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The summaries on this website are summaries of the opinions issued by the judges of the Bankruptcy Court for the Western District of Virginia from October 2004 to date. The opinions may be searched by year, judge, category and chapter. For a more detailed search, enter a keyword in the search box above. This opinion bank, however, is not an exhaustive list of opinions issued by the judges of the Western District. These summaries are not intended to replace other research methods, but may be used as a starting point for your research. These summaries do not contain information as to whether an opinion has been published, appealed or the disposition of any such appeal, or otherwise overruled or affected by subsequent case law or statute. These summaries have been prepared for the convenience of the researcher and in no way constitute an interpretation by the Court of the opinion summarized. Please rely on the opinion not the summary. Please contact Judge Connelly's chambers or Judge Black's chambers regarding any questions or errors.

In re Dobson (Case No. 23-60148) 09/29/2023

The debtors filed a joint chapter 11 petition and elected to proceed under subchapter V of chapter 11. The U.S. Trustee moved to convert the case to chapter 7 pursuant to section 1112(b) of the Bankruptcy Code. At trial, after counsel for the U.S. Trustee completed his presentation of evidence, counsel for the debtors requested the Court grant judgment on partial findings pursuant to Federal Rule of Civil Procedure 52(c). The Court found that the U.S. Trustee had not shown cause under section 1112(b) to convert the case and granted the debtors’ Rule 52(c) motion.

In re Dobson (Case No. 23-60148) 05/17/2023

The debtors filed a joint chapter 11 petition and elected to proceed under subchapter V of chapter 11. An affiliate of one of the debtors filed a chapter 7 bankruptcy petition on the day after the debtors filed their chapter 11 petition. Subsequently, the U.S. Trustee objected to the subchapter V election. According to the U.S. Trustee, because the debts of the affiliate debtor when combined with the debtors’ debts exceeded the statutory maximum under section 1182, the debtors were made ineligible to proceed as subchapter V debtors due to the filing of the affiliate. The debtors disagreed, arguing that the eligibility determination is limited to the petition date. The Court overruled the U.S. Trustee’s objection, finding that the debtors had made a correct statement when they elected subchapter V on their petition and concluding that the debtors had established eligibility to proceed under subchapter V.

Cavalier Pharmacy v. Health Mart Atlas (In re Cavalier Pharmacy) (Case No. 23-70004; A.P. No. 23-07002) 3/8/23

Plaintiff, an independent retail community pharmacy, filed a motion for a temporary restraining order and preliminary injunction seeking to require the Defendant, a Pharmacy Services Administrative Organization, to turn over funds the debtor contended belong to it. In denying the Plaintiff’s motion, the Court found that the Plaintiff failed to meet its burden to prove that it is likely to succeed on the merits of the underlying claims in the adversary proceeding litigation. Here, the test is whether the debtor will be successful in this litigation where it seeks turnover of its receivables, an injunction and a finding that the automatic stay is violated. The Court found that the doctrine of recoupment applies to such receivables under the terms of the contract signed by the parties, thus the automatic stay provided for in the Bankruptcy Code does not apply.

Hegedus v. U.S. Bank (In re Hegedus) (Case No. 19-50855; A.P. No. 22-05007) 02/15/2023

The plaintiffs filed a complaint that the defendant violated the discharge injunction. In granting the defendant’s motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), the Court found that the plaintiffs had failed to plead a cause of action that was plausible on its face.

Harlow v. Wells Fargo (In re Harlow) (Case No. 17-71487; A.P. No. 20-07028) 12.12.22

The Plaintiffs filed a class action adversary proceeding against Wells Fargo Bank and its parent company for actions related to the debtors having their mortgage loans placed in forbearance status by Wells Fargo without their permission, knowledge or request. The Defendants filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. The Defendants assert that the notices of forbearance explicitly disclaimed compliance with Rule 3002.1, that the Rule does not give rise to a private cause of action and that the court lacks jurisdiction over claims involving debtors from other courts. The Court denied the motion to dismiss on the count involving the violation of Rule 3002.1. The Defendants assert that the count involving the alleged violation of the automatic stay should also be dismissed as providing forbearance relief and filing notices of forbearance are not attempts to collect a debt or conduct otherwise prohibited by 11 U.S.C. Section 362. The Court found that the sufficient facts were alleged to support a plausible claim for violation of Section 362(a)(3) , but not as to Section 362(a)(6). The Plaintiffs also asked the Court to invoke its inherent powers and powers under 11 U.S.C. Section 105(a) to sanction the Defendants for abuse of process, contempt of court and fraud on the court. The Court held that the Plaintiffs made a plausible claim that Wells Fargo engaged in a maneuver or scheme sufficient to undermine the integrity of the bankruptcy system and for contempt under the Court’s inherent powers and Section 105 powers, but not for fraud on the court. Finally, the Court dismissed the parent company as a defendant as the Plaintiffs did not allege sufficient facts to support piercing the corporate veil to hold the parent company liable for the acts of its subsidiary.

In re Skaggs (Case No. 17-50941) 08/09/2022

The parties contested whether the creditors’ post-discharge collection action subjected the offending creditors to sanctions for contempt of the bankruptcy discharge order. The parties both filed motions for summary judgment. Applying the Supreme Court’s holding in Taggart v. Lorenzen, 139 S. Ct. 1795 (2019), to the facts of the case, the Court found that the Court may hold the creditors in contempt of the discharge order for violating the discharge injunction.

In re Knott (Case No. 21-50423) 06/24/2022

The debtors converted their chapter 7 case to one under chapter 13. The chapter 13 trustee filed a motion to dismiss or reconvert arguing that the debtors were not eligible to be debtors in chapter 13 because the amount of their debt as of the petition date exceeded the statutory limits based on the debtors’ schedules. The debtors asserted that the amount of their debt as of the petition date was not the proper inquiry for eligibility. Instead, the debtors argued that the Court should not rely on the debtors’ schedules but a combination of the debtors’ schedules, the proofs of claims filed, and potential objections to some of those claims. The Court disagreed, holding that the eligibility limits of section 109(e) are based on the amount of debt as of the petition date. The Court relied on the debtors’ sworn schedules in determining that they were ineligible and thus reconverted the case back to chapter 7.

Johnson v. IRS (In re Johnson) (Case No. 15-70541; A.P. No. 21-07009) 5.2.22

This matter was before the Court on cross motions for summary judgment regarding whether or not the Debtor's 2005 and 2006 tax debts were non-dischargeable. The IRS assessed liability under 26 U.S.C. Section 6020(b). 11 U.S.C. Section 523(a) excepts from discharge debts for taxes in which a return is required but not filed. Section 523(a)(*) defines return to exclude returns made by the IRS under Section 6020(b). The Debtor did not file a return in either 2005 or 2006 and the IRS' assessment of those tax liabilities under Section 6020(b) precludes the Debtor from receiving a discharge as to these debts. The Court found the debt to be non-dischargeable and granted summary judgment in favor of the IRS.

In re Ross (Case No. 20-50885) 11/22/2021

A debtor, who is both a farmer and a school principal, claimed a $10,000 exemption in farming equipment pursuant to Virginia Code section 34-26(7). The chapter 7 trustee objected, arguing that exemptions claimed under Virginia Code section 34-26(7) are limited to a debtor’s primary or principal occupation or trade. Because the language of the statute does not limit the exemption to a debtor’s primary or principal occupation or trade, the Court overruled the trustee’s objection.

Bell v. Department of Education (In re Bell) (Case No. 19-50991; A.P. No. 20-05001) 09/01/2021

The debtor filed a complaint requesting that the Court determine that repayment of his student loan debt was an undue hardship for him, and therefore, under Bankruptcy Code section 523(a)(8), his student loan debt should not be excepted from discharge. The Court found that the debtor met the three prongs of the Brunner test to show that repayment of the student loan debt would impose an undue hardship on him. Accordingly, the Court entered an order discharging the debtor’s student loan debt.