Two toy designers ("Designers") brought an adversary proceeding against the Chapter 7 trustee for recovery of money owed to them after the debtor violated a licensing agreement and manufactured and sold toys designed by the Designers without the Designers' knowledge or consent.  The Court, applying the analysis set forth in Capital Investors Co. v. Morrison, 800 F.2d 424 (4th Cir. 1986), awarded the Designers royalties plus the profits the debtor made from the toys.  Accordingly, the Court held that the value of the constructive trust is not property of the estate under 11 U.S.C. § 541(d).

The debtors filed an application for a hardship discharge under 11 U.S.C. § 1328(b) and (c).  After confirmation of the debtors' Chapter 13 plan, the female debtor was diagnosed with a rare, chronic autoimmune neuromuscular disease which caused her to quit her job due to the resulting muscle weakness.  Under Section 1328(b), Chapter 13 debtors can obtain a discharge after confirmation even though complete payments under the plan have not been made, so long as the debtors show that the following three essential criteria are satisfied: (1) the failure to complete plan payments is due to circumstances for which the debtors cannot justly be held accountable; (2) the value of property distributed under the plan on account of each allowed unsecured claim is not less than the amount that would have been paid on such claim if the estate of the debtor had been liquidated under chapter 7 of this title on such date; and (3) modification of the plan is not practicable.  See 11 U.S.C. § 1328(b)(1)-(3).  The Court denied the debtors' application for a hardship discharge, holding that although the female debtor's illness was an unforeseeable economic circumstance, the debtors have failed to establish that they have made every effort to overcome their situation by failing to present evidence that would preclude the possibility of improvement in the female debtor’s health or the possibility of finding suitable alternative employment.

Court sustained debtor's objection to claim where the claim was based upon a provision in a divorce decree requiring the debtor to pay a joint debt to a bank.  The debtor was not ordered to pay the amount directly to the claimant. Where the debtor has no obligation to pay the claimant, the claimant does not have an allowable claim against the debtor under section 101(5).

Court denied, without prejudice to the filing of a supplemental application, the third interim application for compensation and reimbursement of expenses of the trustee's attorney. It is within Court's sound discretion to decline to award compensation until all relevant circumstances and factors affecting the determination of fair and reasonable compensation for the attorney are known.  Court also questioned the firm's entitlement to any compensation for litigation in light of the failure of the trustee to seek approval of the Court for the firm's retention to provide such services.