The Court denied confirmation the Debtors’ Fourth Amended Chapter 12 plan and dismissed this family farmer’s case finding that the Debtor’s plan was not feasible under 11 U.S.C. § 1225(a). The Court found it improbable that the Debtor would have sufficient income to make all his required payments under the plan, noting the Debtor’s mistake-laden record keeping and financial projections. As the records and projected revenue and expenses were so inaccurate and unpersuasive, they did not demonstrate the Debtor’s probable compliance with the plan terms. Therefore, the Court held that the Debtor failed to carry his burden on the feasibility prong of Section 1225. The Court also denied leave to amend the plan under 11 U.S.C. § 1221 as the Debtor failed to show any reasonable likelihood of reorganization. As the Debtor had multiple opportunities to present a confirmable plan and had been unable to do so, the Court dismissed the case.
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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.
The Court dismissed the Debtor's single-asset Chapter 11 case on motion of creditor under Section 1112(b) for cause as the Debtor's case was both filed in bad faith and was objectively futile. Based upon the lack of assets, equity and cash flow, and considering the structure of the ownership as a tenant-in-common ("TIC") investment vehicle with only one of multiple TICs filing for relief, the Court held that the Debtor could not propose an objectively reasonable plan of reorganization. Further, the Court found that the Debtor did not file the case in good faith as it did so to delay its largest secured creditor when its controlling member knew there was no reasonable possibility of reorganization.
In a case proceeding under the Bankruptcy Act of 1898, the Court granted the Chapter 7 Trustee's Motion Seeking Approval of Interim Distribution to Unsecured Creditors related to gas royalties with the modification that interest shall be payable on the general unsecured claims at the rate of 3.6% in accordance with the U.S. Treasury Bill rate in effect on the date the petition was filed against Yellow Poplar. Additionally, certain heirs challenged the proposed distribution to an assignee of their ancestor's original proof of claim. The Court held that an assignment of their ancestor's original proof of claim would not be recognized as the Bankruptcy Referee made no distributions to the assignee; therefore, the heirs are entitled to distribution under the originally filed claim.
In round two of dispositive motions in this adversary proceeding, Midland Funding, LLC (“Midland”) filed a motion to dismiss the plaintiffs' amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) or in the alternative to compel arbitration and strike class allegations. The debtors claimed that Midland violated the Fair Debt Collection Practices Act and Federal Rule of Bankruptcy Procedure 3001 due to its business practice of knowingly filing proofs of claim that purposely contain inaccurate amounts owed, and only amending the proofs of claim after the debtors file an adversary proceeding. The Court denied Midland’s motion to dismiss and further found that this alleged violation was not an appropriate question for arbitration and therefore denied the motion to compel arbitration.
The debtor filed a motion to quash a creditor’s garnishment of escrowed proceeds from a sale of a house originally held as tenants by the entireties. The creditor objected. The parties disagreed on whether the proceeds were held as tenants by the entireties as of the petition date because the tenancy may have severed prepetition. Looking to the terms of the escrow agreement and the property settlement agreement, the Court found that the tenancy had severed but that the debtor was entitled to his claimed exemption.
Pro se creditor filed adversary proceeding seeking a determination that certain property damages caused by the Debtors to a rental home were non-dischargeable under 11 U.S.C. § 523(a)(6) as debts “for willful and malicious injury by the debtor to another entity or to the property of another entity.” The creditor asked the Court to find that the doctrine of collateral estoppel applied to the action based on the underlying state court judgment. As there was no indication in the state court judgment that findings were made in that court that would form the basis of a collateral estoppel claim in this Court, the Court held that collateral estoppel did not apply. The Court found that the majority of the damages to the home were a consequence of atrocious living habits that did not rise to the level of malicious or willful action. However, certain damages related to sliding shower doors were held to be non-dischargeable because the Debtor knew with objective certainty that his actions, and subsequent inaction to remedy the damage he caused, would injure the creditor’s property.
The Chapter 7 Trustee objected to the Debtors' attempt to reduce the amount of exemptions claimed on a prior recorded homestead deed and use the resulting excess exemption amount in an attempt to exempt funds held in a bank account resulting from the sale of a distribution contract. The contract was an asset of the estate at the time of the initial filing of the case, but the Debtors did not claim an exemption in the contract at that time. The Debtors argued that the proceeds received from the sale were not part of the Chapter 7 estate because the case was previously one under Chapter 13, and the provisions of 11 U.S.C. § 348(f) apply, which provide that the Chapter 7 estate does not include assets that have been obtained since the time of the filing of the original case. Relying on In re Emerson, 129 B.R. 82 (Bankr. W.D. Va. 1991), aff’d, 962 F.2d 6 (4th Cir. 1992), the Court held that the Debtors were precluded from timely perfecting any exemption in the funds held in the bank account pursuant to the Virginia homestead exemption. Had the Debtors wanted to claim a portion of the distribution contract or proceeds realized from its sale as exempt, they should have included it in the original homestead deed. The Court sustained the Trustee’s objection.
A judgment creditor filed a motion to reopen the Debtor’s no-asset Chapter 7 case. The creditor was a known creditor of the Debtor, but was not given actual notice of the case in time to file a non-dischargeability action. Citing In re Rollison, 579 B.R. 67 (Bankr. W.D. Va. 2018), the Court denied the motion to reopen. However, the court specifically noted that nothing contained in its Order prevented the creditor from proceeding in state court to seek a determination of the dischargeability of the Debtor’s obligation to him.
The Debtor filed a Complaint against his employer seeking an award of costs ($775.00) and attorney's fees ($4,200.00) as a sanction for violation of the automatic stay of 11 U.S.C. § 362. Noting that the paralegal and the attorney charged the same hourly rate ($200/hour) and billed in quarter hour increments instead of tenth of an hour increments, the Court reduced the paralegal's rate to $100/hour and also reduced her time by one half. This reduction was also supported by the fact that both the paralegal and attorney performed the exact same task on the exact same date on several occasions. Counsel's fees were allowed in a limited amount as this was not a complicated matter and counsel could have filed a motion to show cause against the employer without the necessity of filing an adversary proceeding. No costs were allowed as the matter should have been filed before the case was closed and due to the fact that no filing fees are due from a debtor who files an adversary proceeding. The Court allowed only $700.00 in attorney's fees and granted judgment in the total amount of $1,075.00 as a reasonable attorney's fee as a sanction against the employer. Counsel was also prohibited from recovering from the Debtor the filing and reopening fees paid in connection with the case.
Creditor moved the Court to dismiss a case as a bad faith filing, because the debtor filed to stop a state court civil action and because the creditor did not believe the debt was dischargeable. The state court action arose from the debtor's prepetition action in engaging in criminal conversation with the creditor's then wife. The Court held that prepetition bad faith conduct by itself is insufficient to disqualify a debtor from proceeding in bankruptcy. The Court also denied the alternative request of relief from stay to pursue the state court civil action.