The following case summaries appear in the Collier Bankruptcy Case Update, which is published by Matthew Bender & Company Inc., one of the LEXIS Publishing Companies.

April 14, 2003

CASES IN THIS ISSUE
(scroll down to read the full summary)

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4th Cir.

§ 502(b)(1) IRS claim based on insufficient evidence of existence and accuracy of deficiency disallowed.
In re Greenspan (Bankr. D. Md.)

Collier Bankruptcy Case Summaries

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Sexual harassment judgment, based on settlement with no admission of validity of claim, where no testimony was given and credibility of claim was questionable, discharged. Bankr. W.D.N.Y. PROCEDURAL POSTURE: A judgment creditor filed a complaint to have a judgment based on a sexual harassment claim against the debtor under 42 U.S.C. § 2000e-2(a)(1) of Title VII of the Civil Rights Act of 1964, determined to be nondischargeable under 11 U.S.C. § 523(a)(6), arguing that the debtor’s conduct was malicious and willful and caused her injury. The debtor denied such conduct and denied agreeing to a settlement upon which the judgment was based. OVERVIEW: Although the judgment had found an enforceable settlement agreement between the creditor and the debtor, no underlying motion papers or transcript was produced, and the judgment made no determination that the action was valid or had been admitted by the debtor. Collateral estoppel did not apply to the judgment. The creditor never testified that there had been a sexual assault, a request for sexual favors, or a threat made and carried out when sexual favors or liberties were requested. As to a hostile work environment, the testimony as to the debtor’s words, conduct, and actions appeared considerably exaggerated. Even if true, the court did not believe objectively or subjectively that the debtor’s conduct rose to the level of sexual harassment discrimination. The creditor’s testimony that the debtor touched her in a sexual caressing nature was not credible when considered under the totality of the circumstances. There was insufficient evidence of any intent to cause injury so as to render the judgment nondischargeable under section 523(a)(6). The other defendants’ settlement in the underlying action, clearly hearsay, could not be used to infer a pattern of behavior. Voss v. Tompkins (In re Tompkins), 2003 Bankr. LEXIS 226, — B.R. — (Bankr. W.D.N.Y. February 12, 2003) (Ninfo, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:523.12 [back to top]

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Creditor’s claim was unsecured and non-priority due to improper creation and perfection of security interest. Bankr. W.D.N.Y. PROCEDURAL POSTURE: The debtor objected to a secured claim, arguing that the creditor did not have a perfected security interest under 13 Pa. Cons. Stat. § 9203 or N.Y. U.C.C. Law § 9-203 in either patterns or core boxes because the debtor never executed a written security agreement that provided a description of the collateral. The debtor argued its “perfected lien creditor” status under 11 U.S.C. § 544 for turnover of the patterns and core boxes. OVERVIEW: None of the creditor’s quotations, with general conditions contained on the back including a purported security agreement, were signed on behalf of the debtor. Except for some bills of lading which were signed on behalf of the debtor, none of the paperwork for the specific sales covered by the claim referred to the general conditions or any security agreement or lien. There was no evidence showing that the person signing for the goods was authorized to bind the debtor to the general conditions or that the individual knew he or she was signing other than to indicate that a shipment was received in good condition. The creditor had not shown that it had an artisan’s lien because there was insufficient information as to when the repairs, modifications, or enhancements were made, whether they were minor, routine, or otherwise expected to be made in the industry without compensation, and what the enhanced value to the particular pattern or core box could reasonably be. The claim was unsecured and a turnover of the patterns and core boxes was ordered. In re Shepard Niles, Inc., 2003 Bankr. LEXIS 225, — B.R. — (Bankr. W.D.N.Y. January 7, 2003) (Ninfo, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 5:544.01 [back to top]

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Fraudulent intent could not be inferred from legitimate transaction where lender financed third party purchase of debtor’s stock without knowledge of debtor’s finances. Bankr. S.D.N.Y. PROCEDURAL POSTURE: The chapter 7 trustee sought to recover fraudulent transfers under 11 U.S.C. §§ 544, 548, and 550, N.Y. Debt. & Cred. Law §§ 270 et seq., and Delaware law. Defendant lender moved for summary judgment and sought sanctions under Fed. R. Bankr. P. 9011. OVERVIEW: The lender loaned money to another company who used the loan proceeds to purchase the debtor’s preferred stock. The stock dividends matched the loan interest. The stock was pledged to the lender as security. New York law applied. The dividend payments were made to an escrow agent for the benefit of the other company stockholder for remittance to the lender. The lender was the initial transferee. It was a legitimate transaction. The lender had no knowledge of the debtor’s finances. Fraudulent intent could not be inferred under 11 U.S.C. § 548(a)(1)(a), N.Y. Debt. & Cred. Law § 276. The economic substance suggested that the lender owned an equity interest. The lender was not entitled to summary judgment stating that the transfers were on account of antecedent debts. The trustee argued that the redemption obligation, which included paying accrued dividends, was a liability as to insolvency and a non-liability as to the adequacy of the consideration provided by the lender. The trustee could contend that the payments were dividends. While the positions appeared to be inconsistent, the court could not find a violation of Fed. R. Bankr. P. 9011, Fed. R. Civ. P. 11. Pereira v. Dow Chem. Co. (In re Trace Int’l Holdings, Inc.), 2002 Bankr. LEXIS 1487, 287 B.R. 98 (Bankr. S.D.N.Y. December 31, 2002) (Bernstein, C.B.J.).

Collier on Bankruptcy, 15th Ed. Revised 5:548.04 [back to top]

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3rd Cir.

Debtor’s retention of financial advisor subject to an agreement to indemnify the advisor for negligence claims approved over trustee’s objection. 3d Cir. PROCEDURAL POSTURE: Appellant trustee challenged the judgment of the United States District court for the District of Delaware which approved appellee debtor’s application to retain a financial advisor over the trustee’s objection. OVERVIEW: The debtor applied to retain a financial advisor in its bankruptcy action. The trustee objected to the debtor’s agreement to indemnify the financial advisor for claims of negligence that might be leveled against it. On appeal of the district court’s approval of the debtor’s application, the court held that the indemnity agreement was reasonable and permissible under 11 U.S.C. § 328(a). The court held that if financial advisors took the appropriate steps to arrive at a result, the substance of that result should not be questioned. The court held that the financial advisor could be held accountable for not advising with the level of care or loyalty expected under the business judgment rule, and the agreement was reasonable because it left open the door to examining the level of care the financial advisor exercised in the process of obtaining its results. However, the court held that the debtor would not be bound to indemnify the financial advisor when its gross negligence contributed only in part to its damages, and that the financial advisor was not entitled to indemnity for a dispute in which the debtor alleged the breach of the financial advisor’s contractual obligations. United Artist Theatre Co. v. Walton (In re United Artist Theatre Co.), 2003 U.S. App. LEXIS 275, 315 F.3d 217 (3d Cir. January 9, 2003) (Ambro, C.J.).

Collier on Bankruptcy, 15th Ed. Revised 3:328.02 [back to top]

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Student loans discharged due to undue hardship where debtor had psychological and medical difficulties and lived in an assisted living facility. Bankr. E.D. Pa. PROCEDURAL POSTURE: The debtor filed a complaint to determine the dischargeability of his student loan, arguing that it would be an undue hardship under 11 U.S.C. § 523(a)(8) to require the debtor to repay the student loan. The creditor argued that notwithstanding the debtor’s diabetes and bipolar disorder diagnoses, the debtor could increase his income by securing a job. OVERVIEW: The debtor had only held short term, minimum-wage jobs, and he was unemployed. It appeared his psychological difficulties played a significant role in school and job problems. The debtor required ongoing psychological and medical treatment, thus, he need to maintain eligibility for assistance benefits. Any job income beyond $780 per month would risk losing the benefits, the only source of income. The debtor lived in an assisted living facility. The assistance income went directly to the facility; he was given a $60 per month allowance. Any work income would have to be remitted to the facility. The current monthly income and expenses did not allow for payment of the student loans. The ability to work was not dispositive, due to the requirement of an assisted living facility to maintain a minimal standard of living. The need for medical support and maintenance was not time limited. The debtor attempted to find employment, but keeping employment was difficult due to psychological infirmities. An exhaustion of administrative remedies such as a moratorium under 34 C.F.R. § 685.205(a) was not required under the good faith prong of the test under 11 U.S.C. § 523(a)(8). Waterston v. Pennsylvania Higher Educ. Assistance Agency (In re Waterston), 2002 Bankr. LEXIS 1498, — B.R. — (Bankr. E.D. Pa. November 26, 2002) (Sigmund, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:523.14 [back to top]

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District court lacked jurisdiction to hear motion for stay pending appeal which should properly have been filed with appellate court. 3d Cir. PROCEDURAL POSTURE: Appellant corporation sought a stay of the court’s order pending disposition of the appeal of the court’s order affirming the order of the Bankruptcy Court for the District of Delaware, which disallowed the corporation’s claim against the estates of appellee debtor and others, alleging breach of contract, negligent misrepresentation, and violations of the Connecticut Unfair Trade Practices Act. OVERVIEW: The court concluded that it had no jurisdiction to hear the motion to stay. Fed. R. Bankr. P. 8017 suggested that the power to stay proceedings once an appeal was taken rested with the appellate court. The court stated that its interpretation of Rule 8017 prevented redundancy, inefficiency, and confusion. It was only logical and appropriate that the court in possession of the complete record should decide any substantive motions relying thereupon. The court also reasoned that its holding comported with the general principle that a lower court was divested of jurisdiction once an appeal was filed. The court was not persuaded that reference to other bankruptcy and appellate rules alone provided sufficient grounds for finding that jurisdiction existed, particularly because other analogous contexts pointed to the opposite conclusion. Iron Mt. Corp. v. AWC Liquidation Corp. (In re AWC Liquidation Corp.), 2003 U.S. Dist. LEXIS 5282, — B.R. — (3d Cir. March 26, 2003) (Sleet, D.J.).

Collier on Bankruptcy, 15th Ed. Revised 10:8017.01 [back to top]

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IRS claim based on insufficient evidence of existence and accuracy of deficiency disallowed. Bankr. D. Md. PROCEDURAL POSTURE: The debtor objected to the proof of claim filed by the Internal Revenue Service (“IRS”) for unpaid income taxes. He filed an objection to the IRS’s proof of claim, disputing the claim in its entirety and asserting that even if such taxes were owed, the length of time that had elapsed would make such taxes dischargeable under chapter 13. OVERVIEW: There two issues presented were (1) whether the assessment and collection actions taken by the Internal Revenue Service (“IRS”) with regard to the 1988 and 1990 income taxes were within the applicable statute of limitations, and (2) whether the respective assessments were correct. The debtor appeared to confuse the concepts of dischargeable debts and allowed claims. There was a 10-year statute if limitations period for the collection of a properly-assessed tax. Neither the assessments for the tax years of 1988 or 1990 were barred by the statute of limitations. However, the IRS failed to carry its burden on the accuracy of the 1988 assessment. The evidence was insufficient to prove the existence and accuracy of the tax deficiency; therefore, the portion of the IRS’s claim that related to taxes due for the year 1988 was disallowed. On the 1990 assessment, the debtor did not provide sufficient evidence to overcome the presumption in favor of the assessment. He provided no evidence that the supplemental assessments were inaccurate or wrongly assessed. The 1990 tax claim was an allowed claim with nonpriority, general unsecured claims. In re Greenspan, 2002 Bankr. LEXIS 1507, — B.R. — (Bankr. D. Md. November 25, 2002) (Keir, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:502.03[2] [back to top]

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Bankruptcy court incorrectly calculated extent to which creditor’s lien impaired debtor’s exemption. W.D. Ky. PROCEDURAL POSTURE: Appellant debtor filed a bankruptcy petition and filed an adversary action against appellee creditor related to a claimed exemption. The court determined: (1) the disregard of an ad valorem state tax lien; and (2) the partial avoidability of a lien. The debtor appealed from the bankruptcy court. OVERVIEW: The liens against the property in issue exceed the property’s value and the debtor’s exemption was impaired by the liens. The debtor sought to avoid only one lien that allegedly impaired his exemption, pursuant to 11 U.S.C. § 522(f)(2)(A). The district court found that the bankruptcy court calculated the extent to which the creditor’s lien impaired the exemption and the calculation was incorrect. The court agreed with the debtor’s position that the Bankruptcy Code made no distinction between statutory and recorded liens, which was the point of distinction in the bankruptcy court’s opinion. The bankruptcy court failed to properly consider the ad valorem tax lien. State lien priority law did not apply in the exemption determination where the Bankruptcy Code addressed the issue. Radcliffe v. LPP Mortg. Ltd., 2003 U.S. Dist. LEXIS 5286, — B.R. — (W.D. Ky. April 1, 2003) (Simpson, D.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:522.11 [back to top]

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Separate classification of secured claims and mortgage claims in plan not only proper but necessary for feasibility of plan. Bankr. E.D. Mich. PROCEDURAL POSTURE: In numerous chapter 13 debtors’ cases in which the debtors used the Model Plan of the Eastern District of Michigan under E.D. Mich. Bankr. R. 3015-1(a)(5), a secured creditor objected to the order of payments, arguing that it could not be classified separately from, and paid after, mortgage claims under 11 U.S.C. § 1322(a)(3). Several mortgage creditors and debtors filed responses. OVERVIEW: Because each secured claim holder had unique collateral, the monthly payment, interest rate, and valuation with respect to each secured claim would be different. If secured claims could not be separately classified, it was likely that no chapter 13 plan could be confirmed when the debtor had more than one secured claim to be dealt with. Separately classifying secured vehicle claims and home mortgage claims did not violate the Bankruptcy Code. The Code did not require, or even permit, the plan to treat all secured claims the same. The only requirements for the treatment of a secured claim were in 11 U.S.C. § 1325(a)(5), that (1) the creditor retain its lien; and (2) the present value of the property to be distributed under the plan be equal to the allowed amount of the claim. The Model Plan met those requirements. To confirm a plan, the court had to find, under 11 U.S.C. § 1325(a)(6), that the plan was feasible. Upon default, the secured creditor had several options, including seeking relief from stay under 11 U.S.C. § 362(d)(1), moving to dismiss the case under 11 U.S.C. § 1307(c)(6), and seeking expedited consideration of such motions under Fed. R. Bankr. P. 9006(c). In re Stewart, 2003 Bankr. LEXIS 229, — B.R. — (Bankr. E.D. Mich. March 21, 2003) (Rhodes, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 8:1322.04 [back to top]

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Proper interest rate to be applied to undersecured loan in chapter 13 cramdown is the current market rate, not the contract rate. 6th Cir. PROCEDURAL POSTURE: In a chapter 13 bankruptcy proceeding, appellant creditor challenged the rate of interest held by the bankruptcy court (rather than the contract rate) to be the proper rate on the debtor’s undersecured vehicle loan. The District Court for the Eastern District of Kentucky sustained the judgment of the bankruptcy court, and the creditor appealed. OVERVIEW: The creditor agreed that the vehicle’s present value was less than the unpaid principal of the loan, so that the creditor had an unsecured claim for the difference between the principal and the value of the collateral. The creditor contended that it was entitled to the contract rate of interest on the entire loan balance, rather than eight percent as claimed by the debtors. The bankruptcy court made a finding as to the current market rate for similar loans in the region, and that, because interest rates had experienced a recent rise, the rate should be one percent higher. The district court found that this ruling was not clearly erroneous, and the court of appeals agreed, holding that the proper interest rate to be applied in a chapter 13 cram down was the current conventional market rate used for similar loans in the region, and not necessarily the contract rate. The bankruptcy court ruling was supported by testimony that the creditor (a sub-prime lender charging high interest rates) offered loans at lower rates, and, by a local bank officer, that the weighted average interest rate of all conventional car loans in the area was the same as found by the bankruptcy court. Household Auto Fin. Corp. v. Burden (In re Kidd), 2003 U.S. App. LEXIS 188, 315 F.3d 671 (6th Cir. January 8, 2003) (Daughtrey, C.J.).

Collier on Bankruptcy, 15th Ed. Revised 8:1325.06[3] [back to top]

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Law firms’ postpetition collection of fees from debtors did not violate stay. Bankr. N.D. Ill. PROCEDURAL POSTURE: Appellant bankruptcy debtors under chapter 7 brought actions against appellee law firms which represented the debtors, alleging that the law firms’ attempts to collect fees for their services under 11 U.S.C. § 329(a) violated the automatic stay and discharge provisions of 11 U.S.C. §§ 362 and 524. The debtors appealed the order of the bankruptcy court which dismissed the debtors’ actions. OVERVIEW: In accordance with the terms of retainer agreements providing for the payment of the law firms’ fees in monthly installments, the law firms deducted monthly payments from the debtors’ bank accounts. The debtors contended that the collection of such fees after petitions were filed violated the automatic stay provisions of 11 U.S.C. § 362, and the collection of fees after discharge violated the statutory injunction against collection after discharge set out in 11 U.S.C § 524. The district court held, however, that the law firms properly deducted monthly fees pursuant to 11 U.S.C. § 329, which governed the relationship between chapter 7 bankruptcy debtors and their attorneys and contemplated instances where fees would be paid after petitions were filed. Application of the automatic stay and discharge provisions which facially conflicted with section 329 would result in section 329 being rendered superfluous and would be contrary to the congressional intent to protect the rights of chapter 7 debtors to the assistance of counsel. Bethea v. Robert J. Adams & Assocs., 2003 U.S. Dist. LEXIS 75, 287 B.R. 906 (N.D. Ill. January 2, 2003) (Zagel, D.J.).

Collier on Bankruptcy, 15th Ed. Revised 3:329.01 [back to top]

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Debtors allowed to avoid fixing of mortgage deficiency liens to the extent exemption was impaired. Bankr. N.D. Ill. PROCEDURAL POSTURE: The debtors filed a motion to avoid judicial liens under 11 U.S.C. § 522(f)(1). The creditor argued that the liens were obtained following foreclosure sales of nonresidential properties owned by the debtors, and encumbered the debtors’ home residence, and thus the mortgage deficiency liens could not be avoided under 11 U.S.C. § 522(f)(2)(C), because the underlying mortgage deficiency judgments arose out of mortgage foreclosures. OVERVIEW: Mortgage deficiency judgments, by their nature and operation, were sufficiently distinct from mortgage foreclosure proceedings to be outside the purview of section 522(f)(2)(C). A deficiency judgment was a legal remedy which, by 735 Ill. Comp. Stat. 5/15-1508(e), was allowed as a relief incidental to a foreclosure. Unquestionably, a deficiency judgment related back to its associated foreclosure proceeding in that the deficiency amount coalesced into a discrete monetary sum when the sale was consummated. The deficiency judgments, as a remedy, were distinct from, and complementary to foreclosures, and arose out of the underlying obligation, not “out of a mortgage foreclosure” as required by section 522(f)(2)(C). As such, the debtors were unhampered by section 522(f)(2)(C) in avoiding the mortgage deficiency liens. Given the objectives of 11 U.S.C. § 522(f), Congress could not have intended to grant greater rights to holders of judgment liens from mortgage foreclosures on non-exempt property than other holders of judgment liens on the exempted property. Logic defied any argument in favor of entitling the creditor to special protections against avoidance of its liens. In re Linane, 2003 Bankr. LEXIS 230, — B.R. — (Bankr. N.D. Ill. March 17, 2003) (Hollis, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:522.11 [back to top]

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Marital debt to former spouse discharged on basis of inability to pay due to poor health and inability to work. Bankr. C.D. Ill. PROCEDURAL POSTURE: Defendant debtor filed a chapter 7 petition. Plaintiff, the debtor’s former spouse, filed an action pursuant to 11 U.S.C. § 523(a)(15) to determine the dischargeability of debt related to marital obligations. OVERVIEW: The marital debt in issue resulted from the divorce of the debtor and his former spouse. In evaluating the former spouse’s complaint, the court found that the debtor lacked the ability to pay the marital debt. The debtor was unemployed and his income consisted only of retirement pay. The debtor had not attained the age for Social Security eligibility. The court found that the debtor was also in poor health and suffering from multiple medical conditions. Because of the debtor’s health, he was not able to seek employment. He applied for Social Security Disability Insurance, but had not been approved. The court determined that where the debtor lacked the ability to pay the subject indebtedness, the inquiry ended and the debt was deemed dischargeable pursuant to 11 U.S.C. § 523(a)(15). Gipin v. Gilpin (In re Gilpin), 2002 Bankr. LEXIS 1485, 287 B.R. 921 (Bankr. C.D. Ill. December 26, 2002) (Lesson, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:523.21 [back to top]

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Creditor’s secured claim included all proceeds generated postpetition and was not fixed as of the petition date. Bankr. E.D. Mo. PROCEDURAL POSTURE: Movant, a creditor, filed a motion for summary judgment and debtor filed a cross-motion for summary judgment to determine the value of the creditor’s secured and total claim against the debtor’s estate under 11 U.S.C. § 506(a). OVERVIEW: The creditor and the debtor had entered into an agreement where the creditor would finance the debtor’s purchase of equipment to be used in the debtor’s business. The debtor granted a security interest in substantially all of its assets, including the equipment and the proceeds from renting it. The debtor filed a petition for relief under chapter 11. The debtor requested to use the creditor’s case collateral to finance its business operations, to which the creditor did not object. The creditor asserted that the value of its secured claim included the full amount of proceeds of the equipment generated during the pendency of the debtor’s bankruptcy. The debtor argued that the value of the claim was fixed as of the petition date. The court determined that the creditor’s secured claim included the value of all the proceeds generated postpetition as a matter of law. Also, under Eighth Circuit precedent, the debtor was allowed to surcharge the value of the secured claim under 11 U.S.C. § 506(c) by the amount the debtor expended in continuing to operate its business. There was a genuine issue of material facts as to the amount of sales proceeds that the debtor remitted to the creditor. In re Mach, Inc., 2002 Bankr. LEXIS 1502, 287 B.R. 755 (Bankr. E.D. Mo. December 11, 2002) (McDonald, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:506.03 [back to top]

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Oversecured creditor allowed to collect default interest at contract rate. Bankr. W.D. Mo. PROCEDURAL POSTURE: The chapter 11 trustee filed a motion to determine that an oversecured creditor, a loan participant, was not entitled to collect default interest. The creditor argued that 11 U.S.C. § 506(b) was the sole determinant of whether a creditor was entitled to an award of interest, and that the plain language of the Bankruptcy Code allowed for the unqualified recovery of interest because the contract so provided. OVERVIEW: The debtor had defaulted on one payment before bankruptcy. The creditor could assess interest at the default rate as to the portion of the defaulted payments applied to its debt, and only as to payments not timely made. The loan provided that the default interest rate was triggered automatically if any one payment was missed, but only on the defaulted amount. The creditor could not collect default interest on the entire debt because the loan was not accelerated. A “default-upon-bankruptcy filing” clause contravened the automatic stay. The filing of the bankruptcy did not per se accelerate the loan. The creditor took no affirmative action to accelerate the loan. The creditor was not entitled to the default rate of interest on its portion of the outstanding loan. The creditor was entitled to the default interest rate on its portion of the missed payment until payment was made, and could assess the default interest rate on its portion of any missed postpetition payments, to the extent permitted by the loan. 11 U.S.C. § 506(b) allowed interest to an oversecured creditor at the contract rate. There was no equitable reason to deny the default rate of interest on the defaulted payment. In re Payless Cashways, Inc., 2002 Bankr. LEXIS 1496, 287 B.R. 482 (Bankr. W.D. Mo. December 24, 2002) (Federman, C.B.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:506.04 [back to top]

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Debtor’s hold harmless obligation set forth in marriage dissolution decree was nondischargeable. Bankr. E.D. Mo. PROCEDURAL POSTURE: In a bankruptcy liquidation proceeding, plaintiff former wife filed an adversary complaint claiming that defendant debtor’s assumption of certain marital debts in the parties’ marriage dissolution decree and the debtor’s obligation to hold her harmless for those marital debts were nondischargeable under 11 U.S.C. § 523(a)(5)(B) or (a)(15), and that the debtor’s obligation to a creditor was nondischargeable under 11 U.S.C. § 523(a)(2)(A). OVERVIEW: The court initially held that the hold harmless obligation contained in the parties marriage dissolution decree was a debt to a former spouse in the nature of support and maintenance and was, thus, nondischargeable under 11 U.S.C. § 523(a)(5)(B). The court then held that the debtor’s obligation on the underlying marital debt to third party creditors was not a debt to a spouse, former spouse or child of the debtor and, thus, did not fall within the scope of 11 U.S.C. § 523(a)(5), and that the debtor’s obligation on the underlying marital debt to the third party creditors was not within the scope of 11 U.S.C. § 523(a)(15). The court further held that the former wife failed to produce any evidence that a certain creditor justifiably relied upon the debtor’s alleged improper use of her social security number and, thus, failed to prove that the debtor’s obligation to that creditor was nondischargeable under 11 U.S.C. § 523(a)(2)(A). The court finally held that the former wife was not entitled to attorney’s fees under 11 U.S.C. § 523(d) because she was not a debtor who prevailed on a claim that consumer debt was excepted from discharge under 11 U.S.C. § 523(a)(2). McKinnis v. McKinnis (In re McKinnis), 2002 Bankr. LEXIS 1503, 287 B.R. 245 (Bankr. E.D. Mo. December 6, 2002) (McDonald, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:523.01 [back to top]

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