n recent years there has been considerable debate in the bankruptcy community concerning how many chapter 7 debtors might be able to repay some or all of their unsecured debt out of future income. By its very nature the debate has concentrated on the s
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In <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Duplan Corp.,</em> 229 B.R. 609 (Bankr. S.D.N.Y. 1999)</a>, the court was confronted with a novel
twist on the issue of whether certain distributees in a former chapter X debtor's assets would have
the benefit of the permanent injunction that had been entered in the prior chapter X case, so as to
protect them from third-party claims by various oil companies seeking contributions arising under
CERCLA. CERCLA was not enacted until after the entry of the permanent injunction and discharge
provisions of the final decree in the chapter X case. In affirming the bankruptcy court, the district
court concluded that since a right to payment is necessary to any bankruptcy claim, and since no right to payment existed
under CERCLA until CERCLA was passed into law, the prior injunction and discharge provisions of the final decree in the
chapter X case would not provide protection to the distributees of the assets from the third-party claims for contributions
brought under the provisions of CERCLA.</p>
<h3>Preferential Payment Avoidance</h3>
<p>In <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Burlington Motor Holdings Inc.,</em> 229 B.R. 611 (Bankr. D. Del. 1999)</a>, the debtor had established a pattern in
practice of accumulating invoices and paying them in batches by one check. Upon the debtor's bankruptcy filing, the debtor
brought an adversary proceeding to avoid a single disputed payment of $17,960 that the debtor had made during the
preference period on accumulated invoices. The creditor argued that the payment was made "in the ordinary course of
business," and thus protected from avoidance. Based upon the evidence in the case, the court found that under the
circumstances, payments clearing the bank 61 days or longer after the invoice date would be avoided as preferential
payments.</p>
<h3>Lease Rejection Claims</h3>
<p>In <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Best Products Co. Inc.,</em> 229 B.R. 573 (Bankr. E.D. Va. 1998)</a>, the debtor objected to a lease rejection claim that
included, as its largest element, a claim for deferred maintenance damages and separate elements for pre-petition real estate
taxes and lease rejection damages. The parties stipulated as to the amounts for the pre-petition real estate taxes and lease
rejection damages, but the debtor continued to object to the claim for deferred maintenance damages, arguing that the
statutory cap provided by <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… U.S.C. §502(b)(6)(A)</a> applies to all claims for damages that a lessor may have for any breach
of a lease or a covenant of a lease, including claims for building repair and maintenance, citing <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re McSheridan,</em> 184 B.R.
91 (9th Cir. BAP 1995)</a>; <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Mr. Gatti's Inc.,</em> 162 B.R. 1004 (Bankr. W.D. Tex. 1994)</a>; <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… v. C.M.C. Inc. (In re
Communicall Central Inc.</em>), 106 B.R. 540 (Bankr. N.D. Ill. 1989)</a>; and <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Storage Technology,</em> 77 B.R. 824, 825 (Bankr.
D. Colo. 1986)</a>. The court concluded that "most of the cases found by this court do not follow the restrictive rationale of
<em>Mr. Gatti's</em> and <em>McSheridan...</em>" Citing, with approval, the analysis contained in <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Atlantic Container Corp.,</em> 133 B.R.
980, 991-92 (Bankr. N.D. Ill. 1991)</a>, the court concluded that the damages for failure to maintain the premises would be
allowed separately and apart from the "lease rejection damages" element of the claim and would not be limited or precluded
by the "rent reserved" cap of §502(b)(6)(A).</p>
<h3>Alimony, Child Support Priority Payments</h3>
<p>In <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Crosby,</em> 229 B.R. 629 (Bankr. E.D. Va. 1998)</a>, the court held that if a debt is non-dischargeable, such as debt for
alimony, maintenance or support to a spouse, former spouse or child of the debtor, then any corresponding claim for
payment will be entitled to priority and must be paid in full under a chapter 13 plan pursuant to <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… U.S.C. §§507(a)(7),
523(a)(5) and 1322</a> (a)(2). Finding that the payments in question (agreed payments to be made for reimbursement of the
debtor's children's post-secondary education) were in the nature of additional "support," the court sustained the chapter 13
debtor's former wife's objection to confirmation on the grounds that the plan did not provide for payment in full of a
priority claim.</p>
<h3>Burglarized Debt Non-dischargeable</h3>
<p>In <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Morris,</em> 229 B.R. 683 (Bankr. E.D. Ky. 1999)</a>, the debtor's former employer's insurance company, as subrogee of
the debtor's former employer, objected to the dischargeability of the debt arising from damages sustained during a burglary
committed by the chapter 7 debtor. The subrogee insurance company insured the premises with business liability insurance
covering loss caused by theft and/or vandalism. The debtor burglarized a former employer's place of business, and
thereafter a civil suit commenced against the debtor seeking reimbursement for the damages caused by his criminal
activities. A default judgment was entered against the debtor in the civil action, following which the debtor filed his chapter
7 case. The court found the debt to be non-dischargeable under <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… U.S.C. §§523(a)(4)</a> and (6). Giving preclusive effect to
the default judgment in the civil case, the court further found that both liability and the amount of the debt had been fixed
by that default judgment.</p>
<h3>Collective Bargaining Agreements</h3>
<p>In <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Typocraft Company,</em> 229 B.R. 685 (Bankr. E.D. Mich. 1999)</a>, the debtor filed a chapter 11 case and then ceased
doing business approximately 15 months later, a week or two prior to converting the case to a chapter 7. During the chapter
11 case, the debtor operated its business but never sought to reject its existing collective bargaining agreement (CBA) or
take any of the steps incident to such a rejection as contemplated by <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… U.S.C. §1113</a>. Further, the debtor took none of the
formal steps necessary to assume the CBA under Rule 6006(a). In his final report, the chapter 7 trustee classified the claim
of the objecting parties under the CBA as pre-petition claims. The union representing the debtor's employees objected to
this classification asserting that the claims should be classified as chapter 11 administrative expenses relating to obligations
of the debtor under the CBA arising prior to the filing of the chapter 11 case. Concluding that it is bound by <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Unimet
Corp.,</em> 842 F.2d 879 (6th Cir. 1988)</a>, and observing that the language of that decision did not distinguish between claims
arising before or after the filing of a chapter 11 petition, the court concluded that qualification as an administrative expense
is not necessary for the union to prevail in its argument that the claim should be treated as a chapter 11 administrative
expense claim in the chapter 7 case.</p>
<h3>Preponderance of Evidence Standard for Revocation of Chapter 13 Plan</h3>
<p>Pursuant to an adversary brought by the trustee for secured bondholders, the court in <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… Partners v. First Union Nat.
Bank of Fla.,</em> 229 B.R. 720 (Bankr. W.D. Tenn. 1999)</a>, entered an order revoking its prior confirmation order pursuant to <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=…
U.S.C. §1144</a> upon its finding that the debtor failed to disclose the true value of its sole asset and that this failure
constituted fraud on the court. The bankruptcy court refused to award the bondholders compensatory or punitive damages
and both parties appealed. Relying on the rationale of <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… v. Garner,</em> 111 S. Ct. 654 (1991)</a> and on other cases applying
a "preponderance of the evidence" standard for revocation of confirmation of a chapter 13 plan [<em>See</em> <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… v.
Nikoloutsos,</em> 222 B.R. 297, 303 (Bankr. E.D. Tex. 1998)</a> (approving the use of preponderance of the evidence standard for
revoking a chapter 13 plan confirmation for fraud under <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… U.S.C. §1330(a)</a>], and applying the preponderance of the
evidence standard to the revocation of discharge due to fraud under §727(d) [<a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… N.A. v. Emery (In re Emery),</em> 201
B.R. 37, 40 (Bankr. S.D.N.Y. 1996), <em>aff'd,</em> 132 F.3d 892 (2nd Cir. 1998)</a>, <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… v. Belt Valley Bank (In re Bowman),</em> 173
B.R. 922, 925 (9th Cir. BAP 1994)</a> and others], the court concluded that the proper standard for determining fraud
sufficient to revoke confirmation under <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… U.S.C. §1144</a> is the preponderance of the evidence standard. The opinion goes
on to analyze the elements of fraud required under §1144 concluding that "the test for fraud under §1144 can be restated to
account for a party's non-disclosures as follows: (1) an intentional omission, (2) by a party with a duty to disclose, (3) of
facts that would be material to finding the party complied with §1129, (4) that were withheld so that the court would find
the party complied with §1129, (5) and that as a consequence of such non-disclosure, the court entered the confirmation
order."</p>
<h3>Miscellaneous</h3>
<ul>
<li><a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… re Blaemire,</em> 229 B.R. 665 (Bankr. D. Md. 1999)</a> (pre-petition judgment debt for fees to the attorney appointed to
represent the minor children of debtor and her former spouse held to be in the nature of child support and excepted from
discharge under <a href="http://www.westdoc.com/find/default.asp?rs=CLWP1.1&vr=1.0&cite=… U.S.C. §523(a)(5)</a>).</li>
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