September 2006

Debtor/Creditor NewsMag
A publication of the Debtor/Creditor Rights Committee of the Business Law Section of the State Bar of Michigan
Bankruptcy Decisions

Decisions from the Eastern and Western Districts of Michigan
and the Sixth Circuit BAP and Court of Appeals

Debtor Estopped From Pursuing Unscheduled Claim

Debtor failed to disclose in Chapter 7 schedules a wrongful discharge action that she commenced pre-petition.  The defendants in the wrongful discharge action moved for summary judgment on the basis of judicial estoppel, among others.  The bankruptcy court granted the motion for summary judgment on the basis of judicial estoppel based on the debtor's failure to disclose the action in her bankruptcy case.  The court noted that "the purpose of judicial estoppel is to prevent litigants from compromising the judicial system through dishonest gamesmanship."  The court found that the debtor in the adversary proceeding acted in bad faith and thus judicial estoppel was warranted.    In re Johnson, __ B.R. __, 2006 WL 2052068 (07/14/06 Bankr WD Mich). 

Comfort Order Granted

Chapter 13 creditor secured by mortgage requested an order confirming that automatic stay had been terminated pursuant to §362(c)(3)(A) where the debtor had one chapter 13 case dismissed within the previous year. The court ruled that this result was required by § 362(j), which states that on request of a party in interest, the Court shall issue an order “under subsection (c)” that the automatic stay has been terminated. That language on its face appears to cover both the one, and, the more than one previous case situations, both of which are “under subsection (c)”. In re Waldron, #06-20323 - ws (05/05/06 - Bankr ED Mich).

Comfort Order Denied

Chapter 7 creditor secured by a vehicle requested an order confirming that the automatic stay has been terminated as to that creditor under §521(a)(6). The court denied the request holding that §521(a)(6) of the Bankruptcy Code, as amended by BAPCPA, does not authorize a party to request, nor does it direct the Bankruptcy Court to enter, an order “confirming” the status of the automatic stay in the circumstances of § 521(a)(6). Similar to the request made by the Creditor in In re Sanders under § 365(p)(1), the creditor’s request in this case, made under §521(a)(6), is simply not made under one of the two specific instances in which BAPCPA permits a party to request a comfort order “confirming” the status of the stay. In re Woods, # 06-40458 - pjs (04/27/06 - Bankr ED Mich).

Comfort Order Denied

Chapter 7 creditor secured by mortgage requested an order confirming that the stay has been terminated under §362(c)(3)(A). The court denied the request holding that for cases where §362(4)(A)(i) applies, §362(4)(A)(ii) provides that “on request of a party in interest, the court shall promptly enter an order confirming that no stay is in effect.” However, for cases where §362(c)(3)(A) applies, there is no similar provision under the Bankruptcy Code which requires the court to enter an order confirming that the stay has terminated, and the court declined to file such an order. The court noted further that Local Rule 4001-6(d) does not contemplate such an order. In re Coleman, #06-43396 - tjt (04/21/06 - Bankr ED Mich).

Debtor's Request to Impose Stay Denied

Chapter 13 debtors, in their second chapter 13 case filed within one year, brought motion to impose the automatic stay pursuant to §362(c)(4)(A). The court denied the motion holding that the court does not have authority to impose a stay once it has been terminated pursuant to §362(c)(3)(A). In re Frye, #06-42416 - tjt (04/20/06 - Bankr ED Mich).

Debtor’s Request to Extend Stay Denied

Chapter 13 debtors, in their second chapter 13 case filed within one year, brought motion to extend automatic stay beyond 30 days pursuant to §362(c)(3)(B). The court denied the motion noting that the statute has a 30-day hearing deadline. L.B.R. 4001-6(a) (E.D.M.) requires that a motion to extend the stay be filed and served within 7 days after the bankruptcy petition is filed, and that:

Immediately after filing the motion [to extend the stay], the movant shall obtain a hearing date from the judge’s courtroom deputy clerk, who will cause notice of the hearing to be served on parties in interest.

The court denied the motion because the debtors filed their motion well beyond the seven day deadline so it was impossible under those circumstances to schedule and complete a hearing on debtors’ motion to extend the stay within the required 30-day period. In re Frye, #06-42416 - tjt (04/20/06 - Bankr ED Mich).

Procedure Where Case Closed But No Discharge for Failure to File Statement of Completion of Personal Financial Management Course

The debtor’s chapter 7 case had been closed but no discharge issued because the debtor failed to file a statement of completion of personal financial management course. The court held that "If the Debtor wishes to obtain a discharge, it will be necessary for the Debtor to file a motion to reopen this bankruptcy case in accordance with Guideline 3, accompanied by the statement required by § 727(a)(11) of the Bankruptcy Code, and Bankruptcy Rule 1007(b)(7) and (c), evidencing the Debtor’s completion of a course in personal financial management pursuant to § 111 of the Bankruptcy Code."   In re Smiley, #06-89741 - pjs (04/12/06 - Bankr ED Mich).

Comfort Order Denied

Chapter 7 creditor secured by a vehicle requested an order confirming that the automatic stay had been terminated with respect to the creditor and the vehicle under 365(p). The court denied the request holding that although BAPCPA created two specific instances (sections 362(c)(4)(A) and 362(j)) where parties in interest are permitted to request, and the court is directed to enter, an order “confirming” the status of the automatic stay, neither of those provisions pertain to the circumstances set forth in § 365(p)(1). That section of the Bankruptcy Code independently and “automatically” terminates the stay, without further process and without resort to any other section of the Bankruptcy Code, if the circumstances set forth in that provision are present. No court order is required by that provision to effectuate it nor does it require resort to any other provision of the Bankruptcy Code to effectuate it. In re Sanders, #06-40096 - pjs (04/06/06 - Bankr ED Mich).

Utility Adequate Assurance Section Leaves Court with no Discretion to Approve Adequate Assurance Proposal but Only to Modify Adequate Assurance after Agreement

Chapter 11 debtor filed motion to provide adequate assurance of future performance to several utility companies per §366(c). The court confirmed that it does not have authority to continue the injunction to prohibit a utility company from terminating service beyond the 30 days after filing the petition. “However, subsection (c) does not give me that discretion, for it clearly requires as a condition to continuing the injunction either the utility’s acceptance of the adequate assurance offered by the Chapter 11 trustee or debtor in possession or the Chapter 11 trustee’s or debtor in possession’s acceptance of the adequate assurance offered by the utility. Granted, subsection (c)(3) does give the trustee or debtor in possession the right to have the adequate assurance payment modified by the court. However, that right arises only after the adequate assurance payment has been agreed upon by the parties. The trustee or debtor in possession has no recourse to modify the adequate assurance payment the utility is demanding until the trustee or debtor in possession actually accepts what the utility proposes.“  In re Lucre, Inc, #05-21723 - jrh (11/09/05 Bankr WD Mich).