OpinionsAfter 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). Layng v. Jackson (In re Bolden) Adv No. 23-2067 (July 2024) -- Judge R.M. Blise The U.S. Trustee filed an adversary complaint against Jeanine Jackson seeking to enjoin her from acting as a bankruptcy petition preparer (BPP) in the Eastern District of Wisconsin pursuant to 11 U.S.C. § 110. The Court found that Jackson repeatedly violated § 110(b) and (c) by failing to sign all documents she prepared for filing and failing to place her name, address, and identification number on all documents she prepared for filing. The Court also found that Jackson repeatedly violated § 110(e)(2), which prohibits BPPs from providing legal advice, when she characterized the nature of debts, chose the amount and applicable law for exemptions, completed means test forms, drafted chapter 13 plans, advocated on her clients' behalf with trustees and creditors, and prepared motions, letters, and an adversary complaint for her clients, all in violation of § 110(e)(2). Jackson was admonished by Judge Kelley in 2018 regarding the scope of permissible services that a BPP may provide. Based on Jackson's disregard of Judge Kelley's instruction and her apparent inability to distinguish between the unauthorized provision of legal advice and the scrivener's services permitted by the statute, the Court determined that a permanent injunction was appropriate. In re Ackerman, Case No. 23-22510-beh, 2024 WL 1925980 (May 2024) -- Judge B.E. Hanan The Chapter 13 debtor filed a plan proposing to “cure and maintain” a claim secured by a reverse mortgage on her homestead under 11 U.S.C. § 1322(b)(5). Several years prior to the petition date, the debtor and her now-deceased husband had signed the reverse mortgage on the property, while only her husband had signed the promissory note. The debtor’s husband passed away a little more than a month before she filed her case. The mortgage creditor objected to confirmation of the debtor’s plan, arguing that the entirety of the note had been called due prepetition, based on the death of her husband, combined with her failure to cure a prepetition tax arrearage on the property, and had to be paid in full through her plan. The Court examined the language of the mortgage and note at issue, as well as the applicable federal laws and regulations in existence when the note and mortgage were signed, and concluded that the parties intended that the maturity date of the note would be fixed upon the occurrence of one of two events: (1) the later of either (a) the death of the borrower or (b) the death (or ineligibility) of the nonborrowing spouse (the debtor); or (2) the sale of the property. Because the loan had not matured on its own terms due to the debtor’s failure to cure the property tax arrearages, the Court concluded that the debtor could cure the contractual default through her plan, and overruled the creditor’s objection. In re Weylock, Case No. 18-30208 (April 2024) -- Chief Judge G.M. Halfenger The chapter 13 debtors filed an objection to a mortgage creditor's response to the trustee's notice of final cure payment. The court construed the creditor's response to state that the debtors are current on postpetition payments for purposes of 11 U.S.C. §1322(b)(5), despite the outstanding postpetition fees, charges, and expenses listed in the response, and declined to act on the debtors' objection, which should have been filed (if at all) as a motion for a determination of final cure and payment under Federal Rule of Bankruptcy Procedure 3002.1(h). Scott Smith v. Gregory Kleynerman, 93 F.4th 1071 (7th Cir. 2024) (February 2024) (March 2024) -- Seventh Circuit Court of Appeals The Chapter 7 debtor moved to reopen case and to avoid, on exemption-impairment grounds, judicial lien that was placed on his interest in limited liability company (LLC) through charging order requiring him to turn over his future distributions and interest in LLC to judgment creditor, his former business partner. The bankruptcy court granted the motion to reopen and conditionally granted the motion for avoidance, provided that debtor reimburse judgment creditor for costs and fees incurred in the relevant state court litigation. The district court affirmed. The Seventh Circuit Court of Appeals affirmed the decision of the district court holding that (1) the bankruptcy court did not abuse its discretion in reopening the case, and (2) the bankruptcy court did not clearly err in valuing debtor’s interest in the LLC as less than $15,000. In re Goldapske, Case No. 19-23754 (March 2024) -- Chief Judge G.M. Halfenger The debtors filed a motion to modify the confirmed chapter 13 plan, purporting in relevant part to merely clarify the plan's existing terms: that payments under the plan began 30 days after the petition was filed. The trustee objected to the debtors' proffered construction of the plan, arguing that payments under the plan began after the plan was confirmed, and further objected to modification of the confirmed plan in accordance with the debtors' motion. The court agrees with the trustee's reading of the confirmed plan's terms and that 11 U.S.C. §1329(a) does not permit the modification of a confirmed plan to change the plan's effective date, i.e., the beginning of the period for payments under the plan, for purposes of 11 U.S.C. §1322(d), and the applicable commitment period, for purposes of 11 U.S.C. §1325(b). But the debtors' motion might instead be construed as a permissible request to reduce the time for payments under the confirmed plan, so the court afforded the trustee additional time to supplement her objection to the motion. In re Oshkosh Refurb, Inc., Case No. 23-25769-beh (oral ruling) (February 2024) -- Judge B.E. Hanan The Chapter 11 debtor’s primary secured creditor moved for relief from the automatic stay as to only a portion of the collateral securing its claim (aged inventory and used vehicles), arguing that the property was not necessary for an effective reorganization under section 362(d)(2) because the debtor could successfully reorganize without it. The Court rejected such a narrow construction of the word “necessary,” which would allow for stay relief any time a single piece of property could be taken away from the debtor’s assets without jeopardizing the overall success of a contemplated reorganization. Instead, the Court considered whether the property contributed to, or had a role to play, in the debtor’s reorganization efforts. Because the evidence established that the property at issue would aid in the debtor enterprise’s overall income-producing capabilities, it was necessary for a reorganization that contemplated preservation of that enterprise, and stay relief was inappropriate. In re Greenpoint Tactical Income Fund LLC, Case No. 19-29613 (February 2024) -- Chief Judge G.M. Halfenger The court confirmed the debtor's chapter 11 plan in May 2022. In August 2023 the debtor's former managing members moved the court to compel the reorganized debtor to pay amounts the former managing members asserted they were due under the plan. The court granted the motion in part and denied it in part, declaring that the former managing members had administrative claims that are due and owing but denying other requests for relief, including a request to compel the reorganized debtor to make the required payments. |