Chapter 13 debtors do not need the bankruptcy court’s permission to sell property that has vested in them after confirmation of their plan. They do, however, need to provide notice to the Chapter 13 Trustee. The Debtor’s post-confirmation motion to sell property that had vested in her was therefore unnecessary; if the sale results in a need to adjust the plan, the appropriate party should file a motion to modify the plan.  

Statutes: 11 U.S.C. §§363(b), 1306(a), 1327(b), 1329(a).

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)

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)

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)

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.

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