Recent Court Orders

  • Adamson, Deceased Debtor, Financial Management Course

    Case no. 19-60046

    Debtor filed a "Motion to Waive Requirement for Financial Management Course and Certification as to Domestic Support Obligations. The Motion seeks an Order waiving the requirement that Debtor submit a certificate of completion of a Financial Management Course and certify that he does not have any domestic support obligations, as required by 11 U.S.C. 1328(a) and (g) because Debtor passed away. 11 U.S.C. 1328(g)(l) precludes a debtor from obtaining a Chapter 13 discharge "unless after filing a petition the debtor has completed an instructional course concerning personal financial management described in section 111." 11 U.S.C. 1328(g)(2), however, provides that subsection (g)(l) does not apply to a debtor who fits the description set forth in 11 U.S.C. 109(h)(h), which excludes a debtor "whom the court determines ... is unable to complete [thepersonal financial management course] because of incapacity, disability, or active military duty in a military combat zone." This Court agrees and waives the requirement of 11 U.S.C. 1328(g)(l) with respect to Debtor in this case. 11 U.S.C. 1328(a) requires "a debtor who is required by a judicial or administrative order, or by statute, to pay a domestic support obligation " to file a certification with the Court affirming that all domestic support obligations have been paid. Upon review of the record, there is no evidence that Debtor “is required by a judicial or administrative order, or by statute” to pay any domestic support obligations. Accordingly, 11 U.S.C. 1328(a)’s requirement is inapplicable.

    In re Adamson, March 4, 2022, Juliane E. Lore for Adamson

    2022 Mont. B.R. 38, (March 4, 2022) 

  • Deherera, Chapter 13 Dismissal, Notice

    Case no. 22-10023

    Pursuant to 11 U.S.C. 1307(b) the Court shall dismiss a case “[o]n request of the debtor at any time, if the case has not been converted under section 706, 1112, or 1208 of this title[.]” The debtor has an “absolute right to dismiss a Chapter 13 bankruptcy case, subject to the single exception [of previous conversion,] noted expressly in the statute itself.” In re Nichols, 10 F.4th 956, 964 (9th Cir. 2021). The Court is able to determine, based on filings and orders in the docket, whether a case has been previously converted. As such, a voluntary dismissal of a chapter 13 case does not require notice to creditors or other parties in interest. Fed. R. Bankr. P. 1017 clearly excepts motions to dismiss under 11 U.S.C. 1307(b) from the notice and hearing requirements of that rule. Our local rule Mont. LBR 1017-1(a)(3) reflects an historical practice of providing notice and opportunity for a hearing, now obsolete under the In re Nichols precedent. Here, the case has not been previously converted. Accordingly, IT IS ORDERED the Debtor’s Motion is granted and this case is dismissed.

    In re Deherera, April 21, 2022, Juliane E. Lore for Deherera

    2022 Mont. B.R. 65 (April 21, 2022)

  • Doty,Oversecured Creditor Attorney Fees

    Case no. 18-61048

    Since the Total Amount does not exceed $1,000, notice to creditors and other parties in interest is not required under Fed. R. Bankr. P. 2002(a)(6) or Mont. LBR 2002-4. Nevertheless, this Court has an “independent obligation to review each application for compensation to ensure that applicants provide an adequate summary of work performed and costs incurred.”

    Under 11 U.S.C. 506(b), to the extent a creditor is over-secured, that creditor “shall be allowed . . . interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement or State statute under which such claim arose.” The 9th Circuit has summarized that code section to allow recovery of attorney’s fees if four distinct elements are met: (1) The claim is an allowed secured claim; (2) the creditor is over-secured; (3) fees are reasonable; and (4) the fees are provided for under the agreement.

    A creditor is over-secured if “the value of [the collateral] . . . is greater than the amount of such claim.” Here, Creditor is over-secured. At the time of default the principal and interest Debtors owed Creditor was $393,807.43. The Buy-Sell Agreement filed with this Court at ECF No. 129 states the value of the real estate securing creditor’s claim is $930,000.00. The value of the collateral exceeds the amount of Creditor’s claim. Therefore, Creditor is over-secured.

    This Court considers the following factors when evaluating the reasonableness of a fee application under 11 U.S.C. 506(b): (1) the nature, extent, length and value of the services rendered; (2) the bankruptcy and non-bankruptcy experience, reputation, and ability of the attorneys; (3) awards in similar cases; (4) the novelty and difficulty (or lack thereof) of the questions presented; (5) the skill requisite to perform the legal services properly; (6) the customary fee; (7) professional time actually spent; (8) amount involved in potential risk; (9) the results of the cases; (10) specialty in which the attorneys may be practicing; (11) fees sought to be applied; (12) distinction between partner and associates time; (13) costs of comparable services; (14) use (or lack thereof) of paralegals; and (15) duplication of efforts. In re Olson, 2020 Mont. B.R. 137, 147 (Bankr. D. Mont. 2020). This Court also considers “the proportion of fees sought in relation to the total claim” Here, Applicant’s request of $1,000.00 of professional fees is reasonable. The Application indicates over $18,000.00 worth of services have been provided. The Court notes this amount was substantially reduced in the Application due to the statutory constraints of Mont. Code Ann. 71-1-320 which provides: “[i]f prior to the trustee’s sale the obligation and the trust indenture shall be reinstated in accordance with provisions of 71-1-312, the reasonable trustee’s fees and attorneys’ fees to be charged to the grantor shall not exceed the lesser of $1,000 or 1% of the amount due on the obligation, both principal and interest, at the time of default.”

    The statutory limitation of Mont. Code Ann. 71-1-320 restrained Applicant from seeking an award exceeding $1,000.00. Nevertheless, considering the above factors along with the substantial reduction in amount requested, the Court concludes the total Amount is reasonable.

    In re Doty, May 25, 2022, Brianne McClafferty for Rocky Mountain Bank, Nik G. Geranios for Doty

    2022 Mont. B.R. 78 (May 25, 2022)

  • Robinson, Sale of Property, Confirmed Chapter 13 Plan

    Case no. 20-10007

    The Motion seeks approval of a sale of Debtors’ real property. The Motion acknowledges that an order approving the sale is not necessary because the Property revested in the debtor upon confirmation. Nevertheless, the Motion requests an order from the court approving the sale along with other relief, identified in the Motion explaining that an order approving the sale will address issues associated with closing and concerns or questions of the title company conducting the closing. According to the Motion, in connection with the sale of the Property: (1) The Trustee will participate in the closing; (2) The secured lender’s unimpaired secured claim will be paid at closing; (3) The secured lender’s prepetition arrearage claim that is included in Debtors’ confirmed plan will be paid at closing, (as if it was paid by the Trustee) ; and 4) The closing agent will pay an additional $12,000 to the Trustee, for payment of administrative claims, including Trustee’s administrative claims and Debtors’ attorney’s fees. In essence, sale of the Property will result in a supplemental source of plan funding. The plain language of 11 U.S.C. 363(b), provides in part:

                The trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate              [emphasis added].

    Pursuant to 11 U.S.C. 1327(b), confirmation of a plan vests all of the property of the estate in the debtor, except as otherwise provided in the plan or the order confirming the plan. Here, the Plan revested property of the estate in the Debtors upon confirmation.

    Although relief under 11 U.S.C. 363(b) may not be available, proceeds from the sale of the property are to be utilized to fund the plan. More specifically, “[u]nder 1329, the bankruptcy court can approve a plan modification that increases the debtor's plan payments due to a postconfirmation increase in the debtor's income, whether or not the additional income is property of the estate.” Id. Notably, the Plan in this case was not a liquidating plan. Instead, Debtors’ plan was to be funded with payments of $320/month for 60 months. According to the Motion, Debtors will use the sales proceeds from the sale of the Property to payoff the secured creditor, including the prepetition arrearage claim. In essence, the Motion requests Court approval of an additional source of plan funding from the sale of the Property to pay the arrearage claim of the secured creditor, and administrative claims. Based on the Court’s review of the Motion, relief is appropriate. Accordingly, absent any opposition after notice, IT IS ORDERED that the Motion is denied in part and granted in part.

    In re Robinson and Brazee, January 26, 2022, Ralph W. Wilkerson for Robinson and Brazee

    2022 Mont. B.R. 27 (January 26, 2022)

  • Serafin, Motion to Approve Loan Modification, Plan Confirmation

    Case no. 21-20161

    An agreement between the debtor and secured creditor to modify a loan will not conflict with 1322(b)(2), because the lender is a party to the agreement. Under 1322(b)(2) a chapter 13 plan may not modify the rights of the holder of a secured claim which is “secured only by a security interest in real property that is the debtor's principal residence.” However, this prohibition does not bar a secured creditor from consenting to modification of its claim, and further accepting the plan under 1325(a)(5)(A).  Courts have recognized that the confirmed plan represents the new contract between debtor and its creditors. As a result, an agreement to modify a loan, reached by debtor and creditor prior to confirmation, may be incorporated into the plan and approved through the confirmation process.

    Post confirmation an agreement to modify a loan may require modification of a confirmed plan under 1329(a). If a plan has been confirmed, the post confirmation loan modification may have a material effect on the confirmed plan, and at a minimum the trustee should be afforded notice of the modified loan in order to evaluate whether the modified loan has any impact on plan administration. Alternatively, if a debtor recognizes a loan modification agreement entered with the creditor post confirmation requires modification of the plan, debtor could elect to file a motion to modify plan, incorporating the modifications to the loan with an appropriate explanation and any modified documents, so that the court, trustee and other parties entitled to notice can evaluate the proposed plan and modification and object, if grounds exist to do so.

    In this case, the Motion seems to contemplate approval of the loan modification agreement independent of confirmation. In this case, Debtor has not confirmed a plan. Debtor’s operative plan treats Creditor’s claim as an unimpaired secured claim. Further, the Plan shows no arrearages on unimpaired secured claims. The Motion explains that delinquent payments totaling $24,223.90 were capitalized and a new note and deed of trust were executed. The loan modification and the Plan do not conflict. As a practical matter, the Plan incorporates the loan modification because the Plan does not provide for any arrearages to be paid through the Plan. Rather than approve the Motion, and confirm the Plan, the Plan will be confirmed by separate order, and the Motion denied as moot because, in essence, the Plan incorporates the modified loan terms by eliminating any arrearages, and Creditor’s withdrawal of its objection constitutes its acceptance of the Plan.

    In re Serafin, February 8, 2022, Stuart Whitehair for Serafin

    2022 Mont. B.R. 33 (February 8, 2022)

  • Stapley, Lien Avoidance, Domestic Support Obligation

    Case no. 22-90018

    Debtor filed a Motion to Avoid Lien under 11 U.S.C. 522(f)(1)(A). Debtor requests the Court avoid a judicial lien that impairs Debtor’s interest in exempt property. Debtor has claimed an exemption pursuant to 11 U.S.C. 522(b)(3) and Mont. Code Ann. 70-32-101. The total value of the homestead exemption claimed may not exceed $364,000.00 in 2022. This amendment to the statute was effective May 10, 2021. The amount of the exemption increases 4% each year after 2021. 11 U.S.C. 522(f)(1)(A) permits the debtor “to avoid the fixing of a lien” on property of the debtor to the extent such lien impairs an exemption “if such lien is a judicial lien, other than a judicial lien that secures a debt of a kind that is specified in section 523(a)(5)[.]” The type of lien specified in 11 U.S.C. 523(a)(5) is one that secures a “domestic support obligation.” The case register report attached as an exhibit to the Motion shows the judgment that is the subject of the Motion was entered in an action for a dissolution of marriage. The Court could not discern from the exhibits if the exception under 11 U.S.C. 523(a)(5) is applicable. In the Order setting the matter for hearing, the Court stated that “[p]rior to the hearing, Debtor may submit copies of the property settlement agreement, complaint to renew judgment and judgment, and if consideration of those items persuades the Court the judgment does not correspond to a domestic support obligation, the hearing may be vacated.” Debtor filed a Notice and included copies of the property settlement agreement, complaint to renew judgment, and judgment. Upon review of the documents attached to the Notice, the Court finds that the judicial lien sought to be avoided in the Motion is not one that secures a domestic support obligation. Thus, the exception does not apply, and it is a judicial lien that may be avoided under 11 U.S.C. 522(f)(1)(A).

    In re Stapley, March 28, 2022, Jeffrey K. Greenwell for Stapley

    2022 Mont. B.R. 57 (March 28, 2022)

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