OpinionsChapter 13 debtors who previously extended their plan payment periods beyond 60 months under now-expired 11 U.S.C. section 1329(d) could not modify another aspect of their plans (such as the amount of plan payments) while retaining the extended payment period. Under the plain language of 11 U.S.C. section 1329(c), a court cannot confirm a plan that expressly provides for payments over a period that exceeds 60 months. Smith v. Kleynerman, 647 B.R. 196 (E.D. Wis. 2022) (September 2022) -- District Court Chapter 7 debtor moved to reopen his case and to avoid, on exemption-impairment grounds, a 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. Affirmed. In re Egerson, No. 21-22557 (Bankr. E.D. Wis. Sept. 30, 2022) (September 2022) -- Judge K.M. Perhach A debtor proposed a Chapter 13 plan providing for payment of 12% interest on tax principal amounts included in the proof of claim filed by the Racine County Treasurer, but providing for payment of 3.25% interest on accrued interest and penalties. The County objected to confirmation of the plan, asserting that the debtor should pay 12% interest on the entire amount of its claim. The court overruled the objection. Section 511 of the Bankruptcy Code establishes the rate of interest to be paid on tax claims and requires courts to look to “applicable nonbankruptcy law” to determine the appropriate interest rate. In Wisconsin, interest accrues at the rate of 12% per year on “delinquent general property taxes, special charges, special assessments and special taxes.” Wis. Stat. § 74.47(1). The statute does not provide for 12% interest on accrued interest or 12% interest on accrued tax penalties. Notably, the court’s reading of the Wisconsin statute corresponded to the method the County used to calculate interest before the debtor filed the bankruptcy case. In re Hannon, Case No. 21-26050 (September 2022) -- Judge R.M. Blise The United States Trustee filed a motion to dismiss seeking a one-year bar on future filings and a dismissal with prejudice under 11 U.S.C. § 349(a). A dismissal with prejudice would have the effect of prohibiting the debtor from ever discharging the debts that existed on the petition date. The debtor had filed seven bankruptcy cases in 11 years and made only one plan payment in the present case. The UST alleged the debtor abused the bankruptcy system with her repeated filings and that she acted in bad faith when she failed to disclose her interest in a business and a loan she received in 2021. The court determined the debtor's lack of good faith constituted cause to dismiss the case and bar the debtor from filing another petition for one year. The court found, however, that the debtor’s abuse of the bankruptcy system was not so egregious to warrant dismissal with prejudice under § 349(a). The court further concluded that, unlike the remedies provided in 11 U.S.C. § 727(a)(4), Congress did not intend to bar the discharge of debts for chapter 13 debtors whose only offense was providing inaccurate information on their schedules. Greenpoint Asset Management II LLC v. Hallick (In re Greenpoint Asset Management II LLC), 646 B.R. 264 (Bankr. E.D. Wis. 2022) (September 2022) -- Chief Judge G.M. Halfenger Creditor filed a cross-motion for summary judgment on his claims that charging and levy orders obtained against the debtors pre-petition were not avoidable as preferences under 11 U.S.C. §547, because, as a matter of law, the liens were created outside of the 90-day preference period, based on the holdings in Mann v. Bankruptcy Estate of Badger Lines, Inc. (In re Badger Lines, Inc.), 590 N.W.2d 270 (Wis. 1999), and Associated Bank N.A. v. Collier, 852 N.W.2d 443 (Wis. 2014). The court denied Creditor’s cross-motion, concluding that, by application of §547(e)(1) & (2), the transfers at issue were made within the preference period. In re Harris, No. 21-23864 (Bankr. E.D. Wis. Sept. 22, 2022) (September 2022) -- Judge K.M. Perhach Chapter 13 debtors objected to the proof of claim filed by the City of Milwaukee. The City failed to meet its burden of proving by a preponderance of the evidence that charges for delinquent municipal services, delinquent storm water services, delinquent water services, “other special” services, and interest and penalties were a “property tax” entitled to priority status under 11 U.S.C. § 507(a)(8)(B). The court sustained the claim objection and also overruled the City’s objection to the debtors’ Chapter 13 plan which proposed to pay the 2020 net property tax owed to the City as an unsecured priority claim under § 507(a)(8)(B) and the remaining balance of the claim as a general unsecured claim. Accord In re Peete, 642 B.R. 299 (Bankr. E.D. Wis. 2022). Cornerstone Pavers LLC v. Zenith Tech Inc., Adv. Proc. No. 21-2044 (July 2022) -- Chief Judge G.M. Halfenger After Cornerstone Pavers LLC and Zenith Tech Inc. sued each other for breach of a highway construction subcontract and the duty of good faith and fair dealing, Zenith sued West Bend Mutual Insurance Company on a bond allegedly insuring the performance of that subcontract. West Bend moved for summary judgment asserting that the bond it issued does not insure the subcontract at issue and, even if it does, Zenith failed to satisfy the conditions precedent to West Bend's obligations and liability under the bond. The court denied West Bend's motion because genuine disputes of material fact remain as to whether the bond insures the performance of the relevant subcontract and, construing the bond as a matter of law against West Bend, the undisputed facts show that Zenith did satisfy the conditions precedent to West Bend's obligations and liability under the bond. In re Antonio and Angel Terrell, Case No. 18-28674 (July 2022) -- Chief Judge G.M. Halfenger The State of Wisconsin filed a motion to vacate two orders of this court because they are based on an earlier order recently reversed by the Court of Appeals for the Seventh Circuit. The court stayed consideration of the state's motion to await the issuance of the mandate, after the expiration of the time for the filing of a petition for rehearing in the court of appeals. Mann v. LSQ Funding Group, L.C., No. 21-CV-1070-BHL (E.D. Wis. July 15, 2022) (appeal pending, No. 22-2436) (July 2022) -- District Court The Chapter 7 trustee appealed the court’s order granting summary judgment in favor of LSQ Funding Group L.C. on the trustee’s fraudulent conveyance and preference claims. See Mann v. LSQ Funding Group, L.C. (In re Engstrom, Inc.), Ch. 7 Case No. 20-22839-kmp, Adv. No. 20-2062-kmp (Bankr. E.D. Wis. 2021). Because the bankruptcy court correctly applied the earmarking and diminution of the estate doctrines to dismiss the trustee’s adversary claims, the district court determined that the appeal failed and affirmed the bankruptcy court’s decision. This decision is on appeal to the United States Court of Appeals for the Seventh Circuit. U.S. Securities and Exchange Commission v. Greenpoint Tactical Income Fund LLC (In re Greenpoint Tactical Income Fund LLC), Adv. Proc. No. 20-2005 (July 2022) -- Chief Judge G.M. Halfenger The defendants were debtors in a chapter 11 bankruptcy case and the court confirmed their chapter 11 plan in May 2022. Before confirmation, the plaintiff sued defendants and others in the United States District Court for the Western District of Wisconsin alleging that the debtor-defendants violated certain federal securities laws that give rise to claims for disgorgement, prejudgment interest, and civil penalties. The plaintiff filed this adversary proceeding against the debtor-defendants seeking a determination that those debts are not dischargeable pursuant to 11 U.S.C. §1141(d)(6). Before confirmation, the defendants objected to plaintiff's proofs of claim in their bankruptcy cases. After the court allowed the plaintiff's claims in the amount of $0 the defendants confirmed chapter 11 plans that provided for payment of the plaintiff's allowed $0 claim in full on the plan's effective date. Once the debtors' chapter 11 plans became effective, the defendants moved to dismiss this adversary proceeding pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, arguing that this proceeding was moot because the debtor-defendants' confirmed plan satisfied the SEC's claim, and the preclusive effect of the claims-allowance order prevented any future adjudication by the Western District that disgorgement or civil penalties should be awarded in an amount greater than $0. The court ultimately concluded that the Western District of Wisconsin is the appropriate court to determine the preclusive effect of the bankruptcy court's claims-allowance order, and it denied the debtor-defendants' motion to dismiss but stayed the remainder of the adversary proceeding until the Western District adjudicates the SEC's claims in that case. |