OpinionsA pro se debtor asserted claims against Kia America, Inc. based on the theft of a Kia vehicle from a motel parking lot. The court dismissed the debtor’s negligence claim based on lack of subject matter jurisdiction. The court did not have “related to” jurisdiction over the negligence claim. The claim was not property of the estate under 11 U.S.C. § 348(f) because it arose between the date the debtor filed his Chapter 13 bankruptcy case and the date he converted the case to Chapter 7. It could not have had any effect on the estate because any recovery on the claim would not be available to satisfy the claims of creditors in the bankruptcy case. The court also dismissed the debtor’s claim for violation of the automatic stay for failure to state a claim upon which relief could be granted. The only facts pled in support of that claim were that an unknown third party stole a vehicle from a parking lot. The debtor failed to plead sufficient facts that permitted the court to draw the reasonable inference that the manufacturer of the vehicle violated the automatic stay when an unknown third party stole the vehicle. 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 Greenpoint Asset Management II LLC, Case No. 21-25900 (June 2024) -- Chief Judge G.M. Halfenger The court entered an opinion and order denying debtor Greenpoint Asset Management II, LLC’s motion to reconsider the court’s March 18, 2024 order determining that there was cause to convert or dismiss the debtor’s chapter 11 case, and determined that dismissal was in the best interests of creditors and the estate. 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). Jaklin Reyes v. Baxter Credit Union, Case No. 20-27843, Adv. No. 23-2038 (Bankr. E.D. Wis. March 29, 2024) (March 2024) -- Judge K.M. Perhach A credit union filed two proofs of claim in a Chapter 13 case seeking payment on the debtor’s two car loans through the bankruptcy case. The debtor filed a putative class action complaint asserting that the proofs of claim filed by the credit union, as an allegedly unlicensed sales finance company and an allegedly unapproved credit union, sought collection of debts and fees barred by the Wisconsin Consumer Act. The court held that the debtor’s state law claims, alleging that the credit union violated the Wisconsin Consumer Act by filing proofs of claim in the bankruptcy case, were preempted by the Bankruptcy Code. The debtor’s unjust enrichment claim also failed as a matter of law due to the contracts between the debtor and the credit union. The court granted the credit union’s motion to dismiss the debtor’s complaint for failure to state a claim upon which relief could be granted. Souran v. EZ Pawn Iowa, Inc. et al., Case No. 21-25247, Adv. No. 23-2053 (Bankr. E.D. Wis. March 25, 2024) (March 2024) -- Judge K.M. Perhach A pro se debtor asserted that a pawn shop and its employees violated the automatic stay. The court rejected the pawn shop’s argument that it did not have subject matter jurisdiction to adjudicate an alleged violation of the automatic stay, but granted the pawn shop’s motion to dismiss due to the debtor’s failure to state a claim upon which relief could be granted. The thrust of the complaint was that the pawn shop violated the automatic stay by refusing to allow the debtor the opportunity to redeem his property. The complaint assumed that the debtor had a right to redeem the pawned property but did not plead any facts to support that assumption. There were no allegations about when the debtor pawned any of the property, what the original maturity dates were for any of the pawns, or when the statutory redemption periods expired. The complaint simply listed pawn ticket numbers and corresponding loan amounts without any dates. In granting the motion to dismiss, the court noted that if the debtor no longer possessed the right to redeem the pawned property at the time that the pawn shop allegedly refused to permit him to redeem it, then the pawn shop could not have violated the automatic stay when it allegedly refused to permit him to redeem the pawned property and would have been within its rights to dispose of or sell the pawned property. 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. |