Bermea et al v. Pascual et al

Filing 22

OPINION and Order Signed by the Honorable Sara L. Ellis on 10/22/2018. Mailed notice (tt, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
IN RE: BARBARA M. BERMEA

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Debtor,
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______________________________________ )
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BARBARA M. BERMEA,
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Appellant,
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v.
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ATKINS REAL ESTATE, LLC, ET AL.,
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Appellee.
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No. 18 C 1207
Judge Sara L. Ellis

OPINION AND ORDER
This appeal arises out of a Chapter 13 bankruptcy petition Debtor-Appellant Barbara
Bermea filed and the subsequent order of the bankruptcy court to convert that Chapter 13
petition to a Chapter 7 Petition. Bermea appeals that order, arguing that the bankruptcy court
incorrectly determined that a judgment entered against her in the Circuit Court of Cook County
for approximately $3.4 million (the “Judgment”) placed her over the debt limit for eligibility for
Chapter 13 bankruptcy protection. Because the bankruptcy court correctly determined that the
Judgment was noncontingent at the time Bermea filed for Chapter 13 protection, the Court
affirms the Bankruptcy Court’s order.
BACKGROUND
In 2017, Bermea had fallen behind on the property tax payments on her home to the tune
of $34,631 and Appellee Atkin Real Estate, LLC (“Atkin”) purchased her tax debt. Attempting
to pay off her tax debt, Bermea sought a loan. In the process of seeking this loan she discovered
that in December 2014, the Circuit Court of Cook County entered a judgment against her and

two others for approximately $3.4 million, which included $3 million of punitive damages.
Presumably unable to obtain a loan to pay her tax debt, Bermea filed for Chapter 13 bankruptcy.
Under Chapter 13, she would be able to pay the tax debt over the course of five years and avoid
losing her home.
In her original Chapter 13 schedules, Bermea listed the $3.4 million judgment as a
secured judgment that she disputed. Atkin moved to dismiss the Chapter 13 action, arguing that
because Bermea’s debts included a $3.4 million secured judgment, she exceeded the debt limits
for eligibility for Chapter 13 protection. But, the day before presentment of Atkin’s motion,
Bermea amended her schedules to denote that the Judgment was not secured and contingent and,
therefore, not included in the debt limit calculation. Amado and Linda Pascual, the individuals
to whom Bermea owed the Judgment, then filed a motion to convert the Chapter 13 matter to one
under Chapter 7 of the bankruptcy code. On January 11, 2018, the bankruptcy court granted the
motion to covert. Bermea filed a motion to vacate the order converting the matter to a Chapter 7
case, which the bankruptcy court denied on February 1, 2018. Then, on February 8, 2018, the
judge in the Cook County case vacated the $3.4 million judgment. Bermea filed her notice of
appeal for the bankruptcy matter on February 15, 2018.
LEGAL STANDARD
Under 28 U.S.C. § 158(a)(1), this Court has jurisdiction to hear appeals from final
judgments, orders, and decrees of a bankruptcy court. The Court reviews a bankruptcy court’s
findings of fact for clear error and its legal conclusions de novo. Kovacs v. United States, 739
F.3d 1020, 1023 (7th Cir. 2014).

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ANALYSIS
On appeal, Bermea argues that the bankruptcy judge improperly converted her Chapter
13 bankruptcy filing to one under Chapter 7 because he incorrectly concluded that the Judgment
should count towards the debt cap eligibility under Chapter 13. Pursuant to 11 U.S.C. § 109(e),
eligibility to be a debtor under Chapter 13 is limited to:
Only an individual with regular income that owes, on the date of
the filing of the petition, noncontingent, liquidated, unsecured
debts of less than $394,725 and noncontingent, liquidated, secured
debts of less than $1,184,200, or an individual with regular income
and such individual’s spouse, except a stockbroker or a commodity
broker, that owe, on the date of the filing of the petition,
noncontingent, liquidated, unsecured debts that aggregate less than
$394,725 1 and noncontingent, liquidated, secured debts of less
than $1,184,200 may be a debtor under chapter 13 of this title.
11 U.S.C. § 109(e). Thus, to be eligible for Chapter 13 protection, Bermea’s noncontingent
unsecured debts must be less than $394,725 on the date of filing her Chapter 13 petition. See In
re Pantazelos, 540 B.R. 347, 350 (Bankr. N.D. Ill. 2015) (eligibility is based on debts as of the
petition date and not on events that may occur after the petition is filed). There is no dispute that
the Judgment is an unsecured debt. This appeal turns on the sole question of whether the debt
created by the Judgment was contingent on the date Bermea filed: June 20, 2017.
Generally, bankruptcy courts consider a debt contingent if it “is one conditioned upon
some future event that is uncertain.” Saint Catherine Hosp. of Ind., LLC v. Ind. Family & Soc.
Servs. Admin., 800 F.3d 312, 317 (7th Cir. 2015). And, typically, tort claims are noncontingent
because “all the events upon which the litigation is based have occurred.” In re Waller, No. 00 C
7312, 2001 U.S. Dist. LEXIS 2057, at *7 (N.D. Ill. Feb. 27, 2001). The bankruptcy court is not
concerned with “whether or not the finder of fact will ultimately determine that those events
The amounts in this section are adjusted every three years in the manner prescribed in 11 U.S.C.
§ 104(a).
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actually occurred and impose liability.” Matter of McGovern, 122 B.R. 712, 716 (Bankr. N.D.
Ind. 1989). The Seventh Circuit has firmly rejected the idea that a debt based on a legal claim
becomes noncontingent only upon a final judgment that makes the claim immediately due. In re
Knight, 55 F.3d 231, 236 (7th Cir. 1995). Contingency depends rather on when the obligation to
answer for a claim arises. Id. (a claim is noncontingent where “all of the allegations upon which
the fact of liability is based relate to events that have already occurred”). Therefore, once all the
conduct underlying the claim has occurred, the claim is no longer contingent. Here, at the time
Bermea filed her Chapter 13 petition, not only had all of the conduct underlying the Pascuals’
claim against her already occurred, the claim had been reduced to a judgment. Thus, the claim
was no longer contingent for Chapter 13 purposes.
However, Bermea argues that the Pascuals’ claim against her was contingent at the time
of filing because she disputes the claim and because at the time she filed the Chapter 13 petition,
the Judgment was not final. She argues that her dispute is different than “a garden-variety
dispute like happens in so many cases,” because she disputes the occurrence of the events giving
rise to the claim. Doc. 12 at 11. Specifically, Bermea says she was not an officer of the
company that defrauded the Pascuals and that she did not do anything that caused them damages.
And though at the time Bermea filed her Chapter 13 petition she was subject to the Judgment
arising from the Pasquals’ claim, she argues that the Judgment was not final and was still subject
to vacatur and was not yet appealable. Bermea provides no support for her argument that where
a party disputes a claim more than is typical (whatever that means), it is somehow rendered
contingent for purposes of Chapter 13 eligibility. As the Seventh Circuit noted in Knight,
“[b]ankruptcy proceedings are seldom free of disputes about the claims filed against the debtor.”
Knight, 55 F.3d at 234. As such, disputed claims are claims, and “a disputed claim is a debt to

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be included when calculating the § 109(e) requirements.” Id. Therefore, the fact that Bermea
disputes the Pascuals’ claim does not make it contingent.
Bermea’s second argument, that the Judgment was non-final and therefore contingent, is
equally unavailing. As noted above, for purposes of contingency, it is not relevant whether the
claim has been reduced to a final judgment. Id. at 236. The existence of a judgment of any kind
is beside the point in the contingency analysis. The touchstone of this analysis is whether the
party’s liability is contingent on the occurrence of some future event. Id. While Bermea tries
valiantly to convince the Court that such future events include the imposition of a final judgment,
this is not the case. Id. (rejecting the argument that “a debt becomes noncontingent only when a
triggering event (such as the entry of final judgment) occurs to make the claim immediately
due.”).
Bermea also argues that Illinois Supreme Court Rule 304(a) is unique and counsels
finding that the debt was contingent at the time of the filing. Rule 304(a) states that when a
judgment is entered as to fewer than all parties in a suit, that judgment is not enforceable or
appealable until judgment is entered as to all remaining parties or the trial court makes a finding
that there is no just reason for delaying enforcement or appeal. This rule is far from unique; it is
nearly identical to Federal Rule of Civil Procedure 54(b). Regardless, it makes no difference.
The finality of the judgment is not relevant to the contingency of the debt. Therefore, Bermea
does not prevail on this argument either.
Finally, the subsequent vacatur of the Judgment does not alter the analysis. Post-petition
events are generally not relevant to the Chapter 13 eligibility analysis. See In re Rios, 476 B.R.
685, 688 (Bankr. D. Mass. 2012) (“[E]ligibility for Chapter 13 is based upon debts as of the
petition date and not upon post-petition events such as allowed claims, filed claims, or treatment

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of claims in a confirmed Chapter 13 plan.” (citing In re De Jounghe, 334 B.R. 760, 768 (B.A.P.
1st Cir. 2005))). Bermea concedes this much in her Reply, but the Court notes this all the same
because the parties included quite a few pages discussing the fact that this Judgment was
vacated.
CONCLUSION
Therefore, for the foregoing reasons the Court affirms the bankruptcy court’s order. The
civil case is terminated.

Dated: October 22, 2018

______________________
SARA L. ELLIS
United States District Judge

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