In ruling on cross-motions for summary judgment on a creditor’s motion to disallow the Debtor’s exemption of a profit sharing plan estimated to have assets of about $300,000, the Court concluded that material questions of fact still existed as to whether the plan was qualified under 26 U.S.C. § 401 and denied both motions. The Debtor argued that the plan was not property of the bankruptcy estate pursuant to 11 U.S.C. § 541(c)(2) because it had an enforceable spendthrift provision under O.C.G.A. § 53-12-80(g) and that even if the plan was property of the bankruptcy estate he was entitled to exempt it pursuant to O.C.G.A. § 44-13-100(a)(2.1) and 11 U.S.C. § 522(b)(3)(C). The crux of both issues was whether the plan was a qualified plan under § 401 of the Internal Revenue Code. The creditor argued that the plan was not qualified because: (a) it did not have a required distribution clause, (b) it violated the anti-alienation provision, (c) it violated the exclusive benefit rule, and (d) that various prohibited transactions under 26 U.S.C. § 4975 occurred. The Court concluded the plan did contain the required distribution clause and that material questions of fact existed as to whether the anti-alienation provision and exclusive benefit rule were violated. In addition, the Court rejected the creditor’s argument that one prohibited transaction was sufficient to disqualify a profit sharing plan, but concluded that a profit sharing plan may be disqualified if a multitude of prohibited transactions exist such that the form of the plan is being abused; material questions of fact still existed as to the number of the prohibited transactions that occurred. Furthermore, because neither party presented sufficient evidence that the plan received a “favorable determination” as contemplated by 11 U.S.C. § 522(b)(4)(A), to exempt the plan the Debtor had to demonstrate that it was in substantial compliance with the tax code (or if not the Debtor was not materially responsible for its failure) and that it had not previously received an unfavorable determination by a court or the IRS, pursuant to 11 U.S.C. § 522(b)(4)(B). The creditor maintained the overall burden of proof in objecting to the exemption in accordance with Fed. R. Bankr. P. 4003. Because neither the Debtor nor the creditor met its respective burden to be entitled to judgment as a matter of law on either issue the Court denied both motions.
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Honorable James R. Sacca
The Court granted the Defendant's motion for summary judgment and dismissed the Plaintiffs' Complaint alleging that the Defendant violated the discharge injunction. The Court concluded that the Defendant, the servicer of a mortgage secured by real property owned by the Plaintiffs, did not violate the discharge injunction when after the Plaintiffs received their discharge it: (a) sent five purely informational letters and two hazard insurance notices to the Plaintiffs, (b) reported the loan to the credit bureaus with a balance of zero and as being included in their chapter 7 bankruptcy case, and (c) participated in phone calls that the Plaintiffs initiated. These acts neither individually nor overall violated the discharge injunction.
The Court concluded that a lump sum severance payment equal to one year of salary for an otherwise unemployed debtor does not render a debtor ineligible to be a debtor under chapter 13 because the severance payment qualifies her as an individual with regular income pursuant to § 109(e) for the time period that the severance covers. In addition the Court will require that a disputed claim for attorney’s fees to be resolved before determining whether the debtor meets the debt limitations for eligibility to be a debtor in a chapter 13 case.
INTENDED FOR PUBLICATION
The Court concluded that Federal Rule of Bankruptcy Procedure 3002(c)(4) does not require the Court to set a separate bar date for lease and contract rejection claims in chapter 7, 12, or 13 cases. The rule permits the Court to fix such a bar date in the Court’s discretion as necessary according to the facts of the case.
INTENDED FOR PUBLICATION
The Court granted in part and denied in part the U.S. Trustee’s motion to compel. During discovery, the Defendant invoked her Fifth Amendment privilege against self-incrimination to certain questions regarding an answer she provided in her Statement of Financial Affairs. In his motion to compel, the U.S. Trustee argued: (1) the Defendant was unable to claim the privilege because she failed to show that answering the questions created any real danger of incrimination, and (2) even if a real danger of incrimination existed, the Defendant waived her right to invoke the privilege by voluntarily revealing incriminating facts related to the questions. The Court concluded the Defendant had a right to invoke the Fifth Amendment privilege against self-incrimination because answering the questions could lead to a real possibility of criminal liability. In addition, she did not waive her right to invoke the privilege because answering the questions could further incriminate her and allowing her to invoke the privilege would not distort the U.S. Trustee's view of the facts. The Court did compel the Defendant to answer questions she previously refused to answer on relevancy grounds.
The Court ruled on a split among the bankruptcy courts in the Eleventh Circuit regarding the interplay between §§ 541(a)(5) and 1306(a)(1). It concluded, based on the plain language of the statute, that property the Debtor inherited more than 180 days post-petition but before the case was closed, dismissed, or converted, was property of the bankruptcy estate.
INTENDED FOR PUBLICATION
Following trial, the Court concluded that: (1) the Debtor would not be denied a discharge under 11 U.S.C. §727(a)(4)(A) for committing a false oath because she had no fraudulent intent when misstating facts related to receiving certain settlement proceeds; (2) the Debtor’s debt to her landlord would not be deemed nondischargeable under 11 U.S.C. §523(a)(2)(A) because, although she broke a promise to pay her rent arrearage out of her settlement proceeds, she intended to pay him when she made the promise and thus had no fraudulent intent; (3) the landlord failed to carry his burden in proving that the Debtor caused certain willful or malicious damage to his property pursuant to 11 U.S.C. §523(a)(6); and (4) the Debtor was not entitled to a grant of attorneys’ fees under 11 U.S.C. §523(d) because the landlord had a reasonable basis for his claims.
The Court concluded that, for purposes of determining the Debtors’ applicable commitment period for their Chapter 13 plan under 11 U.S.C. §1325(b)(4), the average monthly income of the self-employed husband is defined as gross receipts before deducting business expenses, not net income after deducting expenses; thus the Debtors’ applicable commitment period is five years, not three.
The Court denied Bank’s motion for summary judgment in case Chapter 7 Trustee brought against it seeking to recover the value of an allegedly fraudulent transfer. The Trustee had previously obtained a judgment against the Debtor’s daughter for fraudulently transferring the Debtor’s house by selling it to a third party. The trustee then brought an action under 11 U.S.C. §550(a) against the buyers (who settled) and against the Bank that financed the purchase and took an interest in the property via security deed, arguing that he could recover from them as mediate or immediate transferees. The bank raised the “good faith transferee” affirmative defense contained in 11 U.S.C. §550(b), arguing that it took its interest in the property in good faith and without knowledge that the transfer was fraudulent, and it moved for summary judgment. The Court denied summary judgment, concluding that questions of fact remained regarding whether the bank performed a reasonably diligent investigation according to customary practices in the mortgage lending industry and considering the unique facts of this case.
The Court granted relief from the automatic stay for a title pawn company to repossess two vehicles from the Debtor, which had been pledged as collateral on two loans. Although the Debtor proposed in her Chapter 13 plan to cure her default and arrearage as to the amounts owed, the Court concluded that the title pawn company was not bound by her plan because she had no legal rights in the vehicles at the time she filed her bankruptcy petition, which was after her right of redemption had expired. The vehicles were not property of the Debtor’s estate because her legal title in the vehicles was divested upon expiration of the statutory grace period for her to cure her default and redeem the vehicles under Georgia law, and title to the vehicles automatically transferred to the title pawn company upon expiration of that grace period.