After Debtor’s discharge was granted, Plaintiff sought to file complaint to determine dischargeability of debt under 11 U.S.C. § 523(a)(2), (a)(5), and (a)(15). The Court held that Plaintiff’s § 523(a)(5) claim could be filed at any time without leave of court and that Plaintiff could not file a claim under § 523(a)(2) and (a)(15) because she had missed the deadline for doing so set by Fed. R. Bankr. P. 4007(c). However, with respect to her § 523(a)(2) claim, Plaintiff could file a complaint under § 523(a)(3)(b) if her debt was neither listed nor scheduled and she had no actual knowledge of the bankruptcy prior to the deadline for filing a nondischargeability complaint. In addition, because Debtor’s case was a no asset Chapter 7, Plaintiff could file a nondischargeability complaint if her debt was unscheduled by fraud or intentional design.
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Judge James D. Walker, Jr.
Debtor sought a determination that certain federal income tax liabilities were dischargeable. The Court held the taxes nondischargeable under 11 U.S.C. § 523(a)(1)(B) due to Debtor’s failure to file tax returns. Substitute returns completed by the IRS did not constitute returns under § 523(a)(1)(B) because they were not signed by Debtor and because Debtor refused to cooperate in their preparation. An installment agreement signed by Debtor did not constitute a return because it did not contain the information necessary to calculate tax liability.
Having determined that it has the power to rule on the constitutionality of provisions of the Bankruptcy Code, the Court declared that 11 U.S.C. § 106(a), which abrogates the sovereign immunity of governmental units, is unconstitutional as applied to the states.
A creditor-farmer filed nondischargeability complaint under 11 U.S.C. § 523(a)(4) and (a)(6) against Debtor, a seed dealer, for failing to pay the creditor for seeds he had harvested during three growing seasons. With respect to § 523(a)(4) the creditor failed to show any statute or common law rule that gave rise to a fiduciary duty, thus failing to prove fiduciary fraud or defalcation. The creditor also failed to prove embezzlement and larceny because the facts indicated that Debtor intended to pay the creditor, thus demonstrating a lack of fraudulent intent. With respect to § 523(a)(6), the creditor failed to prove willful and malicious injury because he was aware of that Debtor had sold his seeds and had not remitted payment, and despite this knowledge, the creditor failed to take steps to protect his property.
Robert F. Hershner, Jr. (Retired)
The Court entered a "form discharge order" which purported to discharge the debtor's student loan obligation. The debtor had not filed an adversary proceeding contending that payment of her student loans would be an undue hardship. The Court determined that its discharge order was rendered in a manner inconsistent with due process and thus void under Federal Rules of Civil Procedure 60(b)(4).
SunTrust Bank assigned its claims and first priority liens to the Chapter 11 debtor in exchange for the debtor foregoing any 11 U.S.C. 506(c) surcharges against SunTrust's interest in certain property. The Foothill Lenders contended that their second priority liens now had priority over the liens the debtor acquired through the assignment. The Court rejected Foothill's theories and determined that the debtor's liens had priority over Foothill's liens.
Debtors' state income tax obligations were nondischargeable because they failed to file tax returns.
The debtor withdrew the funds in his IRA. The debtor later met with a bankruptcy attorney and learned that he could exempt funds in an IRA. The debtor rolled over his IRA distribution check into his IRA. The Court held that the debtor had, on the eve of bankruptcy, converted his IRA distribution check into an IRA with actual intent to hinder, delay, or defraud creditors. The Court allowed the trustee to avoid the transfer as a fraudulent conveyance.
Chief Judge John T. Laney, III
Debtors filed a motion to compel the mortgage company to pay a mortgage insurance premium which the Debtors alleged was an item required to be paid through escrow. Approximately one month before hearing on Debtors motion was held, the mortgage company paid the premium and reinstated the mortgage insurance policy. Although the motion was moot, Debtors requested to recover attorney fees from the mortgage company for bringing the motion. Failing to find any statutory authority authorizing the recovery of attorney fees, the court denied Debtors request.
Debtors proposed to cure over six months its prepetition arrearage in an automobile lease. The court held that Debtors’ six-month cure proposal did not constitute a "prompt" cure under § 365(b)(1) of the Bankruptcy Code. Also, the court found that Debtors did not exercise the option under the lease agreement to purchase the vehicle. Even if Debtors had timely exercised their option to purchase, the court held that Debtors’ plan proposal to pay the residual value over the life of the plan is contrary to law. Therefore, the court granted relief from stay to the movant.