X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

MEMORANDUM DECISION AND ORDER AFFIRMING IN PART AND VACATING IN PART THE ORDER OF THE BANKRUPTCY COURT This is an appeal from an order of the United States Bankruptcy Court for the Southern District of New York (“Bankruptcy Court”) (Glenn, C.B.J.). Defendant-Appellee Michael D. Schimek (the “Debtor”) filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code on February 8, 2024. In re Michael D. Schimek, 24-10213-mg, Dkt. No. 1. On April 4, 2024, Plaintiff-Appellant Gloria Allred (the “Creditor”) — who has an unsecured breach of contract claim against Schimek for $25,000 that has been pending in the New York State Supreme Court for eight years, see 24-10213-mg, Dkt. No. 11; Br. For Appellee, Ex. A — filed the instant adversary proceeding, in which she sought an order denying Schimek’s discharge pursuant to 11 U.S.C. §§727(a)(2)(A), 727(a)(3), 727(a)(4)(A), and 727(a)(5). See Compl. (“Adversary Complaint”). Schimek subsequently moved to dismiss the Adversary Complaint for failure to state a claim, pursuant to Fed. R. Civ. P. 12(b)(6), made applicable in adversary proceedings by Fed. R. Bankr. P. 7009. See Allred v. Schimek, 24-01337-mg, Dkt. No. 4. The Bankruptcy Court granted Schimek’s motion in a comprehensive written Memorandum Opinion and Order dated June 14, 2024. Allred timely appealed from that order. This Court has jurisdiction to hear appeals from decisions of a Bankruptcy Court pursuant to 28 U.S.C. §158(a), which provides in relevant part that, “The district courts of the United States shall have jurisdiction to hear appeals…from final judgments, orders, and decrees” of the Bankruptcy Court. For the foregoing reasons, the Bankruptcy Court’s Order is AFFIRMED IN PART AND VACATED IN PART. The third cause of action in the Adversary Complaint is not dismissed, and the case is REMANDED to the Bankruptcy Court for further proceedings consistent with this opinion. I. Background The Debtor, Michael D. Schimek, is a non-practicing attorney and a stay-at-home dad, who takes care of his two minor children. In re Schimek, No. 24-10213 (MG), 2024 WL 3023457, at *1, 9 (Bankr. S.D.N.Y. June 14, 2024). He has no job and earns no income. Id. at *9. He is not married but lives with and is supported by the mother of said two children, Lisa Weksler — an arrangement that has subsisted for some time. Id. at *1. The family resides in a 32nd floor rental apartment at 220 Riverside Boulevard, id. at *1, a very upscale address. According to the Debtor’s Amended Schedules I and J, Weksler contributes $2,553 per month to the support of the Debtor. See In re Michael D. Schimek, 24-10213-mg, Dkt. No. 10. The Debtor disclosed that these expenses include: the Debtor’s phone; food and housekeeping supplies, clothing, laundry and drycleaning; personal care products and services; entertainment, clubs, recreation, newspapers, magazines, and books; and health insurance. No amount of Weksler’s support was allocated by the Debtor to the cost of keeping a roof over his head (i.e., a portion of the rent on the apartment in which he resides), or for utilities associated with the operation of that apartment. See id. And the $2,553 per month does not include any portion of the money expended for the support of the couple’s minor children, see id., an obligation for which both biological parents are legally responsible under the N.Y. Fam. Ct. Act §413(1)(a) (“Except as provided in subdivision two of this section [which is inapplicable to the Debtor's circumstances], the parents of a child under the age of twenty-one years are chargeable with the support of such child….”). The Debtor asserts that Weksler pays all his expenses, such as they are — and does so directly to the providers, not to the Debtor himself. See Allred v. Schimek, 24-01337-mg, Dkt. No. 4, 4. He contends that he has significant, unsecured, disputed debts (including the disputed $25,000 debt to Plaintiff-Appellant) that he is unable to pay, given his lack of income and minimal assets. Id. For this reason, Schimek argues that he is entitled to a discharge in bankruptcy. Schimek filed his petition for Chapter 7 relief on February 8, 2024. The duly appointed Chapter 7 Trustee filed a report with the Bankruptcy Court on March 14, 2024, indicating that this was a “no asset” case. In re Schimek, 2024 WL 3023457, at *1. As part of his petition, Schimek filed schedules disclosing his financial information (“Schedules”), which were subsequently corrected, first on March 13 and again on March 25. Id. at *2-3. Despite making various corrections, Schimek did not include in his Amended Statement of Current Monthly Income the $2,553 provided by Weksler to cover the Debtor’s expenses. See In re Schimek, No. 24-10213-mg, Dkt. No. 12.1 Plaintiff-Appellant Gloria Allred, as one of Schimek’s creditors, had a right to object to the granting of a discharge under certain conditions. See 11 U.S.C. §727(c)(1). She exercised this right by timely filing the Adversary Complaint seeking an order denying Schimek’s discharge, pursuant to 11 U.S.C. §§727(a)(2)(A), 727(a)(3), 727(a)(4)(A), and 727(a)(5). See Compl. Allred principally alleges that the Debtor’s disclosures in his petition are “facially inconsistent.” Id. 41. She further alleges that the “means test” does not accurately set forth the number of persons residing in the household and fails accurately to disclose Debtor’s household income, and so is false, regardless of how the Debtor’s “household” is defined. See id.

 
Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.

More From ALM

With this subscription you will receive unlimited access to high quality, online, on-demand premium content from well-respected faculty in the legal industry. This is perfect for attorneys licensed in multiple jurisdictions or for attorneys that have fulfilled their CLE requirement but need to access resourceful information for their practice areas.
View Now
Our Team Account subscription service is for legal teams of four or more attorneys. Each attorney is granted unlimited access to high quality, on-demand premium content from well-respected faculty in the legal industry along with administrative access to easily manage CLE for the entire team.
View Now
Gain access to some of the most knowledgeable and experienced attorneys with our 2 bundle options! Our Compliance bundles are curated by CLE Counselors and include current legal topics and challenges within the industry. Our second option allows you to build your bundle and strategically select the content that pertains to your needs. Both options are priced the same.
View Now
November 18, 2024 - November 19, 2024
New York, NY

Join General Counsel and Senior Legal Leaders at the Premier Forum Designed For and by General Counsel from Fortune 1000 Companies


Learn More
November 27, 2024
London

Celebrating achievement, excellence, and innovation in the legal profession in the UK.


Learn More
December 02, 2024 - December 03, 2024
Scottsdale, AZ

Join the industry's top owners, investors, developers, brokers and financiers for the real estate healthcare event of the year!


Learn More

Prominent law firm seeks 2 associates to join our defense teams in our downtown New York City and Melville, NY offices.The Litigation Associ...


Apply Now ›

Description: Fox Rothschild has an opening for a Litigation Counsel in our Seattle office. Experience with insurance bad faith and coverage ...


Apply Now ›

Robert C. Gottlieb & Associates PLLC is a 40-year-old litigation boutique looking to hire a civil attorney who has concentrated in civil...


Apply Now ›