documents into evidence and heard the testimony of Salgado, his brother, and Lenoci.  After considering the evidence and testimony, the Court determined that the doctrine of issue preclusion did not bar Lenoci from disputing that he struck Salgado because: (1)  Lenoci did not have a full and fair opportunity to be heard in the prior criminal and civil state court cases that arose from the same facts, and (2) the records from the prior suits lacked specific findings as to which issues had been actually litigated and determined.  Turning to the merits of Salgado’s § 523(a)(6) claim, the Court found that Salgado and his brother were more credible than Lenoci.  Thus, the Court accepted Salgado’s version of the story and found both that Lenoci injured Salgado and that Lenoci’s actions were willful and malicious.  Accordingly, the Court concluded that the state court judgment debt was not dischargeable under § 523(a)(6).

Judge Deborah L. Thorne


Judge Jack B. Schmetterer

Judge Timothy A. Barnes

On a chapter 13 debtor’s claim objection seeking a determination from the court of the nature, validity and amount of a tax purchaser’s claim in a chapter 13 case where the deadline to redeem the property taxes in question expired prepetition but no tax deed has been issued or recorded and also upon the tax purchaser’s objection to the confirmation of the debtor’s chapter 13 plan, held:
The tax purchaser has a perfected in rem claim for the statutory redemption amount that exists irrespective of whether the redemption period has passed.  That claim is allowed as a secured claim in the amount asserted by the tax purchaser.  The tax purchaser also has a contingent, unperfected in rem claim for the fair market value of the property in question that exists irrespective of whether the redemption period has passed.  The court estimates for the purpose of allowance that this unperfected in rem claim is in the amount asserted by the tax purchaser, the property’s full fair market value as of the petition date, less that amount of perfected in rem claim for the redemption amount.  Such unperfected in rem interest is, however, unsecured, by operation of 11 U.S.C. § 506(a) and because it is subject to the trustee’s avoidance power as a hypothetical lien creditor.  The resulting allowed unsecured claim must be treated in the debtor’s plan.  The debtor’s objection is, therefore, SUSTAINED IN PART AND OVERRULED IN PART.
The confirmation objection fails in its attempt to have this court change its prior published legal conclusions regarding the treatment of tax purchaser claims after the passing of the redemption period but before the issuance of a tax deed.  However, as the tax purchaser’s claim as determined and allowed by the court is not fully addressed in the debtor’s plan, the confirmation objection is SUSTAINED in that limited respect only.

Upon the motion to dismiss brought by a creditor, alleging that the debtor filed a second petition for bankruptcy in violation of a court order that dismissed the debtor’s first bankruptcy case with prejudice, held: The dismissal of the debtor’s first case under bad faith grounds precluded the debtor from filing for relief at the time it filed its second petition. The motion is, therefore, GRANTED.


Judge Jacqueline P. Cox

In re James Thigpen
April 20, 2019

17 B 10161
The Debtor James Thigpen maintained two Social Security numbers and made false statements to obtain Supplemental Security Income ("SSI") benefits he was not entitled to.  He pleaded guilty and was convicted of embezzling money belonging to the United States.  The sentencing district judge required him to pay restitution to the government in the amount of $49,327.17 in increments of 10% of his net, monthly income.
Thigpen eventually qualified for and received Old-Age, Survivors and Disability Insurance ("OASDI") benefits which he received for a period of time. The Social Security Administration, which administers each program under separate statutes, sought to retain 100% of his monthly OASDI benefit to satisfy the SSI overpayment debt.
Thigpen got a chapter 13 plan confirmed that provided payment of $6000 toward the restitution obligation during the plan's term.
The Court ruled that because the debts arose from separate government programs the recoupment doctrine and its exception from the automatic stay did not apply.  The Court ruled that setoff applied.  However, Bankruptcy Code Section 362(a)(7) provides that the automatic stay applies where setoff is available.  Courts have discretion to not permit setoff where it is unfair to do so, which is what the Court ruled in denying the government's motion for relief from the automatic stay to withhold 100% of Thigpen's monthly OASDI benefit to satisfy the SSI overpayment debt.