These are some of the decisions issued by the Supreme Court 7th Circuit Court of Appeals and Bankruptcy Judge Manuel Barbosa for the United States Bankruptcy Court for the Northern District of Illinois, Western Division. The summaries posted herein are editorialized summaries prepared by Lydia S Meyer. Therefore, Trustee Meyer does not make any warranties express or implied as to the accuracy of the summaries contained herein. Before relying on any case, you should obtain a full version of the transcript and make all appropriate legal conclusions based on your own reading and understanding of the case.


In re:  Lanning, 560 US S. Ct 2464; 130 S. Ct 2464, 177 L. Ed2d23 (June 7, 2010).  US Supreme Court held 6/7/10 that "when a bankruptcy court calculates a debtor's projected disposable income, the court may account for changes in the debtor's income or expenses that are known or virtually certain at the time of confirmation."  The Court found the Respondent/Debtor's forward-looking approach was a better interpretation of "projected disposable income."

In re:  Schwab v. Reilly, 560 US 130 S. Ct 2652, 177 L.Ed234 2010).  On 6/17/10, the US Supreme Court held "Because Reilly [debtor] gave " the value of [her] claimed exemption [s]" on Schedule C dollar amounts within the range the Code allows for what it defines as the ""property claimed as exempt,"" Schwab [trustee] was not required to object to the exemptions in order to preserve the estate's right to retain any value in the equipment beyond the value of the exempt interest."

In re:  Ransom v. FIA Car Services, Supreme Court of the United States, No. 09-907 Argued October 4, 2010 - Decided January 11, 2011, 562 U.S. 131 S. Ct 716, 178 L.Ed2d603 (January 11, 2011)  Issue:  Whether a debtor who owns a car outright, and does not make loan or lease payments, may claim the car ownership allowance on the B22.  Ruling:  No, the debtor may not take the ownership allowance.  "We hold that the text, context, and purpose of the statutory provision at issue preclude this result.  A debtor who does not make loan or lease payments may not take the car ownership deduction."

7th Circuit Post BAPCPA Decisions

In re:  Howard, 97 F.3d 852 (7th Cir. 2010) - The 7th Circuit joined other circuit courts "in ruling that negative equity can be part of a purchase money security interest and if thus secured is not subject to the cramdown power of the bankruptcy judge in a Chapter 13 bankruptcy. "

In re:  Turner, 574 F.3d 349 (7th Cir. 2009) - The 7th Circuit agrees with Eighth Circuit in In re: Frederickson, 545 F.3d 652 (8th Cir. 2008) that while the calculation of "disposable income in the plan submitted by the debtor" is a starting point for determining the debtor's projected disposable income, the final calculation can take into consideration changes that have occurred in the debtor's financial circumstances.  "The court ruled the debtor may not take deduction for monthly mortgage payment for real estate that is being surrendered."  7th Circuit reversed bankruptcy court.

In re: Ross -Tousey, 549 F.3d 1148 (7th Cir. 2008) – Debtor who owns his auto free and clear may take the local standard ownership deduction under 707(b)2A (ii) means test. 

 In re: Wright, 439 F3d 829 (7th Cir. 2007) – Debtor may not surrender collateral on 910 claim in full satisfaction of the claim.  Any deficiency must be treated as unsecured debt.  Rights under state law count in bankruptcy unless the Bankruptcy Code states otherwise. “Creditors do not need §506 to create, allow or recognize security interests, which rests on contracts (and the UCC rather than federal law.”)


Post BAPCPA Decisions by Judge Lynch

In re Cross, 13-83602- Debtor sought to extend the stay in her second Chapter 13 which was filed within 1 year of her prior Chapter 13 being involuntarily dismissed.  The court held that the debtor bears the burden of demonstrating that the current case was filed "in good faith as to the creditors to be stayed."  The second case is presumed to be "filed not in good faith since the debtor's prior case was dismissed "after the debtor failed to...perform the terms of a plan confirmed by the court."  The motion was supported by an affidavit which stated that in the previous case "she was not entitled to a discharge but would be entitled to a discharge in the instant proceeding."  The court found that this evidence was insufficient to rebut the presumption of bad faith by clear and convincing evidence and denied the debtor's motion to extend the automatic stay.

In re Buck,13-83858 - Court denied extension of stay in debtor's 2nd Chapter 13 filed one week after prior chapter 13 was dismissed.  Section 362(c)(3)(B) authorizes Court to extend the stay "only if party demonstrates that the filing of the latter case is in good faith as to the creditors to be stayed."  Debtor failed to rebut the statutory "not in good faith" presumption by clear and convincing evidence.  Debtor's affidavit was only evidence presented and failed to explain why she failed to make the post-petition mortgage payments in last case or would be more likely to be able to do so in this case when income per Schedule I was less than prior case and decreased expenses were unexplained. 

In re Downey,13-83745 Debtors' filed third Chapter 13 after second Chapter 13 involuntarily dismissed one week earlier.  Court denied debtors' Motion to impose the stay.  Under § 362(c)(4)(D) statutory presumption arises that the debtors' third Chapter 13 case is filed in bad faith as to all creditors.  Additionally, because the automatic stay had been lifted in favor of mortgage holder, Everbank, on debtors' residence at the time both prior cases were dismissed, statutory presumption arises that this third Chapter 13 case is filed in bad faith as to Everbank.  Debtors failed to rebut presumption by clear and convincing evidence.  Debtors failed to demonstrate that this case was more likely to succeed than the prior two.  Debtors' employment status was really not different.  Debtor failed to explain why the debtor's business now would generate sufficient profits when it was insufficient to do so in the past and offered nothing concrete as to his hope or expectation of employment by another entity.

In re Burks, 12-84004 - Case was filed 10/24/12 and redemption date for sold real estate taxes ran 10/25/12 - Debtor's plan proposed to pay sold real estate taxes over life of plan.  Creditor (Tax Buyer) objected.  Court overruled creditor's objection.  Creditor (Tax Buyer) has appealed the Court's decision.

In re Thomas A. Schelle,13-83587 - Attorney seeking an order for additional fees over and above the "no-look" agreed to $4000 from the Court Approved Retention Agreement. 

Ruling:  granted in part, denied in part.  

Facts:  The debtor filed his petition 10-21-13.  Debtor's ex-wife and trustee filed objections, in part because the schedules were inaccurate or incomplete.  Several amended schedules and plans were filed, however, the objections were not resolved and the matter was set for evidentiary hearing on March 20, 2015.  The Judge ruled the debtor had not accurately disclosed the assets or values and denied confirmation.  The debtor was given leave to refile a confirmable plan.  After the denial of confirmation and prior to the order confirming the amended plan filed June 16, 2015, debtor's attorney was awarded their fees under the Court Approved Retention Agreement in the amount of the flat fee of $4000.  An amended fee petition was filed seeking an additional $12,545 in "extraordinary" fees under the CARA.  Debtor's attorney attached an itemization of the fees incurred between April 18, 2014 and December 9, 2015.  Debtor's attorney argues they were extraordinary fees beyond the scope of a regular Chapter 13 case. 

The issue presented as not whether the requested compensation exceeds the reasonable value of services provided for purposes of 11 U.S.C. § 329 or whether the requested compensation was reasonable based on a consideration of the benefit and necessity of such services to the debtor for purposes of 11 U.S.C. § 330(a)(4)(B), but instead the issue was whether the fees were within the scope of ordinary fees already encompassed by the flat fee contemplated by the CARA.

The court ruled that much of the itemization was for routine matters, such as "communication about the case with the debtor, communication with the Chapter 13 Trustee and objecting creditor about the plan, the attendance at simple status hearings on plan confirmation."  Although the case was longer than the average Chapter 13 case, which had the correlating result of more time spent on the case, the length of time by itself is not to be considered unexpected or 'extraordinary'.  The court did find that the trial and preparation for the second trial on confirmation was extraordinary and granted fees for those entries directly incurred at trial, pre-trial conference and direct preparation of the trial.

Ismael and Maria Bello, 12-83144

Issue:  Trustee's Motion to Modify to increase plan payment after review of tax returns.

Facts:  Above median debtors filed their petition August 17, 2012.  The plan was confirmed June 28, 2013.  Debtors' proposed to pay $631 for 60 months with 0% distribution to general unsecured creditors.  The Trustee filed a motion to modify to increase the plan payment upon the review of the debtors' 2014 tax return.  The motion alleged that the debtors' disposable income after the adjustment for the IRS allowances required a monthly plan payment of $1959.

At the hearing the debtors alleged their expenses had increased substantially.  The court found there was a material change in income that supported the trustee's motion to modify, however, the debtors' argument that their living expenses had increased commensurately with their increased income was unwarranted.  There was little credible evidence to support the amount of the increase in expenses in the amount the debtors' claimed.

Ruling: The court ruled the debtors' income had increased "at a significantly higher rate compared to their reasonable incurred expenses in the years after their Chapter 13 plan was confirmed."  Trustee's motion to modify was granted.



In re Hanson, Jr. 16-82019

July 18, 2017

Debtor filed his petition and failed to list creditor Global Finance Solution ("GFS") in his petition or schedules.  The bar date passed for regular creditors on December 27, 2016 however GFS filed their claim on February 2, 2017.  The Trustee objected to the late filed claim and GFS, in their response, indicated they had only learned of the bankruptcy filing in late January 2017 after the bar date ran.

The court ruled that under Section 502(b) of the Code, upon an objection to the timeliness of a claim, the claim shall not be permitted except under certain circumstances.  More specifically the court referenced Rule 3002(c) which sets forth requirements for a claim to be timely and lists six exceptions.  GFS did not argue that any of the exceptions applied to them.

Rule 9006(b)(1) allows for enlargement of certain time actions.  Although Rule 9006(b)(1) allows for a court to extend deadlines where a movant failed to act under circumstances that amount to excusable neglect, this section is limited by subsection (b)(3).  Rule 9006(b)(3) states that a court may 'enlarge action under...[Rule] 3002(c), only to the extent and under the condition stated in those rules' so the creditor was limited to the exceptions set forth under Rule 3002.

Ultimately the court concluded that even in situations where the creditor did not receive timely notice, the Code prohibited the late filing of a proof of claim.  Rule 9006(b)(3) does not enlarge the deadline for filing proofs of claims based upon a showing of excusable neglect.  As stated in U.S. Court of Appeals for the Seventh Circuit, In re Greenig, 'a bankruptcy court may not use its equitable powers to enlarge a deadline in contravention of Rule 9006(b)(3). 152 F.3d 631, 634 (7th Cir. 1998).

It was noted that although the Trustee's objection was sustained, this did not preclude the creditor from seeking other remedies, for instance seeking relief from the automatic stay for cause, seeking conversion of the Chapter 13 under Section 1307(a) for cause, seeking relief from under the confirmation order under Section 1330, or seeking to exempt the debt from discharge under Section 523(a)(3) and Section 1328(a).


Post BAPCPA Decisions by Judge Barbosa


Above Median – B22C
1. In re Slater, 08 72714-(4/29/09) - Above median debtors with 100'%  plans/B22 issues -

Issue#1:  Whether debtor who was proposing 100% plan but had additional disposable income had to donate the income into the plan to shorten the plan length.

Issue#2:  Whether the debtor who was surrendering his primary residence in the plan could take the deduction on line 47 of the B22.

Ruling #1:  No.  the plain language of the statute required compliance with either subsection of 1325(b)(1)(A) [a debtor can propose a 100% plan] or (B) [the debtor must contribute all his projected disposable income into the plan], but not both.  In this case the debtor's plan complied with the former section.  This decision overrules this Court's prior non-written ruling in In re Shlifka, 08-70947.


Ruling #2:  Yes.  The deduction fit under the statute section 707(b)(2) subparagraphs (A) and (B) which allows a debtor to take a deduction for his primary residence.  This overrules this Court's prior ruling in In re Holsinger, 06-70261.  This holding has been overruled by 7th Circuit Court's decision in In re: Turner.  In Turner, the 7th Circuit ruled that the debtor may not take mortgage expense deduction for real property that is being surrendered.  The 7th Circuit made no distinction between an allowance for primary residence vs. second residence. 

2.  In re Romero, 08 73024-(4/13/09) - Above median debtors/B22 issues -Issue:  Whether debtors could take a deduction for their second residence, which was being surrendered according to the plan, on line 47 of the B22.

Ruling:  No.  The plain language of section 707 allows for a deduction of a "primary residence" and for other property necessary for the support of the debtor.  The court did not find the second residence was reasonable necessary for the support of the debtors, therefore debtors were not entitled to the deduction. 

3.  Above Median debtors must propose 60 month plan unless the plan provides for full payment of all unsecured debts.  Wiggs, 2006 WL2246432 (Bankr. N.D. Ill.2006). 
4.  AVOIDING WHOLLY UNSECURED MORTGAGEJudge Barbosa allowed Debtor strip down wholly unsecured second mortgage on Debtor’s residence.  In re:  Hedenstrom, 08-27585. 
5.  Disposable income should be calculated for above median income debtors by utilizing Schedule I income, which reflects current income as opposed to a historical overage.  Above median debtor is allowed to take the full national and local standard IRS allowances.  Additional expenses for categories specified by the IRS are proper if they fall within additional expense provisions as specified by the IRS.  To claim “other necessary expenses,” debtor must itemize, document and provide a detailed explanation of the special circumstances that render those expenses reasonable and necessary.  B22 current monthly income (6 month historical income) determines if debtor is above or below median income.  A debtor who is not liable on a mortgage may claim the full local standard expense for housing but may not claim additional expenses based upon actual amounts paid. DeMonica (345 B.R. 895 (Bankr. N.D. Ill. 2006)

6.  In above median cases, IRS allowances should be utilized to determine disposable income.  Schedule J, however, should still reflect actual expenses even though those actual expenses are not utilized to determine disposable income on above median case.  Because projected disposable income constitutes something other than current monthly income, Form B22C does not accurately reflect a debtor’s income and because an above median debtor’s income is determined by IRS allowances, Schedule J does not accurately reflect same.  Although each form may be inapplicable to determine appropriate plan payment, this does not inhibit the calculation itself.  Broderick, 06-70373.  

7.  Debtors are not entitled to their homeowners association fees on Line 470 since those expenses are expressly included in the local standard allowance for housing –non mortgage expenses, line 25A.  Becker, 08-70851. 
8.  If inaccuracies exist in the B22C form, the debtor must be required to correct them.  In re:  Sherrer, In re:  Schroeder

Miscellaneous Issues
1.  Debtor’s motion for Counseling Waiver under 109(h)3 is denied.  Debtor failed to file a certification, failed to sign motion, failed to describe circumstances that constituted exigent circumstances and failed to attest that he attempted to obtain counseling services but was unable to do so within five days.  Debtor’s motion would have been denied even if debtorhad set forth the sufficient information.  Debtor’s request to waive the counseling requirement was not timely filed-109(h)3(B) provides that exemption for exigent circumstances may in no case apply 30 days after the petition is filed except the Court may extend the time an additional 15 days for cause and after hearing. In re:  Miotto, 06-70052. 

2.  The applicable commitment period is determined as of the effective date of the plan.  The effective date of the plan is the date the plan is confirmed.  The number in household for determining the above median income figure is the number in the household as of the time of plan confirmation.  In re: Baker, 08-72480.

 3.  In re: Hernandez, 19 CBN 460 (Bankr. N.D. Ill. 2009) 08-72148 -

Section 1325(1)(5) requires monthly payments into the plan, not equal distributions to a particular creditor.

4.  In re Peterson, 08 71744-(4/10/09) - Service on Debtor/Personal Guaranties -

Issue:  Whether the debtor can object to the proof of claim filed by creditor for a judgment obtained in a separate court matter on the grounds that the judgment was void for lack of personal jurisdiction.  Debtor argues she was entitled to notice because she was a guarantor to a lease and her rights and duties were adjudicated by the court.

Ruling:  The debtor signed two personal guaranties and the guaranties were valid and enforceable against the debtor, therefore service of process on her corporation was as if service of process was upon the debtor herself, therefore the debtor's objection to the claim is overruled.


Pre-BAPCPA Decisions by Judge Barbosa

Good/Bad Faith

Two Chapter 13’s pending at the same time for the same debtor(s) is per se bad faith (Colle, 01 B 70619).

Issue of good faith is based on a totality of the circumstances and the debtor(s) bears the burden of proof of the elements of good faith as he does with the other requirements for plan confirmation under Section 1325 (Farley, 00 B 71727).

A zero percent plan is not per se bad faith, but the lower the percentage to unsecured creditors, the greater the scrutiny the court will impose (McClinton, 00 B 73096).

Motion To Incur

Request to purchase $18,000 automobile in 0% case denied as $18,000 vehicle is not reasonable and necessary. (Thompson 99 B 52491)

Secured Debts/Collateral

Debtor(s) may modify a plan post-confirmation to surrender collateral and reclassify any deficiency as unsecured (King, 99 B 51935).

Debtors(s) plan of reorganization may provide for the release of a lien upon payment of the secured portion of the claim (Santos, 00 B 70745).

Disposable Income

Maintaining a motor home is not a reasonable and necessary expense (Anderson, 00 B 71861).

Cigarette expense is not a reasonable and necessary expense (Otts, 00 B 72097).

Miscellaneous Decisions

The court addressed issue of late filed unsecured claims in an unpublished decision (Smith, 98 B 53360) (Fare, 99 B 50683).

Student Loans

Student loans may be paid directly outside of the plan IF they are long term debt pursuant to Section 1325(b)(5). (Butterworth 01 B 73794)