Following Supreme Court precedent in Harris v. Viegelahn, upon conversion of a case from Chapter 13 to Chapter 7, including conversion pre-confirmation, all undistributed funds on hand with the Chapter 13 Trustee paid from the Debtor’s postpetition wages must be returned to the Debtor. Motion for Allowance of Administrative Claim filed by former counsel for the Debtor after conversion was denied.
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Chief Judge Phyllis M. Jones
Judge Ben T. Barry
In this short order, the Court denies counsel’s claim for the allowance of attorney fees in a chapter 13 case as an administrative expense because the case was dismissed prior to an order allowing the claim was entered.
The creditor filed a motion to dismiss both counts of the debtors’ complaint–first, for lack of standing to challenge the endorsements on an assignment and, second, for failure to state a claim under the FDCPA. The court denied the motion in its entirety. In their first count, the debtors are challenging the signatures that appear on the subject note as a matter of law under the UCC, not the contractual rights of the parties to the assignment. For the second count, the court found that the debtors stated sufficient facts to state a facially plausible claim for relief under a provision of the FDCPA.
This case lays out the required two-step process for obtaining default judgment. The debtor properly served the creditor bank with summons and the complaint. When the bank failed to respond to the complaint, the debtor then properly served a motion for default judgment on the bank, to which the bank did respond. After recognizing the Eighth Circuit’s two-step process, the court treated the motion for default judgment as a motion for entry of default, which would have been entered on the court’s docket when the motion was filed. Based on the lesser standard of “good cause,” the court treated the bank’s response as a motion to set aside the entry of default, granting the motion setting aside the default and allowing the case to proceed.
The debtor objected to the late filed claim of the IRS. The court sustained the objection, finding that although the IRS was not on the initial creditor matrix, it received actual notice with good service at least three times prior to the claims bar date, the last such notice being received at least two months prior to the bar date. The IRS did not file its proof of claim until three years after the bar date.
The court found that 11 USC 1322(c)(1) provides a federal right to cure a home mortgage default up until the purchase price is paid and a trustee's deed is delivered, even though the Arkansas Statutory Foreclosures Act follows the "gavel rule" in Arkansas, which states that a statutory foreclosure sale is concluded when the highest bid is accepted.
The debtor filed a small business chapter 11 plan on the 300th day after filing its petition. The court set the plan for confirmation hearing. At the hearing, the debtor did not have any of its impaired classes voting for the plan so the court denied confirmation. Because another plan could not be filed within the statutory 300 days, the court dismissed the case.
The court denied the debtor’s motion to reopen his case to add an omitted creditor. The creditor’s claim is a non-dischargeable obligation under § 523(a)(3) and reopening the case to schedule the creditor would not affect the dischargeability of this debt.
The court denied the debtor’s motion to reconsider. The debtor asked the court to “impose” a stay because she failed to file a timely motion to extend the stay under § 362(c)(3), even though she only had one case pending in the prior year. Neither the debtor nor her counsel appeared at the hearing on her motion.
The court granted the creditors’ motion to dismiss the trustee’s complaint on two of the fourteen counts: fraud on the court and violation of § 363(n). The trustee failed to plead facts sufficient to state a plausible claim for fraud on the court. Additionally, the court did not accept the trustee’s legal conclusion concerning the identity of “potential bidders” and found that the trustee did not plead sufficient facts to support a finding of collusion under § 363(n).