When a Chapter 13 plan has not been confirmed and the case is then dismissed, the court held that the Chapter 13 Trustee is subject to a properly issued writ of garnishment or levy by a judgment creditor or taxing entity. Therefore, the Chapter 13 Trustee's objection to the garnishment was overruled and the Chapter 13 Trustee was ordered to turn over all the sums in his possession to the Plaintiff that were not needed for administrative expenses.
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Opinions
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James G. Mixon
After the Debtors' case was dismissed without plan confirmation, the Court found that the Chapter 13 Trustee was subject to a properly issued writ of garnishment.
The Court ruled that pursuant to the dictates of § 523(a)(4) the state court judgment for damage to Clear Sky property is nondischargeable; however, the state court award for breach of fiduciary duty regarding past and future lost revenue and the award to Deere for breach of fiduciary duty is dischargeable because there is no definable res, a requirement of a statutory trust for purposes of § 523(a)(4). Pursuant to § 523(a)(6), the punitive damage award is dischargeable because the Plaintiffs did not prove the state court award was a result of both willful and malicious injury. The attorneys fees and costs are dischargeable because they were based on breach of contract.
Judge Ben T. Barry
Payment of rent from an account that was closed six months earlier amounted to a false representation made with the intent to deceive the creditor/landlord. The court found the debt for unpaid rent to be nondischargeable under § 523(a)(2).
The court denied the creditor/defendant’s motion to dismiss for failure to state a claim finding that the debtor had stated a plausible cause of action. The court also declined the parties request to use additional agreed stipulations to decide the motion to dismiss.
The court found that a second claim filed by a creditor after liquidation of the collateral securing the debt was an amended claim that related back to the date of the original filing.
Judge Richard D. Taylor
Debtors may not involuntarily include a post-petition section 1305 creditor by filing a proof of claim on its behalf. Further, the res judicata effect espoused in Espinosa must be viewed in the context of the plan, confirmation order, and relevant code provisions.
A confirmation order is not necessarily res judicata as to post-petition and post-confirmation debt. Also, inconsistent arguments may be sufficient bad faith to deny confirmation of a plan.
Audrey R. Evans
Court denied Debtor’s discharge pursuant to 11 U.S.C. § 727(a)(5) for failing to explain the loss of an asset. The uncontroverted evidence was that the Debtor sold and received payment for a house prior to filing. At the hearing, the Debtor failed to provide a reliable explanation to convince the Court that he had not hidden or improperly shielded the proceeds from that sale. Bailey v. Whitehead (In re Whitehead), 483 B.R. 902 (Bankr. E.D. Ark. 2012).
Order Approving Application to Employ Attorney. Court approved employment of Chapter 11 Debtor-in-possession's proposed counsel James E. Smith and Smith Akins, P.A. pursuant to 11 U.S.C. § 327(a) finding that Smith was disinterested and did not hold or represent an adverse interest to the Debtor-in-possession's estate. Court found that Smith did not represent an adverse interest based on his prepetition representation of the Debtor while certain transfers took place because Smith had valid reasons to counsel Debtor to make the transfers and Smith did not represent those insiders receiving the transfers, even if their interests were adverse to the Debtor. Court also found that Smith's employment was in the best interests of the estate due to his knowledge of the Debtor, its operations, and the extensive litigation involving the Debtor both before and since filing bankruptcy. In re Living Hope Se., LLC, 495 B.R. 866 (Bankr. E.D. Ark. 2012).