Plaintiff Omega Cotton Company brought two claims against Debtor Loyd Bill Sutton. The first claim was based on a district court judgment in the amount of $308,430.25. The second claim was based on alleged fraud by the Debtor, resulting in a claimed loss of $4,523,400.00. Omega sought to have both claims exempted from discharge. On the first claim, the court determined that res judicata did not preclude a finding that the debt was dischargeable under 11 U.S.C. § 523(a)(4), because of the narrow definitions of fraud and defalcation as applied to the bankruptcy code. The court held that debt dischargeable. The court found that the second claim was precluded by res judicata, because Omega had a full and fair opportunity to litigate those claims in the previous district court case. Summary judgment was entered for the debtor.
Opinions
The Middle District of Georgia offers opinions in PDF format, listed by year and judge. For a more detailed search, enter the keyword or case number in the search box above.
Please note: These opinions are not a complete inventory of all judges' decisions and are not documents of record. Official court records are available at the clerk's office.
Judge John T. Laney, III
Creditor Wells Fargo Corp. (Fargo) filed an objection to the confirmation of Debtor's Chapter 13 plan. In his plan, Debtor proposed to bifurcate and cramdown Fargo's undersecured claim using § 506 of the Code as was common practice prior to the enactment of certain provisions of BAPCPA. The "hanging paragraph" of § 1325(a), which was added by BAPCPA and became effective on October 17, 2005, prohibits bifurcation and cramdown where (1) the creditor has a purchase money security interest; (2) the debt was incurred within 910 days preceding the filing of the bankruptcy case; (3) the collateral for the debt is a motor vehicle; and (4) the motor vehicle was acquired for the personal use of the debtor.The Court SUSTAINED Fargo's objection holding that in the context of the retail installment sale of a motor vehicle in Georgia, "price," for purposes of Georgia's purchase money security interest statute, can include monies paid for an extended service contract and gap insurance.
Creditor objected to confirmation of Debtor's Chapter 13 Plan, where Debtor proposed to bifurcate the Creditor's claim on a vehicle driven and used exclusively by his wife. Overruling Creditor's objection, the court held that the hanging paragraph of 1325(a)(*) does not prevent bifurcation of a purchase money security interest on a 910 day vehicle where the vehicle was not purchased for the personal use of the Debtor.
The Court finds that there is no issue of material fact remaining to be determined and that MSDW has carried its burden of proving that § 546(e) is applicable to bar the Trustee from avoiding the transfers in question. As such, MSDW’s Motion for Summary Judgment is granted as to all counts of the Trustee’s Amended and Restated Complaint.
The discharge of student loans is reserved for those most extreme instances of financial destitution. It is the Court’s finding that this debtor finds herself in such a situation. The Court holds that Debtor has carried her burden of proving, under the standard set forth in In re Brunner and adopted by the Eleventh Circuit Court of Appeals in In re Cox, that excepting Debtor’s student loan debt from discharge would impose an undue hardship on Debtor and her dependent son. As such, the student loan debt at issue, representing loans made by ECMC and the DOE, is held to be dischargeable.
Chapter 7 Trustee filed an objection to the claimed exemptions by Debtors in a singlewide mobile home (“Singlewide”) and in real property on which a block house was constructed. Debtors claimed the exemption under O.C.G.A. § 44-13-100(a)(1), Georgia’s opt-out homestead exemption statute. Debtors argued that their equity interest in the Singlewide could be exempted under O.C.G.A. § 44-13-100(a)(1) since their 22 year-old daughter and minor grandson occupied the Singlewide at the time Debtors’ bankruptcy petition was filed. Debtors claimed that their daughter and grandson were “dependent” for purposes of the homestead exemption statute. The evidence at the hearing revealed that Debtors had claimed their daughter and grandson as “dependents” on their 2005 income tax returns and that the daughter and grandson did, in fact, occupy the Singlewide at the time Debtors’ petition was filed. With regard to the Singlewide, the Court found that the Trustee did not present evidence sufficient to prove that Debtors’ daughter and grandson were not dependents of Debtors for purposes of O.C.G.A. § 44-13-100(a)(1). Therefore, the claim of exemption in the Singlewide was proper since the Singlewide was the residence of Debtors or their dependents. As to the block house property, however, the Court found that there was no legal basis for exempting the equity interest in a rental property owned by a debtor just because that property was located contiguous to the homestead or residence of the debtors. The Court, therefore, sustained the objection of the Trustee as to the claim of exemption in the block house property.
Creditor Nuvell Credit Corp. (“Nuvell”) filed an objection to the confirmation of Debtor’s Chapter 13 Plan. In his plan, Debtor proposed to bifurcate and cramdown Nuvell’s undersecured claim using § 506 of the Code as was common practice prior to the enactment of certain provisions of BAPCPA. The “hanging paragraph” of § 1325(a), which was added by BAPCPA and became effective on October 17, 2005, prohibits bifurcation and cramdown where (1) the creditor has a purchase money security interest; (2) the debt was incurred within 910 days preceding the filing of the bankruptcy case; (3) the collateral for the debt is a motor vehicle; and (4) the motor vehicle was acquired for the personal use of the debtor. The Court SUSTAINED Nuvell’s objection holding that in the context of the retail installment sale of a motor vehicle in Georgia, “price,” for purposes of Georgia’s purchase money security interest statute, can include negative equity in a trade-in vehicle.
On June 16, 2006, Debtors’ filed a Motion to Reconsider the Memorandum Opinion issued by the Court on June 6, 2006 (see above). Debtors made four arguments in favor of their motion: (1) The language of § 1325(a)(*) does not prohibit “the stripping down of the lien or cram-down or bifurcation of the creditor’s claim”; (2) The Court’s reliance on In re Johnson, 337 B.R. 269 (Bankr. M.D.N.C. 2006), for the proposition that despite the purchase of items other than the vehicle, Nuvell still held a purchase money security interest in the vehicle, was improper being that the court in Johnson did not make that finding and that such an argument was not made; (3) The court did not consider the argument raised by Debtors at the April 4, 2006 hearing that the secured claim of Nuvell could still be bifurcated under the authority of § 1322, which states that a Chapter 13 plan may modify the rights of a secured creditor; and (4) Claims qualifying under § 1325(a)(*) are not entitled to the present value protection provided for in § 1325(a)(5)(B)(ii), such protection provided in the form of a “prime plus risk factor” interest rate as set forth by the United States Supreme Court in the case of Till v. SCS Credit Corp., 541 U.S. 465 (2004).
The Court held a hearing on Debtors’ motion to reconsider on July 18, 2006, and orally granted the motion, agreeing to reconsider a portion of the June 6 memorandum opinion. The Court revisited its discussion of whether Nuvell held a purchase money security interest. Considering many cases on O.C.G.A. § 11-9-103 (2002) and the statute itself, which defines “purchase money security interest” in Georgia, the Court confirmed that Nuvell does, in fact, hold a purchase money security interest in Debtors’ vehicle. The Court found no authority for the proposition that the purchase of an extended service contract, payment of a documentary fee, and payment of a governmental title fee, at the same time the collateral was purchased, disqualifies the creditor from holding a purchase money security interest in the collateral itself. The court held that the “transformation” rule, which is applicable in the Eleventh Circuit to situations involving refinancing or consolidation of past and present loans, was not applicable in the situation before the Court. The Court held that the extended service contract and the other fees were so inextricably related to the collateral itself, that the purchase of these items contemporaneous with the purchase of the collateral, could only mean that the cost of these items should be considered part of the purchase “price” of the collateral for purposes of applying O.C.G.A. § 11-9-103. The order issued with the June 6 Memorandum Opinion was, therefore, left unchanged.
Debtors filed a Motion to Abrogate the Administrative Order of January 3, 2005, which set forth the procedure for payment of debtors’ attorneys fees in Chapter 13 cases. After consideration of Debtors’ evidence of the increased burden on debtors’ counsel under the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”), the Court held that the Administrative Order should not be abrogated, but should be amended to allow the payment of $2,500 to debtors’ counsel in Chapter 13 cases without separate application or hearing (i.e., “no-look” fee). The Court is convinced that its modification of the Administrative Order will strike a much-needed balance between debtors’ interests in proposing and completing a successful Chapter 13 plan, secured creditors’ interests in recoupment despite oftentimes rapidly depreciating collateral, and bankruptcy attorneys’ interests in being fairly compensated for the vital service they provide to debtors. Along with an increase in the no-look fee, the Court amended the Administrative Order to increase the amount of the initial disbursement, the monthly payments, and the fee due in dismissed cases. Individuals should reference the Amended Administrative Order for specifics.
Creditor Nuvell Financial Services Corp. (hereinafter, “Nuvell”) filed an objection to the confirmation of Debtors’ Chapter 13 Plan on the basis that the treatment of Nuvell in the plan did not comport with the requirements of the “hanging paragraph” of 11 U.S.C. § 1325(a) (hereinafter, “§ 1325(a)(*)”). Debtors purchased a motor vehicle within 910 days of filing their Chapter 13 bankruptcy petition. The vehicle was purchased for the personal use of Debtors. At the time the vehicle was purchased, Debtors also purchased an extended service contract and were assessed a documentary fee by the seller. Debtors argued that the purchase of the extended warranty and the payment of the documentary fee with monies meant for the purchase of the vehicle alone, prevented Nuvell from holding a purchase-money security interest.
The Court held that Nuvell in fact held a purchase-money security interest and that the other requirements of § 1325(a)(*) were met so as to qualify Nuvell’s claim for treatment under that section. Further, the Court held that § 1325(a)(*) does not prevent a claim qualifying under that section from being an “allowed secured claim” for purposes of § 1325(a)(5) and its present interest requirement. Section 1325(a)(*) serves to prevent the bifurcation of an under-secured claim into a secured and unsecured portion under § 506. This holding is consistent with the vast majority of cases considering the meaning of § 1325(a)(*). The Court’s interpretation is also consistent with the plain meaning of the statute and with the legislative history on the section.
The Court also considered the issue of post-petition interest rates to be paid in accordance with § 1325(a)(5) on secured claims that qualify for treatment under § 1325(a)(*). The Court concluded that the United States Supreme Court case of Till v. SCS Credit Corp., 541 U.S. 465 (2004), was applicable to claims falling under § 1325(a)(*). The Supreme Court held in Till that § 1325(a)(5) required that interest on allowed secured claims should be paid at a current rate determined by an adjustment from the prime rate based upon the risk of nonpayment. Being as the Court concluded that a claim qualifying under § 1325(a)(*) is an “allowed secured claim” for purposes of § 1325(a)(5), the interest rate set forth in Till is appropriate.