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 debtors filed a complaint, and subsequently a motion for default judgment, seeking damages under the Fair Debt Collection Practices Act. The Court denied the motion and dismissed the complaint, because the Court determined that it did not have subject-matter jurisdiction over the complaint.
The debtors filed a complaint seeking sanctions for violation of the automatic stay by Taxing Authority Consulting Services, Inc. and the County of Louisa, Virginia. A consent order was entered dismissing the complaint as against the County of Louisa, but TACS opposed the complaint. After the debtors filed for bankruptcy, TACS filed a proof of claim in the case on behalf of Louisa County. About two months later, TACS sent a collection letter to the plaintiffs attempting to collect the taxes, and the female debtor informed it she had filed a bankruptcy petition. After this phone call, TACS made no further attempt to communicate with the debtors.
Twice a year TACS received delinquent accounts from the County of Louisa with those taxpayers who have filed a bankruptcy petition flagged; the debtors were not flagged in the communication, which the Court found not to be the fault of TACS. Further, TACS ceased collection efforts after being informed. The Court found that TACS did not willfully violate the stay and that the debtors incurred no damages as a result of the collection letter other than attorney’s fees which were incurred well after TACS ceased such violation. The Court declined to award any attorney’s fees because the attorney and debtors had a duty to mitigate damages and the problem could have been resolved by a two minute phone call instead of a complaint.
The plaintiffs were not scheduled as a creditor in the defendant’s chapter 7 case. The plaintiffs filed a motion to extend time to file a complaint objecting to the dischargeability of the debt arising from their claim. The Court granted that motion, and the plaintiffs filed an adversary proceeding under 11 U.S.C. § 523(a)(2), (4), and (6). The defendant appealed the order granting the motion to extend, and the district court vacated that order on grounds that a complaint brought under 11 U.S.C. § 523(a)(2),(4), and (6) must be filed no more than sixty days after the date first set for the first meeting of creditors. The district court specifically did not rule on whether the complaint, if amended to include a cause of action under 11 U.S.C. § 523(a)(3)(B), would have been timely filed. The district court remanded the matter.
The plaintiffs amended their complaint to include a cause of action under section 523(a)(3)(B) and on the same date filed a motion to amend the complaint. The defendant filed an opposition to the motion. The Court noted that section 523(a)(3)(B) provides that a creditor may file an objection to the discharge of a debt of the kind found in section 523(a)(2), (4) or (6) if the debtor did not schedule the creditor as required by section 521(a) and if the creditor did not have notice or actual knowledge of the case in time to timely file a complaint objecting to the dischargeability of the debt. The Court concluded that in order for the second sentence of Rule 4007(c) to have meaning, creditors who do not receive notice of the filing of the petition from the debtor must have at least thirty days actual notice of the filing of the petition.
Finding that the plaintiffs had notice of the bankruptcy case no more than twenty-six days before the deadline to file an adversary complaint under Section 523(a)(2), (a)(4), or (a)(6), the Court granted the motion to amend.
In 1975, the debtor obtained a federally insured student loan. The debtor filed under chapter XIII of the Bankruptcy Act of 1898 in 1979 and received a discharge in 1983. In 1998, Educational Credit Management Corporation acquired title to her student loan debt. ECMC sent the debtor a letter asking for documents relating to her discharge; the debtor did not reply. In 2004, ECMC began efforts to collect the debt, which included phone calls during which the debtor asserted that she did not owe the debt and that it was discharged by the order in 1983. Further, ECMC notified the debtor that it intended to offset her federal income tax refund, and in 2006 the Department of Treasury offset the tax refund and forwarded those funds to ECMC.
The debtor moved to reopen the case and filed an adversary complaint seeking a declaration that the debt was discharged by order entered in the 1978 case. The Court filed a judgment granting her request. The judgment was based on the conclusion that the discharge orders that issued in bankruptcy cases that were filed between November 6, 1978, and August 14, 1979, discharged all debts arising from governmentally insured student loans. The judgment was affirmed after ECMC appealed the judgment to the United States District Court for the Western District of Virginia. ECMC refunded all collected monies to the Plaintiff and marked the debt as “discharged” on its books.
The debtor then filed a motion for sanctions against ECMC based on alleged violation of the discharge injunction. The Court made several findings: When ECMC acquired ownership of the debt, it contacted the debtor through a 1998 letter but received no response. Over a six-year period it attempted to gather facts that would permit it to determine whether the debt was dischargeable. Before offsetting the debtor’s income tax refund in 2004, ECMC again contacted the debtor with the request for review, but again received no response. When the debtor finally contacted ECMC seven years after ECMC’s first attempt to resolve the matter, ECMC correctly explained that its position was consistent with the weight of judicial authority. When, two years later, the debtor hired an attorney and took steps to reopen the 1979 case, ECMC ceased all collections immediately. The Court concluded that at no time did ECMC knowingly and wilfully violate the discharge order.
The Court found that the defendant was in default as it failed to timely respond to complaint seeking to determine the value of the defendant's secured interest in property owned by the plaintiffs. However, the Court ordered plaintiffs to submit authority in support of the legal positions contained in the complaint instead of entering default judgment against the defendant. Court found that credit line deed of trust remained secured by the real property notwithstanding a judgment lien. Court found that under sections 101(13A) and 101(27B) the definition of debtor's principal residence includes rents. Thus, fact that credit line deed of trust listed rents as item of collateral did not add any additional collateral to the defendant's security interest beyond those items already listed in the Code. Since the credit line deed of trust was secured only by the plaintiffs' principal place of residence, section 1322(b)(2) prohibited the plaintiffs from modifying the deed of trust; thus the plaintiffs could not cram down the deed of trust despite the assignment of rents provision. As the aggregate value of first deed of trust and credit line deed of trust exceeded the value of the property, there was no equity in the property to which the judgment lien could attach. Therefore, Court declared the judgment lien to be wholly unsecured under section 506(a).
The female debtor in a joint case filed a motion asking the Court to either find that she has complied with the requirements of 11 U.S.C. § 109(h) or, alternatively, to bifurcate the joint case and to dismiss her resulting individual case. Instead of having taken the pre-filing credit counseling required, the female debtor had taken the post-petition debtor education course required to receive a discharge under chapter 13. The petition was filed and the female debtor subsequently took the pre-filing course. The Court found that the female debtor had not timely received the pre-petition credit counseling and was ineligible to be a debtor. The Court then bifurcated the joint case and dismissed the female debtor’s resulting case.
The debtors filed an application to employ counsel. The United States trustee objected on the basis of inconsistent and inaccurate disclosures regarding the pre-petition services rendered by the firm to the debtors. The Court concluded that question number nine of the Statement of Financial Affairs was properly interpreted broadly to require disclosure of the particulars regarding the case filing fee provided by the debtors’ son prior to the bankruptcy filing. The Court further concluded that the receipt of the filing fee from the son ought to have been disclosed as a connection which the firm had with a party in interest in the case as a pre-petition transferee of a material part of the debtors’ property.
Due to the novel situation presented by the facts of this case where the transferee was a close family member of elderly parents and the absence of prior controlling legal authority on point, the Court concluded that these omissions, standing alone and absent some indication that disclosure of the filing fee was expressly considered but rejected on the premise that there was an arguable basis upon which to contend that it was not mandated, are insufficient cause to deny the application to employ the firm.
A secured creditor filed a motion for relief from the automatic stay to allow it to repossess collateral. The creditor asserted as basis for relief (1) that it lacked adequate protection under 11 U.S.C. § 362(d)(1) because the debtor had not made any payments to it since the commencement of the case, no proposal for adequate protection had been made, and the stay was resulting in a decrease in the interest in the property; (2) that the Debtor’s pre-petition default in the security agreement was cause, arguing that the default could not be cured in a chapter 11 plan because it resulted from the debtor’s misrepresentation; (3) that relief should be granted because the debtor filed the petition in bad faith, arguing that the debtor filed its petition just four days after the creditor filed an action for prejudgment attachment of the collateral in state court and, because the schedules were not filed until sixteen days after the petition date and none of the motions typically brought early in a chapter 11 case had been filed; and (4) that under § 362(d)(2) the debtor had no equity in the collateral and it was not necessary for an effective reorganization.
The Court noted that in order to make out a prima facie case for relief from the stay for cause under § 362(d)(1), the movant must generally show that the continuation of the stay will cause some affirmative harm to it. The Court concluded that the creditor failed to meet its burden of proof on the first three counts but did meet its burden on the § 362(d)(2) claim. Weighing the balance of potential harm to the parties by the continuation of the stay, the Court concluded that it was appropriate to continue the stay in effect upon certain conditions.
Plaintiff filed for bankruptcy and subsequently formed a corporation. As a result of communications concerning a notice of levy sent by the IRS to customers of the debtor’s previous corporation, a client of the new corporation turned over funds to the IRS that were owed to the new corporation. Plaintiff brought a complaint against the Internal Revenue Service under 11 U.S.C. § 362(k)(1) requesting the IRS to return the funds. The Court found that the funds were not a debtor, were not property of the debtor, and were not property of the estate. The Court accordingly held that the IRS did not violate the automatic stay.
The debtors filed a chapter 13 petition and subsequently converted to a chapter 7. After conversion, the United States trustee filed a motion to dismiss the debtors’ case under 11 U.S.C. § 707(b)(1) as an abuse of the provisions of chapter 7. Agreeing with an earlier decision issued by Judge Krumm, the Court concluded that the plain language of 707(b) only applies to cases filed under chapter 7 and that cases converted to chapter 7 from another chapter do not fall within the scope of that subsection.