OpinionsThe court granted the creditor’s motion for default judgment against the debtor for her alleged fraudulent tender of NSF checks, concluding that the creditor had made a prima facie case of “actual fraud” under § 523(a)(2)(A), based on circumstantial evidence that the debtor did not intend to repay the debt when she incurred it. Relevant evidence included the debtor’s retention of bankruptcy counsel before issuing the bad checks, the large amount of the checks in relation to her income at the time, the issuance and cashing of four separate checks in less than 30 hours, and the fact that the checks were issued from a checking account that had been closed for over three months. As to the state law question of the appropriate amount of damages to award under Wis. Stat. § 895.446, the court rejected the creditor’s argument that the statute mandated an award of exemplary damages, recited factors Wisconsin courts consider in determining whether to exercise discretion in awarding exemplary damages, and concluded that exemplary damages were not warranted. In re CF Beef & Grain, LLC, Case No. 18-20898, 590 B.R. 849 (September 2018) -- Judge B.E. Hanan After multiple creditors and the Chapter 12 trustee objected, the court denied confirmation of the debtor’s amended chapter 12 plan, due to lack of feasibility and failure to meet the best-interests test. The court found that the debtor’s cash flow projections were not reasonably possible because they appeared to understate expenses and overstate revenue; the plan did not take into account the possible loss of farmland (and attendant outbuildings) owned by the debtor’s individual members, which was in foreclosure at the time, and would mean the inability to earn any income from grain drying and storing and a reduction in the debtor’s crop acreage by almost a third; and, most significantly, the plan’s success hinged on significant “cash infusions” from another LLC owned by the same individual members, which would be possible only if the other LLC continued to default on its own loan to the debtor’s main secured creditor. In addition, the debtor’s liquidation analysis used excessive discount rates and miscalculated the required secured debt payment in a hypothetical liquidation, and the plan lacked clarity about the precise amount to be paid to unsecured creditors; based on the record, the court could not conclude that the debtor had proven the plan met the best-interests test. Because it appeared the debtor would be unable to propose a confirmable plan in the circumstances, the court granted the requests of both the trustee and an unsecured creditor to dismiss the case. Pansier et al v. State of Wisconsin et al (In re Pansier), Adv. No. 18-2129, Case No. 18-22297-beh, 2018 WL 4191851 (August 2018) -- Judge B.E. Hanan The court denied the pro se debtors’ motion for leave to amend their adversary complaint to add the U.S. Trustee as a defendant and seek an injunction barring the U.S. Trustee from investigating the debtors’ interest in property listed on their current bankruptcy schedules via a previously approved Rule 2004 examination or subsequent investigation of the debtors’ property interests. The debtors claimed that res judicata and collateral estoppel applied because they had listed the property in their prior bankruptcy cases such that receiving discharges in one or more of those cases resulted in a final determination that they had no ownership interest in the property. The court denied leave because the amendment would be futile, res judicata and collateral estoppel did not apply, and the debtors could not use a complaint for injunctive relief against the U.S. Trustee to circumvent their obligation to provide full and accurate disclosures in the present bankruptcy case. Wisconsin Mutual Insurance Company v. Cross (In re Cross), Adv. No. 17-02153, Case No. 17-20977-beh, 2018 WL 3965191 (August 2018) -- Judge B.E. Hanan The court granted the creditor’s motion for default judgment against the debtor, concluding that the creditor made a prima facie showing of a nondischargable debt under 11 U.S.C. section 523(a)(9), based on a police report (portions of which were considered under Federal Rule of Evidence 803(8)(c)) and a court record evidencing debtor’s guilty plea to the charge of operating while intoxicated (of which the court took judicial notice). Gorokhovsky v. Ocheretner (In re Gorokhovsky), Adv. No. 17-2360 (July 2018) -- Judge B.E. Hanan The debtor moved for sanctions against his ex-wife and her family law attorney for allegedly violating the automatic stay by filing a state court motion for contempt based on the debtor’s failure to pay “section 71” payments incurred in the parties’ prepetition divorce. The court denied the motion, first noting—without deciding—that the action may have been excepted from the automatic stay under § 362(b)(2)(B) as an attempt to collect a domestic support obligation from non-estate property, and that the debtor had failed to demonstrate any compensable injury from the action, precluding an award of damages. Doss v. Norhardt Crossing Condominium Association (In re Doss), Adv. No. 18-2091 (June 2018) -- Judge B.E. Hanan The court rejected the debtor's argument that statutory liens become avoidable judicial liens after the holder obtains a foreclosure judgment, dismissing the adversary complaint against the debtor's condominium association on summary judgment. The court also ruled that the statutory lien was not avoidable under sec. 506(d), regardless of whether it was "consensual" or "nonconsensual," and that sec. 523(a)(16) applies to discharge of personal liability, not liens. In re Hicks, Case No. 17-2800 (June 2018) -- Judge B.E. Hanan The chapter 13 trustee objected to the debtor’s motion to modify a confirmed plan on the basis that its “plan shortening” language operated as a retroactive forgiveness of missed plan payments (and would, essentially, allow for less than 36 months’ worth of plan payments). The court overruled the objection, noting that the disposable income and “applicable commitment period” requirements of § 1325(b) do not apply to modifications under § 1329, but good faith considerations remain applicable. Layng v. Sgambati (In re Sgambati), Adv. No 17-02022, Case No. 16-26430, 584 B.R. 865 (April 2018) -- Judge B.E. Hanan The U.S. Trustee moved to deny the debtor's discharge under 11 U.S.C. section 727(a)(4)(A), based on the debtor’s alleged failure to list all debts, income, business creditors and expenses. The debtor, who operated a pizza business and regularly mixed business and personal expenses and income, admitted some errors on his schedules but denied any fraudulent intent. After a two-day trial, the court found that some of the errors were not intentional or reckless, and that fire loss insurance proceeds and cash advances from credit cards in this case were not income that the debtor should have disclosed. Nonetheless, other omissions and mischaracterizations on the debtor’s schedules were part of a pattern of reckless disregard for the truth. The court denied debtor's discharge. Gorokhovsky v. Huron Hudson Condo Assn. (In re Gorokhovsky), Adv. No. 18-2045 (oral ruling) (April 2018) -- Judge B.E. Hanan The plaintiff-debtor sought an order declaring that the debt owed to the defendant-creditor, a condominium association, and its corresponding lien were dischargeable. The complaint also asserted state law causes of action for waste and destruction of personal property and trespass. The court granted the defendant’s motion to dismiss, finding that the court lacked subject matter jurisdiction over the debtor’s state law claims, that the debtor’s request for an order declaring his personal liability dischargeable was not justiciable (so the court lacked constitutional jurisdiction), and that the request for a finding that the defendant’s lien was dischargeable failed to state a claim upon which relief could be granted. The court also denied leave to amend the complaint, concluding that amendment would be futile. In re House, Case No. 17-30434-beh (March 2018) -- Judge B.E. Hanan After a careful consideration of the debtor’s prior filing history, the court granted a secured creditor’s motion for in rem stay relief as to the debtor’s rental property. The fact that the debtor had filed five chapter 13 cases in six-and-a-half years was not dispositive. In deciding whether in rem relief was warranted, the court reviewed the circumstances surrounding each of the debtor’s prior filings, as well as her performance in those cases, including the reasons for their failures and the debtor’s treatment of the creditor. |