Lorin Newton Ward

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WILMINGTON DIVISION
IN RE:
LORIN NEWTON WARD,
Debtor. Case No. 05-05126-8-JRL
Chapter 13
______________________________________________________________________________
ORDER
This case is before the court on the Chapter 13 trustee’s motion for confirmation, the debtor’s
objection to the claim of Discover Bank, the Chapter 7 trustee’s motion to allow the late filing of a proof
of claim by the estate of Jane P. Ward, the debtor’s objection to the claim of the estate of Jane P. Ward,
the Chapter 7 trustee’s motion for relief from the automatic stay, and the debtor’s motion to sell property.
On May 17, 2006, the court conducted a hearing on these matters in Wilmington, North Carolina.
The debtor and his wife, Jane P. Ward, owned property as tenants by the entirety located at 1798
E. Highway 11, Kelly, North Carolina, where they resided. In June 2005, the couple separated, and Ms.
Ward transferred her interest in the property to the debtor pursuant to a separation agreement. On July 5,
SO ORDERED.
SIGNED this 23 day of May, 2006.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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2005, the debtor filed the subject case under Chapter 13. Thereafter, on July 12, 2005, Ms. Ward filed
for relief under Chapter 7 (Case No. 05-05333-8-JRL).
In the year of 2000, Ms. Ward approached the debtor and revealed that she had opened credit
card accounts, either individually or jointly in the couple’s names, and that the couple was now in financial
straits. The debtor said that Ms. Ward would wait by the mailbox on days when credit card bills would
arrive, and that he had no knowledge of the credit card accounts until the revelation by his wife. The debtor
discovered that his wife had incurred approximately $91,000.00 in credit card debt. Ms. Ward was having
an affair with the debtor’s best friend, and she was using the credit cards to purchase items and
entertainment related to the affair.
On July 12, 2004, the debtor and his wife borrowed $71,461.94 from BB&T secured by the
marital residence. The debtor used this money to pay off the majority of the credit card debt. The debtor
told his wife to cancel all credit cards at that time. However, Ms. Ward continued to receive credit card
bills at an address in Myrtle Beach, South Carolina, and she incurred additional debt exceeding
$25,000.00.
The debtor said that, at the time of entering the separation agreement, he was represented by
counsel, and Ms. Ward was not. Pursuant to the separation agreement, Ms. Ward assumed liability of all
credit card accounts and cell phone accounts held individually or jointly with the debtor. The debtor
received Ms. Ward’s interest in the marital residence and assumed liability on the mortgage.
Both parties waived alimony, support, and any rights in the others’ retirement benefits, pensions, or 401k
accounts. The debtor testified that, as part of the agreement, he relinquished his right to sue either Ms.
Ward or her lover. However, the separation agreement only reflects a waiver of the right to sue Ms. Ward.
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The debtor contests the proof of claim in the amount of $13,174.57 filed by Discover Bank. He
asserts that he had no knowledge of the credit card, that he never signed the credit card application, and
that he never authorized anyone to sign the application on his behalf. The debtor stated that he became
delinquent on the mortgage payments to BB&T because the bank draft that he opened for mortgage
payments was stopped without his knowledge.
The debtor proposes to sell the house and lot for $165,000.00 to Susan Wilson. He proposes to
use the proceeds from the sale to pay off BB&T, to pay the allowed claims in his Chapter 13 case, and to
keep the remainder of the proceeds for himself. At the hearing, BB&T did not object to the sale of the
house, but it requested that its attorneys’ fees be paid from the proceeds of the sale.
The Chapter 7 trustee on behalf of the estate of Jane P. Ward seeks relief from the automatic stay
to institute a fraudulent conveyance action in order to recover Ms. Ward’s interest in the marital residence
that she transferred to the debtor pursuant to the separation agreement. In addition, the Chapter 7 trustee
also seeks to file a late proof of claim on behalf of the estate of Jane P. Ward.
Based on the evidence presented at the hearing, the court grants the Chapter 7 trustee’s motion
for relief from stay to pursue a fraudulent conveyance action. The court denies the Chapter 7 trustee’s
motion to file a late proof of claim on behalf of Ms. Ward, as the Chapter 7 trustee lacks standing; rather,
it is a matter of whether the Chapter 7 trustee can recapture the property interest through an adversary
proceeding.
The court grants the debtor’s motion to sell the real property located in Kelly, North Carolina. The
debt owed to BB&T, including attorneys’ fees, will be paid from the proceeds of the sale. The remainder
of the proceeds will be held by the Chapter 13 trustee as part of the Chapter 13 estate until the fraudulent
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conveyance action is resolved.
The court sustains the debtor’s objection to the claim of Discover Bank. While the debtor’s
evidence was somewhat murky regarding the illegitimacy of the claim, Discover Bank was noticed of the
hearing and failed to appear in support of its claim. The Chapter 13 trustee informed the court that
payments to Discover Bank had already been distributed. While it is not necessary for the Chapter 13
trustee to seek disgorgement of those funds, the court instructed him to stop payments to Discover Bank
immediately as of the date of the hearing.
Regarding the Chapter 13 trustee’s amended motion for confirmation, it was represented at the
hearing that the plan had already been confirmed. However, the docket reflects that the amended motion
for confirmation remains pending and that a confirmation order has not been entered. The court finds that
a Chapter 13 plan can be confirmed consistent with the terms of this order.
“END OF DOCUMENT”
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