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Hon. Peter W. Henderson

Reinbold v. Menard, Inc., No. 19-8110 02/28/2025

The Chapter 7 Debtor paid for goods at Menards, a home improvement store, for the benefit of non-debtor entities. In each transaction, an agent of the non-debtor entity would pick out goods, take it to the cash register, use the Debtor’s credit card (which he was authorized to use), and then take the goods out of the store for use by the non-debtor entity. The Trustee alleged both actual and constructive fraud and sought to recover all payments the Debtor made. Because Menard gave value to the debtor, as that term is understood in federal fraudulent conveyance law, it is not liable to return the payments as a good-faith transferee, even though third parties ultimately received the goods.

 

Statute: 11 U.S.C. §548(c)

Maria A. Karpuleon, No. 24-80647 12/06/2024

The Debtor filed her fourth Chapter 13 petition in four years. Each petition has forestalled her mortgagee from foreclosing on her home. Under 11 U.S.C. §362(d)(4), the mortgagee is entitled to in rem stay relief, because the latest bankruptcy petition was filed as part of a scheme to delay, hinder, or defraud creditors as those terms of art have traditionally been understood at law.

Statute: 11 U.S.C. §362(d)(4)

Reinbold v. Menard, Inc., No. 19-8110 11/14/2024

The Debtor made $700,000 worth of purchases at Menard’s retail stores. The Chapter 7 Trustee, believing that the Debtor did not receive any of the purchased goods (she alleges that the Debtor’s principal and his related companies received the merchandise), seeks to avoid those transactions as fraudulent transfers under 11 U.S.C. §548(a). Menard moved for summary judgment and argued that a purchase by credit card does not involve a transfer of an interest of the debtor in property, as required under §548(a). The Trustee cross moved for summary judgment and argued that it does. The Trustee is correct. A debtor’s credit card purchase, like a cash or debit purchase, involves a transfer of an interest of the debtor in property. The Trustee’s motion was granted and Menard’s denied.

11 U.S.C. §548(a)(1)

James Thomas A. Jones, No. 24-80205 09/18/2024

The Chapter 13 Trustee objected to the Debtor’s plan because it did not “step up” plan payments in month 29, when the Debtor would finish paying his retirement plan loan. The Debtor responded that no step up was required because he intended to increase his contributions to his retirement plan by the same amount as his loan repayments. Because contributions to an ERISA-qualified, employee benefit plan are not to be counted as disposable income, the Debtor is not required to increase his plan payments so long as he agrees in his plan that he will in fact increase his retirement contributions in month 29.

11 U.S.C. §§541(b)(7), 1306(a)(2), 1325(b)

Devore-Slaughter v. Bennett, No. 24-08001 09/13/2024

The Plaintiff loaned the Debtor-Defendant $8,000. She alleged that the loan was obtained by a misrepresentation and thus was nondischargeable in the Debtor’s bankruptcy. After a trial, the Court determined that the Plaintiff had failed to meet her burden of proof and awarded judgment to the Debtor.

11 U.S.C. §523(a)(2)(A)

Riegle v. Lambert, No. 24-9002 09/11/2024

The Debtor was found liable for embezzlement by an Illinois court, which issued a money judgment in favor of her former employer. After the Debtor filed for bankruptcy protection, her employer’s estate filed this adversary proceeding seeking a determination that the judgment debt was nondischargeable under 11 U.S.C. §523(a)(4). The Court granted the estate’s motion for summary judgment because, under Illinois law, the Debtor is collaterally estopped from contesting the issue of whether the debt is for embezzlement.

Statutes: 11 U.S.C. §523(a)(4).

24-80157, Snell 08/13/2024

The chapter 7 debtor received a discharge. She later filed two reaffirmation agreements. She moved to reopen the case to permit her to modify the discharge order in a way that would render the reaffirmation agreements timely. The Court issued this opinion to clarify that the longtime practice of “vacate and reinstate” would no longer be followed in the Peoria division. Debtors must take care to file reaffirmation agreements before a discharge is entered.

23-8008 Erickson v. McCaw 02/02/2024

The Debtor’s prepetition payment of her long-time cohabiting partner’s real estate taxes was avoidable in part as a fraudulent conveyance, because the defendant failed to meet his burden of production to establish that the Debtor received reasonably equivalent value for the payment.

Wallace v. IRS, No. 23-8005 08/18/2023

The IRS moved the Court to abstain from hearing an adversary proceeding in which the Debtor-Plaintiff sought a determination that his pre-petition tax debts were dischargeable notwithstanding 11 U.S.C. §523(a)(1)(C). Abstention is an exceptional remedy, however, and it would be inappropriate to abstain from hearing a core bankruptcy matter in favor of transferring the dispute to the district court. The Court was confident it had jurisdiction to hear the matter, which was both constitutionally and prudentially ripe. Bankruptcy courts are authorized to determine the dischargeability of federal taxes notwithstanding the Declaratory Judgment Act, 28 U.S.C. §2201. And the potential increase in judicial resources required to adjudicate the dispute did not justify abstention.

11 U.S.C. §523(a)(1); 28 U.S.C. §1334(c)(1); 28 U.S.C. §2201

Midwest M & D Services, Inc., Case No. 20-81102 07/17/2023

The corporate Debtor moved for a finding that one of its shareholders violated the automatic stay, 11 U.S.C. §362(a)(3), by bringing a cause of action that belonged to the corporation in state court. The shareholder alleged that officers of the Debtor had engaged in shareholder oppression under 805 ILCS 5/12.56. Unlike a derivative common-law action for breach of fiduciary duty, the asserted cause of action under §12.56 belonged to the shareholder alone, not the Debtor, so the shareholder did not violate §362(a)(3).

11 U.S.C. §362(a)(3); 805 ILCS 5/12.56