In re Trentadue

(7th Cir. Sept. 14, 2016)

The Seventh Circuit affirms the bankruptcy court and district court ruling that debtor husband must pay ex-wife’s attorney’s fees as a priority, non-dischargeable domestic support obligation (DSO). Debtor was ordered by a state court to pay $25,000 directly to his ex-wife’s attorney for “significant over-trial”. He never paid and eventually filed Chapter 13. His ex-wife’s attorney filed a DSO claim for $25,000. Debtor objected to the claim but was overruled. On appeal, he argued that the over-trial award did not deserve DSO status because it was not payable to his spouse, former spouse, child, or caregiver as required by §101(14A) of the Code. The 7th Circuit noted that debtor’s interpretation of §101(14A) was correct, but refused to address this argument because he failed to raise it before the bankruptcy court or the district court. Debtor also argued that DSO status should be denied because the over-trial award was intended as punishment, not as support, but the Court noted that every Circuit that has considered the issue (including the 6th, in In re Rugiero, 502 F.App’x. 436, 439 (6th Cir. 2012)) has recognized that attorney fee awards can constitute support under certain circumstances. Opinion below.

Circuit Judges: Ripple, Kanne, and Williams

Attorney for Debtor/Appellant: Jared Nusbaum

Attorney for Appellee: Helen Ludwig

Author: Robert Imperial

2016-09-14-in-re-trentadue

In re Mustafa

(Bankr. E.D. Ky. September 14, 2016)

Debtor obtained a personal loan from bank to buy a Mercedes at a car auction and represented to the loan officer that the car was for personal and family use. The day debtor received the loan proceeds he leased the car to his used car business, which then sold the car to debtor’s friend, an out of state resident. Debtor failed to satisfy the bank loan with the sales proceeds. Instead, his business used the proceeds to pay its debts. Also, the business never transferred title to the car to debtor’s friend in order to hide the fact that the car had been sold. Debtor continued to make a few loan payments to the bank, but eventually quit and filed Chapter 13, which is when the bank learned that the car had been sold. The bank filed a dischargeability action and the court found that debtor made material misrepresentations to obtain a consumer loan and never intended to use the car for personal use. Thus, the debt, including attorney’s fees, was nondischargeable pursuant to both §523(a)(2) and (a)(6). Also, debtor’s plan, in which he proposed to surrender the vehicle to the bank, was not confirmed and was found lacking in good faith since, among other things, the car was currently located out of state in a repair shop subject to a $10,000 mechanics lien. Opinion below.

Judge: Schaaf

Attorney for Debtor: Tom Bunch

Attorney for Creditor: Greg Pavey and Jessica Middendorf

Author: Robert Imperial

2016-09-14-in-re-mustafa

In re Bullitt Utilities, Inc.

(Bankr. W.D. Ky. Sep. 16, 2016)

The court grants the trustee’s motion to employ the law firm as special counsel to pursue claims against certain third parties on behalf of the estate. The law firm had represented two of the largest creditors of the estate in connection with commencing the involuntary chapter 7 against the debtor. The court finds that there is no conflict in the representation, in part because the scope of the proposed engagement—seeking recovery of amounts owed to the estate—was aligned with the interests of the creditors, and in part because the creditors confirmed that the law firm no longer represented them. Opinion below.

Judge: Lloyd

Trustee: Robert W. Keats

Special Counsel: Bingham, Greenbaum, Doll, LLP

Author: Matt Lindblom

2016-09-16-in-re-bullitt-utilities

 

Federal Insurance Company v. Woods (In re Woods)

(Bankr. W.D. Ky. Sep. 16, 2016)

The bankruptcy court grants in part the plaintiffs’ motion for summary judgment in this nondischargeability action. The court denies the motion as to the amount of damages. The debtor admitted to committing the fraud and embezzlement while employed by the plaintiff car dealer. Thus, the court finds that the elements in 11 U.S.C. 523(a)(6) are satisfied, as the undisputed facts established that the debt arose from the willful and malicious injury by the debtor. However, Kentucky’s statute of repose for fraud claims creates an issue as to how much of the loss can be attributed to acts committed within the ten-year repose period. Opinion below.

Judge: Stout

Attorney for plaintiffs: Stoll Keenon Ogden PLLC, Adam Mastin Back

Attorney for debtor: Lowen & Morris, Jan C. Morris

Author: Matt Lindblom

2016-09-16-in-re-woods

In re Romano

(N.D. Ind. Sept. 14, 2016)

The district court affirms the bankruptcy court’s ruling that denied appellant’s (Jones) application for post facto appointment as special counsel to debtor and his administrative expense motion. Debtor filed a routine chapter 7 case and obtained a discharge; however, she failed to disclose an employment discrimination action she filed in federal district court prior to filing her bankruptcy case. She eventually reopened her case and disclosed the lawsuit. The chapter 7 trustee filed an application to employ his law firm, which was granted, and quickly settled the case. Jones sought compensation for representing debtor in her employment discrimination case. Since he did not pursue any argument pursuant to § 327(e), the district court focused solely on § 327(a) and found that Jones’s claim failed because the trustee did not request or consent to his employment. Likewise, Jones’s attempt to obtain an administrative expense priority failed because § 330(a)(1) does not authorize compensation to attorneys not employed under § 327(a).

Judge: Springmann

Attorney for Debtor: Richard Busse

Attorney for Trustee: Kenneth Manning

Attorney for Appellant: Stuart Jones

Author: Robert K. Imperial

2016-09-14-in-re-romano

In re McWhorter

(Bankr. E.D. Ky. Sept. 14, 2016)

The bankruptcy court denied debtor’s discharge under Sections 727(a)(2) and (a)(4) at the request of the UST. Debtor failed to disclose a corvette, a motor home, and a boat and trailer on Schedule B, asserting they were sold to his father in January 2013, but the UST showed that transfer and certificate of title documentation was not executed until October 2014, just over a month before debtor filed bankruptcy. Debtor maintained possession of those assets. Debtor also failed to disclose his ownership of four complete sets of tickets for the 2014-2015 UK men’s basketball season, as well as numerous other assets. Debtor’s testimony on the status, ownership and disposition of all these assets was inconsistent and led to credibility issues according to the court. The court also discussed the UST’s claim under Section 727(a)(5). A March 2013 financial statement by debtor listed assets of $10.5 million, but his November 2014 petition identified just $415,000 in assets. Even though the court did not have to rely on the 727(a)(5) claim, as denial of discharge was already warranted under 727(a)(2) or (a)(4), the court noted a discussion of the UST’s 727(a)(5) claim was valuable as it supported the (a)(2) and (a)(4) claims.

Judge: Schaaf

Attorney for Debtor: Michael Baker

Attorney for UST: Bradley Nederman

Author: Robert K. Imperial

2016-09-14-in-re-mcwhorter

In re Webb

(Bankr. W.D. Ky. Sep. 12, 2016)

The bankruptcy court grants the motion to terminate the automatic stay. The creditor and the debtor entered into a sale contract prepetition for sale of the debtor’s real property. The debtor argued that the sale contract terminated prepetition, and the creditor argued that it should be permitted to pursue its claims on the contract in state court. The court finds that the debtor has no equity in the property and that it is not necessary to an effective reorganization. Thus, stay relief is appropriate. Opinion below.

Judge: Lloyd

Attorney for Debtor: Kruger & Schwartz, Richard A. Schwartz

Attorney for Creditor: Eddins Domine Law Group, PLLC, H. Kevin Eddins

2016-09-12-in-re-webb

Author: Matt Lindblom