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Citizens Bank v. McKendree

August 1, 2006

CITIZENS BANK A/K/A/ CITIZENS BANK AUTOMOBILE FINANCE, APPELLANT,
v.
RHONDA L. MCKENDREE AND JUSTIN ALLEN HUETT, APPELLEES.



The opinion of the court was delivered by: Foreman, District Judge

MEMORANDUM AND ORDER

Before the Court is an appeal by Citizens Bank from the judgment of the Bankruptcy Court for the Southern District of Illinois (Doc. 7). Appellees Rhonda L. Huett (nee McKendree) and Justin Allen Huett have filed a brief, (Doc. 10), as have the bankruptcy trustees (Doc. 16). Citizen Bank has filed reply briefs (Docs. 15,17). This appeal is discussed below.

I. Discussion

On February 8th and 9th of 2005, two unmarried individual debtors, Rhonda McKendree and Jason Huett, jointly bought a new 2004 Nissan Titan for $40,000 that was financed by Gateway Metro Credit Union. Ms. McKendree also bought a new 2005 Nissan Altima for $42,040 that was financed by Citizens Bank.

On April 29, 2005, McKendree and Huett filed bankruptcy under Chapter 7. On August 9, 2005, Citizens filed an adversary complaint seeking to determine that the debt owed by McKendree to Citizens is non-dischargeable. McKendree's deadline to respond was September 8, 2005. McKendree did not file a response to the complaint, and the Bankruptcy Court filed and issued a Notice of Default Entitlement.

On August 9, 2005, McKendree received a Chapter 7 discharge as to all of her creditors except Citizens Bank. At some point prior to September 19, 2005, McKendree and Huett became married. On September 19, 2005, the Bankruptcy Court consolidated McKendree and Huett's individual Chapter 7 cases into one case. Thereafter, the debtors moved to convert their consolidated Chapter 7 case to Chapter 13. On September 21, 2005, the Bankruptcy Court granted this request without a hearing.

On September 29, 2005, Citizens filed a motion for entry of default against McKendree in the Chapter 13 case. On September 30, 2005, default was entered. On September 30, 2005, the debtors filed a Plan under Chapter 13. On October 4, 2004, the Court set a hearing on Citizens' motion for default judgment, and dismissed Citizens' complaint in the Chapter 7 case as moot (because McKendree had converted from Chapter 7 to 13).

On October 31, 2005, the debtors amended their Chapter 13 Plan. On November 21, 2005, (the last day for creditors to object to confirmation of the Plan), the debtors filed a motion to reconvert their Chapter 13 case back to Chapter 7. Later that same day, Citizens filed an objection to confirmation of the amended Plan, and filed a motion to dismiss the Chapter 13 Plan.

On December 12, 2005, the Bankruptcy Court held a proceeding on the debtors' motion to reconvert the Chapter 13 case to Chapter 7, and on Citizens' motion to dismiss the Chapter 13 Plan. With regard to the motions, Judge Fines stated that:

I have read everything. I can do a little pretrial and study this.

I am not going to. (December 12, 2005 Tr. 4). The minutes of the hearing simply state that:

***

The Motion to Convert is Granted and this case is converted to a proceeding under Chapter 7. The ...


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