Commercial Banking, Collections, and Bankruptcy

Dist. Ct. did not err in finding that child support award for “above-median” debtor may generally be excluded in its entirety from disposable income calculation under section 1352(b)(2) of Bankruptcy Code so as to make such award unavailable to creditors in Chapter 13 bankruptcy proceeding. Ct. found that child support awards could be included in disposable income calculations only in rare case where such awards were so excessive so as to constitute abuse of bankruptcy system, and instant $400 per month child support award did not qualify as excessive award. In so holding, Ct. rejected Trustee’s arguments that: (1) categorical exclusion of child support award often results in double deduction from disposable income calculation because many expenses covered by child support are already factored into standardized living expense deductions permitted under section 1325; and (2) child support awards should only be excluded from disposable income calculation where debtor could show existence of additional specific documented expense that was reasonably necessary for support of minor children.

Bankruptcy Judge did not err in finding that debtor’s debt to creditor was dischargeable, even though: (1) debt was result of fraud committed by debtor’s agent in agent’s attempt to procure loan from creditor on behalf of debtor; and (2) certain debts obtained through false representations are barred from discharge under 11 USC section 523(a)(2)(A). While agent made false representations to creditor about existence of debtor’s $1 million line of credit that induced creditor to make $250,000 short-term loan to debtor, record showed that debtor was not complicit in said fraud. As such, court found that denial of discharge of debt in bankruptcy could only have occurred if creditor could have shown that debtor knew or should have known of fraud. Court further observed that creditor was in as good of position as debtor to have detected fraudulent nature of agent’s false representations about existence of line of credit.

Dist. Ct. did not err in finding in favor of defendant in bench trial on action by plaintiffs-shippers alleging that company hired by defendant improperly packed heavy molds purchased by defendant that caused floor of shipping container to break, which in turn caused derailment of train carrying said molds. While plaintiffs alleged that defendant breached clause in bill of lading requiring it to properly stow and secure said molds, record contained no direct evidence of how said molds were packed into container, and thus plaintiffs had failed to satisfy their burden of establishing any breach of contract. Moreover, Ct. rejected plaintiffs’ claim that defendant had burden to show that molds were properly packed, after Ct. observed that information as to how molds were packed was not peculiarly within defendant’s knowledge.