The bankruptcy court avoided a judgment creditor’s lien that impaired the debtor’s homestead exemption. The creditor focused on two main arguments: (1) that the debtor had abandoned the home when he moved out after a marital separation, and (2) that even though the debtor moved back in after his wife and children moved out, he could not reestablish it as his homestead because he did not reside there with his family at that time.

The court found that although the debtor lived in other locations after his marital separation, he did not abandon or intend to abandon his homestead rights in the family home:

Abandonment must be “total, without any occupancy under claim of homestead.” Dennis v. Omaha Nat’l Bank, 28 N.W. 512, 514–15 (Neb. 1886) (emphasis added). The debtor or [his wife] always resided in their family home. They remained married at the time the bankruptcy was filed. The debtor’s absence from the home beginning in 2023 was due to a marital dispute and divorce filing, it being agreed as in the best interest of the debtor’s children, who also resided there. Even if he spent nights or resided at his girlfriend’s apartment, the debtor returned to his home after [his wife] moved out. Although the debtor and [his wife] agreed to sell the house and obtained a court order to list it for sale, the house is not sold. The debtor’s rental of a house with his girlfriend was temporary, regardless of whether he remains liable on the lease. The debtor’s personal property has always been at his home. And [his wife] did not testify she intended to abandon the home or her homestead rights.

In response to the creditor’s second argument, the court pointed out the Nebraska homestead exemption statute no longer focuses on protecting the family home. Rather, recent amendments to Neb. Rev. Stat. § 40-101 allow any natural person to claim a $120,000 exemption in their home. “The debtor is a natural person. He lives in his home. He claimed it as exempt. As a result of the amendment, it is not necessary the debtor’s wife or children live with the debtor after March 2025.”

Because the total amount of the judicial lien and consensual liens on the property plus the homestead exemption, less the value of the debtor’s one-half interest in the property, impair the debtor’s claimed exemption, the judicial lien is avoided in full.

The bankruptcy court enjoined a deed of trust sale that was based on a pre-petition default under loan documents that were restructured by the terms of the debtor’s confirmed Chapter 11 plan.

The debtor’s debts to the bank are secured by deeds of trust against multiple parcels of real estate. Pre-petition, the borrower defaulted on her loan payments and the bank filed and served notices under the Nebraska Trust Deeds Act. The debtor then filed a Chapter 11 petition and her plan was confirmed. Provisions in the plan modified, superseded, and replaced the debtor’s original obligations to the bank. 

The debtor subsequently failed to timely pay real estate taxes, which was a default under the plan. The bank notified the debtor of the default and the cure period. The debtor paid the real estate taxes in June 2025 shortly after the cure period expired. Nevertheless, the bank moved ahead with the deed of trust sale process that it had initiated pre-petition and published notice of sale with a sale date in August 2025. The debtor then moved for a temporary restraining order and injunction to stop the sale.

While the bank argued that the plan simply stayed enforcement of the pre-petition deed of trust foreclosure as long as the debtor continued to meet all plan obligations to the bank, the court pointed out that a confirmed plan modifies a debtor’s obligations and a creditor’s lien rights. A reorganized debtor is free of pre-confirmation obligations except to the extent they are provided for in the confirmed plan, and the confirmed plan is a new enforceable contract between the parties.

Accordingly, the bank could not enforce the pre-petition payment default nor rely on the pre-petition notice of default under the Trust Deeds Act. Instead, the bank was required to file a new notice of default identifying the debtor’s breach of her modified obligations to the bank under the plan – the failure to timely pay real estate taxes. Because the debtor has cured the default by paying the taxes, the bank is precluded from foreclosing.

The bankruptcy court approved a settlement between the debtors and their lender to resolve the lender’s objection to the debtors’ Chapter 12 plan. It also settles the lender’s motion for relief from stay in which it seeks to recover and foreclose its liens against collateral still owned by the debtors. Under the settlement, the parties stipulated the total amount owed to the bank, which includes unpaid principal, accrued interest, and attorneys’ fees and costs. The debtors are required to execute a “modified” note pursuant to the settlement which will add the accrued interest and the fees and costs to the principal balance of the note and reduce the interest rate. Of the total modified debt, only one-half is recourse against the debtors, the debtors’ estates, and collateral still owned by the debtors. The other half is recourse only against collateral sold out of trust pre-petition. The bank also retains any claims it has against any parties who converted its collateral.

Parties against whom the bank seeks to recover collateral to satisfy the other half of the modified debt objected to the settlement. They assert the settlement seeks approval of attorney’s fees and costs without disclosure or a finding of reasonableness under 11 U.S.C. § 506(b), is usurious under Neb. Rev. Stat. § 45-109, is unfair and inequitable to the objectors, and allows post-petition attorney fees to be collected against the objectors.

The bankruptcy court ruled that the settlement met the required standard of being fair and equitable and in the best interests of the estate. The court found the settlement resolves significant and protracted litigation between the debtors and the bank and requires the bank to make significant concessions.

The court overruled the objection as to the reasonableness of the attorneys’ fees, stating that the court needn’t determine the reasonableness of the fees because the settlement reduces the bank’s secured claim to an amount less than it is entitled to. “On whole, the Bank is not seeking to supplement its proof of claim for payment through the bankruptcy plan [which would implicate §506(b)]. As to the bankruptcy estate, the Bank is voluntarily reducing its claim.”

Likewise, §506(b) does not require the interest rate to be reasonable. It permits interest “provided for under the agreement or State statute under which such claim arose” and the loan agreement in this case provided for a 45% default interest rate.

The objecting parties argued the default interest rate is usurious under Nebraska law, which “forbids contracts for the payment of money to satisfy a debt where the debtor’s payment does not actually discharge the debt.” They took the position that the settlement agreement is usurious because if the debtors pay their half, the indebtedness is not discharged. The court disagreed with this argument, noting that under the terms of the settlement, “[t]he debt is discharged if the contracted amount is paid, plus interest, in an amount less than the usury rate. Making half non-recourse to the debtor simply does not constitute usury.”

The objectors also argued the settlement is unfair and inequitable because it “purports to place them on the hook for at least $277,798.71, plus 9.5% interest” when the debtors have assets available to pay the bank. The court disagreed, noting that the objecting parties’ liability, if any, already exists, and arises both inside and outside of bankruptcy under U.C.C. Article 9. “The objecting parties might prefer the secured party completely recover from the debtors and their bankruptcy estates. But any recovery from the objecting parties is authorized by state law and is not unfair or inequitable. The Bank has multiple avenues of recovery from which it can elect. It is free to avail itself against the objectors, with or without the settlement. The objectors are free to raise any defenses they have.”

The court limited its approval of the settlement to the bankruptcy realm only, giving the settlement agreement no preclusive effect outside of the bankruptcy case or in any litigation between the bank and third parties.

After a trial, the bankruptcy court denied the U.S. Trustee’s complaint objecting to discharge under §§ 727(a)(2)(A), (a)(4)(A), and (a)(5). The debtor failed to list a business entity he had formed to replace a failing enterprise. As he liquidated the first company, he occasionally used the second company’s bank accounts for deposits and payments. Nevertheless, the evidence showed that the proceeds from the asset sales for the first business, even if funneled through other accounts, were used to pay creditors of the first business. The debtor testified that he simply forgot to list the second business because it never really got off the ground, but he amended his schedules and complied with the U.S. Trustee’s discovery requests. The court found no intent to hinder, delay, or defraud; no knowing and fraudulent false oath; and no unexplained loss of assets.