OpinionsThe 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 Mayville Holdings, LLC, Case No. 23-24460-BEH, 662 B.R. 354 (June 2024) -- Judge B.E. Hanan The Chapter 11 debtor, which operates an assisted living facility, objected to the claim of its primary secured creditor, arguing that only a portion of the claim—secured by a mortgage and security interest in the debtor’s real and personal property—should be treated as secured, and asked the Court to determine the value of the secured portion under 11 U.S.C. § 506(a). The debtor and the creditor both presented appraisals and testimony from expert witnesses, who reached vastly different valuation conclusions. The Court found both experts to be similarly qualified and experienced, and both used the same accepted and competent methodologies. Given the experts’ credentials and the degree of data support each offered for their conclusions, the Court declined to credit the valuation of one appraisal and wholly discount the other. Instead, considering the thoroughness of the two appraisals, yet mindful of some weaknesses in each, the Court found it appropriate to average the two different valuation conclusions, rather than assign a dollar value to each critique. This approach best accounted for undue optimism in one expert’s appraisal and undue pessimism in the other, without credentialing the Court as a third appraiser. 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 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. Rogers v. TitleMax of Wisconsin, Inc. (In re Rogers), Adv. No. 22-2129, Case No. 22-25190, 2023 WL 5354417 (August 2023) -- Judge B.E. Hanan Creditor’s failure to return debtor’s repossessed vehicle for 26 days postpetition, until after the Court considered the creditor’s concerns regarding adequate protection, did not amount to an act to “exercise control” over property of the estate in violation of 11 U.S.C. section 362(a)(3), nor did the creditor’s conduct violate section 362(a)(4) (prohibiting acts to “enforce a lien against property of the estate”) or section 362(a)(6) (prohibiting acts to collect a prepetition claim). In re Mahler, Case No. 22-21674-beh, 2023 WL 3880465 (June 2023) -- Judge B.E. Hanan The Chapter 13 trustee objected to the debtor's amended plan, specifically the provision for direct payments to Freedom Mortgage Corporation. Disbursement by the trustee, however, is not mandatory. 11 U.S.C. §§ 1322(a) and 1326(c) do not prohibit direct payments. Rather, the Court may exercise its discretion to require payment via trustee disbursement. Matter of Aberegg, 961 F.2d 1307, 1308 (7th Cir. 1992). In determining whether to confirm a plan providing for debtor-direct payments, courts have devised several factors by which to apply their discretion. In re Perez, 339 B.R. 385, 409 (Bankr. S.D. Tex. 2006), aff'd sub nom., Perez v. Peake, 373 B.R. 468 (S.D. Tex. 2007). After considering the Perez factors relevant to this debtor's history and proposed amended plan—such as the debtor's reason for filing the case, whether it is a consumer loan, the number of payments to be made, and whether the trustee's ability to perform her duties will be hindered—the Court held that disbursement of payments by the trustee to Freedom Mortgage offered a greater likelihood of achieving the debtor's goals for her Chapter 13 plan. In re Teclaw, Case No. 22-24591-beh, __ B.R. __, 2023 WL 3331553 (May 2023) -- Judge B.E. Hanan The individual chapter 13 debtor scheduled an interest in several LLCs, two of which owned commercial buildings with mortgage debt owed to Summit Credit Union. Summit filed a motion for relief from the co-debtor stay under § 1301(a)(1), arguing the stay did not apply to the LLCs because they were not individual debts. Alternatively, Summit asked for adequate protection. The debtor conceded the co-debtor stay did not extend to his LLCs, but asked the Court to invoke its equitable powers under § 105(a) to find that the automatic stay of § 362(a) was in effect, arguing there were unique circumstances. The Court agreed that the co-debtor stay did not apply to the LLCs, as the debts were not incurred for a household purpose as defined in § 101(8), and LLCs are routinely distinguished from individuals, as discussed in Consol. Rail Corp. v. Gallatin State Bank, 173 B.R. 146, 147 (N.D. Ill. 1992) and In re McCormick. 381 B.R. 594, 598 (Bankr. S.D.N.Y. 2008). The Court declined to exercise its equitable powers to find the automatic stay applied to the LLCs because doing so would create a substantive right that conflicts with another applicable provision of the Bankruptcy Code (§ 1301), citing Law v. Siegel, 571 U.S. 415, 421 (2014). The Court also did not view the debtor’s circumstances as any more unusual than those that plague debtors in similar circumstances, and in any event, the LLCs had the option of filing their own bankruptcy petitions. |