Collier Bankruptcy Case Update February-19-01
A Weekly Update of Bankruptcy and Debtor/Creditor Matters
Collier Bankruptcy Case Update
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.
February 19, 2001
CASES IN THIS ISSUE
(scroll down to read the full summary)
- 2d Cir.
§ 544(a)(1) Trustee granted summary judgment complaint to recover a fraudulent transfer under New York law.
Skalski v. Barden (In re Skalski) (Bankr. W.D.N.Y.) 023025
§ 350(b) Bankruptcy court had jurisdiction to reopen chapter 7 case.
Martin’s Aquarium, Inc. v. Goldstein (In re Martin’s Aquarium, Inc.) (E.D. Pa.) 023006
§ 507(a)(8) Claims held by private entity, as city’s assignee, not entitled to priority.
National Tax Funding v. Thomas (In re Thomas) (Bankr. W.D. Pa.) 023014
§ 524 Creditor’s actions in enforcing charging order did not violate discharge order.
Keeler v. Academy of American Franciscan History, Inc. (In re Keeler) (Bankr. D. Md.) 023022
§ 363(m) Appeal of bankruptcy court’s authorization of sale was dismissed as moot.
Ginther v. The Ginther Trusts (In re Ginther Trusts) (5th Cir.) 023012
§ 523(a)(2)(A) Innocent partners could not discharge debt.
Deodati v. M.M. Winkler & Assocs. (In re M.M. Winkler & Assocs.) (N.D. Miss.) 023016
§ 105(a) Petition preparer was found in contempt.
In re Walker (Bankr. N.D. Ohio) 023002
§ 101(54) Transfer occured when wages were earned, not when garnishment payment was remitted.
James v. Planters Bank (In re James) (B.A.P. 8th Cir.) 023001
§ 362(d) Circumstances warranted annulment or retroactive lifting of stay to validate foreclosure sale.
In re Williams (Bankr. W.D. Mo.) 023011
§ 523(a)(5) State was entitled to judgment as matter of law.
Hardin v. South Carolina Dept. of Social Servs. (In re Hardin) (Bankr. E.D. Ark.) 023017
§ 547(b)(5) Payments held not to be preferential because they did not reduce assets of estate.
R.M. Taylor, Inc. v. H.M. White, Inc. (In re R.M. Taylor, Inc.) (Bankr. W.D. Mo.) 023027
Rule 9019(a) Settlement not approved because creditors were likely to succeed in fraudulent transfer litigation and recover 100 percent of their claims.
In re Revelle (Bankr. W.D. Mo.) 023039
§ 330(a)(2) Failure to comply with confirmation requirements was basis for reduction in professional fees.
In re Crown Oil, Inc. (Bankr. D. Mont.) 023004
§ 362(a) Prepetition sale did not violate stay.
In re McLouth (Bankr. D. Mont.) 023008
§ 362(b)(1) Stay exception was no defense to avoidable transfer.
Gandara v. Bitterroot Rock Prods. (In re Gandara) (Bankr. D. Mont.) 023010
§ 523(a)(8) Student loans were excepted from discharge.
Marsh v. Moorehead State College (In re Marsh) (Bankr. D. Mont.) 023020
§ 1325(a)(3) Failure to disclose girlfriend’s income in chapter 13 petition did not constitute bad faith.
In re Gress (Bankr. D. Mont.) 023031
§ 1325(a)(5) Dual valuation method was applied to determine payments required to adequately protect secured creditor.
In re Farmer (Bankr. D. Mont.) 023033
§ 523(a)(1) Chapter 11 debtor’s postpetition, preconfirmation tax obligation was nondischargeable.
In re Tuttle (Bankr. D. Kan.) 023015
Rule 8017(b) The B.A.P. had jurisdiction to stay mandate pending appeal to the Court of Appeals.
Fross v. MJPB, Inc. (In re Fross) (B.A.P. 10th Cir.) 023038
§ 109(e) Debtor held eligible for chapter 13 relief over creditor’s argument that debtor was not an 'individual with regular income.'
In re Goodrich (Bankr. M.D. Fla.) 023003
§ 1325(b) Court granted trustee’s motion to modify confirmed plan to add proceeds from workers’ compensation settlement as disposable income.
In re Tolliver (Bankr. M.D. Fla.) 023035
Collier Bankruptcy Case Summaries
Trustee granted summary judgment complaint to recover a fraudulent transfer under New York law. Bankr. W.D.N.Y. The chapter 7 trustee moved for summary judgment on an adversary complaint seeking, among other things, to recover a fraudulent transfer pursuant to the state (New York) debtor and creditor law. The trustee claimed that debtor transferred her home to her daughter and son-in-law, took a note in the amount of $ 35,000 in return, and, at some point in time, forgave the $35,000 obligation in violation of state law. The bankruptcy court granted the trustee’s summary judgment motion, and held that the trustee made a prima facie case that the transfer was fraudulent under the state’s debtor and creditor law and Code section 544 because there was no fair consideration and the debtor was insolvent at the time the transferred occurred, or was rendered insolvent thereby. The court rejected the transferees’ claim that their promise of future support constituted fair consideration. In addition, the court found the transferees’ argument that they lacked knowledge of the debtor’s insolvency and took title in good faith to be unavailing because state law required not only good faith, but good consideration as well.Skalski v. Barden (In re Skalski), 2001 Bankr. LEXIS 30, – B.R. – (Bankr. W.D.N.Y. January 2, 2001) (Kaplan, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 5:544.05
Bankruptcy court had jurisdiction to reopen chapter 7 case. E.D. Pa. In 1998 the creditors, who had commenced a state court action against the debtor and its owners, filed an involuntary chapter 7 petition against the debtor. The trustee filed an adversary proceeding to recover a fraudulent conveyance, and the creditors participated in the action. After judgment was entered against the owners of the debtor business, the bankruptcy court approved a negotiated settlement. In April 2000, with the settlement payment still outstanding, one of the creditors reinitiated the suit in state court, and the debtor’s owners filed a motion in bankruptcy court to reopen the adversary proceeding. The court dismissed the motion for lack of jurisdiction, setting forth factual findings and suggesting that the court would have ruled against the owners if the court had jurisdiction. The owners appealed. The district court reversed, holding that it was unable to determine whether the bankruptcy court exercised its discretion in not reopening the case under section 350(b), or whether the court erroneously concluded that it lacked subject matter jurisdiction to consider reopening under that provision. The district court remanded for a determination of that issue.Martin’s Aquarium, Inc. v. Goldstein (In re Martin’s Aquarium, Inc.), 2001 U.S. Dist. LEXIS 666, – B.R. – (E.D. Pa. January 26, 2001) (Padova, D.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:350.03
Claims held by private entity, as city’s assignee, not entitled to priority. Bankr. W.D. Pa. Pursuant to Rule 9023 or 9024, a private entity, as the assignee of a city’s tax liens, moved to amend a bankruptcy court decision. In the challenged decision, expressed by the court in a memorandum opinion, the court held that the assignee did not have priority claims, nor were its liens perfected. The bankruptcy court granted the reconsideration motion, in part, and denied the motion, in part. The court held that the assignee’s claims did not have section 507(a)(8) priority because, under the plain language of that section, priority depends on the holder of the claims being a 'governmental unit.' The court also held that examination of whether the assignee’s liens were perfected was a necessary part of the prior decision, and the memorandum opinion was not advisory; that the lack of recording of the lien in the name of the assignee, as the entity that actually held the claim on the date the debtors’ bankruptcy was filed, rendered the lien unenforceable; and that prepetition penalties that were purchased were allowed as part of the assignee’s claim to the extent that the penalties and interest charges combined did not exceed ten percent.National Tax Funding v. Thomas (In re Thomas), 2001 Bankr. LEXIS 32, – B.R. – (Bankr. W.D. Pa. January 18, 2001) (Fitzgerald, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:507.10
Creditor’s actions in enforcing charging order did not violate discharge order. Bankr. D. Md. The chapter 7 debtor brought proceedings for declaratory relief seeking a determination that prepetition charging orders entered by a county court in favor of a creditor and against the debtor’s partnership interests were terminated by the discharge. The debtor also alleged that the creditor’s attempts to collect income on account of the partnership interests violated the discharge, and that the partnership’s escrow agent had received income from the partnership that it refused to pay over to the debtor. The parties cross-moved for summary judgment. The bankruptcy court granted summary judgment in favor of the creditor and the escrow agent. Based on the undisputed facts presented, the court held that no violation of the discharge occurred by the creditor’s post discharge actions in enforcing and liquidating its charging order through collection of the partnership distributions. The court explained that the discharge was a permanent injunction that barred the commencement or continuation of actions to recover or collect a debt as a personal liability of a debtor and voids any judgment to the extent that the judgment was a determination of personal liability of the debtor. However, the discharge injunction did not extinguish the liability itself. The court concluded that although any action to collect upon the lien was stayed during the debtor’s case, the lien itself 'rode through' the case and remained viable against property captured before the case commenced. The court stated that while the prepetition judgment could not be used postdischarge as the basis for obtaining any new liens or for collection against the debtor personally, no facts were asserted to suggest that the creditor had attempted any such prohibited actions.Keeler v. Academy of American Franciscan History, Inc. (In re Keeler), 2001 Bankr. LEXIS 31, – B.R. – (Bankr. D. Md. January 11, 2001) (Keir, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 5:524.02
Appeal of bankruptcy court’s authorization of sale was dismissed as moot. 5th Cir. The grantors created a revocable inter vivos trust to which they transferred their interest in real property. Upon the death of one grantor in 1989, and in accordance with the trust agreement, the trust’s 51 percent interest in the property was divided into two separate shares, which were then placed into the debtor company, a joint venture serving as successor trustee. In 1998 the debtor filed a chapter 11 petition. In response to the challenge by certain creditors to the debtor’s standing to file, the bankruptcy court found that the debtor constituted a de facto joint venture under state (Texas) law and that it did have the proper standing. The venture and other owners entered into an agreement to sell the property to a purchaser subject to approval by the court. The surviving grantor challenged the debtor’s record title to the property and attempted to block the sale but did not challenge the purchaser’s status as a good faith purchaser until the eventual appeal to the district court. The bankruptcy court approved the sale, and the grantor appealed to the district court and then the Court of Appeals for the Fifth Circuit, seeking a stay of the sale pending each appeal. The district court refused to grant a stay, and the sale was consummated. Despite the failure to obtain a stay, the grantor appealed the authorization of the sale to the district court, which dismissed the appeal as moot because the sale had already closed. This second appeal followed. The Court of Appeals affirmed, holding that, pursuant to section 363(m), the bankruptcy court’s authorization of the sale of property to a good faith purchaser could not be reversed or modified, unless such authorization or sale were stayed pending appeal. The Court of Appeals noted that the challenge to the purchaser’s good faith status was being made for the first time on appeal, and thereby declined to address the issue. Ginther v. The Ginther Trusts (In re Ginther Trusts), 2001 U.S. App. LEXIS 1167, – F.3d. – (5th Cir. January 29, 2001) (PER CURIAM).
Collier on Bankruptcy, 15th Ed. Revised 3:363.11
Innocent partners could not discharge debt. N.D. Miss. The creditor appealed a decision of the district court upholding the bankruptcy court’s judgment in favor of the chapter 7 debtors. One of the debtors’ partners in their accounting firm placed the creditor’s money in her personal bank account and generated fictitious income statements to conceal the fraud. Although the debtors were unaware of the fraud and did not receive any of the stolen money individually or through the partnership, they admitted to the vicarious liability imposed by state (Mississippi) law. The bankruptcy and district courts held that section 523(a)(2)(A) did not bar the innocent partners from discharging the fraud unless they benefitted from the fraud and the perpetrator of the fraud acted in the ordinary course of partnership business. The Court of Appeals for the Fifth Circuit reversed, holding that because the debt arose from fraud and the debtors were liable for that debt under state partnership law, the debt was nondischargeable under section 523(a)(2)(A). The receipt of benefits and the ordinary course of business were irrelevant to the inquiry as a matter of law (citing Collier on Bankruptcy, 15th Ed. Revised).Deodati v. M.M. Winkler & Assocs. (In re M.M. Winkler & Assocs.), 2001 U.S. App. LEXIS 1359, – F.3d – (N.D. Miss. February 1, 2001) (Jones, C.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:523.08
Petition preparer was found in contempt. Bankr. N.D. Ohio The United States trustee moved to hold the chapter 7 debtor’s petition preparer in contempt for failure to refund fees to the debtor and to pay a fine pursuant to a prior court order. The preparer, although given notice of the court order, the motion for contempt and the scheduled hearing date, failed to appear in court. The bankruptcy court found that the petition preparer did not present any evidence that he was unable to comply with the order, even though given a chance to do so both at the time the order was entered and at the contempt hearing. The court imposed an additional fine of ten dollars for each day that he failed to pay the fine from the original order.In re Walker, 2001 Bankr. LEXIS 37, – B.R. – (Bankr. N.D. Ohio January 26, 2001) (Morgenstern-Clarren, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 2:105.04
Transfer occured when wages were earned, not when garnishment payment was remitted. B.A.P. 8th Cir. Bank obtained a judgment against the debtor and, later, a judgment of garnishment which required the debtor’s employer to make payments of the debtor’s wages to the bank. After thirteen payments were made, the debtor filed a chapter 7 petition. The debtor filed a complaint to recover nine of the thirteen payments as preferences, and to hold the bank in contempt for violation of the automatic stay on the grounds that the last payment was made after the date the chapter 7 petition was filed. The debtor asserted that the dates of transfer for preference purposes were either the dates that the bank received the payments or the dates the employer sent the wages to the bank. The bankruptcy court held that only five of the payments were preferences and that no violation of the automatic stay occurred. The B.A.P. affirmed, holding that the dates of transfer of the garnished wages were the dates that the wages were earned, not the later remittance dates. Under state (Arkansas) law, service of the writ of garnishment created a lien in favor of the bank which attached to the wages when the employer became obligated to the debtor employee. Thus, the employer’s obligation to the bank arose when the wages were earned. Since the wages were earned more than 90 days before the chapter 7 petition was filed, the payments were not preferences, even though the payments were remitted within the 90 day period.James v. Planters Bank (In re James), 2001 Bankr. LEXIS 25, – B.R. – (B.A.P. 8th Cir. January 24, 2001) (Kressel, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 2:101.54; 5:547.05[b]
Circumstances warranted annulment or retroactive lifting of stay to validate foreclosure sale. Bankr. W.D. Mo. A mortgagor and the chapter 13 debtor filed competing motions with respect to a foreclosure sale of the debtor’s residence conducted by the mortgagor in violation of the automatic stay. The mortgagor sought validation of the sale, and the debtor sought relief for the stay violation. The bankruptcy court held that actions taken in violation of the automatic stay were voidable, and not void ab initio, and the circumstances in this case warranted annulment or retroactive lifting of the stay to validate the mortgagor’s foreclosure sale. The court noted the following factors that may be considered in determining whether to grant the extraordinary relief of annulment or retroactive lifting of the automatic stay: whether the creditor had actual or constructive knowledge of the bankruptcy filing and, therefore, of the stay; whether the debtor has acted in bad faith; whether there was equity in the property of the estate; whether the property was necessary for an effective reorganization; whether grounds for relief from the stay existed and a motion, if filed, would have been granted prior to the violation; whether failure to grant retroactive relief would cause unnecessary expense to the creditor; whether the creditor detrimentally changed its position on the basis of the action taken; whether the creditor took some affirmative action postpetition to bring about the violation of the stay; and whether the creditor promptly sought retroactive lifting of the stay and approval for the action that was taken. The court found that several of the foregoing factors were present in this case. The court acknowledged that the automatic stay was at the very heart of the protections extended to debtors, and that violations of the automatic stay should not be lightly regarded or routinely condoned. Nevertheless, the court found that in this case, exceptional circumstances existed making it equitable and appropriate to annul the stay, grant retroactive relief to the creditor, and validate the foreclosure sale (citing Collier on Bankruptcy 15th Ed. Revised).In re Williams, 2001 Bankr. LEXIS 29, – B.R. – (Bankr. W.D. Mo. January 12, 2001) (Venters, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:362.07
State was entitled to judgment as matter of law. Bankr. E.D. Ark. The chapter 7 debtor filed an adversary proceeding, seeking a determination that his child support obligation was dischargeable under section 523(a)(5) because the debt was assigned to the state (South Carolina). The debtor asserted that the state had to demonstrate that it took the assignment in order to collect money it had paid to support the minor child, not merely for the purpose of collecting the money for the minor child or parent entitled to receive the support. The state moved for judgment on the pleadings. The bankruptcy court granted the state’s motion for judgment on the pleadings, holding that the child support obligation could not be discharged even if the obligation was assigned, so long as the assignment was to a state or federal entity. The court noted that the dischargeability was not limited by reason of the assignment to the government agency (citing Collier on Bankruptcy, 15th Ed. Revised).Hardin v. South Carolina Dept. of Social Servs. (In re Hardin), 2001 Bankr. LEXIS 39, – B.R. – (Bankr. E.D. Ark. January 29, 2001) (Scott, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:523.11
Payments held not to be preferential because they did not reduce assets of estate. Bankr. W.D. Mo. The debtor was a general contractor engaged in manufacturing conveyor systems for the automotive industry. The debtor was in the practice of hiring subcontractors to complete various projects. The creditor, a sheet metal contractor, was hired by the debtor, and the parties’ agreement required the debtor to pay $477,868 for the work it was to perform. The debtor made several payments, the last two of which became the subject of a preference action. Commensurate with the payments, the debtor obtained partial lien releases from the creditor. These releases were required by the debtor to receive payments for certain construction projects. In 1997, the debtor filed a chapter 11 petition. Thereafter, the debtor in possession filed an adversary proceeding seeking to avoid the last two payments as a preference. After conversion to chapter 7, the trustee maintained the preference action, arguing that all elements of a preference under section 547(b) had been met. The bankruptcy court held that the payments did not constitute a preference because the estate would have been reduced by the amount of the payments had the debtor filed a chapter 7 petition without making those payments. The court reasoned that the third entity’s obligation to the debtor would have been reduced had the payments not been made, and that the creditor waived its lien rights in exchange for payment (citing Collier on Bankruptcy 15th Ed. Revised). R.M. Taylor, Inc. v. H.M. White, Inc. (In re R.M. Taylor, Inc.), 2000 Bankr. LEXIS 1633, – B.R. – (Bankr. W.D. Mo. December 8, 2000) (Federman, C.B.J.).
Collier on Bankruptcy, 15th Ed. Revised 5:547.03
Settlement not approved because creditors were likely to succeed in fraudulent transfer litigation and recover 100 percent of their claims. Bankr. W.D. Mo. The chapter 13 debtor purchased a life insurance policy on the life of his spouse, who was subsequently murdered. As a result of certain of the debtor’s actions, the insurance proceeds were not paid to the debtor but to a conservatorship for the benefit of his children. The chapter 13 trustee filed a motion to approve a monetary settlement with the debtor and certain family members, whereby a portion of those proceeds would be paid to creditors in full satisfaction of their claims. Two objecting creditors held claims against the debtor as a result of the debtor’s conviction for misappropriation of funds during employment. The bankruptcy court denied the motion to approve the settlement, holding that the settlement was not in the paramount interest of the creditors nor a proper deference to their views. Specifically, the court determined that the objecting creditors had a substantial probability of prevailing in the fraudulent transfer litigation and of recovering 100 percent of their claims if the matter was not settled, rather than the 69 percent provided for by the proposed settlement (citing Collier on Bankruptcy 15th Ed. Revised).In re Revelle, 2001 Bankr. LEXIS 36, – B.R. – (Bankr. W.D. Mo. January 12, 2001) (Federman, C.B.J.).
Collier on Bankruptcy, 15th Ed. Revised 10:9019.02
Failure to comply with confirmation requirements was basis for reduction in professional fees. Bankr. D. Mont. The debtor, an oil producing company, filed a chapter 11 petition on August 1, 1997, which was converted to chapter 7 on September 9, 1998. The conversion order set forth numerous deficiencies in the liquidating plan, including failure to address (1) IRS obligations, (2) assumption or rejection of leases, and (3) the method in which the debtor’s assets would be sold. The debtor’s attorney and the economist eventually filed applications seeking approval of professional fees in the amounts of $46,104 and $7,549.28, respectively. During the administration of the chapter 11 case, tax returns were incorrect, quarterly tax returns were delinquent, and the plan failed to address municipal problems with oil wells. The attorney testified that the debtor and its professionals knew that reorganization could not be successful given the low price of oil, and the fact that the debtor’s primary assets were disputed oil leases and potential preference actions against shareholders. The bankruptcy court applied section 330(a)(2) and awarded fees to the attorney and the economist in the amounts of $15,000 and $7,500, respectively. The court found that the attorney and economist sought compensation for submitting plans which failed to address confirmation requirements, never had a realistic chance of being approved, and that the two parties failed to demonstrate that the services they rendered throughout the pendency of the case were reasonably likely to benefit the estate. The court also found that there had been a lack of proper disclosure of oil prices to the creditors and the court. The parties filed a motion for reconsideration, which resulted in amended findings regarding the disclosures but did not reduce the awards.In re Crown Oil, Inc., 2000 Bankr. LEXIS 1626, – B.R. – (Bankr. D. Mont. September 13, 2000) (Kirscher, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:330.03
Prepetition sale did not violate stay. Bankr. D. Mont. The chapter 13 debtor filed a motion for turnover and sanctions for violation of the automatic stay against her secured lender. The debtor’s home was sold to a third party at a foreclosure sale several hours prior to the time the debtor filed her petition. The debtor argued that her petition stayed the sale because it was filed on the date of the sale, even though the sale took place before she filed her petition. The bankruptcy court denied the debtor’s motion, holding that the creditor did not violate the automatic stay because the stay was not in effect at the time of the sale. The court declined to adopt the 'indivisible day' rule urged by the debtor.In re McLouth, 2000 Bankr. LEXIS 1630, – B.R. – (Bankr. D. Mont. September 14, 2000) (Kirscher, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:362.03
Stay exception was no defense to avoidable transfer. Bankr. D. Mont. The chapter 11 debtors sought judgment against a creditor for funds held by the county attorney as an unauthorized postpetition transfer voidable under section 549(a). A check written by the debtor husband to the creditor was returned for insufficient funds. The creditor turned the check over to the county attorney’s office, which thereby informed the debtor that it would not prosecute him if he made the check good. The debtor paid the county attorney postpetition and the latter remitted the funds to the creditor. The creditor argued that the transfer was excepted from the automatic stay because the payment was for nondischargeable criminal restitution. The bankruptcy court entered judgment for the debtors, holding that the transfer of funds through the county attorney’s office in exchange for dismissal of the felony bad check charges was avoided pursuant to sections 549(a) and 550(a). Section 549 operated independently of the automatic stay, and section 362(b)(1) was no defense even if the payment was excepted from the stay (citing Collier on Bankruptcy, 15th Ed. Revised).Gandara v. Bitterroot Rock Prods. (In re Gandara), 2000 Bankr. LEXIS 1622, – B.R. – (Bankr. D. Mont. October 3, 2000) (Kirscher, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 3:362.05
Student loans were excepted from discharge. Bankr. D. Mont. The chapter 7 debtor sought discharge of student loan obligations based upon undue hardship. The debtor lived in public housing, never received a degree past high school and worked minimum wage jobs her entire life. Although her monthly income exceeded her expenses, the debtor argued that she would not be able to maintain a minimal standard of living and repay her student loan debts at the same time. The bankruptcy court dismissed the debtor’s complaint, holding that the debtor failed to show that excepting her student loan debts from her discharge would impose an undue hardship. The debtor failed to satisfy the first and second prongs of the test set forth in Brunner v. New York State Higher Educ. Servs. Corp., 831 F.2d 395 (2d Cir. 1987). She could not demonstrate inability to maintain a minimal standard of living if forced to repay her loans and that her state of financial affairs was likely to persist for a significant portion of the repayment period.Marsh v. Moorehead State College (In re Marsh), 2000 Bankr. LEXIS 1628, – B.R. – (Bankr. D. Mont. November 20, 2000) (Kirscher, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:523.14
Failure to disclose girlfriend’s income in chapter 13 petition did not constitute bad faith. Bankr. D. Mont. The debtor had cohabited with his girlfriend, who received monthly social security income of $500 and with whom the debtor financed the purchase of two motor vehicles, an automobile and a pickup truck, in the debtor’s name. The debtor filed a chapter 13 petition, listing his interest in four motor vehicles and listing the girlfriend as codebtor on the truck loan. The debtor’s schedules did not disclose the social security income. Shortly thereafter the girlfriend moved out of the debtor’s residence. The debtor’s first proposed plan treated the creditor on the automobile as having an allowed impaired secured claim and made no provision for the truck loan. After his girlfriend’s departure, the debtor filed an amended plan, removing the automobile loan from any treatment and instead providing for payment of a secured claim on the truck loan. The trustee filed objections, arguing that the debtor proposed the modified plan in bad faith by failing to disclose the social security income, thereby demonstrating a misrepresentation and egregious behavior. The bankruptcy court denied the trustee’s objections and confirmed the plan, finding that the debtor did not show a lack of good faith under section 1325(a)(3). The court reasoned that the girlfriend was listed as a codebtor, both vehicle loans were listed, and the girlfriend was not legally obligated to contribute her income to the debtor’s support. In re Gress, 2000 Bankr. LEXIS 1620, – B.R. – (Bankr. D. Mont. November 20, 2000) (Kirscher, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 8:1325.04
Dual valuation method was applied to determine payments required to adequately protect secured creditor. Bankr. D. Mont. The debtor filed a chapter 13 petition on August 3, 2000. The debtor had purchased a pickup truck pursuant to a retain installment contract and security agreement dated April 3, 1998. In her chapter 13 schedules, the debtor valued the truck at $9,800. The secured creditor filed a proof of claim in the amount of $16,759.01, which included principal, interest to the petition date, and late charges. The debtor was current in all preconfirmation plan payments to the trustee, but confirmation was not scheduled until January 2001. The creditor filed a motion seeking a modification of the stay, contending that it was not receiving adequate protection on the claim. The bankruptcy court held that the dual valuation method was the proper method of valuation for confirmation purposes under section 1325(a)(5)(B)(ii). Accordingly the court determined that the rate of depreciation on the vehicle could be calculated by comparing its value on the date of purchase and the date of the petition filing. The court concluded that the vehicle had depreciated at a rate of $215 per month. The court then determined that the monthly calculated depreciation was then deducted from the petition date value for the five additional months from August 2000 to January 2001, which calculation provided the creditor with adequate protection and required an amendment to the allowed secured claim (citing Collier on Bankruptcy, 15th Ed.).In re Farmer, 2000 Bankr. LEXIS 1625, – B.R. – (Bankr. D. Mont. November 16, 2000) (Kirscher, B.J.).
Collier on Bankruptcy, 15th Ed. Revised 8:1325.06
Chapter 11 debtor’s postpetition, preconfirmation tax obligation was nondischargeable. Bankr. D. Kan. Chapter 11 debtor’s plan provided for full payment of the principal on a nondischargeable priority tax claim as well as postconfirmation interest. However, the plan did not provide for payment of any interest accruing between filing of the petition and confirmation. Since this gap period was six years, the interest amounted to $30,000. The IRS asserted that the interest accruing postpetition was nondischargeable. The bankruptcy court held that the postpetition, preconfirmation interest accruals on the priority tax obligation were not discharged in the chapter 11 case.The bankruptcy court reasoned that section 1129(a)(9)(C) established the requirements for payment of a priority tax claim and, since that section did not require payment of interest accruing between the filing of the petition and confirmation, Congress intended those sums to be dischargeable. However, since the Court of Appeals for the Tenth Circuit had declared Bruning to be applicable in chapter 11 cases, the bankruptcy court was not free to apply the reasoning it believed to be correct.In re Tuttle, 2000 U.S. Dist. LEXIS 19357, – B.R. – (Bankr. D. Kan. October 30, 2000) (Pusateri, C.B.J.).
Collier on Bankruptcy, 15th Ed. Revised 4:523.07; 4:507.10; 7:1129.03
The B.A.P. had jurisdiction to stay mandate pending appeal to the Court of Appeals. B.A.P. 10th Cir. The bankruptcy court dismissed the debtors’ chapter 11 petition, holding that the debtors were unable to formulate a confirmable plan. The debtors appealed to the B.A.P. for the Tenth Circuit. The bankruptcy court issued an order staying its dismissal order pending the appeal and requiring the debtors to provide a mortgage creditor proof of insurance on their residence. In December 2000, the B.A.P. affirmed the dismissal order, and on January 5, 2001, prior to the B.A.P. issuing a mandate but after the stay had expired, the debtors filed a notice of appeal to the Court of Appeals for the Tenth Circuit, also filing a motion seeking stay of the mandate and a stay pending the appeal. The creditor notified the B.A.P. that it did not object to the continuation of the bankruptcy court stay but did not address the debtor’s request for a stay of the mandate. The B.A.P. addressed the issue of its jurisdiction pursuant to Rule 8017(b), and held that the B.A.P. had jurisdiction over motions to stay the mandate and motions for stay pending appeal that were filed simultaneously with or after the filing of a notice of appeal, provided the B.A.P. did not yet issue a mandate. The B.A.P. noted that its ruling was in keeping with general principles of postjudgment jurisdiction, which included holdings that lower courts retain jurisdiction after a notice of appeal over tangential matters, such as issuance of stays pending appeal. The B.A.P. granted the debtors’ motion.Fross v. MJPB, Inc. (In re Fross), 2001 Bankr. LEXIS 34, – B.R. – (B.A.P. 10th Cir. January 24, 2001) (PER CURIAM).
Collier on Bankruptcy, 15th Ed. Revised 10:8017.02
Debtor held eligible for chapter 13 relief over creditor’s argument that debtor was not an 'individual with regular income.' Bankr. M.D. Fla. A creditor objected to confirmation of the chapter 13 debtor’s plan. Arguing that the debtor was not eligible for chapter 13 relief because he was not an individual with regular income as required by section 109(e). The creditor also argued that the debtor did not have regular income on the date he filed his petition because his income was not sufficient for him to make payments under his plan. The bankruptcy court rejected this argument, and held that the debtor had the ability to make the payments under his plan and was eligible to be a debtor under chapter 13. The court explained that it was not the date of the filing of the debtor’s petition that determined whether debtor has regular income, but the court could view the circumstances prospectively, at the time of confirmation. The court stressed that the relevant inquiry was whether the debtor could make the required payments under the plan. In this case, at the time of the confirmation hearing, the debtor was substantially current with the plan payments.In re Goodrich, 2000 Bankr. LEXIS 1642, – B.R. – (Bankr. M