Category Archives: Fed. R. Civ. P.

In re Louis Jones Enterprises, Inc. (Bkrtcy.N.D.Ill.)


The Facts: Chapter 11 Debtor failed to segregate its employee’s wages and apply a portion toward a group health insurance premium. When those funds were seized later by a creditor, the employees left with a 5th priority wage claim and a lapsed insurance policy.

The Issue
: Employee alleged that the funds taken should be classified as a contribution to an employee benefit plan arising from services rendered within 180 days before the filing date of the case.

The Upshot: The Court agreed that the funds had been earned with the 180 days before the case was filed, and also ruled that employees also had an administrative expense claim for wages that were withheld but not applied during the post-petition. Finally, the Court ruled that employees had a claim for un-reimbursed medical expenses that would have been covered under the policy, had it not expired.



Ransom v. FIA Card Services (U.S. S.Ct.)

Ransom v. FIA Card Services, N.A., f/k/a MBNA America Bank, N.A.
Certiorari from the U.S. Court of Appeals for the 9th Cir., Case 09–907
Argued October 4, 2010—Decided January 11, 2011

The Issue: Here the question was whether a Chapter 13 debtor could deduct the allowable auto payment from his monthly budget even though he did not have a car payment (i.e the vehicle was paid for). Put another way, is it fair for all debtors to be entitled to the maximum allowable deduction from their monthly disposable income, or must debtors establish what they actually pay?

The Answer: The Court ruled 8 to 1 (Scalia J. dissenting) that if a debtor makes more than the median income for his State then he must establish that he incurrs the amounts deducted from his monthly living expenses. No more automatic deductions if debtor cannot prove what he pays.

The Gist: To determine “disposable income” BAPCPA gave us the Means Test, which starts with gross monthly income then deducts living expenses – i.e. “amounts reasonably necessary for maintenance or support” of the debtor. In a Chapter 13 case the expenses considered “reasonably necessary” are identified in 11 U.S.C. §1325(b)(2)(A)(i) and include “applicable monthly expense amounts” as specified in National and Local IRS standards. Since BAPCPA was adopted, it has become common practice to include expenses at the maximum allowable level even if the debtor does not have, or pay for, that type of asset. This case appears to say that the party is over for Chapter 13 debtors.

See Also: this post from Chicago Attorney Steve Jacobowski on the Bankruptcy Litigation Blog regarding the Scalia dissent.


I knew they Government was up to something …


Simmons v. Roundup Funding, LLC, 09-4984

2nd Cir.
Adversary Decided: October 5, 2010
Holding: A proof of claim filed in bankruptcy court cannot form the basis for a claim under the Fair Debt Collection Practices Act.
Download and read a copy of the Opinion in .pdf format here.
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Apex Oil Co. v. U.S. (Supreme Court)

The U.S. Supreme Court denied certiorari with respect to U.S. v. Apex Oil Co., 579 F.3d 734 (C.A.7-Ill. 2009) in which the 7th Circuit held that an government injunction requiring Apex to clean up a contaminated site constituted a non-dischargeable debt as set out in the Bankruptcy Code.

By contrast, Apex argued that an injunction is not a “claim” under sec. 101(5)(B) because it is not a right to money damages arising from a breach of performance. Instead, claimed Apex, the injunctive claim was a demand on the Debtor barred by sec. 362, the Automatic Stay. In the alternative, said Apex,the claim was reducible to money damages and was therefore dischargeable. Finally, Apex argued that to consider an environmental clean-up order a nondischargeable claim would conflict with a line of Supreme Court cases starting with Ohio v. Kovacs, 469 U.S. 274, 105 S.Ct. 705, 83 L.Ed.2d 649 (1985).

The U.S. Supreme Court refused to hear the matter and the holding of the 7th Cir. Stands.

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In re Hanson/Grant LLC v. Hanson

Bankruptcy:   In re Stuart M. Hanson, 09-04820
Adversary: 6050 Grant LLC v. Hanson, 09-00447

Opinion issued Oct. 5, 2010 by the Honorable John H. Squires

Upshot: After a hearing the Court determined that $93,461.29 owed by the Debtor to 6050 Grant was non-dischargeable under §523(a)(2)(A).  Two weeks after entry of the Opinion, Debtor filed a motion to alter it. According to Rule 59(e) of the Federal Rules of Civil Procedure, incorporated here by Bankruptcy Rule 9023, a judgment may be amended based on one or more of the following: the Court’s manifest error of law or fact, newly discovered evidence, or a change in controlling law. Under the circumstances, the Court found none of these conditions, so the judgment stands.

Click here to view and download the Opinion in .pdf format.

In re Raymond Professional Group, 06-16748

In re Raymond Professional Group, 06-16748
Raymond Professional Group v. William A. Pope Company, 07-00639
Issued November 25, 2009
Judge Jack B. Schmetterer
Summary The Court denies debtor’s Amended Motion for Sanctions since no basis has been found under 28 U.S.C. §1927, but grants counter-plaintiff’s Motion to Compel Debtors to Pay Witness Deposition Fees in part. Counter-plaintiff is entitled to be paid fees associated with the deposition of Professor Hazard but not Professor Rapoport due to “manifest injustice” under Fed. R. Civ. P. 26(b)(4)(C)(i).

View and download the opinion in PDF format here.