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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.

Lyall v. United States (In re Lyall) (Case No. 11-70535; A.P. No. 11-07037) 10/31/2012

In an adversary proceeding, the debtors sought, among other relief, a declaratory judgment that the female debtor was not a “responsible officer” under section 6672 of the Internal Revenue Code.  Both sides filed motions for summary judgment.  The court concluded that summary judgment was not appropriate because there were genuine issues of fact as to whether the female debtor actually possessed but failed to exercise power to compel the payment of the withholding taxes owing to the government.

In re Nittany Enterprises, Inc. (Case No. 11-70779) 10/30/2012

Claimant, who was a customer of the debtor and who had purchased a membership in the franchisor of the debtor, filed a proof of claim seeking a refund of his membership fees after the debtor closed the local showroom.  The chapter 7 trustee filed an objection to the claim.  The court found that the trustee did not carry his burden in rebutting the presumptive validity of the proof of claim, but did carry his burden as to the amount of the claim and its priority status.

In re Bolling (Case No. 09-60353) 10/25/2012

The creditor moved for relief from the automatic stay in order to reduce the debtor's guarantees on a loan to judgment and to record that judgment.  The trustee did not oppose granting relief to the creditor to obtain a judgment against the debtor, but objected to the recordation of any judgment obtained.  The Court held that the creditor would not be permitted to record any judgment that it obtained because it would create a change in priority of the creditor's claim.

In re Humphrey (Case No. 12-70431) 10/23/2012

            The chapter 7 trustee, Robert E. Wick, objected to a proof of claim on the basis that no supporting documentation was filed with the claim.  The debtor had scheduled this debt as an undisputed debt in a slightly higher amount than that listed in the claimant’s proof of claim.  The Court overruled the objection because the only basis for objection was lack of supporting documentation, citing the decision in In re Magic Wand, LLC, Case No. 12-70404 (Bankr. W.D. Va. Oct. 10, 2012).

Hayes v. Well Fargo Home Mortgage et al (In re Hayes) (Case No. 12-61487-LYN; A.P. No. 12-06067) 10/11/12

First, the debtor sought to avoid a lien arising under a deed of trust in favor of Wells Fargo Home Mortgage. Case law provided that, generally, a debtor is permitted to avoid a consensual lien on a debtor’s residence if the amount of the senior liens are greater than the value of the residence. The Debtor met that standard and therefore the Debtor was allowed to avoid Wells Fargo’s lien arising from its second deed of trust.

Creasy v. McGarry (In re Abingdon Orthopedic Associates, PC) (Case No. 10-72803; A.P. No. 12-07021) 10/11/2012

            Chapter 7 trustee, Roy V. Creasy, filed an adversary proceeding on behalf of the debtor to recover property obtained by the defendant through a pre-petition garnishment summons.  The Court found that the defendant’s lien against the judgment debtor’s bank account became effective on the date the writ of fieri facias was delivered to the county sheriff.  Even though the payment at issue occurred within ninety days prior to the debtor’s bankruptcy filing, it represented a transfer in partial satisfaction of an existing lien upon that account which had been created more than ninety days before such bankruptcy filing.  For that reason the payment was not preferential within the meaning of § 547 of the Bankruptcy Code because a lien creditor is entitled in bankruptcy to the benefit of its lien against the debtor’s property.  The Court dismissed the trustee’s complaint and entered final judgment in favor of the defendant.

In re Magic Wand, LLC (Case No. 12-70404) 10/10/2012

            The chapter 7 trustee, Robert E. Wick, filed objections to two proofs of claim, both on the basis that no supporting documentation was filed with the claim.  Under 11 U.S.C. § 502(a) and Bankruptcy Rule 3001(f), a properly filed proof of claim is prima facie evidence of the validity and amount of the claim.  However, the Court noted that the failure to file the documentation merely deprives the claimant of prima facie validity; the objection must still be based on some good faith ground.  The debtor in this case listed the two claims in its schedules as undisputed and owing in the same amounts asserted in the proofs of claim.  In short, simply the lack of documentation, standing alone, is no reason to conclude that a debt which is in no way disputed by the debtor is not valid.  The Court overruled both objections.

Hayes v. Wells Fargo Home Mtg. (In re Hayes) (Case No. 12-61487; A.P. No. 12-06067) 10/11/2012

In a second chapter 7 case filed by the debtor, a creditor was granted relief from stay based on two deeds of trust on real property.  The debtor then received a discharge.  Thereafter, the creditor attempted to sell the property on 3 separate occasions, but was not successful.  The creditor then agreed to modify the debt owed under the first deed of trust.   The debtor then filed a chapter 13 case and provided for avoidance of the creditor’s second deed of trust.  The creditor and the debtor entered into a consensual judgment to avoid the second deed of trust, subject to approval by the Court and completion of performance under Chapter 13 plan.  The Chapter 13 Trustee objected to the plan on the grounds that it was filed in bad faith.

The Court held that a debtor may avoid a lien in a Chapter 13 bankruptcy case if the value of the collateral is less than all senior liens and if the debtor is not eligible to receive a discharge in the case.   The Court held that the determination of whether a plan has been proposed in good faith is to be determined by considering all militating factors.   In this case, the creditor holding the lien consented to the entry of a judgment avoiding its lien.  That decision followed 3 failed attempts to auction off the real property and an agreement between the parties resulting in a signification modification of the creditor’s first deed of trust.  The Court held that the filing of the petition and the plan did not constitute bad faith because the debtor had not forced any creditor to accept a modification of its rights.  The plan only modified the creditor’s claim and the creditor had agreed to that modification.

Johnson v. Dowling (In re Dowling) (Case No. 12-60031; A.P. No. 12-06017) 9/27/2012

The Court found that the Debtor’s receipt of a $150,000 loan from a creditor was dischargeable, determining that (1) there was no defalcation because the Debtor was not in a fiduciary capacity with the creditor pursuant to 11 U.S.C. § 523(a)(4); (2) there was no evidence presented that the Debtor willfully and maliciously sought to cause injury to the creditor pursuant to 11 U.S.C. § 523(a)(6); and (3) there was no common law fraud pursuant to 11 U.S.C. § 523(a)(2)(A), though the Court found that this was a “close case.”  The Court ultimately concluded that the Debtor did not intend to deceive the creditor. 

In re Coburn (Case No. 12-71189) 9/24/2012

Chapter 7 debtors claimed IRA exemptions on Schedule C pursuant to Section 522(b)(3)(C).  The trustee argued that since Virginia opted out of federal exemption scheme, the debtors could only claim the Virginia exemption for retirement accounts under Va. Code section 34-34 and within the time limit prescribed by Va. Code section 34-17.  The Court relied on In re Diaz, 2010 Bankr. Lexis 1944 (Bankr. E.D. Va. June 10, 2010), which held that a debtor who is required to take state law exemptions can still elect to claim the retirement account exemption under section 522, and overruled the Trustee's objection.

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