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Opinions


    In re Gaddour, Case No. 23-22130 (January 2025) -- Judge B.E. Hanan
    The U.S. Trustee moved to dismiss the debtor's Chapter 7 case under § 707(b)(3)(A) (debtor's petition filed in bad faith) and § 707(b)(3)(B) (debtor's financial situation demonstrates abuse). The Court granted the motion on a finding of bad faith, but declined to find that the debtor's financial situation demonstrated abuse under a totality of the circumstances analysis. By a preponderance of the evidence, the Court found that the debtor filed inaccurate schedules which understated his income, failed to support large deductions for tax and entertainment expenses as reasonably necessary, used ongoing retirement savings funds for other purposes, and incurred significant consumer debt for gambling, entertainment, and home improvements on the eve of bankruptcy, showing bad faith. The Court, however, did not find that the debtor's financial situation as a whole demonstrated abuse—the debtor's age, employment uncertainty, and social security income weighed against a finding of abuse as social security income cannot be considered when assessing the debtor's future ability to pay.

    Universal Credit Advisors, LLC v. Aydt (In re Aydt), Case No. 23-24094-BEH, Adv. No. 23-02136, 2025 WL 297662 (on appeal) (January 2025) -- Judge B.E. Hanan
    The debtor-defendant solicited funds from the creditor-plaintiff to invest in a luxury car-export business run by an acquaintance of the debtor. The business later was revealed to be a Ponzi scheme. The creditor’s final loan remained unpaid, and it filed an adversary proceeding seeking to except its debt from discharge under 11 U.S.C. §§ 523(a)(2)(A) and (a)(4) (larceny). The debtor moved for summary judgment, arguing (among other things) that he was neither aware of nor actively participated in the underlying fraudulent scheme. The Court granted the debtor’s motion, concluding that the creditor had failed to meet its evidentiary burden of establishing a genuine issue for trial by citing to “particular parts of materials in the record,” Fed. R. Civ. P. 56(c)(1)(A). Although questions of credibility and intent often are unsuited for summary judgment, a nonmoving party who bears the burden of establishing fraudulent intent at trial still must come forward with at least circumstantial evidence that would allow a fact-finder to reasonably infer the relevant state of mind. Here, the creditor’s vague references to nonspecific statements allegedly made by the debtor, along with conjecture as to motive unsupported by any evidence of record (and contrary to the debtor’s prior sworn statements), were insufficient to allow a reasonable inference that the debtor intended to deceive or defraud the creditor.

    Goldman v. Becker (In re Becker), Case No. 23-25123-BEH, Adv. No. 24-2007, 2025 WL 272245 (January 2025) -- Judge B.E. Hanan
    A creditor who had been assigned a judgment debt owed by the debtor, a former correctional officer, for showing “deliberate indifference” to the health and safety of an inmate, sought to have the debt excepted from discharge under 11 U.S.C. section 532(a)(6) as one for willful and malicious injury. The creditor moved for summary judgment, arguing that the underlying jury verdict established all the elements of a claim under section 523(a)(6) as a matter of law. The Court disagreed. The jury’s finding that the debtor acted with deliberate indifference—meaning that she actually knew of a substantial risk of harm to the inmate and consciously disregarded that risk—did not equate to a finding of “willfulness.” Willfulness under section 523(a)(6) requires more than a reckless (even a criminally reckless) act; instead, the debtor either must intend the resulting injury, or believe that her actions are substantially certain to cause the injury.

    In re Rhodes, Case No. 24-20838 (January 2025) -- Judge B.E. Hanan
    The Chapter 13 trustee objected to the debtor's proposed modified plan on the grounds that it provided insufficient funds to pay the full amount of the secured vehicle claim with Till interest accruing from the petition date. The Court concurred with In re Hammond, Case No. 24-20428, and found that 11 U.S.C. § 1325(a)(5)(B)(ii) required only that interest accrue beginning from the effective date of the plan, which was the date that the debtor's original Chapter 13 plan was confirmed.

    In re Hammond, Case No. 24-20428 (January 2025) -- Chief Judge G.M. Halfenger
    The chapter 13 trustee objected to confirmation of the plan asserting that the plan does not propose payments by the debtor to the trustee in a sufficient amount to allow the trustee to pay the allowed secured claims provided for by the plan, if interest on those claims, pursuant to Till v. SCS Credit Corp., 541 U.S. 465 (2004), is calculated from the date on which the petition was filed. The court interpreted the plan, in accordance with 11 U.S.C. §1325(a)(5)(B)(ii), to provide for Till interest only from the effective date of the plan, which is the date on which the plan is confirmed, not from the petition date, and overruled the trustee's objection to confirmation.

    Layng v. Mims (In re Mims), Case No. 23-23979, Adv. No. 23-2131 (Bankr. E.D. Wis. Sept. 30, 2024) (September 2024) -- Judge K.M. Perhach
    The United States Trustee filed a complaint to deny the debtor’s discharge (1) based on an unjustified failure to keep records from which the debtor’s financial condition or business transactions could be ascertained under § 727(a)(3); (2) based on false oaths or accounts in the debtor’s bankruptcy case under § 727(a)(4)(A); and (3) based on the debtor’s failure to satisfactorily explain a loss of assets under § 727(a)(5). The debtor’s receipt and disposition of loan proceeds from the Small Business Administration’s Paycheck Protection Program, and the debtor’s statements made under oath on her bankruptcy schedules, on her Statement of Financial Affairs, and at the meeting of creditors formed the basis for the claims. The court denied the debtor’s motion to dismiss for failure to state a claim upon which relief could be granted.

    The complaint alleged that the debtor received a PPP loan of $20,833 for the operation of a sole proprietorship in the “Nursing Care Facilities” industry. According to the complaint, within five days after receiving the loan proceeds, the debtor withdrew $20,000 to an account she did not own. The debtor testified at the § 341 meeting of creditors that the loan was used for her nonfiling spouse’s trucking business. She provided a receipt showing the trucking business paid a $9,900 cash deposit towards the purchase of a truck but did not provide any other receipts or invoices. The complaint plausibly alleged that the debtor failed to keep records regarding the disposition of the PPP loan proceeds or records substantiating the use of the PPP loan proceeds. It also plausibly alleged that the debtor only offered vague, indefinite, and uncorroborated statements about the use of the PPP loan proceeds.

    The complaint also plausibly alleged that the debtor (1) omitted income from a business from her Statement of Financial Affairs in light of business bank statements showing deposits of at least $45,052 in 2021; (2) falsely stated that she received the PPP loan on behalf of an LLC; (3) failed to disclose a sole proprietorship; and (4) failed to disclose that she had given a financial statement about her business since the complaint alleged that the PPP loan forgiveness application required the debtor to make financial statements about her business.

    In re Archdiocese of Milwaukee, Case No. 11-20059 (September 2024) -- Chief Judge G.M. Halfenger
    The State of Wisconsin Department of Justice moved to reopen this chapter 11 case, which has been closed since 2016 (following plan confirmation and full administration of the bankruptcy estate), to request access to hard copies of approximately 1,500 proofs of claim and related documents filed and maintained under seal pursuant to a 2011 protective order. The court denied the State's motion to reopen the case (and struck, as improperly filed, the State's motion for access to sealed records) because the State failed to show cause for reopening the case as required by §350(b) of the Bankruptcy Code: the State offered no substantial bankruptcy-related purpose for seeking access to the documents at issue (and several plainly non-bankruptcy-related purposes), and the court concluded that, even if it had, the relevant factors set forth in governing caselaw weigh decisively against reopening the case, including that the State is not entitled to relief from the protective order because there is no applicable legal authority for granting it such relief. In the alternative, the court denied the State's request for access to the sealed filings based on the lack of legal authority for the requested relief and because disclosure of the documents to persons other than those authorized by the protective order, which includes neither the State nor its employees, is not warranted under the circumstances.

    In re Lang, Case No. 23-20782 (September 2024) -- Judge R.M. Blise
    After reopening his chapter 7 case, the debtor moved to amend his schedules to disclose and exempt proceeds from a personal injury claim. As a matter of law, the Court determined that a debtor could amend his schedules after a case is reopened only if the debtor demonstrates that the time should be enlarged under Bankruptcy Rule 9006(b), which requires a showing of excusable neglect. The Court considered the factors set forth in Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 385 (1993) – (1) the danger of prejudice to the opposing party; (2) the length of the delay and its potential impact on the proceedings; (3) the reason for the delay, including whether the delay was within the reasonable control of the movant; and (4) whether the movant acted in good faith. The Court found that two factors (prejudice against non-moving party and debtor’s good faith) weighed in favor of excusable neglect, and two factors (length of delay and reason for delay) weighed against. The Court determined that the lack of prejudice should be given great weight under the circumstances of the case. The Court concluded that the debtor had demonstrated excusable neglect and could amend his schedules to disclose and exempt the claim.

    Huebner v Humphrey (In re Humphrey), Case No. 23-22884, Adv. No. 23-2112 (September 2024) -- Judge R.M. Blise
    The plaintiff sought a determination that the debtor-defendant owed a nondischargeable debt for alleged misrepresentations in connection with the sale of residential real estate. The plaintiff alleged the debtor misrepresented the condition of the house by failing to disclose defects related to water intrusion in the living room, basement, and kitchen. After trial, the Court concluded that the plaintiff had not sufficiently proven the required elements for nondischargeability under 11 U.S.C. § 523(a)(2)(A) for debt related to any misrepresentation related to water intrusion in the living room and basement. The Court also concluded that the debtor owed a debt to the buyer for a misrepresentation on the pre-sale Real Estate Condition Report (RECR) related to water problems in the kitchen ceiling and that the debt was nondischargeable under § 523(a)(2)(A).

    In re Thomas Orthodontics, SC, Case No. 23-25432 (September 2024) -- Judge R.M. Blise
    The only creditor in an impaired class did not return a ballot accepting or rejecting the debtors’ chapter 11 plan by the deadline, and the debtors requested that the Court deem the creditor to have accepted the plan by its silence. After the conclusion of an evidentiary hearing on plan confirmation, the debtors contacted the non-voting creditor and requested that it return a ballot. The creditor returned a ballot accepting the plan, and the debtors filed a motion to deem the creditor’s late ballot timely. The Court denied both motions. The Court held that the “excusable neglect” standard in Bankruptcy Rule 9006(b)(1) should be applied when a request to extend the deadline to submit a ballot is made after expiration of the original deadline. The Court found that the factors set forth in Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 385 (1993) – (1) the danger of prejudice to the opposing party; (2) the length of the delay and its potential impact on the proceedings; (3) the reason for the delay, including whether the delay was within the reasonable control of the movant; and (4) whether the movant acted in good faith – weighed against a finding of excusable neglect. In addition, the Court followed the majority view and concluded that an impaired class cannot accept a chapter 11 plan by silence. Because an impaired class of claims did not accept the plan, the plan could be confirmed only under § 1191(b).