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In re Jenkins

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

January 9, 2018

IN RE LINDSAY JENKINS, Debtor-Appellant.
v.
SELECT PORTFOLIO SERVICING, INC. AS AGENT FOR U.S. BANK, N.A., et al., Appellees. LINDSAY JENKINS, Appellant,

          MEMORANDUM OPINION AND ORDER

          MATTHEW F. KENNELLY, DISTRICT JUDGE.

         By October 2016, when she filed a bankruptcy petition under Chapter 11, Lindsay Jenkins had been in default on two mortgages for years. The Bankruptcy Code provides that, upon filing a petition, all proceedings to collect from the debtor are automatically stayed. 11 U.S.C. § 362(a). Two entities-Elizon Master Participation Trust I, U.S. Bank Trust National Association, as Owner-Trustee (Elizon), and Select Portfolio Servicing, Inc. as servicing agent for U.S. Bank NA, successor trustee to Bank of America, NA, successor to LaSalle Bank NA, as trustee, for the WaMu Mortgage Pass-Through Certificates, Series 2006-AR2 (SPS)-each of which serviced one of the mortgages, separately moved to lift the automatic stay so they could proceed with foreclosure. The bankruptcy court granted both motions. The U.S. Trustee-the Department of Justice administrator who oversees bankruptcy cases in the Northern District of Illinois-then moved to dismiss Jenkins's bankruptcy case. The bankruptcy court granted the motion. Jenkins has appealed these decisions and alleges she has experienced additional wrongs at the hands of the judge, court staff, and other parties.

         Background[1]

         Jenkins owns one property in Illinois, which is not at issue in this appeal, and two in New York. Both of the New York properties are at issue; one is a rental property that provides Jenkins with her sole source of income. Jenkins, with assistance from counsel, filed a petition for bankruptcy under Chapter 11 on October 27, 2016. The filing of a bankruptcy petition automatically stays any action to recover from the debtor. 11 U.S.C. § 362(a). At the time she filed the petition, Jenkins had been in default for 74 months and owed $472, 145.16 in outstanding loan payments on the first property. On the second property, Jenkins had been in default for 81 months and owed $213, 389. In her bankruptcy petition, Jenkins stated that she had monthly expenses of $5, 920 and income of $6, 440, for a net monthly income of $520.

         Elizon and SPS moved to modify the automatic stay. The bankruptcy court granted both motions. Jenkins filed a notice of appeal on December 28, 2016, which became Case No. 16 C 11685 in this court.

         The U.S. Trustee moved to dismiss Jenkins's bankruptcy petition on December 28, 2016, arguing that she had failed to provide the monthly updates required by the Bankruptcy Code and that there was no likely means by which Jenkins could rehabilitate. The bankruptcy court granted this motion on February 2, 2017. Jenkins filed a notice of appeal on February 10, 2017, which became Case No. 17 C 1120 in this court. In the interim, on January 13, 2017, Jenkins's counsel Ted Smith moved to withdraw as her attorney. The bankruptcy court granted Smith's motion on January 19, 2017.

         Discussion

         Jenkins has appealed two of the bankruptcy court's orders and has raised numerous other issues. The first two issues in this appeal are whether the bankruptcy court abused its discretion by granting the SPS and Elizon motions for relief from the automatic stay or dismissing Jenkins's bankruptcy petition. The final issue is whether any of Jenkins's other allegations against the judge, Trustee, and opposing party have merit.[2]

         In this Opinion, the Court cites to four parts of the record, all filed as part of Case No. 16 C 11685. The first is the set of exhibits associated with docket entry 9; the second is the "Appendix, " filed as docket entry 20; the third is the "Supplemental Appendix, " filed as docket entry 21; and the fourth is the set of materials filed as docket entry 24. The Court cites to the first source as "Ex. 9-xx, " with "xx" indicating the number of the specific exhibit; the second source as "App."; the third source as "Supp. App."; and the fourth source as "Ex. 24-xx."

         I. Orders granting SPS and Elizon's motions to modify the automatic stay

         The bankruptcy judge granted SPS and Elizon's motions to modify the automatic stay under Section 362(d)(2). Ex. 24-9 at 12-13 (Order Modifying Stay; Order of Correction Pursuant to Fed.R.Civ.P. 60). This Court reviews a bankruptcy court's determination of whether there is cause to modify the automatic stay for abuse of discretion. Matter of Williams, 144 F.3d 544, 546 (7th Cir. 1998).

         After a bankruptcy petition is filed, the debtor is entitled to an automatic stay of any proceedings in which creditors seek to recover from the debtor. 11 U.S.C. § 362(a). A creditor may obtain relief through modification of the stay if it can demonstrate "cause, " which includes "the lack of adequate protection" of the creditor's interest. Id. § 362(d)(1). There is no "exact science" to determining whether a creditor's interest is adequately protected, but factors include the level of unpaid debt, the debtor's ability to repay, and the hardships to each party. See, e.g., In re Spencer, 541 B.R. 208, 214 (W.D. Wis. 2015) (citation omitted) (holding that the interest of a mortgagee was inadequately protected, as the debtor had accrued over $30, 000 in unpaid tax and insurance payments, failed to pay the mortgage since 2008, and continued to burden the creditor with litigation costs).

         The bankruptcy court did not abuse its discretion by modifying the automatic stay for SPS after finding that Jenkins lacked adequate protection. SPS sought to proceed on foreclosure proceedings against Jenkins. Ex. 24-8 at 49-53 (Motion to Modify the Automatic Stay and Required Attachment). Jenkins had been in default for 81 months and owed in excess of $200, 000. Id. at 53. With a self-reported net monthly income of $520, it would have taken Jenkins over 30 years to catch up on the deficiency if every bit of that money went toward this particular loan.

         Although Elizon moved to modify the stay on a different basis, Ex. 24-6 at 74-76 (Motion for Relief from Automatic Stay), the Court also holds that the bankruptcy court did not abuse its discretion by modifying the stay for Elizon. Jenkins could not show that she would adequately protect Elizon's interest in the property, given the period it would require for her to cure the deficiency. "We may affirm the bankruptcy court's decision on an alternative ground, but that ground must have been adequately presented in the bankruptcy court." Capital Factors, Inc. v. Kmart Corp., 291 B.R. 818, 824 (N.D. Ill. 2003) (citing Anderson U.S.F. Logistics (IMC), Inc., 274 F.3d 470, 478 (7th Cir. 2001)). Jenkins had been in default for 74 months and owed approximately $470, 000. I ...


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