After a trial on a complaint by a creditor alleging non-dischargeability of a debt under 11 U.S.C. § 523(a)(4) arising from the financial problems of an LLC in which the creditor and the debtor were members, the court ruled in the debtor’s favor. There was no evidence of a technical or express trust as required by § 523(a)(4), nor did the evidence show that the debtor acted in bad faith or with the intent to cause the creditor harm.
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The court denied confirmation of a Chapter 12 plan because the plan proposed to treat one partially secured creditor as fully secured, which unfairly discriminated against general unsecured creditors.
Deere & Company holds a fully secured claim and an unsecured claim. To settle Deere’s motion for relief, the debtor agreed, inter alia, to provide for full payment of the entire debt in the plan, and the court approved that stipulation. After the plan was filed, an unsecured creditor objected to confirmation. The court agreed with the objecting party that the treatment of Deere’s claim foundered on the four-part unfair-discrimination test. The court also clarified that approval of the parties’ stipulation simply approved the agreement between Deere and the debtor and did not excuse the debtor’s obligation to comply with § 1222.
This adversary complaint was filed to object to the amount, validity, and extent of a secured claim held by an assignee of the original lender. On summary judgment, the plaintiff argued that one of the promissory notes at issue is unsecured and unenforceable because no agreements securing that note had been assigned to the claimant. The assignee argued that all of the loans made to the debtors were cross-collateralized, so it holds a beneficial security interest in instruments securing other loans even though no formal assignment of those security interests was made. The court denied summary judgment, holding that the original lender, which still holds the security interests in which the assignee is also claiming an interest, is a necessary party to the litigation.
The court granted summary judgment to the debtor in a non-dischargeability action under § 523(a)(4) brought by a defendant in a state-court lawsuit filed by a creditor of the debtor. The debtor had purchased cattle from the state-court plaintiff, a livestock auction company, for resale to the state-court defendant, a cattle feeding operation. The cattle feeder paid the debtor for the cattle, but the debtor’s check to the auction company was dishonored and remains unpaid. When the auction company sued the cattle feeder in state court to recover payment for the animals, the cattle feeder specifically denied that the debtor had acted as its agent and fiduciary, but it filed this adversary proceeding to protect itself in the event it was held liable in the state-court litigation.
The evidence submitted on the summary judgment motion did not support a finding that the parties had a technical or express trust that would give rise to a fiduciary relationship as required under § 523(a)(4), nor that there was any intentional wrongdoing by the debtor.
The court denied the debtor’s motion for a temporary restraining order to stop a foreclosure sale of certain real estate. In evaluating the Dataphase factors, the court questioned the debtor’s standing and found no likelihood of success on the merits because the debtor admittedly had not paid the mortgage for more than three years and tendered no performance or cure at this time.
The court granted summary judgment to the debtors, ordering that a wholly unsecured junior lien on the debtors’ residential real estate may be avoided after the debtors complete Chapter 13 plan payments.
The debtor’s employment was terminated shortly before the Chapter 7 petition was filed. Her 401(k) plan was liquidated and the proceeds were deposited in her bank account on the eve of bankruptcy. She spent most of the funds prior to the § 341 meeting. She thereafter amended her bankruptcy schedules to claim the proceeds as exempt because they came from her retirement account. The trustee objected. The court ruled the objection moot, because the money was no longer in the debtor’s account and the trustee would have no way of recovering it. Regardless of whether the funds were exempt, the trustee had no remedy.
This is an adversary proceeding seeking denial of discharge for transferring property with intent to hinder, delay or defraud a creditor. The plaintiffs alternatively ask the court to except the debt from discharge under § 523(a)(2)(A), (a)(4), or (a)(6).
The debtor intended to purchase a restaurant owned by the plaintiffs. They entered into an employer/employee relationship with an anticipated buyout agreement. The debtor operated the business for three months with oversight from the plaintiffs, who lived out of state. The restaurant closed permanently after suffering damage in a fire, the debtor filed a Chapter 7 proceeding, and the plaintiffs filed this adversary proceeding alleging they were owed $62,000.
After a careful and extensive review of the evidence at trial, the bankruptcy court concluded that all but $1,300 of the debt should be discharged. The plaintiffs did not establish the elements of § 727(a)(2)(A), and the evidence did not support the allegations of false representations made with the intent to deceive or the existence of a fiduciary relationship. At most, there was evidence that the debtor removed some property from the restaurant premises after the fire, and such conduct was intentional and with the knowledge that it would harm the plaintiffs. The $1,300 value of the items taken was excepted from discharge under § 523(a)(6).
The Chapter 7 debtor filed a post-discharge motion to revoke the discharge and allow her to file a reaffirmation agreement. The court denied the motion, citing § 524(c)’s strictly construed requirement that a reaffirmation agreement is enforceable only if filed prior to discharge. Because the debtor did not enter into the reaffirmation agreement before discharge, “any proposed agreement would be unenforceable” and granting the debtor’s motion to revoke the discharge in order to file the agreement “would, therefore, be futile.”
The debtor’s Chapter 7 means test showed monthly disposable income of $1,600, which exceeds the threshold for a presumption of abuse under the Bankruptcy Code. The debtor claimed special circumstances because he contributes $1,500 per month to the living expenses of his daughter’s and grandsons’ separate household.
The court ruled that the record did not sustain the debtor’s argument because there was no evidence the daughter’s alcoholism and ADHD were chronic or disabling conditions or that the debtor’s support was reasonable and necessary. In fact, the daughter was gainfully employed and lived independently with her two young sons. Even a small reduction in the debtor’s monthly contribution to his daughter would allow him to fund a Chapter 13 plan.
The court directed the debtor to convert the case to Chapter 13 or face dismissal.