MWRD Employees' Credit Union v. Frazier (In re Frazier), Bankruptcy Case No. 15 B 05304

• Decision Date: 20 June 2016
• Docket Number: Bankruptcy Case No. 15 B 05304,Adversary Case No. 15 A 00812
• Citation: 551 B.R. 410
• Parties: In re: Selina L. Frazier, Debtor. MWRD Employees' Credit Union, Plaintiff, v. Selina L. Frazier, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

551 B.R. 410

In re: Selina L. Frazier, Debtor.MWRD Employees' Credit Union, Plaintiff

v.Selina L. Frazier, Defendant.

Bankruptcy Case No. 15 B 05304

Adversary Case No. 15 A 00812

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

Filed June 20, 2016

Amy A. Aronson, Aronson & Walsh, P.C., Vernon Hills, IL, for Plaintiff.

Selina L. Frazier, Chicago, IL, pro se.

MEMORANDUM OPINION

Janet S. Baer

, United States Bankruptcy Judge

The MWRD Employees' Credit Union (the “Plaintiff”) filed an adversary complaint in the bankruptcy case of Selina L. Frazier (the “Debtor”), seeking a determination that a debt owed to the Plaintiff by the Debtor in connection with the Debtor's Chevrolet Impala is nondischargeable pursuant to 11 U.S.C. § 523(a)(6)

.¹ The Plaintiff also alleged that the Debtor is not entitled to a discharge pursuant to § 727(a)(2). For the reasons set forth below, the Court finds that the Plaintiff has failed to meet its burden to establish the elements required under either § 523(a)(6)

or § 727(a)(2). As such, the debt at issue will not be excepted from discharge, nor will the Debtor's discharge be denied.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334

and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A), (I), and (O).

BACKGROUND

The pertinent facts are drawn from the complaint, the exhibits attached thereto, the Court's docket, and the testimony and various exhibits received into evidence at a bench trial that was held on April 5, 2016. At that trial, Linda Geers (“Geers”), the president and general manager of the Plaintiff, and Sheila O'Leary (“O'Leary”), the collections department manager of Creditors Resource Service (“CRS”), testified for the Plaintiff.² The Debtor appeared pro se and, despite having failed to file a written answer to the complaint, testified in her own defense.³ As established by the applicable documents and the trial testimony, the facts that are relevant to the Plaintiff's claims of nondischargeability and denial of discharge can be summarized as follows.

On June 9, 2012, the Debtor, an employee of the Metropolitan Water Reclamation District, entered into a retail installment contract for the purchase of a 2012 Chevrolet Impala (the “Vehicle”) and granted a security interest in the Vehicle to the lender. (Compl. ¶ 6; Trial Tr. 13:15–16.) Thereafter, the Debtor began to experience significant financial trouble and, as a result, turned to the Plaintiff for help in early 2013. According to Geers' testimony, the Debtor's “very bad” credit history included eleven creditors that needed to be “addressed,” and she was paying a “terribly high” rate of interest on the Vehicle. (Trial Tr. 12:10–16.) To alleviate the Debtor's financial difficulties, the Plaintiff helped her consolidate her debts, acquired the retail installment contract from the original lender, and gave the Debtor a car loan, in an amount based on the value of the Vehicle, at a much lower interest rate. (Compl. ¶ 6 & Exs.; Trial Tr. 12:17–14:12.) Additionally, the Plaintiff provided the Debtor with an unsecured signature loan based on her length of employment, as well as a People Helping People loan. (Compl. Exs.; Trial Tr. 14:4–7.)

On January 25, 2014, the Vehicle was impounded by the City of Chicago (the “City”) because of unpaid parking tickets. (Trial Ex. A; Trial Tr. 16:3–4, 17:1–3, 26:10–13, 37:14–24, 52:1–53:17.) The Debtor received those tickets for parking violations in connection with both her own Vehicle and a car for which she had co-signed with a friend.⁴ (Trial Tr. 37:20–24, 52:1–53:17.) A notice of impoundment dated January 29, 2014 was sent to the Plaintiff by the City. (Trial Ex. A.) According to the notice, failure to claim the Vehicle within twenty-one days of the notice date could “result in the sale or other disposition of the [V]ehicle and its contents....” (Id. )

Upon learning of the impoundment, the Debtor contacted the Plaintiff for assistance in recovering the Vehicle. (Trial Tr. 16:5–11; see also Trial Ex. A.) Before the Plaintiff was able to offer help, however, the Debtor borrowed funds from family members to pay for the outstanding tickets and impound-related fees and retrieved the Vehicle from the City. (Trial Tr. 16:11–14, 37:25–38:1, 41:24–42:8, 43:7–25.)

On December 27, 2014, the Vehicle was impounded by the City a second time, again because the Debtor had accumulated parking tickets that had not been paid. (Trial Ex. B; Trial Tr. 16:17–22, 17:1–3, 42:9–11, 44:1–5, 53:18–54:6.) A notice of impoundment dated January 6, 2015 was sent to the Plaintiff by the City. (Trial Ex. B.) The notice included the same language as the first one, warning that the Vehicle could be sold or otherwise disposed of if not claimed within twenty-one days. (Id. ) Once again, the Debtor contacted the Plaintiff for help in getting the Vehicle back from the impound lot. (Trial Tr. 16:21–25, 38:1–3.) This time, the Debtor did not have the funds necessary to recover the Vehicle. (Trial Tr. 17:12–13.) Accordingly, the Plaintiff paid the City for the impound-related fees and outstanding parking violations and then added those amounts, which totaled $2,830, to the Debtor's loans with the Plaintiff. (Trial Exs. B & J; Trial Tr. 17:12–13.)

With her financial difficulties continuing (Trial Tr. 36:1–17), the Debtor filed a voluntary petition for relief under chapter 13 on February 17, 2015 (Bankr.No. 15–5304, Docket No. 1). On her schedule D, she listed the debt owed to the Plaintiff for the Vehicle in the amount of $15,800 and a value for the car of $12,950.⁵ (Trial Ex. F; see also Trial Tr. 49:20–50:10.) In her initial plan, filed on February 18, 2015, the Debtor proposed to pay the Plaintiff directly for the Vehicle. (Bankr.No. 15–5304, Docket No. 6; see also Trial Tr. 36:18–25.) Pursuant to schedule I, which was filed with the petition, the monthly payment for the Vehicle was listed as $1,133.17. (Bankr. No. 15–5304, Docket No. 1.) On February 26, 2015, shortly after filing for bankruptcy relief, the Debtor insured the Vehicle with full coverage through Access American Casualty Company.

(Trial Ex. H; see also Trial Tr. 55:15–57:2.)

About two months later, on April 15, 2015, while the Debtor's chapter 13 case was pending, the City impounded the Vehicle a third time, again because of unpaid parking tickets. (Trial Ex. C; Trial Tr. 17:19–22, 21:1–3, 28:21–23.) A notice of impoundment dated April 20, 2015 was sent to the Plaintiff by the City. (Trial Ex. C.) Once again, the notice warned that the Vehicle could be sold or otherwise disposed of if it was not claimed within twenty-one days of the date of the notice. (Id. )

At trial, the Debtor gave conflicting testimony regarding both the second and third impoundments. She initially testified that she did not get the Vehicle back after it was impounded the second time. (Trial Tr. 40:5–41:14, 42:15–18, 44:3–24, 48:9–11, 50:20–51:2.) She also testified that she did not know that the Vehicle had been impounded a third time. (Trial Tr. 40:15–24, 44:21–24, 54:7–11.) Upon further questioning, the Debtor admitted that the Vehicle had been returned to her after the second impoundment, that the Plaintiff had advanced funds for the payment of the parking tickets and the costs associated with the return after the second impoundment, and that she had had possession of the Vehicle until it was impounded for the third time on April 15, 2015. (Trial Tr. 71:17–72:14.)

The Debtor did not get the Vehicle back after the third impoundment. (Trial Tr. 72:23–73:13.) According to the testimony, the Vehicle was inoperable at the time, the Plaintiff did not want to advance the funds needed to retrieve the car again, and the Debtor did not have the money needed to either repair and recover the Vehicle or get it towed from the impound lot. (Trial Tr. 29:12–16, 47:4–8, 51:12–15, 73:18–74:5.) Because the Debtor was unable to retrieve the Vehicle, on May 4, 2015, she filed an amended chapter 13 plan which provided for surrender of the car to the Plaintiff in full satisfaction of its claim. (Bankr.No. 15–5304, Docket No. 17; Trial Tr. 29:17:21, 47:2–8, 51:12–15.)

On May 14, 2015, the Plaintiff filed an objection to confirmation of the Debtor's plan.⁶ (Bankr.No. 15–5304, Docket No. 22.) In that objection, the Plaintiff sought denial of confirmation, alleging that the plan was not filed in good faith. According to the Plaintiff, surrender of the Vehicle, as provided for in the amended plan, was not possible because the Debtor was not in possession of the car. Rather, the Plaintiff argued, the Debtor had to incur the costs necessary to recover the car from the City in order to surrender it to the Plaintiff.

On June 12, 2015, while the objection was pending, the title to the Vehicle was transferred from the Debtor's name to a tow company in Illinois and then subsequently two more times to other entities; the Vehicle is now titled to a corporation located in Wausau, Wisconsin. (Trial Ex. D; Trial Tr. 30:18–24, 32:3–21.) Neither the Debtor nor the Plaintiff was notified of these transfers when they occurred.⁷ (See Trial Tr. 30:14–17.)

Confirmation of the Debtor's plan was continued several times. On August 13, 2015, the Debtor filed a response to the Plaintiff's objection to confirmation. (Bankr.No. 13–5304, Docket No. 40; Trial Ex. E.) In that response, the Debtor argued that the amended plan was not filed in bad faith, that actual delivery of the Vehicle to the Plaintiff was not required for surrender, that the Plaintiff knew that the Debtor could not physically deliver the Vehicle, and that although the Plaintiff could have mitigated its damages by retrieving the car, it failed to do so.

Before the Court ruled on the Plaintiff's objection, the Debtor voluntarily converted her chapter 13 case to a case under chapter 7 on October 21, 2015. (Bankr.No. 15–5304, Docket...