Case Summary:
Creditors (Defendants in the current action) secured a judgment against Debtor in Federal District Court, and, in an effort to collect, filed a non-earnings garnishment action against Brian Sanderson, one of debtor’s debtors, in state court. Although Sanderson was served with the garnishment summons on December 28, 2012, 91 days before Debtor filed its Chapter 11 petition, summary judgment on the garnishment complaint was not entered until March 19, 2013. On March 29, 2013, Debtor filed its Chapter 11 petition (the case was converted to a Chapter 7 shortly thereafter). On March 26, 2015, the Chapter 7 Trustee commenced an adversary proceeding against creditors primarily for the purpose of avoiding the Sanderson transfer under 11 U.S.C. § 547. In support of this preferential transfer action, the Trustee argued that the date of transfer was the date that summary judgment on the garnishment was entered and not the date on which the summons and complaint were served. The Court agreed, holding that under the Supreme Court of Wisconsin’s Commerce v. Elliot, 85 N.W. 417 (Wis. 1901), decision, creditors possessed only an equitable lien until summary judgment was entered, at which point the equitable lien became actual. Further, the Court found that while the latter qualifies as a lien under 11 U.S.C. § 101(37), and thus a transfer under 11 U.S.C. § 101(54)(A), the former does not. Accordingly, the Court held that the date of transfer was March 19, 2013, not December 28, 2012, and therefore that the transfer represented a preference, voidable by the Trustee.
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Judge Robert D. Martin
Case Summary:
Creditor, Dr. Phuoc Vuong, one of the Debtor’s former employees, filed a claim in the amount of $7,624.00 for reimbursement for vacation time and continuing education expenses. Dr. Vuong was terminated for cause on April 15, 2014. However, he argued that he was entitled to reimbursement for continuing education expenses relating to classes which he was scheduled to attend from April 21st through 25th in 2014. The Debtor objected to Dr. Vuong’s claim, arguing that, although Dr. Vuong was owed the regular vacation time, he was not owed reimbursement for the continuing education expenses because he had neither obtained approval to attend nor actually attended any classes. The Court found in favor of the Debtor as to the continuing education expenses, holding that that the Debtor had carried its burden in defeating the presumption in favor of the validity of Dr. Vuong’s claim. Specifically, the Court held that the employment contract introduced into evidence by the Debtor provided that an employee would only be reimbursed for continuing education expenses where the employee had both received approval from a supervisor to attend continuing education classes and successfully completed the classes with proof of credit earned. In this case the court found that Dr. Vuong had done neither of these things, and, thus, his claim was limited to reimbursement for vacation time.
Case Summary:
Debtors claimed exemptions in three annuity accounts pursuant to Wis. Stat. § 815.18(3)(j). The Trustee objected, relying on Wis. Stat. § 815.18(3)(f). The only issue before the Court was the interpretation of § 815.18(3)(j), in particular the phrase “the plan or contract complies with the provisions of the internal revenue code.” The prevailing view is that compliance with the IRC is accomplished by meeting the tax-deferral provision of IRC § 72. However, the Trustee argued that compliance with the IRC is accomplished by meeting the retirement plan provisions of IRC §§ 401-409 because a broader interpretation makes the amendment to Wis. Stat. § 815.18(3)(f) redundant. The Court found that the amendment of § 815.18(3)(f) did not change the prevailing statutory interpretation of § 815.18(3)(j). Thus, debtors only need to comply with IRC § 72 to exempt a retirement annuity under Wis. Stat. § 815.18(3)(j).
Case Summary:
Case Summary:
The Chapter 7 Trustee objected to an executing judgment creditor’s state-created lien. Previously, the Trustee had initiated an adversary proceeding to avoid the lien but dismissed it on stipulation. While the case was on appeal to the Supreme Court concerning an exemption issue, the Wisconsin Supreme Court issued a ruling overturning the law which validated the executing judgment creditor’s lien. As a result, the Trustee filed an objection to the Creditor’s claim. The Creditor argued dismissal of the avoidance action precluded the Trustee from objecting to the claim and that the Wisconsin Supreme Court’s ruling in Associated Bank v. Collier, 355 Wis. 2d 343 (2014), should not apply retroactively. The Court found that the theories of res judicata, law of the case, estoppel by record, and laches did not preclude the Trustee from objecting to the claim. Furthermore, the Court found that the only way to practically interpret Collier was to use retroactive application. Therefore, the Court sustained the Trustee’s objection.
Case Summary:
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 Summary:
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.
Statute/Rule References:
11 U.S.C. § 502(a)
Key Terms:
Bad Faith
Case Summary:
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.
Statute/Rule References:
11 U.S.C. § 109(e)
Key Terms:
Eligibility for Chapter 13
Unsecured Debt Limit
Case Summary:
Prior to this bankruptcy filing, the Debtor was found liable on claims of unjust enrichment, wrongful conversion and breach of a fiduciary duty in state court. Once the 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 the Debtor from defending this action. Finding the creditors’ theory lacked legal support, the Court dismissed the complaint.