Creditors filed and adversary proceeding against the Debtor under § 523(a)(2)(A) and § 727(a)(2). Creditors asserted that their debt should be excepted from discharge because the Debtor failed to disclose that he had violated his noncompete agreement when the parties were negotiating a separation agreement. The Creditors also asserted that the Debtor should be denied a discharge because he transferred his equity interest in a business within one year of filing for bankruptcy.Creditors' § 523(a)(2)(A) claim. Held: To prevail on a claim for nondisclosure, the plaintiff must establish that the debtor had a duty to disclose a fact, that the undisclosed fact was material and that the debtor knew the undisclosed fact was material. In addition, the plaintiff must establish that the debtor failed to disclose the fact with intent to deceive the creditor, that the creditor relied on the nonexistence on the fact and that the creditor's reliance was justified. Creditors failed to establish any of the elements under § 523(a)(2)(A) and their debt was therefore dischargeable. Creditors' § 727(a)(2) & (5) claims. Held: To prevail on a § 727(a)(2) claim the plaintiff must establish that a transfer was made with actual intent to hinder, delay or defraud creditors. To prevail on a § 727(a)(5) claim the plaintiff must establish that there was a loss or deficiency of debtor's assets. Absent any evidence that a transfer hindered or delayed a creditor, the transfer of an asset with little or no value did not give rise to a § 727(a)(2) or (5) claim. Debtor was granted a discharge.

In this chapter 7 case, the Creditor filed a motion for relief from stay on the Debtor's real property. The Debtor alleged that the Creditor did not have standing as a party in interest to request relief from stay because the Creditor did not provide evidence that the original promissory note was in the Creditor's possession. The Court relied on In re Thomas, No. 10-17039, 2012 WL 1574418, at *1 (10th Cir. B.A.P. May 7, 2012), which held that while the original note is not required to be placed into evidence, “the bankruptcy court must make a cognizable determination of standing in a contested matter . . . which requires some review of the standing documents, whether they be admitted into evidence or proffered to the court without objection.” In re Thomas, 2012 WL 1574418, at *5 n.32. In this case, the Creditor's attorney represented that the original note was on its way to his office, but could not provide evidence that the Creditor was otherwise in possession of the original note. Moreover, the Court determined that under 11 U.S.C. § 362(c)(1) the motion for relief from the automatic stay was not moot as to property of the estate when the Debtor received a discharge. The Court continued the Creditor's motion without date and ordered the stay remain in place pending further order of the Court.

The Court denied the fee application for the attorneys who represented the Debtor while it was in chapter 11 bankruptcy. The Court found that the attorneys had failed to disclose a significant amount of payments and who had paid them until the fee application hearing that occurred many months after the services were provided. Further, the Court found that the attorneys had received money directly from the principals of the owner of the Debtor. The Court concluded that without proper and complete disclosure, the application could not be approved under the mandates of § 328, § 329, and Fed. R. Bankr. P. 2016. As an additional and alternative basis to its denial of the fee application, the Court concluded that the attorneys were not disinterested due to their acceptance of payments directly from the principals of the owner of the Debtor who were also the principals of the largest unsecured creditors of the estate.

Pre-petition, Bank of Utah entered into a letter of credit transaction with the Debtor wherein the Bank issued a letter of credit in the amount of $362,000 secured by funds in the amount of $362,000 deposited with the Bank by the Debtor. In addition to being secured by the funds on deposit, the letter of credit was cross collateralized to other assets of the Debtor. Post-petition, and knowing that the Debtor was in bankruptcy, the Bank declined to renew the letter of credit and applied the proceeds from the certificate of deposit to payoff the indebtedness. The Trustee commenced an adversary proceeding to recover the entire $362,000 plus interest free and clear of any encumbrance in favor of Bank arguing that by avoiding the transfer under § 549, the Trustee could recover the transfer free and clear of the Bank's security interest and that the transfer was void as a violation of the automatic stay and that the Trustee was entitled to turnover of the $362,000 plus interest under § 542. In doing so, the Trustee did not allege that the post-petition actions of the Bank caused any damage to the Debtor. The Court held that a transfer to a fully secured creditor may not be avoided under § 549 without reviving the secured creditor's lien, that the remedies available to a non-individual debtor are subject to the limitations of the Court's § 105 powers, that § 362(a) does not permit the Court to strip a bank's lien, and that although an act committed in violation of the automatic stay is “void,” some acts cannot be undone. The law does not recognize a void act, and that judicial machinery is not available for use to one that acted in violation of the automatic stay.