The court held that deferral of the payment of the adversary proceeding filing fee was not warranted when the chapter 7 trustee had funds available in the estate.
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Judge Ben T. Barry
In this opinion, Judge Barry denied the creditor’s complaint under § 523(a)(2) and (a)(6). Under (a)(2), the court found that subsequent exchanges of collateral that occurred between the debtor and creditor did not induce the creditor to either loan money or provide for the extension, renewal, or refinancing of the obligation. Under (a)(6), although the court found the potential for injury, it could not identify a specific “willful” injury or any resultant harm from the injury. The court also was not able to find that the debtor’s conduct was targeted at the creditor such that the conduct was “malicious” as required under (a)(6).
In this case, the court found that two mortgages that were filed for record and contained only the street address of the subject property provided the requisite “key” to identify the property and that the mortgages constituted constructive notice to the trustee under Arkansas law. Because the mortgages contained constructively noticed facts, the court found that constructive inquiry notice (as opposed to actual inquiry notice) was applicable in this instance and the trustee had a duty to investigate “everything to which the inquiry might lead.” Based on the evidence presented at trial, that inquiry would have identified specifically the legal description of the property subject to the creditor’s interest. Accordingly, the court denied the trustee’s motion to avoid the creditor’s liens under 11 U.S.C. § 544(a)(3).
The court revoked the debtor’s discharge under § 727(d) because she failed to turn over life insurance proceeds she received within 180 days of filing her chapter 7 petition in accordance with § 541(a)(5). Instead, the debtor placed the proceeds in an overseas account, moved out of state, and bought a house out of state. The debtor turned over the balance of the proceeds (the house) only after the trustee filed an adversary proceeding.
The debtor and creditor attempted to reaffirm a debt of $22,000 on a car valued at $16,000. Because the debtor’s attorney did not sign the attorney certification, the court scheduled a hearing on the reaffirmation agreement. In addition to informing the debtor of the consequences of entering into the agreement, the court also had to determine whether the agreement was in the best interest of the debtor. After discussing the four possible scenarios a reaffirmation agreement presents to a court, the court did not approve the reaffirmation agreement. The debtor was current in her payments to the creditor and had complied with § 521; therefore, the court could conceive of no benefit to the debtor to enter into the reaffirmation agreement and obligate herself to $6000 of unsecured debt.
In this short order, the court distinguishes between criminal and civil contempt and finds that the state court order that sentenced the debtor to spend time in jail was criminal contempt because it carried an unconditional penalty and the jail time could not be purged.
The court found that, under Arkansas law, the debtor was not entitled to claim a homestead in property that was purchased with funds that were fraudulently transferred from a trust (of which the debtor was trustee) to the debtor's individual account. As a result, the debtor could not avoid a creditor's lien as impairing an exemption in the property.
The court found that the debtors’ joint case consisted of two separate debtors with two separate estates being jointly administered. As such, the debtors were only able to claim the exemptions to which they would be entitled individually. The court disagreed with the debtors’ argument that Arkansas marital dissolution laws establish the wife’s equitable interest in her husband’s property. However, the court did find that, under Arkansas law and the facts presented, the wife had an equitable interest in a vehicle that was titled solely in her husband’s name.
The debtors initially filed a voluntary chapter 7 case, then converted the case to a chapter 13 case, then converted the case to a small business chapter 11 case. In accord with § 348(a), the court found that the requirement under § 1121(e) for a debtor to file a plan and disclosure statement within 300 days in a small business case runs from the date the initial petition was filed, not the date the case was converted to a small business chapter 11 case. Because this case was filed more than 300 days earlier, the court granted the UST’s motion to dismiss or convert.
The court found that in accordance with §§ 365(d)(1) and 502(g)(1), the debtor’s unpaid post-petition rent was treated as a pre-petition claim for the period of time between the filing of the petition and the trustee’s rejection of the lease that occurred statutorily 60 days after the date the petition was filed. However, because the debtor remained in the premises after the trustee rejected the lease and the lease was no longer property of the estate, any further damages as a result of the breach of the lease would be the debtor’s personal obligation outside the confines of her bankruptcy case.