Court denied the Debtors’ Motion for Summary Judgment on a cause of action seeking to avoid a creditor’s lien. As part of that ruling, the Court found that the statutory language of 11 U.S.C. § 544(a)(3) grants authority to avoid a lien to the trustee, but not to the debtor. Following Eighth Circuit precedent construing that statutory language narrowly, the Court held that the Debtors lacked standing to avoid the creditor’s lien under § 544(a)(3). The Court also found that the Debtors’ other claims, which were not based on § 544(a)(3), required a trial. Huskey v. Citimortgage, Inc. (In re Huskey), 479 B.R. 827 (Bankr. E.D. Ark. 2012).
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Audrey R. Evans
Order Approving in Part Application to Employ Attorney. Court found that Chapter 11 Debtor's proposed counsel Chip Welch and Ashley Hudson were disinterested and neither held nor represented an adverse interest to the Debtor's estate, and accordingly, they could be hired to represent the Debtor-in-possession under 11 U.S.C. § 327(a). Court did not grant application to hire applicants nunc pro tunc to the date of Debtor's Chapter 11 filing where an objection was filed and no explanation was provided for the tardiness of the application to employ. In re Living Hope Se., LLC, 495 B.R. 424 (Bankr. E.D. Ark. 2012).
In an Order sustaining an Objection to Confirmation, the Court held that 11 U.S.C. § 1225(a)(5)(B)(i) requires that a secured creditor be allowed to retain a lien on cross-collateralized property, and that the Debtor could not sever cross-collateralization through the Chapter 12 plan without the secured creditor’s consent. In re Heath, 483 B.R. 708 (Bankr. E.D. Ark. 2012).
Court found that a joint venture created by individual husband and wife debtors did not constitute a separate legal entity, specifically a general partnership, based on evidence presented, and that accordingly, the debtors' bankruptcy estate included property held in the name of the joint venture. The Court also granted a permanent injunction in favor of the Trustee to prevent the Bank of England from exercising control over and selling certain grain held in the name of the joint venture. Rice v. Carlton Farms, LLC (In re Webb), 474 B.R. 891 (Bankr. E.D. Ark. 2012), aff’d, 742 F.3d 824 (8th Cir. 2014).
The Court converted Debtor’s Chapter 13 case to Chapter 7 after concluding the Debtor filed both his bankruptcy petition and his Chapter 13 plan in bad faith. Specifically, the Court found the Debtor’s actions in filing bankruptcy two days before a scheduled contempt hearing in State Court initiated by his former spouse to collect the divorce judgment owed her, and in proposing a fee-only plan that paid his creditors virtually nothing, evidenced a lack of good faith. The Court further found that conversion of Debtor’s case to Chapter 7 was in the best interests of creditors because there are potentially fraudulent or preferential transfers that a Chapter 7 trustee should investigate and possibly pursue for the benefit of the Debtor’s creditors. Finally, because Debtor filed this case solely to avoid the State Court contempt action without any legitimate need for bankruptcy relief, the Court found cause to lift the automatic stay to allow the State Court divorce proceedings and related contempt action to proceed. In re Hopper, 474 B.R. 872 (Bankr. E.D. Ark. 2012).
The Court dismissed cause of action as failing to state a claim for relief for violation of the automatic stay where bank allegedly seized $10,000 in funds from a business account owned by the individual debtor's wholly owned corporation. The Court concluded the corporation's property is not property of the Debtors’ bankruptcy estate subject to the automatic stay. Dugan v. U.S. Bank (In re Dugan), No. 4:11–BK–13039, 2012 WL 6825328 (Bankr. E.D. Ark. June 20, 2012).
Judge Ben T. Barry
The court granted partial summary judgment against one of the debtors based on the doctrine of collateral estoppel and under § 523(a)(2)(A) for fraud. The court denied summary judgment against the other debtor because the state court made no specific findings against that debtor relating to a false representation made with the intent to deceive the plaintiffs.
The court denied the chapter 7 debtors their discharge under 727(a)(2) and (a)(4)(A) because the debtors failed to disclose numerous assets and a significant amount of income in their original schedules and statements and their four subsequent amendments.
The court held that with regard to real property that is collateral for a consumer debt, in addition to the three options set forth in § 521(a)(2)--surrendering the property or retaining the property by either reaffirming the debt secured by the property or redeeming the property under § 722--if the debtor is current on her obligation to the creditor, she also has the right to retain the property and continue to make payments to the secured creditor.
James G. Mixon
The Court found that a tax lien, once assessed and properly filed, attaches to a debtor's personal property regardless of where the debtor moves to.