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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.

November 18, 2002

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

 

Collier Bankruptcy Case Summaries

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2d Cir.

Stay modified to allow liquidating trustee in another bankruptcy to pursue preferential transfer claim against debtor. Bankr. D. Conn. PROCEDURAL POSTURE: The debtor filed a chapter 11 petition under the U.S. Bankruptcy Code and the case was later converted to chapter 7. A liquidating trustee (the movant) in another bankruptcy matter filed a motion to modify the automatic stay under 11 U.S.C. § 362(a). The movant sought to obtain a judgment against the debtor in action to recover alleged preferential transfers. The chapter 7 trustee objected. OVERVIEW: The movant sought to use the judgment as a defense to the allowance and payment of a proof of claim filed by the debtor in a separate bankruptcy proceeding which the movant was involved. The movant was a liquidating trustee in a confirmed chapter 11 plan in consolidated bankruptcy cases. Before filing for bankruptcy, the debtor had filed a claim in the other bankruptcy proceeding, and the movant objected. The court believed that it had the power to condition any order it issued, but that any such condition did not require the prior commencement of an adversary proceeding, as if the condition were an injunction. It was the court’s responsibility in ruling on the motion, to allow pending litigation to continue and to state the conditions of any stay modification, even if the court where the pending litigation was located was another bankruptcy court. Without a stay modification, no further action on the pending litigation was possible. Goldin Assocs., LLC v. Shared Techs. Cellular, Inc. (In re Shared Techs. Cellular, Inc.), 2002 Bankr. LEXIS 873, 281 B.R. 804 (Bankr. D. Conn. August 1, 2002) (Krechevsky, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 3:362.03

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Bankruptcy court abused discretion in lifting stay despite factual issues as to dischargeability of debt. 2d Cir. PROCEDURAL POSTURE: Debtors appealed from a judgment of the district court affirming an order of the bankruptcy court lifting an automatic stay imposed under 11 U.S.C. § 362(a) in debtors’ bankruptcy proceedings. OVERVIEW: After plaintiffs obtained a multi-million dollar verdict in California state court against debtors, the debtors filed a petition for bankruptcy and obtained an automatic stay preventing plaintiffs from reducing their favorable verdict into a final judgment. In response to the stay, plaintiffs began an adversary proceeding in the same bankruptcy court arguing that the stay be lifted because the debt owed them — represented by the California verdict — was not one dischargeable in bankruptcy. On appeal from the district court’s order affirming the stay, the court of appeals found that a question existed as to whether some of the misrepresentations in the case satisfied the nondischargeability exception for fraudulent statements under 11 U.S.C. § 523(a)(2)(A). As such, the evidence relied on by the jury in the California action was the key to determining whether the debtors’ debt was obtained by fraud. Thus, to justify lifting the stay, the court of appeals found that it would have to speculate on what evidence was presented to the jury and in light of this uncertainty, and as such, the court held that the bankruptcy court abused its discretion when it lifted the stay. Schneiderman v. Bogdanovich (In re Bogdanovich), 2002 U.S. App. LEXIS 9171, 292 F.3d 104 (2d Cir. May 15, 2002) (Cardamone, C.J.).

Collier on Bankruptcy, 15th Ed. Revised 3:362.07

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Bankruptcy court granted partial discharge of marital property distribution obligation. Bankr. D. Vt. PROCEDURAL POSTURE: In bankruptcy proceedings, plaintiff ex-husband sued defendant debtor, challenging debtor’s right to discharge a property distribution obligation set forth in the parties’ final order of divorce. Debtor filed a cross-claim for back child support owed by the husband. OVERVIEW: Upon the parties divorce, debtor took possession of the family home, and gave the husband a mortgage in an amount representing his financial interest in the home. Subsequently, the husband discharged the mortgage he held so debtor could refinance the mortgage debt. Debtor then sought to discharge the husband’s now unsecured claim in the home. The court held that the husband had made a prima facie showing that the debt was within the scope of section 11 U.S.C. § 523(a)(15). Therefore, there was a presumption that the debt should have been excepted from discharge, and the burden of proof shifted to whether debtor had established one of the two grounds for rebutting the presumption. As to debtor’s ability to pay, the testimony reflected a diminution in debtor’s disposable income between the date the petition was filed and the date of trial. Further, debtor testified that several of her expenses had increased since the filing of the petition which essentially had offset the potential savings from less expensive transportation. Hence, debtor had established that she could not afford to pay the debt in full. However, debtor could afford to pay $13,000.00 of the debt over time. Rushlow v. Rushlow (In re Rushlow), 2002 Bankr. LEXIS 459, 277 B.R. 216 (Bankr. D. Vt. May 3, 2002) (Brown, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:523.21

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Bankruptcy court properly exercised jurisdiction over reorganized debtor’s intellectual property ownership dispute. S.D.N.Y. PROCEDURAL POSTURE: Debtors, a company and its subsidiaries, filed for chapter 11 bankruptcy in New York. After the stays issued and the plan was confirmed, defendant patent owner filed a patent infringement case in Florida. Debtors filed an adversary proceeding in New York. The bankruptcy court took jurisdiction and issued its ruling, which the patent owner appealed. OVERVIEW: The patent owner held patents for sewing machine needles pursuant to a transfer from one of debtor’s affiliated companies. In the bankruptcy proceeding, debtors failed to list an implied license for the needles as an asset for reorganization purposes. A patent infringement action erupted over the alleged license on the eve of debtors’ re-emergence from bankruptcy. Inter alia, the district court held that the bankruptcy court properly retained jurisdiction over the subject matter because continuation of the Florida action would compromise the reorganization. The bankruptcy court’s decision to stay the Florida action and enjoin the patent owners from further litigation was largely based on a finding that resolution of the dispute over the implied license would significantly impact the debtor’s revenues. That finding was not clearly erroneous. Thus, the injunction staying the Florida action and enjoining the patent owners from pursuing that litigation was affirmed. However, the declaration of one of debtor’s executives was inadmissible. The evidence offered by the patent owners therefore defeated the debtor’s summary judgment motion on the issue of the license. Singer Co. B.V. v. Groz-Beckert KG (In re Singer Co.), 2002 U.S. Dist. LEXIS 8609, — F. Supp.2d — (S.D.N.Y. May 14, 2002) (Pauley, D.J.).

Collier on Bankruptcy, 15th Ed. Revised 1:3.01[4]

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3d Cir.

Former employees of debtor, which ceased operating as rail carrier prepetition, were not entitled to priority administrative status. 3d Cir. PROCEDURAL POSTURE: Appellants, employees, sued appellee employer for injuries they received in the course of their employment. The employees subsequently won judgments against the employer. The employer filed for bankruptcy. The district court affirmed the decision of the bankruptcy court that determined that 11 U.S.C. § 1171(a) was inapplicable to the employees claims. The employees appealed. OVERVIEW: The employer operated as a railroad at the time the employees were injured. The employer subsequently ceased operations as a rail carrier after which it filed for bankruptcy under chapter 11 of the Bankruptcy Code. The employees filed timely proofs of claim against the employer in the bankruptcy court, classifying their personal injury claims as having preferred unsecured status. The employees alleged that their claims were preferred because they were entitled to administrative expense status under 11 U.S.C. § 1171(a). The bankruptcy court determined that 11 U.S.C. § 1171(a) only applied to cases in which the debtor was an actual railroad on the petition date and classified the employees’ claims as general unsecured. The court of appeals held that because the employer was not a railroad carrier or owner of leased trackage on the petition date, it was not a railroad at that time or during the course of the bankruptcy proceedings. Congress chose to tie the protections of 11 U.S.C. § 1171 to the bankruptcy machinery reserved for the reorganization or dissolution of current rather than former railroads, and the court was not empowered to undo that decision. Hileman v. Pittsburgh & Lake Erie Props. (In re Pittsburgh & Lake Erie Props.), 2002 U.S. App. LEXIS 9429, 290 F.3d 516 (3d Cir. May 14, 2002) (Hall, C.J.).

Collier on Bankruptcy, 15th Ed. Revised 8:1171.01

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5th Cir

Motion for permissive withdrawal of reference denied absent recommendation from bankruptcy judge. S.D. Tex. PROCEDURAL POSTURE: Pursuant to 28 U.S.C. § 157(d); Fed. R. Bankr. P. 5011(a); U.S. Bankr. Ct., S.D. Tex., Galveston Div., R. 5011; movants sought withdrawal of the reference over the adversarial proceeding they filed in the debtor’s bankruptcy case. OVERVIEW: Movants asked the district court to withdraw the reference without first obtaining a recommendation from the bankruptcy court. The district court declined. While the court had authority to withdraw the reference, U.S. Bankr. Ct., S.D. Tex., Galveston Div., R. 5011 stated that, unless otherwise ordered by the district court, the matter 'shall' first be presented to the bankruptcy judge for recommendation. The bankruptcy court was more familiar with the subtle and esoteric intricacies permeating the entirety of the federal bankruptcy laws and with the procedural and factual details of movants’ adversarial proceeding. Thus, the court concluded that it would be inappropriate to withdraw the reference over the adversary proceeding without first procuring a recommendation from the bankruptcy judge. Rutherford v. Money Mortgage Corp. (In re Premier Holdings of Tex.), 2002 U.S. Dist. LEXIS 8503, 277 B.R. 332 (S.D. Tex. May 6, 2002) (Kent, D.J.).

Collier on Bankruptcy, 15th Ed. Revised 1:3.04

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6th Cir.

District court affirmed determination that debtor’s tax liability was nondischargeable due to willful attempts at evasion. W.D. Ky. PROCEDURAL POSTURE: The bankruptcy court determined that appellant debtor’s 1990 and 1991 tax liabilities were nondischargeable under 11 U.S.C. § 523(a)(1)(C) because the debtor willfully attempted to evade or defeat collection and payment of those taxes. The debtor appealed. OVERVIEW: The debtor’s central argument was that he and an Internal Revenue Service agent had established an understanding of how the debtor would repay his past due taxes. As to the law, the debtor argued that appellee United States and the bankruptcy court relied upon an overly broad interpretation of the willful evasion standard. After reviewing the bankruptcy court decision, however, the district court concluded that it was not grounded upon a mistake of law. The bankruptcy court took into account the latitude and flexibility which the agent allowed the debtor. The bankruptcy court concluded that the debtor deceived the agent and concealed various kinds of vital information from him. The district court found that most of the evidence was subject to a variety of reasonable inferences. The bankruptcy court chose to draw negative inferences against the debtor from the evidence. The bankruptcy court was in the best position to evaluate the credibility of conflicting testimony and to apply the proper inferences from it. Because the district court could not have completely discounted the bankruptcy court’s conclusions, it could not have said that those conclusions were erroneous. Gardner v. United States (In re Gardner), 2002 U.S. Dist. LEXIS 8208, — F. Supp.2d — (W.D. Ky. March 20, 2002) (Heyburn, C.D.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:523.07

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7th Cir.

Bankruptcy court properly denied debtor’s motion to reopen chapter 11 case where plan was fully implemented. 7th Cir. PROCEDURAL POSTURE: The district court affirmed the decision of the bankruptcy court holding that reopening of the debtor’s case was barred, that the debtor had no remaining state remedies, and thus, the debtor was not entitled to restitution. The debtor appealed. OVERVIEW: The creditor, who was the debtor’s attorney, obtained a judgment against the debtor. However, the state appellate court reversed the judgments to the extent that they had required the debtor to pay the attorney. The attorney was then required to return the money the debtor paid to satisfy the judgments, however, he never did return the money. After 13 months, the debtor moved to reopen the bankruptcy proceeding and requested a return of the money. The request was denied. The 7th Circuit held that the plan of reorganization was fully implemented; thus, there was nothing to enforce and no reason to reopen and alter the plan. The state court was the right forum for the litigation to continue. In re Zurn, 2002 U.S. App. LEXIS 9163, 290 F.3d 861 (7th Cir. May 15, 2002) (Easterbrook, C.J.).

Collier on Bankruptcy, 15th Ed. Revised 3:350.03

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Debtor judicially estopped from disputing secured status of claim due to failure to object prior to confirmation. N.D. Ill. PROCEDURAL POSTURE: Debtors in separate cases below, but who filed a joint plan of reorganization, appealed from an order of the bankruptcy court allowing the claim of creditor bank. OVERVIEW: Debtors argued on appeal that the claim should have been disallowed because the bank had sold collateral without accounting for the proceeds rendering it impossible for debtors to know whether the amount of the bank’s claim was accurate. The bankruptcy court found as a fact in its memorandum opinion confirming debtors’ plan that the bank’s claim was $2,083,427.92 plus certain costs, interest and attorneys’ fees. The court held that because a confirmation order precludes the relitigation of issues decided or which could have been decided at the confirmation hearing, debtors were bound by the confirmation order since they did not file an objection pre-confirmation. Furthermore, debtors failed to produce evidence to rebut the prima facie validity of the bank’s proof of claim. Debtors produced no evidence in support of their objection. Hovis v. Nat’l Bank & Trust Co. (In re Hovis), 2002 U.S. Dist. Lexis 8285, — F. Supp.2d — (N.D. Ill. May 3, 2002) (Reinhard, D.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:502.00

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8th Cir.

Bankruptcy court properly allowed filing of a complaint that was untimely due to the court’s own error. 8th Cir. PROCEDURAL POSTURE: The debtor appealed the Bankruptcy Appellate Panel’s affirmance of two bankruptcy court orders: (1) sustaining the trustee’s objection to the debtor’s exemptions, and (2) accepting a late-filed complaint, under 11 U.S.C. § 105. OVERVIEW: The bankruptcy court entered an order noting that it was troubled by irregularities in the record, and sua sponte extended indefinitely the time for filing complaints. The bankruptcy court had authority under 11 U.S.C. § 105(a) to accept an untimely complaint, because it was untimely due to the court’s own error. Moss v. Block (In re Moss), 2002 U.S. App. LEXIS 9025, 289 F.3d 540 (8th Cir. May 10, 2002) (Riley, C.J.).

Collier on Bankruptcy, 15th Ed. Revised 2:105.05

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Stay did not preclude sublessor from pursuing unlawful detainer action because debtor lacked interest in sublease. Bankr. E.D. Ark. PROCEDURAL POSTURE: Creditor sublessor of nonresidential real property moved for relief from the automatic stay to pursue an unlawful detainer action, asserting the debtor sublessee was in default under the terms of the sublease. The debtor asserted that an agreed order in the detainer action was an accord and satisfaction such that the sublease was not terminated before the debtor filed chapter 13, and that she could assume the lease under 11 U.S.C. § 365(a). OVERVIEW: Neither the original lease nor the sublease specified what type of termination notice was required. The creditor had served a notice to quit stating that it was terminating the sublease and requesting that the debtor vacate the premises, giving the debtor no right to cure her default under either lease. Ark. Code Ann. § 18-60-301 et seq., under which the order was entered, did not provide her with an opportunity to cure a default before the issuance of a writ of possession. The sublease was terminated upon receipt of the notice to quit five months before the bankruptcy. The order was not an accord and satisfaction. It specifically stated that it was not a final adjudication and that the court reserved jurisdiction to consider a request for a money judgment. Thus, the creditor had not agreed to take a specific payment or action in satisfaction of a larger debt. When the debtor filed bankruptcy, she had no interest in the premises under 11 U.S.C. § 541(b)(2), and no rights under the sublease because it had terminated. She had no right to possession because she had failed to comply with the agreed order by not making the payments under the order. There was no lease to assume. Staffmark Inv. LLC v. Foote (In re Foote), 2002 Bankr. LEXIS 462, 277 B.R. 393 (Bankr. E.D. Ark. April 3, 2002) (Evans, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 3:362.05[10]

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9th Cir.

Landlord who obtained order compelling debtor to pay rent could not commence actual collection activity absent lifting of stay. 9th Cir. PROCEDURAL POSTURE: Appellant creditor landlord obtained an order of the bankruptcy court that compelled appellee, a debtor in chapter 11 bankruptcy, to pay all accrued rent. After this order, the case was converted to chapter 7. The creditor levied the debtor’s bank account when it did not pay the rent. The bankruptcy court held that the levy violated the automatic stay, and the Bankruptcy Appellate Panel affirmed. The creditor appealed. OVERVIEW: The appellate court held that the creditor’s levy violated the automatic stay. By virtue of 11 U.S.C. § 362(a)(3), the creditor was required to obtain the bankruptcy court’s explicit lifting of the stay before it could commence collection proceedings even though the bankruptcy court had previously ordered payment of the back rent. Once the case was converted to chapter 7, the priority of payments changed. The appellate court held that 11 U.S.C. § 365(d)(3) did not give the creditor’s claim from the original chapter 11 case super-priority over chapter 7 administrative creditors, who were entitled to be paid first by virtue of 11 U.S.C. § 726(b). For that reason, the bankruptcy court correctly ordered the creditor to release any funds it had levied. Temecula v. LPM Corp. (In re LPM Corp.), 2002 U.S. App. LEXIS 17375, 300 F.3d 1134 (9th Cir. August 22, 2002) (Silverman, C.J.).

Collier on Bankruptcy, 15th Ed. Revised 3:362.03[5]

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Bankruptcy court erred by applying incorrect legal standard in holding creditor’s personal injury claim nondischargeable. 9th Cir. PROCEDURAL POSTURE: In debtor’s chapter 7 bankruptcy, creditor filed an adversary complaint to determine the dischargeability of a judgment debt owed to her by debtor. The bankruptcy court held that the debt was nondischargeable. The Bankruptcy Appellate Panel reversed, holding that the bankruptcy court erred by applying the incorrect legal standard, and creditor appealed. OVERVIEW: While creditor was crossing a major downtown intersection, debtor sped into the intersection against a red light, while speeding, nearly five seconds after the light had turned red, leading to creditor’s being injured. Creditor recovered a judgment against debtor in state court for negligence and malice. Debtor then filed in bankruptcy. Creditor claimed that the debt was nondischargeable under 11 U.S.C. § 523(a)(6) for willful and malicious injury. The court of appeals found that a subjective (rather than objective) standard applied to willfulness, so that a debtor’s subjective motive to inflict injury or a belief that injury was substantially certain to result was required. The bankruptcy court focused exclusively on the objective substantial certainty of harm stemming from debtor’s driving, but did not consider his subjective intent to cause harm or knowledge that harm was substantially certain, requiring remand to consider creditor’s claim under the subjective framework. Further, the court instructed the bankruptcy court to consider the malicious injury requirement of section 523(a)(6) separately from the willful requirement. Carillo v. Su (In re Su), 2002 U.S. App. LEXIS 9524, 290 F.3d 1140 (9th Cir. May 20, 2002) (Tashima, C.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:523.12

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10th Cir.

Debtors’ failure to disclose tax returns or refunds could result in denial of discharge. B.A.P. 10th Cir. PROCEDURAL POSTURE: Appellant debtors filed a chapter 7 petition for relief under the Bankruptcy Code. Appellee trustee filed a motion seeking copies of the debtors’ federal and state tax returns, as well as any refunds. The debtors filed a response to the motion, but the court granted the motion. The debtors appealed the order of the bankruptcy court. OVERVIEW: The trustee filed a motion asserting that: (1) he requested that the debtors provide him with copies of their tax returns, but they refused; (2) any state or federal tax refund related to the prepetition year was estate property; and (3) because the debtors failed to turnover their tax returns, the trustee could not ascertain the amount of any refund that was estate property. The debtors maintained that 26 U.S.C. § 6103 required that their tax returns be kept confidential, and that res judicata barred litigation of the matter. The debtors contended that under section 6103, the trustee was required to request the tax returns from the Secretary of the Treasury, and the failure to do so barred a later request for the tax returns. The bankruptcy appellate panel rejected this claim and found that section 6103 had no application to a bankruptcy trustee requesting tax returns from a chapter 7 debtor. This section applied to requests made on the Internal Revenue Service or a state taxing authority to divulge a taxpayer’s tax return information. The debtors’ returns were important to allow the trustee to determine if the debtors’ tax refunds were estate property. Beach v. Morris (In re Morris), 2002 Bankr. LEXIS 883, 281 B.R. 917 (B.A.P. 10th Cir. August 19, 2002) (Clark, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 6:727.01

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11th Cir.

Debtor’s non-support obligation to spouse was dischargeable due to spouse’s failure to file a timely complaint to determine dischargeability. Bankr. M.D. Fla. PROCEDURAL POSTURE: Plaintiff debtor filed a chapter 7 petition and listed defendant creditor as an unsecured creditor. The creditor received a notice of a deadline for filing a complaint to determine the dischargeability of a debt. Plaintiff filed a complaint to determine the dischargeability of a debt to the creditor. The creditor filed an answer and a counter-complaint. The debtor filed an answer and a motion to dismiss related to 11 U.S.C. § 523(a)(15). OVERVIEW: The debt was the result of the dissolution of the debtor’s marriage to the creditor. The debtor claimed that the debt was not excepted from the discharge pursuant to 11 U.S.C. § 523(a)(5). The debtor also argued that the creditor was barred from asserting that the debt was nondischargeable pursuant to 11 U.S.C. § 523(a)(15) because the creditor failed to file a complaint to determine the dischargeability of the debt before the due date. The creditor argued that she did not initiate an adversary proceeding because the debtor had told her that he had not listed the debt on his bankruptcy petition. She claimed that her failure to file an adversary proceeding constituted excusable neglect. The creditor sought to have the debt declared nondischargeable pursuant to 11 U.S.C. §§ 523(a)(5), 523(a)(15). The debtor responded that any claim under section 523(a)(15) was time barred. The court found that the creditor’s situation did not fall within excusable neglect, where the court could have allowed a late filed dischargeability complaint. Johnson v. Johnson (Johnson), 2002 Bankr. LEXIS 874, 282 B.R. 43 (Bankr. M.D. Fla. August 14, 2002) (Funk, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 4:523.21

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Prepetition transfer by debtor to outside lender that benefited insider guarantor was preferential. Bankr. N.D. Ga. PROCEDURAL POSTURE: The debtor filed a petition for relief under the Bankruptcy Code. Plaintiff trustee filed a preference action against defendants, five guarantors, who were alleged insiders of the debtor. Four guarantors filed motions to dismiss. The trustee opposed the motions. OVERVIEW: Prior to filing for bankruptcy, the debtor had made alleged preferential payments, which the trustee claimed indirectly benefited the guarantors by reducing their liability. The guarantors claimed that 11 U.S.C. § 550(c) prevented the trustee from recovering any damages against insider-guarantors for avoided preferences resulting from certain payments. The trustee sought to avoid the transfers made in the one-year period prior to the bankruptcy filing, pursuant to 11 U.S.C. § 547(b)(4). The court disagreed with the guarantors’ claim that since the transfers were made between 90 days and one year of the filing of the petition, 11 U.S.C. § 550(c) prohibited a trustee from recovering damages from both the non-insider transferee and from the insider-guarantor who benefited from the avoided transfer. The guarantors did not address the preference issue. The amendments to 11 U.S.C. § 550 did not limit avoidance of a preferential transfer under 11 U.S.C. § 547. A transfer from a debtor to an outside lender that benefited an insider-guarantor remained a preference if it was made within the year before bankruptcy and the requirements of section 547 were met. Gordon v. Sturm (In re M2Direct, Inc.), 2002 Bankr. LEXIS 876, 282 B.R. 60 (Bankr. N.D. Ga. July 25, 2002) (Bihary, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 5:547.03

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D.C. Cir.

Debtor’s case was reopened to permit debtor’s lien avoidance motion on condition that debtor pay creditor’s attorney’s fees. Bankr. D.D.C. PROCEDURAL POSTURE: The debtor sought to reopen a bankruptcy case in order to file a motion to avoid the garnishment lien of a creditor on a bank account. OVERVIEW: The creditor recovered a judgment against the debtor, and garnished the debtor’s bank account. The debtor later filed for bankruptcy pro se. Although the debtor’s schedules and statement of financial affairs were not accurate, the court found that the inaccuracies were not deliberate, and that the debtor disclosed the creditor’s judgment. The debtor first tried to have the lien avoided in state court after or in anticipation of, the bankruptcy discharge, before hiring an attorney and attempting to reopen the bankruptcy case. By requesting that the court deny the motion to reopen, the creditor essentially sought to win by default. If the court did not allow the debtor to reopen the case, the court would have been precluding the debtor from pursuing his only viable defense. Because the debtor failed to signal an intention to seek to avoid the lien during the bankruptcy case, and because the bank account was not obviously exempt, the creditor was not unreasonable in seeking to enforce its lien. The court found that the prejudice to the creditor’s attorney, who was working on contingency, needed to be redressed as a condition to the debtor’s motion to reopen being granted. In re Nash, 2002 Bankr. LEXIS 456, — B.R. — (Bankr. D.D.C. May 6, 2002) (Teel, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 3:350.03

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Trustee’s motion to compel debtor’s pension plan to deduct and remit plan payments was denied. Bankr. D.D.C. PROCEDURAL POSTURE: The chapter 13 trustee moved to compel the husband debtor’s retirement plan to deduct and remit to her the husband debtor’s chapter 13 plan payments under 11 U.S.C. § 1325(c). OVERVIEW: The trustee conceded that the retirement plan qualified as an ERISA-qualified pension plan and hence was not property of the estate. That concession necessarily precluded issuing a section 1325(c) payment order to the retirement plan. The court declined to view section 1325(c), despite its seemingly plain language, as overriding ERISA’s antiassignment provision. Because the pension was not estate property, a section 1325(c) payment order could not be justified by treating the trustee as the owner of the pension and hence entitled to administer the pension as estate property. In re Snipe, 2002 Bankr. LEXIS 457, 276 B.R. 723 (Bankr. D.D.C. May 6, 2002) (Teel, B.J.).

Collier on Bankruptcy, 15th Ed. Revised 8:1325.09

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