2011 Judge Wizmur - Opinions
Judge Judith H Wizmur -- Opinions signed in 2011
The Chapter 13 trustee and a creditor both moved to dismiss the debtor's Chapter 13 petition, pursuant to 11 U.S.C. § 1307(c), or in the alternative, to deny confirmation of the debtor's modified Chapter 13 plan, pursuant to 11 U.S.C. § 1325(a), on the grounds that neither the petition nor the plan were filed in good faith. The debtor was the president and sole employee of a company that operated primarily on a cash basis. The debtor was unable to explain discrepancies in his representations of his income and expenses in his bankruptcy schedules and in a prepetition financing statement. The debtor claimed he had received a nominal or no salary from the company and yet he was able to maintain two mortgages and associated home and personal expenses for his family. He was unable to reliably account for the cash he handled in his business and to explain the family expenses covered by the company. The court concluded that there were serious credibility problems that, coupled with multiple contradictions and inconsistencies, supported a finding that the debtor's failure to honestly represent his income qualifies as bad faith in filing the Chapter 13 case, which is sufficient to require the dismissal of his Chapter 13 case.
The plaintiff accused his brother, the debtor/defendant, of fraudulently coercing him into agreeing to settle for less than his fair share of their mother's decedent's estate. The plaintiff alleged that the debtor failed to reveal significant and improper transfers from the decedent's assets to the debtor before she died, and asserted that he never would have agreed to compromise his share had he known the truth about the transfers. The plaintiff believed that the debtor's fraudulent acts unfairly deprived him of his originally intended 50% share of their mother's estate. He sought a determination that the disclaimer he executed regarding his share of his mother's estate was revocable, that the debtor owed him additional money to satisfy his full inheritance, and that the debt was nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A) and/or § 523(a)(4). The court concluded that the debtor's drafting of a second mortgage on his mother's house, his deposit of the remaining house proceeds into his personal account, and his failure to disclose these acts to his brother, the only other beneficiary under his mother's will, constituted acts of actual fraud within the meaning of § 523(a)(2)(A) and sufficient grounds to revoke the disclaimer. The court declined to liquidate the plaintiff's claim, leaving that matter to the state court.
The debtor's motion to enforce an agreement made and placed on the record, which resolved a motion to modify the secured claim of the second mortgagee and required the lender to discharge its lien of record upon the completion of the payments required under the Chapter 13 plan, was denied upon a showing that special circumstances existed warranting relief from the agreement. Where the debtor was not entitled to a Chapter 13 discharge, both procedural and substantive unconscionability factors weighed in favor of denying enforcement of an agreement where the debtor's ineligibility was a major factor, the mistake was quickly discovered and there was no serious prejudice to the debtor.
The plaintiff's claims against the debtor/defendant for unconscionable and fraudulent commercial business practices in violation of the New Jersey Consumer Fraud Act with respect to the scope of services and the quality of workmanship that the debtor and/or his company would provide in a home renovation contract were sustained. The plaintiff's quest for nondischargeability pursuant to 11 U.S.C. § 523(a)(2)(A) and/or § 523(a)(6) was denied.
The actions taken by the IRS to apply the debtors' 2009 tax refund to offset general unsecured debt due to the IRS occurred prior to the entry of the written order reinstating the debtors' case when the automatic stay was not in effect. The debtors' objection to the proof of claim filed by the Internal Revenue Service is overruled.
The plaintiffs' adversary complaint seeking nondischargeability under § 523(a)(2)(A) on their state court judgment, plus attorneys' fees is denied. The plaintiffs have also not met their burden of proof to deny the debtors their discharge under § 727(a)(4) and (a)(5). The plaintiffs' complaint is dismissed in its entirety with prejudice.
The debtor's Chapter 13 plan provision seeking to cram down a secured claim to the replacement value of its collateral, a seven year old pickup truck used by the debtor for business purposes, was approved. The vehicle's value would be based on the debtor's expert's independent valuation without deduction for the cost of repairs, as synthesized with the applicable valuation guides. The court affirmed the use of the creditor's higher 3.0% interest rate over the course of the debtor's plan, but denied the creditor's request for counsel fees.
The mortgagee's actions violated § 362(a)(3) of the automatic stay when it improperly sought to obtain possession of or exercise control over property of the bankruptcy estate, i.e. the debtor's post-petition payments made from the debtor's post-petition earnings which constitute property of the estate under § 1306, by (1) assessing and attempting to collect additional charges post-petition from the debtor's regular post-petition mortgage payments, for which the creditor had no court approval, and (2) by reallocating, redirecting or misallocating the debtor's post-petition payments to various other accounts and ultimately causing the debtor to improperly fall into a default status. The debtor's request for attorneys' fees was granted.