In re: Simon v. Finley, III et al

Summary: The debtors’ chapter 13 confirmed plan provided that debtors would make direct payments to their mortgage creditor. In their motion for a chapter 13 discharge under § 1328(a), the debtors represented that they had made all payments required by the plan. After the motion was filed, but before entry of the discharge order, the mortgage creditor filed a response to the chapter 13 trustee’s Notice of Final Cure Payment. The creditor’s response indicated that the debtors were delinquent in post-petition mortgage payments in the amount of $70,869.24. No objections to the motion for discharge were filed and an order of discharge was entered. Approximately three weeks after entry of the discharge order, the trustee filed a complaint to revoke the debtors’ discharge under §1328(e) of the Bankruptcy Code. The complaint alleged that the debtors obtained their discharge by falsely and fraudulently stating (in their motion for discharge) that they had made all payments required by the plan. The debtors moved to dismiss the complaint for failure to state a claim on two grounds: (1) payments made directly to the mortgage creditor are not “payments under the plan,” and (2) the trustee had notice of their failure to make post-petition mortgage payments in plenty of time to file an objection to their motion for discharge. The court found that direct payments to the mortgage creditor were payments under the plan as contemplated by § 1328(a). The court further found that § 1328(e)(2) barred the trustee’s action to revoke debtors’ discharge because he had notice of their failure to make post-petition mortgage payments in ample time to object to their motion for discharge. The debtors’ motion to dismiss the complaint was granted.

In re: Connie L Melching 15-31947

Summary: The issue in this case was whether a chapter 7 debtor may claim two separate exemptions, each in the amount of $15,000.00, for payment received on account of personal bodily injury.  Debtor sought to exempt $15,000.00 for personal bodily injury arising from a pre-petition automobile accident, as well as $15,000.00 for injuries related to a pre-petition products liability claim.  The Court held that under the Illinois exemption statute governing payment for personal bodily injury, Debtor was limited to a maximum exemption of $15,000.00.

In re: First Financial Bank, N.A. et al v. Blake et al

Summary: In this chapter 12 case, First Financial Bank asserted a secured interest in debtors’ crops, farm equipment and general intangibles, including payments under the Agricultural Risk Coverage Program (ARC). The Bank filed a complaint to determine the validity, priority and extent of its lien in the ARC payments. Debtors filed a counterclaim seeking to avoid any lien asserted by the Bank as a preference under 11 U.S.C. §547. The sole issue before the court was this: When did the debtors acquire rights in the ARC payments to trigger a transfer as required by §547(e)(3)? The Court found that debtors acquired contractual rights to the 2015 and 2016 crop year payments on the date that they enrolled in the ARC program for those years, which was well outside of the 90-day preference period. Judgment was entered in favor of the Bank and the debtors’ counterclaim was denied.

In re: Michael S and Alicia F Eubanks

Summary: Chapter 13 debtors filed a five-year plan that proposed to pay general unsecured creditors 100% of their claims.  Trustee objected to confirmation because the plan payments did not include all of the debtors’ disposable income.  The trustee argued that for the plan to be confirmed, the debtors must agree that in post confirmation modifications of the plan, they would provide a minimum pool to unsecured creditors in an amount equal to the difference between their disposable income at confirmation and their actual plan payment, multiplied by the number of months that passed as of the effective date of the modification.   The trustee argued that the court could require such a pledge pursuant to the good faith provision of §1325(a)(3), or through the equitable powers granted to bankruptcy courts by §105(a).  The trustee also argued that if debtors refused such a pledge, then their plan payment must be increased to include the full amount of their disposable income.  Finally, the trustee argued that if debtors would not contribute all disposable income to their plan, general unsecured creditors would be entitled to interest on their allowed claims.   The court found that the plan complied with the requirements set forth in §1325(b)(1), that the plan was filed in good faith and that the debtors were not required to pay interest under §1325(b)(1)(A).