OpinionsCourt abstained from hearing third party complaint for indemnification after plaintiff and defendant stipulated for dismissal of first party cause of action. In re Jeff Carlson, Case No. 10-38400, Baytherm Insulation, Inc. v. Debtor, Adv. No. 10-2702 (August 2011) -- Judge M.D. McGarity Underlying theft by contractor judgment was nondischargeable under sec. 523(a)(4). Lind, 11-22623 (August 2011) -- Judge P. Pepper In a Chapter 7 case involving married, jointly-filing debtors, the United States Trustee filed a motion to dismiss the debtor/husband under § 707(a), alleging that the fact that he was not eligible for a Chapter 7 discharge constituted "cause" for dismissal, and in the alternative, that he had filed his petition in bad faith, for the sole purpose of allowing the debtors to exempt assets that the wife, filing alone, would not have been able to exempt. The Court denied the motion to dismiss, finding that ineligibility for a discharge did not constitute "cause" under § 707(a). The Court found that bad faith was not a basis for dismissal under § 707(a), given that Congress explicitly had provided for dismissal due to bad faith in § 707(b). The Court also found insufficient evidence to conclude that the debtor/husband had filed for the purpose of allowing the wife to exempt otherwise non-exempt assets 10-33790, James and Leslie Lippe (August 2011) -- Judge P. Pepper Oral ruling sustaining Chapter 13 trustee's objection to confirmation of the plan. The Court held that debtors who would finish repaying a 401k loan before the expiration of the plan commitment period could not use the funds they had been devoting to repaying the loan to increase the amount they were contributing to the 401k plan. Fair v. GMAC Mortgage, LLC, 10-2362 (July 2011) -- Judge P. Pepper Debtor who had received a Chapter 7 discharge in a case commenced within the previous 8 years filed a Chapter 13. She then filed an adversary complaint, proposing to strip off the wholly unsecured, junior mortgage lien. When the defendant did not file an answer, the plaintiff/debtor filed a motion for default judgment. On October 26, 2010, the Court denied the motion for default judgment and dismissed the adversary complaint, holding that a debtor who was not eligible for a Chapter 13 discharge could not use the Chapter 13 case to strip off the wholly unsecured, junior mortgage lien. The debtor appealed, and on April 19, 2011, Judge Randa reversed the bankruptcy court's legal conclusion. In re Sandra Lee Fair, 10-C-1128. Judge Randa held that there was nothing in the Bankruptcy Code which tied modification of an unsecured lien to obtaining a Chapter 13 discharge. He noted, however, that bankruptcy courts had an obligation to determine whether debtors filed their Chapter 13 petitions in good faith, and that filing a Chapter 13 case "solely for the purpose of the lien avoidance" suggested manipulation of the Bankruptcy Code and constituted evidence of bad faith. He thus remanded the case to the bankruptcy court for a determination regarding whether the debtor filed her Chapter 13 case in good faith. On July 6, 2011, the bankruptcy court issued an oral ruling, finding that under the specific factual circumstances in this debtor's case, she had filed her Chapter 13 case in good faith. The Court found that she had filed the case for the purpose of paying the arrearage on her first mortgage and saving her home from foreclosure, and not just for the purpose of stripping off the wholly unsecured, junior mortgage lien. In re Kohler, 09-35931, and Kohler v. U.S. Bank, et al., 10-2694 (June 2011) -- Judge P. Pepper Chapter 13 debtors argued that the mortgage creditor who filed motions for relief from the automatic stay, who filed proofs of claim in the bankruptcy case, and who objected to confirmation of their Chapter 13 plan did not have standing to do any of these things. The creditor who filed the various objected-to pleadings was the trustee for a structured asset investment loan trust. The debtors argued that this creditor did not own the mortgage or the note on their home, and thus did not have standing to assert rights in the bankruptcy proceedings. At an evidentiary hearing, the creditor produced, through an employee of the company acting as custodian for the trust's records, the original note and an endorsement in blank. The Court concluded that under Article 3 of the UCC, the creditor had proven that it was the entity entitled to enforce the note, because it possessed the note and the endorsement in blank. Because the creditor was the entity entitled to enforce the note, the Court held, it had proven that it had standing to move for relief from stay (by asserting that it had not received payment on the note--a fact which the debtors did not dispute), standing to file a proof of claim (thus asserting that it was entitled to payment on the note through the bankruptcy), and standing to objection to confirmation of the plan (which did not propose to pay its claim). The Court further held that ownership of the mortgage was not relevant to the question of standing, as the mortgage followed the note, and the Court was not being asked to consider whether the creditor could foreclose on the collateral. The Court noted that the fact that the creditor had attached to its proofs of claim two signed, dated allonges which post-dated the bankruptcy court litigation seemed to indicate that the creditor had made some effort to grant itself standing after the fact, but found that because the endorsement in blank had been present in the loan file prior to the petition date, the later-signed allonges were not relevant. In re Robert McCoy, et al. Case No. 11-24652 (court minutes and order only) (June 2011) -- Judge M.D. McGarity Bankruptcy petition preparers were sanctioned for violating sec. 110. Building Trades United Pension Trust Fund v. Mueller, 2011 Bankr. LEXIS 2290 (June 2011) -- Judge S.V. Kelley Creditor's Motion for Summary Judgment denied where factual issues remained on whether Debtor's violation of theft by contractor statute was more than merely negligent. In re Robenhorst, 2011 Bankr. LEXIS 1383 (April 2011) -- Judge S.V. Kelley Above median income Chapter 13 debtors not required to dedicate one-half of their tax refunds to unsecured creditors in a post-confirmation plan modification where the original plan contained no such requirement, the modification was necessary to accommodate an increased mortgage arrearage claim, and the debtors reduced their expenses in good faith. Debtor v. M&I Bank FSB (In re Jeannie Lindskog) (April 2011) -- Judge J.E. Shapiro Debtor filed a chapter 13 case in which she was ineligible to receive a discharge pursuant to § 1328(f), because the case was filed less than four years after she filed a chapter 7 case in which she received a discharge. Debtor commenced an adversary proceeding seeking to “strip off” her second mortgage because there was no equity for the lien to attach to. The creditor filed a motion to dismiss the adversary proceeding arguing that a discharge is a requirement for lien avoidance under § 506(d). An objection to confirmation of plan was filed on the same grounds. The court held that to allow a debtor in a no-discharge chapter 13 to avoid a junior lien would run afoul of § 1325(a)(5)(B)(i)(I)(aa) which provides that the holder of a secured claim shall retain such lien until the earlier of the payment of the underlying debt or discharge. The court further stated that permitting such action would be contrary to both the Congressional intent in enacting BAPCPA and the ruling of the U.S. Supreme Court in Dewsnup v. Timm. The court granted the motion to dismiss adversary proceeding and sustained the objection to confirmation of plan without prejudice to the right of the debtor to file an amended plan. **Affirmed on appeal** |