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Although the court recognized these sanctions may be viewed as burdensome, it recognized that
they were necessary in order to “impress upon [the attorney] the seriousness of his misconduct.”

This decision marks a growing trend from bankruptcy courts in at least three
other states regarding the strict enforcement of Bankruptcy Rule 9011’s signature
and verification requirements. The holding in Reubling relied in part on a decision
from a Texas bankruptcy court, where the attorney was also sanctioned for filing
bankruptcy papers without a wet signature. See In re Stomberg, 487 B.R. 775
(Bankr. S.D. Tex. 2013). This decision and its potential consequences were
discussed in a previous edition of Sharp Thinking. See Sharp Thinking No. 86
(Mar. 2013).

As noted in that issue, the decision in Stomberg does not constitute binding
precedent. However, the continued reliance on that decision by other bankruptcy
courts, now including Illinois, should serve as a stern warning that signature and verification
requirements for bankruptcy filings should not be overlooked.

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No Rescission for Confirmed Bankruptcy Plan

A confirmed bankruptcy plan “operates as an absolute settlement” and “failure to pay unpaid
obligations created by the plan will not revive the old debts,” a panel of the Appellate Court’s Fifth
District held recently.

Acting in Holman v. Village of Alorton, 2016 IL App (5th) 150404, the court
said there was nothing in the Bankruptcy Code to suggest that the debtor’s failure
to achieve promises made in a confirmed plan reinstates an original obligation.
The panel also said there was no authority permitting state courts to “rescind” a
“contract” made in a bankruptcy reorganization plan. Rather, it said, the
bankruptcy plan “is solely under the jurisdiction of the federal courts.”
In Holmon, defendant village’s policeman shot a citizen, who recovered a judgment for $978,874.
Defendant then filed for protection under Chapter 9 of the Bankruptcy Code, and the injured citizen
agreed to a plan under which the village would pay him $600,000 over 25 years. Subsequently, an
amended plan was confirmed, awarding the majority of the citizen’s payments to one Goodlow, who
had recovered a $346,000 judgment against the citizen.

By February 2015, the village should have paid him $95,000 but had only paid some $20,000.
The citizen filed suit for breach of contract and rescission, but the appellate court said “enforcement
of the terms of the ‘contract’ and not rescission is the appropriate remedy.”

– John T. Hundley, John@sharp-hundley.com, 618-242-0200

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