Case No. 13-11475-7
Creditors filed a motion to grant standing to pursue, on behalf of the bankruptcy estate, preference and fraudulent transfer claims against debtor’s insiders. Although the creditor had ongoing discussions with the trustee about various causes of action, the trustee declined to pursue the actions at issue. Generally, a creditor may bring an avoidance action under the theory of derivative standing. The court found that while the trustee’s decision not to pursue the actions was well thought out and reflected no improper motives, it was not technically justified in the manner which would preclude granting derivative standing to the creditor. Furthermore, the creditor volunteered to absorb the costs in the event the actions were unsuccessful. Thus, derivative standing was appropriate in this case because of the low cost and risk placed on the estate.
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- Chief Judge Catherine J. Furay--2013-present
- Judge William V. Altenberger--2016-present
- Judge Brett H. Ludwig--2017-present
- Judge Robert D. Martin (retired)--1990-2016
- Judge Thomas S. Utschig (retired)--1986-2012
Judge Robert D. Martin
Case No. 13-11475-7
Case No. 13-15958-7
Creditor filed an adversary proceeding seeking to determine the dischargeability of his debt. After a trial on the merits, the court dismissed the case. Debtor’s counsel filed a motion for attorney fees pursuant to 11 U.S.C. § 523(d). While the legal and factual positions taken by the creditor to litigate the dischargeability (of what the court determined to be a consumer debt) were not substantially justified, special circumstances existed to deny the motion. Attorney fees under § 523(d) are only allowed for defending § 523(a)(2) claims. In this case, the amount of resources devoted to defending the § 523(a)(2) action was likely small and the related fees de minimis and hard to determine. Accordingly, the court found awarding the entire amount requested would be unjust.
Case No. 12-16624-7
The chapter 7 trustee objected to the debtor’s amended claim of exemptions shortly after the reopening of the case. The trustee asserted that the exemption claim was filed in bad faith. At issue was the bankruptcy courts’ authority to deny bad faith exemptions. The court found that the Supreme Court clearly opined in Law v. Siegel, 134 S.Ct. 1188 (2014), that bankruptcy courts do not have authority to deny a federal exemption on a ground not specified in the code. Thus, the court could not reach the merits of the trustee’s objection because there is no codified bad faith prohibition on exemption amendments.
11 U.S.C. § 502(a)
Case No. 14-14757-13
At issue in this case was the debtors’ eligibility for chapter 13. Pursuant to 11 U.S.C. § 109(e), only an individual with unsecured debts of less than $383,175 may be a debtor under chapter 13. The debtors scheduled over $800,000 in unsecured debt due to a deeply underwater mortgage. This unsecured debt also included a judgment lien which was found to be non-dischargeable in a previous bankruptcy. Debtors wanted the court to define secured debt using the Dewsnup v. Timm, 502 U.S. 410 (1992), rationale resulting in the judgment lien as a secured debt and debtors falling below the unsecured debt ceiling in § 109(e). The court declined to extend Dewsnup to chapter 13 eligibility determinations. Furthermore, controlling 7th circuit precedent applied the § 506(a) test. Consequently, a debt is only secured for the purposes of chapter 13 eligibility to the extent of the value of the collateral.
11 U.S.C. § 109(e)
Case No. 13-15958-7
Prior to this bankruptcy filing, debtor was found liable on claims of unjust enrichment, wrongful conversion and breach of a fiduciary duty in state court. Once debtor filed bankruptcy, creditors from the state court action filed an adversary proceeding seeking to determine the dischargeability of their debt under 11 U.S.C. § 523(a)(2), (a)(4) and (a)(6). Despite the court’s recommendation, creditors relied on a theory of collateral estoppel and chose not to present any testimony. Creditors argued the court should use the state court transcripts, in absence of sufficient findings of fact by the state court, to preclude debtor from defending this action. Finding the creditors’ theory lacked legal support, the court dismissed the complaint.
Chief Judge Catherine J. Furay
Case No. 15-11204-13
The Court found a bank demonstrated it had standing to seek relief from stay. Its foreclosure judgment demonstrated it had a “colorable claim” to property. The debtor did not meet her burden of showing making a payment in the amount of the regular monthly mortgage payment to the debtor’s attorney’s trust fund adequately protected the bank’s interest. Thus, the bank was entitled to relief from stay for cause under section 362(d)(1). It was also entitled to relief under section 362(d)(2). The debtor stipulated she had no equity in the property, and she failed to meet her burden of proving it was necessary for an effective reorganization. Her proposed sale of the property would not result in proceeds available for any other creditor, nor would it generate exempt proceeds for purchase of a new home. Her personal liability for the debt had previously been discharged.
The court also granted in rem relief from stay as to the property, finding the filing of the petition was part of a scheme to hinder, delay, or defraud creditors involving multiple bankruptcy filings affecting the property.
11 U.S.C. § 362 -- Automatic stay
11 U.S.C. § 362(g)(1)
Case No. 15-11204-13
At the time this adversary proceeding was filed, a motion for relief from stay was pending in the main case. The debtor’s arguments in opposition appeared to require the conclusion that until a determination was reached in the adversary proceeding, it was impossible to determine whether the movant had standing to seek relief from stay. Thus, the Court reviewed the adversary complaint. Because the review suggested the debtor was challenging the validity of a foreclosure judgment, the Court ordered the debtor to explain why the Rooker-Feldman doctrine would not bar the claims. After considering her response and other submissions, the Court determined it lacked subject-matter jurisdiction and dismissed the complaint.
Case No. 14-13002-7
The Court sustained the chapter 7 trustee’s objection to debtors’ claim of exemptions. The debtors claimed an exemption in two non-contiguous lots under Wis. Stat. § 815.20. Each lot was improved with a two-bedroom residence. The debtors argued both lots constituted their homestead because they occupied one or another of the lots, and sometimes separated and occupied both simultaneously. The Court determined the lots taken together did not qualify as one homestead. Although a person may have multiple houses, only one is his home, and thus only one may qualify as a homestead. The debtors also could not exempt the lots under a theory that each debtor had established a separate homestead, even if Wisconsin law permitted such an exemption. The debtors had not separated with the intent to remain apart when they filed their bankruptcy petition.
Case Number: 14-11773-7
The Court sustained the chapter 7 trustee’s objection to debtors’ claim of exemptions. The debtors claimed an exemption in a dairy cooperative equity revolvement account under 11 U.S.C. § 522(d)(10)(E). The cooperative bylaws were clear that redemption of the debtors’ equity was entirely within the discretion of the board of directors. Neither illness, disability, death, nor age would trigger redemption of the debtors’ equity. Although the debtors may have accumulated their patronage equity over time, the Court also determined they did not have a right to receive payment because of their length of service. This term connotes tenure, in the sense of plans conferring benefits based on the number of years of employment.
Case No. 13-15635-7
On summary judgment, collateral estoppel applied to render part of a state court judgment award nondischargeable under section 523(a)(4). The findings leading to the award established the defendant was a fiduciary. They also established she committed defalcation by retaining, commingling, and expending funds. As to whether the amount of the state court awards on the remaining claims were non-dischargeable, issues of fact remained, as necessary findings in the judgment did not satisfy the elements of sections 523(a)(2)(A), 523(a)(4), or 523(a)(6).