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Judge Jacqueline P. Cox

In re Falconridge, LLC
November 8, 2007

07 B 19200

Prior to the debtor’s bankruptcy filing, the mortgagee obtained a judgment of foreclosure in state court against the debtor, the owner of an apartment building, and its sole member. The state court also appointed a receiver to maintain the property. The debtor thereafter filed a single-asset real estate bankruptcy case before the property could be sold at a sheriff’s sale. The mortgagee brought an emergency motion under 11 U.S.C. § 543(d) seeking to excuse the receiver from having to turnover the apartment building to the debtor in accordance with 11 U.S.C. § 543(b). The court found that the Debtor’s prior mismanagement of the property and questionable business practices negated the statutory obligation of a custodian to turnover assets to a debtor in bankruptcy. The court concluded that the interests of creditors would be better served if the receiver was excused from complying with 11 U.S.C. § 543(b).

04 B 48014, 05 A 01624

Plaintiff Trustee and the Defendant filed cross-motions for summary judgment on the Trustee's adversary complaint. The adversary complaint sought avoidance under 11 U.S.C. § 544(b) and § 5 of the Illinois Uniform Fraudulent Transfer Act of the Debtor's pre-peition transfer of real estate to his wife, the Defendant. Prior to the transfer, the Debtor and his wife held the real estate as tenants by the entirety. The Trustee's adversary complaint also sought authority under 11 U.S.C. § 363(h) to sell the real estate. The Defendant argued that avoidance of the transfer will restore the property to the tenancy by the entirety estate that existed prior to the transfer being made and operate to keep the real estate beyond the reach of the Trustee's avoidance power. The Trustee argued that the tenancy by the entirety estate will not be revived once the transfer is avoided because whatever “entirety” existed prior to the transfer was voluntarily extinguished by the Debtor once the transfer was made. Moreover, even if the tenancy by the entirety comes back into existence after avoidance, 11 U.S.C. § 522(g) prohibits an exemption from being claimed in the real estate. The court granted summary judgment in favor of the Trustee and against the Defendant on all counts of adversary complaint.

Judge A. Benjamin Goldgar

05 B 16679

Chief Judge Pamela S. Hollis

In Re: Stephen A. Weiss
October 23, 2007

07 B 06781

In this individual chapter 11, creditors moved for relief from stay based on purported underlying security interests in debtor's interests in various partnerships and LLCs. Creditors' interest arose out of an assignment of interests executed by debtor as security for two loans. Court found that under underlying operating agreements and Illinois law, debtor did not have authority to assign his interests without prior consent of other parties to the various agreements. Therefore, assignment was invalid. Accordingly, creditors did not have security interest and motion was denied.

Judge Jack B. Schmetterer