The bank objected to the dischargeability of its claim under 11 U.S.C. § 523(a)(2)(B) because the debtor had falsely claimed on his financial statements that he owned certain real property. Although the bank had foreclosed on the real property that secured the debtor’s debt, the bank had not had the sale confirmed in state court. The bankruptcy court held that, under state law, the bank had no enforceable deficiency claim against the debtor and dismissed the bank’s complaint with prejudice.
Opinions
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Judge James P. Smith (Retired)
The court held that a Chapter 13 debtor, pursuant to a Chapter 13 plan, can use 11 U.S.C. § 506(a) to value a non-910 vehicle and then, under 11 U.S.C. § 1325(a)(5)(C), surrender that vehicle in full satisfaction of the creditor’s claim where the value so determined is equal to or greater than the creditor’s claim. The court also held that the proper standard of value to be applied where the collateral is surrendered is the replacement value as of the date of the bankruptcy filing.
The “above median” Chapter 13 debtor proposed to pay in full all unsecured claims during the five year term of his plan. The plan payment would be substantially lower than the debtor’s monthly net or disposable income. The Court held that a plan satisfies 11 U.S.C. § 1325(b) if unsecured claims will be paid in full even if the claims could be paid in a shorter period of time if all monthly disposable income was contributed to plan payments.
The state court had held the debtor and his corporation in contempt of court for failing to produce certain maintenance records on a jet aircraft that was owned by the creditor, and certain personal property in which the creditor held a security interest. The creditor argued that the contempt order was entitled to collateral estoppel effect in its objection to discharge and dischargeability actions against the debtor. The bankruptcy court held that although the contempt order was a final order and that the debtor was bound by the order, that the contempt order had not resolved the same or similar issues presented in the creditor’s objection to discharge under 11 U.S.C. § 727(a). The bankruptcy court, however, held that the contempt order had established that the debtor had willfully and maliciously injured property and collateral of the creditor and that the creditor’s claims for those injuries were nondischargeable under 11 U.S.C. § 523(a)(6).
The court denied the creditor's motion for summary judgment contending that a certain obligation was nondischargeable under 11 U.S.C. § 523(a)(2)(B). Although the debtor had listed on his financial statement certain real property that he did not own, the debtor, in his affidavit, testified that he had told the creditor's loan officer that he did not own it, but included the property on his financial statement in compliance with the loan officer's instruction. The court held that there were material facts in dispute regarding the creditor's reliance, its reasonable reliance and the debtor's intent to deceive concerning the debtor's financial statement.
The Chapter 13 debtor contended that his obligation to buy a replacement home for his former spouse was a dischargeable property division rather than a nondischargeable domestic support obligation. The court disagreed and held that the debtor's obligation to buy a replacement home was a nondischargeable support obligation.
The creditor filed a motion to extend the deadline to file a complaint objecting to the dischargeability of debt after the deadline for filing such complaint had expired. The creditor had received the notice from the court which contained the deadline to file complains but failed to do so. The creditor asked that the deadline be equitably tolled because, the creditor alleged, he missed the deadline because he allowed the debtor to induce him to take no action in the bankruptcy case. The court denied the request for equitable relief, finding that there had been no deception or act of fraud about the dischargeability objection deadline by the debtor in his communications with the creditor.
The debtor's Chapter 13 plan proposed to separately classify a non-dischargeable student loan debt and pay that debt more than other general unsecured creditors. The debtor would be eligible for a Public Service Loan Forgiveness Program if she made 120 consecutive payments without default on her student loan. This would allow the debtor to write off $50,000 in student loans. The plan as proposed would give the other unsecured creditors a 15 percent distribution. Without the separate classification, the distribution would be 20 percent, with an additional amount of $5,000, to the other unsecured creditors. The court held that this separate classification was not unfair discrimination under 11 U.S.C. § 1322(b)(1) and that the Chapter 13 plan could be confirmed over the trustee's objection.