Opinions
The Southern District of Illinois offers a database of opinions. These opinions were entered between the period of 2/1987 and the present. To conduct a detailed search, enter a keyword or case number in the search box to the right.
Opinions can also be viewed via the U.S. GPO's Federal Digital System
Date Filed |
Summary | Case Number | |
|---|---|---|---|
| 03/17/2023 |
In re: Donald M Samson v John T Spencer Summary: This case presented the issue of whether the Chapter 7 Trustee, using § 544(b) of the Bankruptcy Code, could avoid the Debtor’s disclaimer of an inheritance as a fraudulent transfer under § 3304 of the Federal Debt Collection Procedures Act (FDCPA) and recover the inheritance proceeds for the benefit of the estate under 11 U.S.C. §550. Prior to the filing of the bankruptcy, the Debtor was entitled to receive a share of an insurance trust established by his deceased parents. Rather than accept his interest, the Debtor disclaimed his interest in the trust proceeds and, consequently, the proceeds passed to the Debtor’s children under the terms of the trust and Illinois law. At the time that the Debtor executed his disclaimer he owed unpaid tax obligations to the Internal Revenue Service. After the Debtor filed his Chapter 7 petition, the Trustee filed an adversary proceeding to avoid the disclaimer as a fraudulent transfer. Section 544(b)(1) permits a trustee to “step into the shoes” of an unsecured creditor and avoid a transfer of an interest of the debtor in property that the creditor could have avoided under “applicable law” but for the filing of the bankruptcy petition. Because it is well established that a disclaimer does not constitute a fraudulent transfer under the Illinois Fraudulent Transfer Act, the Trustee instead “stepped into the shoes” of the IRS—one of the Debtor’s unsecured creditors—and proceeded under the fraudulent transfer provision of the FDCPA. Both the Debtor and several of the Debtor’s children (“Defendants”) moved to dismiss the complaint arguing, inter alia, that (1) the FCPA was inapplicable to avoidance brought by a bankruptcy trustee under 11 U.S.C. § 544(b); and (2) because the Debtor disclaimed his interest in the trust proceeds, he never proceeds, he never possessed an interest in “property” or an “asset” that could be transferred under the FDCPA. In denying the Defendants’ motions to dismiss, the Court first examined the broad language of § 544(b) and noted it did not restrict trustee avoidance actions to those under state law or to specified codes sections. Instead, the focus is on whether the creditor into whose shoes the Trustee has stepped may pursue avoidance. Here, because the IRS could have brought an avoidance but foe the filing of the bankruptcy petition, so, too, could the Trustee. Further, the Court concluded that permitting the Trustee to use the FDCPA to seek to avoid the disclaimer did not impermissibly “modify the operation of title 11” in violation of § 3003(c)(1) of the FDCPA. The Court also rejected the Defendants’ contention that due to the disclaimer, the Debtor never possessed an interest in property that could be transferred. Although the Debtor had no transferrable interest in the disclaimed trust proceeds under Illinois law, the FDCAP contains an preemption clause which specifically pre-empts state law to the extent that it is inconsistent with the FDCPA. 28 U.S.C. § 3001(a). After examining the definitions of “property” and “transfer” under the FDCPA, the Court concluded that the Trustee had established that the Debtor had an interest in property that was transferred under the FDCPA. |
22-3016 | View |
| 03/09/2023 |
In re: Nike USA Inc v CNB Bank & Trust NA Summary: Both Nike USA, Inc. and the Chapter 11 Trustee filed complaints against CNB Bank to determine the status of the bank’s claims, along with the avoidance and recovery of an alleged post-petition transfer. Each party then filed separate motions for summary judgment. The Court found CNB Bank’s security agreements had attached and perfected under the Uniform Commercial Code and that a determination on the alleged post-petition transfer was not necessary. The Court granted summary judgment in favor of CNB Bank against both the Trustee and Nike.
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21-3013 | View |
| 03/09/2023 |
In re: Michael Collins v CNB Bank & Trust NA Summary: Both Nike USA, Inc. and the Chapter 11 Trustee filed complaints against CNB Bank to determine the status of the bank’s claims, along with the avoidance and recovery of an alleged post-petition transfer. Each party then filed separate motions for summary judgment. The Court found CNB Bank’s security agreements had attached and perfected under the Uniform Commercial Code and that a determination on the alleged post-petition transfer was not necessary. The Court granted summary judgment in favor of CNB Bank against both the Trustee and Nike.
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21-3016 | View |
| 02/02/2023 |
In re: Brandon A Ritter Summary: The mortgage creditor in this Chapter 13 case withdrew its objection to the Debtor’s original Chapter 13 Plan stating that the treatment of its claim in the Debtor’s new plan provided “sufficient treatment as to Creditor.” Thereafter, the creditor filed its proof of claim setting forth an amount necessary to cure the default in the mortgage. The Debtor amended his plan to conform to the proof of claim and to satisfy unrelated objections by the Trustee. The mortgage creditor did not object to that amended plan. Only later, when the Debtor filed additional amended plans to address the Trustee’s objections, did the mortgage creditor raise an objection that a prepetition foreclosure sale had terminated the Debtor’s right to cure the mortgage pursuant to 11 U.S.C. §1322(c)(1). By that time, the Trustee had paid the creditor over $9,000.00 on its mortgage claim pursuant to the terms of the Debtor’s unconfirmed plan. The Court found that the creditor was precluded from pursuing its Objection under both the equitable doctrine of judicial estoppel and the Bankruptcy Code. Using a three-part analysis in New Hampshire v. Maine, 532 U.S. 742 (2001), the Court determined that the mortgage creditor was judicially estopped from pursuing a new and inconsistent legal position in the case. The Court further found that the mortgage creditor had “accepted” the treatment of its claim in the earlier version of the plan, and therefore was precluded by 11 U.S.C. §1323(c) from objecting to that treatment in a later version of the plan. The Court noted that its decision was not intended to interpret or apply Illinois foreclosure law or render an opinion as to the validity of the mortgage creditor’s foreclosure sale, as those were matters for the state court.
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22-40120 | View |
| 01/13/2023 |
In re: Adam L Morris Summary: The Debtor in this case attempted to exempt his contingent interest in a non-spendthrift trust pursuant § 5/2-1403 of the Illinois Code of Civil Procedure (735 ILCS 5/2-1403). This section prohibits a judgment creditor from satisfying its judgment from the debtor’s interest in a trust if the trust was created in good faith by, or has proceeded from, a person other than the judgment debtor. The Trustee objected on the grounds that § 5/2-1403 was not an “exemption statute” and could not be used to shield estate property from the Trustee. In sustaining the Trustee’s objection, the Court examined the statute in question and concluded that it was very narrow and did not unequivocally protect property from any and all forms of debt collection. Hence, it could not be used to exempt the Debtor’s trust interest.
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21-30468 | View |
| 07/21/2022 |
In re: Zackery and Lori Laramore Summary: This case presented the issue of whether a debtor who was not a party to her spouse’s personal injury suit, may nonetheless claim a personal injury exemption in the settlement proceeds based on loss of consortium. At the time of the filing of the bankruptcy petition, the debtor husband had a pending personal injury action for hearing loss caused by faulty earplugs. On their Schedule C, both debtors claimed a $15,000.00 personal injury exemption in the proceeds of this suit pursuant to 735 ILCS 5/12-1001(h)(4): the debtor husband for his alleged hearing loss and the debtor wife for loss of consortium relating to her husband’s injury. The Chapter 7 Trustee objected to the wife’s exemption on the grounds that the wife was not entitled to claim an exemption in the proceeds because she did not have an ownership interest in the asset.
In sustaining the Trustee’s objection, the Court relied on its prior opinion in In re Hamilton, 2010 WL 390240 (Bankr. S.D. Ill., September 29, 2010). In that case, the Court held that property that is wholly owned by one joint debtor is neither included in the bankruptcy estate of the non-owner debtor nor subject to exemption by the non-owner. Here, the debtor’s Statement of Financial Affairs and schedules all indicated that the lawsuit was solely the property of the debtor husband and the parties’ bankruptcy estates had not been consolidated. Accordingly, the debtor wife was not entitled to claim an exemption in the property.
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22-30012 | View |
| 07/08/2022 |
In re: Norrenberns Foods Inc Summary: The Debtor filed a Motion to Sell under 11 U.S.C. § 363(f) seeking an order approving the sale of substantially all of the Debtor's assets used in the operations of its grocery business “free and clear of any interest,” including successor liability claims. The United Food and Commercial Workers Unions and Employers Midwest Pension Fund objected to the sale, arguing that its successor liability claims were not an interest in the property being sold so could not be extinguished by the sale order. The Court agreed with the majority of courts that the term “interest” should be interpreted broadly. Because section 363(f) of the Bankruptcy Code permits a sale of property “free and clear” of an “interest in such property” and because the claims arose from the assets sold, the Court held that the Fund’s successor liability claims are an “interest” for purposes of Section 363(f), and the Debtor was authorized to sells its assets free and clear of the successor liability claims. |
21-30825 | View |
| 06/21/2022 |
In re: Lunn vs. Lunn Summary: The Debtor filed a complaint seeking to avoid a judicial lien in favor of his former spouse pursuant to 11 U.S.C. § 522(f)(1)(A). The lien secured the former spouse’s interest in the equity in the parties’ marital residence. As a preliminary procedural matter, the Court noted that this action should have brought as a motion rather than an adversary proceeding pursuant to Federal Rules of Bankruptcy Procedure 4003(d) and 7001(2) and construed the complaint as such. Then, relying on the Supreme Court’s ruling in Farrey v. Sanderfoot, 500 U.S. 291, 114 L.Ed. 337, 111 S.Ct. 1825 (1991), the Court denied the Debtor’s motion. The Court explained that § 522(f)(1)(A) does not simply allow a debtor to “undo” a judicial lien. Instead, it permits the debtor to avoid the “fixing” of a lien on the debtor’s interest in property. This implies that the debtor must have had a pre-existing interest in the property at the time that the creditor’s lien fixed. Here, a species of common ownership in the parties’ marital property was created under state law when the divorce petition was filed. This common ownership interest remained until the entry of the judgment of dissolution of marriage establishing the parties’ property interests—the same judgment which simultaneously created the judicial lien in favor of the former spouse. Hence, the Debtor did not possess a pre-existing interest at the time that the lien fixed, and, therefore, the former spouse’s lien was immune to the Debtor’s challenge under § 522(f)(1)(A). |
22-3007 | View |
| 01/13/2022 |
In re: Bryan M McGee Summary: When the Chapter 13 Debtor and his Co-Debtor spouse divorced, the case was deconsolidated. The Trustee then filed a Motion to Compel asking the Debtor to amend Schedules D and E/F to list only the debts he owed and to object to all claims no longer part of the Debtor’s case. The Trustee argued that he needed the Debtor to take that action so that the Trustee would know what claims to pay in the Debtor’s deconsolidated case. The Debtor argued that he was potentially obligated for all the debts listed on his original schedules by virtue of the Illinois Family Expense Act, and therefore the schedules and claims remained accurate as filed. The Trustee countered that there was no indication that the Debtor was liable for any claims under the Illinois Family Expense Act. Emphasizing that the Bankruptcy Code requires a debtor to file accurate schedules, the Court denied the Trustee’s Motion, finding that to do otherwise would require the Debtor to file schedules and claim objections contrary to his considered judgment that the schedules are still accurate and that the claims should be paid as filed. The Court noted that the Bankruptcy Code and Rules provide for the Trustee to object to any claims that he believes are improper, and that he can request additional information from the Debtor who has a duty to cooperate with the Trustee in that regard. As to the Illinois Family Expense Act, the Court found it premature to rule on the applicability of the Act as no hearing had been held on the allowability of any claim based on that Act. |
18-41056 | View |
| 12/29/2021 |
In re: Dallas R Law Summary: Prior to filing Chapter 13 bankruptcy, the Debtor made $8,000.00 in preferential transfers. His Chapter 13 Plan proposed to pay $6,450.00 to general unsecured creditors, which the Debtor asserted satisfied the “best interests of creditors test” of 11 U.S.C. §1325(a)(4) as unsecured creditors would have received $6,450.00 in a Chapter 7 bankruptcy after deducting the Chapter 7 trustee fee of $1,550.00. The Debtor’s disposable income was $2,548.80 over the 60-month term of the Debtor’s Plan. The Debtor asserted that his proposed payment to general unsecured creditors satisfied the “disposable income test” of §1325(b)(1)(B) by exceeding his disposable income. The Trustee objected to the Plan arguing that the “good faith test” of §1325(a)(3) required the Debtor to provide a pool for general unsecured creditors of $10,548.80 to account for the $8,000.00 preferences and the $2,548.80 disposable income. The Trustee contended that the Debtor’s Plan provided a windfall to the Debtor’s insiders at the expense of unsecured creditors, because if the Chapter 13 Trustee pursued the preferences, the unsecured creditors would receive both the disposable income and the preference recovery. Addressing the “best interest of creditors test”, the Court noted that $33,144.85 in priority unsecured claims had been filed, and those claims would be paid first in a hypothetical Chapter 7 liquidation, leaving $0.00 for general unsecured creditors. The Debtor’s Plan exceeded that amount by proposing to pay $6,450.00 to general unsecured creditors. As to the “disposable income test”, the Court rejected the Trustee’s argument that the preferences should be added to “disposable income”. Distinguishing Watters v. McRoberts, 167 B.R. 146 (S.D. Ill. 1994), the Court noted that a preference action only arises upon the bankruptcy filing and belongs to the bankruptcy estate, unlike the exempt personal injury recovery at issue in Watters. Finally, the Court found that the Debtor’s Plan met the “good faith test” because it complied with the explicit provisions of the Bankruptcy Code and the only element of “bad faith” asserted by the Trustee was the amount that the Debtor’s Plan proposed to pay to general unsecured creditors. The Debtor’s Plan satisfied both the “best interests of creditors test” and the “disposable income test”, and the proposed payment to general unsecured creditors exceeded the amount required by both of those provisions.
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21-40223 | View |