Sexton v. PHEAA (In re Sexton)

(Bankr. W.D. Ky. Nov. 24, 2014)

The bankruptcy court denies the chapter 7 debtor’s motion seeking an order declaring a student loan debt dischargeable. The court applies the three-part Brunner test and determines that excepting the student loan debt from discharge would not cause an undue hardship. The debtor could not show inability to maintain a minimal standard of living while repaying the loan, as he was paying private school tuition for his children and had an average monthly telephone/cable bill of $600 per month. The debtor also could not show that his future income was not likely to improve, as he had just started a law practice and did not establish that he had otherwise made significant efforts at finding employment. Finally, the debtor’s repayment history showed lack of a good faith effort to repay the loan. Thus, the debt remains nondischargeable. Opinion below.

2014-11-24 – sexton v pheaa

State Bank of Toulon v. Covey (In re Duckworth)

(7th Cir. Nov. 21, 2014)

The Seventh Circuit reverses the bankruptcy court’s orders finding the lender’s security interests enforceable despite a mistaken reference to the promissory note purportedly secured. The security agreement recited that it secured a promissory note dated December 13, but the promissory note was dated December 15. The court holds that parol evidence cannot be used to save the security agreement, due to the trustee’s strong-arm powers. Opinion below.

2014-11-21 – state bank of toulon v covey

In re Appalachian Fuels

(Bankr. E.D. Ky. Nov. 19, 2014)

The bankruptcy court overrules the trustee’s objection to the state agency creditor’s application for an administrative expense claim for expenses to correct environmental violations. The state agency sought administrative expense status for its estimate of such expenses to be incurred in the future. The court considers whether the claims were “actual and necessary” for preservation of the estate, and ultimately concludes that they are. The court orders that the claim be paid in small amounts as needed and that a reserve of funds be maintained for the estimated future costs.

At the end of the opinion, in “A Final Mea Culpa,” the court recognizes that the plan confirmed in this case could be interpreted in a way that violates § 1129(a). The court states that it expects an appeal will follow. Opinion below.

2014-11-19 – in re appalachian fuels

Skavysh v. Katsman (In re Katsman)

(7th Cir. Nov. 19, 2014)

The Seventh Circuit holds the debtor’s discharge should be denied, affirming the district court’s reversal of the bankruptcy court’s ruling in favor of the debtor in the nondischargebility action. The Chapter 7 debtor had omitted certain creditors from her Schedule F. She testified at trial that she had done so because she intended to pay those creditors (friends and family members) on their claims after the bankruptcy. The creditor-plaintiff sought denial of her discharge under § 727(a)(4)(A), alleging the omissions (and other discrepancies in her schedules) constituted her knowingly and fraudulently making a false oath or account in the case. The Seventh Circuit held that this satisfied the statute, even though her fraudulent acts were not to her pecuniary benefit. Opinion below.

2014-11-19 – skavysh v katsman

In re Baham

(Bankr. W.D. Ky. Nov. 18, 2014)

The bankruptcy court grants the chapter 7 debtors’ motion to avoid judicial liens on a parcel of real property. After an evidentiary hearing, the court finds that the debtor’s appraisal is too low, because it included an inappropriate depreciation deduction, and finds that the appraisal obtained by the bank (one of the judicial lienholders) is too high, because it did not take into account the unfinished nature of the improvements. The court sets a value for the property, applies the Sixth Circuit’s calculations set forth in Brinley, and holds that the judicial liens are avoided pursuant to § 522(f) to the extent they impair the debtors’ exemption in the property. Opinion below.

2014-11-18 – in re baham

Roberts v. Kleven

(N.D. Ind Nov. 14, 2014)

The district court affirms the bankruptcy court’s decision to revoke the debtor’s discharge pursuant to § 727(d)(1), (2), and (3). The debtor obtained a tax refund and transferred the bulk of it ($6,400) from her bank account to a relative’s account in the days leading up to the filing of her chapter 7 petition. The refund and transfer were not disclosed to the trustee. The trustee repeatedly requested copies of her bank account statement for the three months leading up to the bankruptcy, among other documents, but the debtor refused to produce the documents despite entry of an agreed order compelling their production more than a year after the 341 meeting. The documents were eventually produced before trial. The district court held the bankruptcy court’s order revoking the discharge was appropriate—the debtor failed to comply with a court order, fraudulently obtained her discharge, and fraudulently failed to report property of the estate. Opinion below.

2014-11-14 – roberts v kleven

In re Conco, Inc.

(Bankr. W.D. Ky. Nov. 13, 2014)

The bankruptcy court denies the creditor’s motion for declaratory relief. The creditor sought a declaration that another interested party had no basis to object to the chapter 11 debtor’s stock being transferred to the creditor and that the creditor could provide adequate assurance of future performance of certain executory contracts with the debtor. The court declines to exercise jurisdiction over the issues raised in the motion, as they do not present an actual controversy. The creditor had not made an offer to purchase the stock nor had it proposed a competing plan. Opinion below.

2014-11-13 – in re conco