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The District of Colorado offers a database of opinions listed by year and judge. For a more detailed search, enter the keyword or case number in the search box above.

In re Robert H. Andrick and Brenda K. Andrick, Case No. 18-17556-JGR Order entered July 25, 2019 (special circumstances deduction for medical marijuana) 07/25/2019
The above-median income Debtors proposed a Chapter 13 Plan providing for monthly payments of $681 over a sixty-month period.  The Debtors sought to reduce their calculated monthly disposable income of $1,701.27 by claiming special circumstances deductions of $210 per month for cigarettes and $900 per month for medical marijuana.
 
The Chapter 13 Trustee and the United States Trustee objected to confirmation of the Plan.  Specifically, the UST argued the Plan failed to meet the requirements of 11 U.S.C. § 1325(a) and (b) in that the Plan was not proposed in good faith and failed to provide for the payment of all disposable income.
 
The Court declined to address the good faith argument but sustained the UST’s objection and denied confirmation because the Plan did not provide for the payment of all disposable income as required under 11 U.S.C. § 1325(b)(1)(B). Marijuana use, whether for medical or recreational purposes, remains illegal under federal law.  The Court held the deduction of a medical marijuana expense cannot be allowed as either an ongoing out-of-pocket medical expense or as a deduction for special circumstances.
In re James Joseph Anthony Alonzo and Cynthia Anne Alonzo, Case No. 17-20589 JGR Order entered June 12, 2018 (11 U.S.C. § 109(e) and student loan debt) 06/12/2018

The Chapter 13 trustee objected to the debtors’ plan on the basis that their unsecured debts exceeded the debt limitations in 11 U.S.C. § 109(e). The debtors argued that the majority of their unsecured debt was student loan debt, and such debt was not cause for dismissal. Specifically, the debtors asserted that the standard is the best interest of the creditors and bankruptcy estate; the decision to convert or dismiss is uniquely within the discretion of the bankruptcy court; and the Court should exercise such discretion and allow them to continue in Chapter 13 because the creditors and debtors would fare better in a Chapter 13 case with a repayment plan than the alternatives. The debtors also contended that because § 1307 uses the words “may” dismiss and not “shall,” and because exceeding the debt limitations is not one of the eleven enumerated reasons for cause for dismissal, the Court should examine the legislative history and public policy behind the Bankruptcy Code to find in their favor.   

The Court acknowledged the split of authority on the issue and analyzed the opposing views and policy arguments. Ultimately, the Court found that § 109(e) is clear on its face that a debtor is not eligible for Chapter 13 if such debtor exceeds the unsecured debt limitations. The Court also concluded that if the debtor is not eligible, the debtor cannot proceed in a Chapter 13 case, reasoning that although ineligibility is not expressly identified as cause under § 1307, simple logic indicates that ineligibility is cause for dismissal.

In re Galvin, Case 17-13786- JGR; Order entered March 2, 2018 (Colorado Homestead Exemption, Colo. Rev. Stat. § 38-41-201) 03/02/2018

The Debtor filed for relief under chapter 13 and listed a Winnebago Motor Home ("RV") on Schedule A/B and claimed the RV completely exempt as a homestead under Colorado law on Schedule C. The Chapter 13 Trustee objected to the claimed exemption and a hearing was held.

The Debtor testified he purchased the RV using the proceeds from the sale of his former residence and a commercial property. He further testified he and his wife lived in the RV and it was their intent to use the RV as their home going forward.

The Trustee contended that because the RV had a motor, it fit within the Colorado statutory definition of a motor home: "a vehicle designed to provide temporary living quarters and which is built into, as an integral part of or a permanent attachment to, a motor vehicle chassis or van" under Colo. Rev. Stat. § 42-1-102(57). Because the RV was a motor home, rather than a "mobile home" or "manufactured home," the Homestead Exemption did not apply.

The Court agreed with the Trustee, noting the Homestead Exemption had been expanded to include "mobile homes" and "manufactured homes," but not "motor homes." The statutory definitions of mobile home and manufactured home both specified that such homes did not have motive power. In contrast, the RV had motive power and was licensed as a motor vehicle, which likened it to the Peterbuilt Truck found not entitled to the Homestead Exemption in the case of In re Romero, 533 B.R. 807 (Bankr. D. Colo. 2016), aff'd, Romero v. Tyson, 579 B.R. 551 (D. Colo. 2016).

Thus, because the RV had motive power, it did not fit into the Colorado statutory definition of a "mobile home" or "manufactured home" and therefore was not entitled to the Homestead Exemption. The Court granted the Trustee's objection to Debtor's exemption.

In re Atna Resources, Inc., et al., Case 15-22848- JGR; Order entered November 1, 2017 (28 U.S.C. §§ 1930(a)(6)) 11/01/2017

The Court considered the issue of whether a liquidating trustee (“LT”), whose sole
existence flowed from the Debtors and their assets, liabilities, and confirmation of their Chapter
11 bankruptcy cases, could avoid payment of post-confirmation statutory fees to the United States
Trustee (“UST”) through administrative closure.

Debtors filed for Chapter 11 and moved to consolidate their cases. After approximately one
year of negotiation, the Debtors and the Unsecured Creditors Committee agreed upon a Joint Plan
of Liquidation, which the Court confirmed in November 2016. Under the Plan, all assets and
claims of the Debtors were transferred to a Trust, the Debtors were deemed liquidated, and all
equity interests in any Debtor were automatically canceled and extinguished.
The LT was appointed, and, beginning in March 2017, initiated 24 adversary proceedings
for recovery of avoidance claims against third parties, moved for several Rule 2004 exams and
asserted various claims objections. Shortly thereafter, the LT moved to administratively close the
Debtors’ cases to stop the accrual of quarterly fees due the UST under 28 U.S.C. § 1930(a)(6).
The UST objected, arguing the LT was attempting to circumvent the fee system mandated by
Congress.

The Court ultimately agreed with the UST, examining the plain language of the statute
and the Tenth Circuit case of United States Trustee v. CF & I Fabricators of Utah, Inc. (In re
CF & I Fabricators of Utah, Inc.), 150 F.3d 1233, 1237 (10th Cir. 1998). The Court also
distinguished the administrative closure of individual Chapter 11 cases, with a subsequent
reopening to enter discharge once all payments are completed. Further, the Court determined
the LT could not use 11 U.S.C. § 105 to bypass the requirements of Fed. R. Bankr. 3022 to
obtain a Final Decree and case closure. Accordingly, the Court denied the LT’s motion to
administratively close the Debtors’ cases.

In re Ajubeo, LLC, Case 17-17924- JGR; Memorandum Opinion entered September 27, 2017 (Employment of Chief Restructuring Officer under 11 U.S.C. §§ 105 and 363(b)) 09/27/2017

The Debtor filed for chapter 11 and moved to approve the retention of a Chief Restructuring Officer (“CRO”) under 11 U.S.C. §§ 105 and 363(b). The United States Trustee (“UST”) objected and an evidentiary hearing was held. No creditors or other parties in interest objected to the motion.

The UST argued that Mr. Smith, the principal of Alliance, should be employed as a professional person governed by 11 U.S.C. § 327(a) and its disinterested standard, and Alliance’s compensation governed by 11 U.S.C. § 330 for reasonableness.

The Debtor contended that many bankruptcy courts around the country have approved the employment of a CRO under 11 U.S.C. §§ 363(b) and 105(a), and urged the Court to approve the retention of Alliance with its fees reviewable under 11 U.S.C. §§ 330 and 328.

The Court held that under the circumstances of this case, the twin goals of impartiality and court review of fees were met, especially where Alliance agreed to subject its hourly fees and success fee to final review by the Court. The Court granted the motion to approve the retention of the CRO.

In re Reed, Case 16-18947- JGR; Order entered April 25, 2017 (11 U.S.C. §§ 707(b), 101(12)). 04/25/2017
The Court considered the issue of whether a mortgage encumbering a debtor’s 50% interest in a home, for which the debtor is not personally liable, is still a “debt” for the purpose of calculating whether the debtor has primarily consumer debts under 11 U.S.C.
§ 707(b).  Debtor argued the mortgage was a “claim” but not a “debt,” because in § 101(12), the Bankruptcy Code defines a “debt” as “liability on a claim,” and the debtor was not personally liable for the mortgage. Therefore, the debtor’s business debt outweighed his consumer debt, making the ‘abuse’ provisions of §707(b) not applicable.
 
In response, the United States Trustee (“UST”) cited established case law holding a home mortgage is a consumer debt, and observed the debtor had not asserted the mortgage was not a consumer debt.  The UST contended the terms “debt” and “claim” were coextensive, citing Tenth Circuit and Supreme Court precedent. The UST also cited cases from other jurisdictions holding a non-recourse mortgage was a debt under the Bankruptcy Code.
 
The Court ultimately agreed with the UST, recognizing it was bound by Supreme Court and Tenth Circuit precedent holding that the terms “debt” and “claim” are “coextensive.” The Court examined Johnson v. Home State Bank, 501 U.S. 78 (1991), where that Court discussed the concepts of in personam liability and in rem liability, and stated that even after in personam liability has been extinguished by a bankruptcy discharge, the creditor still retains a “right to payment” from the proceeds of the sale of the debtor’s property.
 
The Court also found persuasive the Fifth Circuit case of In re Lindsey, 995 F.2d 626 (5th Cir. 1993).  In that case, the court recognized that the Bankruptcy Code defines “debt” as “liability on a claim,” not “personal liability on a claim,” and that “personal liability” is a subcategory of “liability.”  Finally, the Court followed the reasoning of a Kansas bankruptcy court holding that in rem debts are included when applying the condition of § 707(b) that the UST may move to dismiss a case for substantial abuse only if the Debtor’s debts are primarily consumer debts.  In re Bryson, 2007 WL 2219114 (Bankr. D. Kan. 2007).
 
Accordingly, the Court concluded the case was subject to the dismissal provisions of §707(b). Because the UST moved for dismissal on several grounds, and advised the Court an evidentiary hearing would be necessary to resolve the remaining issues, the Court set a status and scheduling conference by separate order.
 
In re Diggins, Case 10-40335- JGR; Order entered December 20, 2016 (11 U.S.C. § 1328(a); Fed. R. Bankr. P. 3002-1(f)). 12/20/2016
The Court weighed in on the recent trend of lenders objecting to discharge at the conclusion of a Chapter 13 case because a debtor failed to make post-petition mortgage payments.  In this particular case, the mortgage lender initially filed a response to the Trustee’s Notice of Final Cure Payment indicating Debtor had failed to make post-petition mortgage payments, but the parties were in the process of a loan modification.  As a result, the Trustee filed a motion to dismiss under § 1307 for failure to comply with provisions of the Debtor’s Chapter 13 Plan.   Subsequently, the mortgage lender filed a supplemental response indicating the loan had been modified and the Debtor was no longer in default.
 
The Trustee conceded a loan modification may cure deficiencies in post-petition mortgage payments under some circumstances, but questioned the timing of the loan modification, which was not finalized until after the 60-month plan period had ended.  Debtor argued it would be inequitable to deny discharge, when she had made mortgage payments for most of the plan term, but entered a loan modification with her mortgage lender when her income dropped during the last year of her plan, and, pursuant to instructions from her mortgage lender, did not make payments for a certain amount of time. 
 
The Court recognized the holdings of other divisions of this Court that post-petition mortgage payments are “payments under the plan” pursuant to § 1328(a).  However, the Court agreed with the reasoning of In re Binder, 224 B.R. 483, 490 (Bankr.D.Colo. 1998), that, for a creditor holding a “long-term debt secured only by a lien against the debtor’s residence” the debtor is allowed to “cure arrearages over a reasonable period of time” so long as they keep current with regard to other obligations.  In this particular case, the Court held any default was not material under  § 1307(c)(6), because it was technical and temporary, and had since been cured to the mortgage lender’s satisfaction. 
 
The Court also determined that, while §§ 1322 and 1325 prohibit a debtor and a bankruptcy court from knowingly extending a plan that extends beyond five years, these sections do not mandate dismissal of a bankruptcy case if a debtor needs a reasonable period of time to cure an unanticipated arrearage incurred during the sixty-month period.  (Citing In re Handy, 557 B.R. 625, 628 (Bankr. N.D. Ill. 2016)). 
 
Ultimately, the Court denied the Trustee’s motion to dismiss,  determined it would be inequitable in this circumstances to deny discharge, and ordered the Clerk to enter Debtor’s discharge and close the case.
Simon E. Rodriguez, Chapter 7 Trustee v. Margaret Nelabovige (In re Kirst), Case No. 14-23835- JGR, Adversary Proceeding 15-01281-JGR; Order entered October 26, 2016 (fraudulent transfer under 11 U.S.C. § 548(a)(1)(B)). 10/26/2016
The issue before the Court was whether an innocent mistake by a grandmother in titling property in her name and the names of her daughter and son-in-law is reached by the law of constructively fraudulent transfers when the son-in-law transferred his interest in the property back to the grandmother immediately upon her request almost two years before the son-in-law filed bankruptcy.
 
Trustee filed a complaint against Debtor’s mother-in-law, Mrs. Nelabovige (“Nelabovige”), for recovery of a constructive fraudulent transfer under 11 U.S.C. §§ 548(a)(1)(B) and 550(a)(1). Trustee alleged that when Nelabovige purchased property in Fairplay, and titled the property in her name and the names of Debtor and his wife, Nelabovige gifted a one-third interest in the property to Debtor. Trustee further contended that when Debtor quit-claimed his interest in the property to Nelabovige, he made a transfer of his property to her and received less than a reasonably equivalent value in exchange for the transfer, and was either insolvent on the date of the transfer or rendered insolvent by the transfer. The Trustee requested a judgment against Nelabovige for one-third of the amount the property sold for in December 2014. The Court held a full-day evidentiary hearing on the complaint and Nelabovige’s answer, and took the matter under advisement.
 
In its written opinion, the Court cited Davis v. Pham (In re Nguyen) 783 F.3d 769, 776 (10th Cir. 2015), for the proposition that an interest in property consisting of bare legal title holds no tangible economic value; accordingly, the transfer of bare legal title does not constitute a fraudulent transfer. Therefore, the question before the Court was whether under Colorado law, Nelabovige made a gift of a one-third interest in the property to Debtor. If there was no gift, since she paid for the property and did not receive any consideration from Debtor, a resulting trust would arise in Nelabovige’s favor, making the transfers to and from Debtor of bare legal title only.
 
The Court found by strong and convincing evidence that Nelabovige did not intend to make a gift to Debtor. Thus, Debtor only had bare legal title subject to a resulting trust in favor of Nelabovige, who held equitable title. Accordingly, the reconveyance of Debtor’s bare legal title was not a fraudulent transfer. The Court entered judgment in favor of Nelabovige and against the Trustee, and dismissed the complaint with prejudice.

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