David James Truscott

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
In re:
David James Truscott,
Debtor/Debtor-In-Possession.
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Case No. 25-30378
Chapter 11
Judge Crist
MEMORANDUM OPINION AND ORDER DENYING, WITHOUT PREJUDICE,
DEBTOR-IN-POSSESSION’S OBJECTION TO PROOF OF CLAIM 4-1 FILED BY
CREDITOR JONATHAN D. KRACHENFELS (DOC. 152)
I. 	Introduction
This matter is before the Court on the Objection of Debtor to Proof of Claim Filed by
Creditor Jonathan D. Krachenfels (Doc. 152) (the “Claim Objection”) filed by Debtor-In-
Possession David James Truscott (“Mr. Truscott” and “Debtor”) on April 20, 2026. Creditor
Jonathan D. Krachenfels (“Mr. Krachenfels” and “Creditor”), by and through his counsel, timely
filed a proof of claim on May 8, 2025, as permitted by Federal Rules of Bankruptcy Procedure
(“Bankruptcy Rule”) 3002(a) and 3003(c)(3) and this Court’s prior Order Establishing Bar Date
to File Proof of Claim or Interest (Doc. 1) (Doc. 30) (the “Bar Date Order”),1 for the total amount
of $3,111,175.98 (the “Claim”) It was docketed as Claim No. 4-1 on the Clerk’s Claims Register.
1 The Bar Date Order established June 23, 2025, as “the last day for all creditors or parties-in-interest in this case to
file proofs of claim or interest[.]”
This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Dated: July 3, 2026
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Mr. Krachenfels classified the Claim as a non-priority unsecured claim based on “[s]tate court
judgments [of] Montgomery Co. Common Pleas Court.” Claim at 2, Part 2, item 8.
Mr. Krachenfels, by and through counsel, filed his Response in Opposition of Creditor
Jonathan D. Krachenfels to Debtor’s Objection to Claim No. 4 (Doc. 152) (Doc. 166) (the
“Response”) on May 20, 2026. And the Debtor filed his Reply of Debtor/Debtor-In-Possession to
Creditor Jonathan D. Krachenfels’ Response to Debtor’s Objection to Proof of Claim Filed by
Creditor Jonathan D. Krachenfels (Doc. 166) (Doc. 172) (the “Reply”) on May 27, 2026.
In the Claim Objection, Mr. Truscott seeks to have “the claim held in abeyance[.]” Claim
Obj. at 3, 5. Although the Claim has been reduced to a final appealable judgment, Mr. Truscott
scheduled the Claim as contingent, unliquidated, and disputed on his Schedule E/F (Doc. 35 at 19)
and Amended Schedule E/F (Doc. 129 at 6). The Debtor asserts that the bases for scheduling the
Claim in this manner are two-fold: (1) a pending appeal concerning the Claim before the Second
District (Ohio) Court of Appeals, Case No. CA 30349 (the “Appeal”), and (2) that the Claim “does
not account for funds that were attached post judgment nor does it account for a reduction in value
based on the value of the four parcels of real estate that were ordered to be transferred pursuant to
the Judgment.” (Claim Obj. at 5, ¶¶ 10-13.) In response to the Claim Objection, Mr. Krachenfels
makes the following points: (1) the pending Appeal does not make a judgment “contingent” or
“unliquidated”; (2) the Claim Objection does not assert a valid basis under 11 U.S.C. § 502(b); (3)
the Debtor is improperly launching a collateral attack on the state court judgment which is entitled
to full faith and credit; and (4) the state court judgment already accounts for any setoff that Debtor
is entitled to take.
II. 	Jurisdiction
This Court has jurisdiction pursuant to 28 U.S.C. § 1334(b) and Amended General Order
05-02 (Amended Standing Order of Reference) of the United States District Court for the Southern
District of Ohio entered pursuant to 28 U.S.C. § 157(a). This is a core proceeding pursuant to 28
U.S.C. § 157(b)(2)(B).
III. 	State Court Judgment
A review of the state court judgment helps place the current Claim Objection in context.
There are two relevant entries by the Court of Common Pleas, Montgomery County, Ohio (the
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“State Court”) in Case No. 2022 CV 01408, which were attached to the Claim, as attached to the
Claim Objection. First, in a Decision and Entry Sustaining Plaintiff’s Motion for Default Judgment
(the “Default Judgment”) entered on October 20, 2023, the State Court granted default judgment
to Mr. Krachenfels as a sanction for Mr. Truscott failing to comply with discovery. See Ex. A to
Claim 4-1 at 6 (concluding that “Defendants’ conduct in the instant case evince a complete and
total disregard for the Plaintiff and his counsel, as well as the Court’s orders” and “[t]he record
establishes that Defendants have defied Plaintiff’s legitimate discovery requests and flouted the
orders of this Court at nearly every juncture in this case”). Said Default Judgment indicates that
Mr. Truscott, along with his businesses, specifically David James Custom Homes, LLC, Finishing
Touches Flooring Specialists, LLC, and Daco Custom Flooring2 were the Defendants, such that it
appears Mr. Truscott was the sole individual behind all the related business entity Defendants.
Second, after granting default judgment, “specifically with respect to Plaintiff’s claims for
conversion, breach of fiduciary duty, and fraud[,]” the State Court held a damages hearing on June
18, 2024, and July 15, 2024, during which both parties testified, and the Court entered its ruling
on December 27, 2024. See Ex. B to Claim (Decision and Entry Awarding Plaintiff Damages,
Attorney Fees, and Costs, Case No. 2022 CV 01408 (the “State Court Judgment”). The State Court
determined that Mr. Krachenfels’ actual damages, with interest, were in the amount of
$2,692,775.79. Id. at 5, 9. The State Court also awarded punitive damages in the amount of
$300,000.00, plus attorney fees and expenses of $139,865.95, minus a rent credit of $21,465.56
for “250 Janet” in favor of Defendants, which were “attributable to rent received for a residence
owned by the parties located at 250 Janet and a check for a partnership account with FM Bank.”
Id. at 8-9. Altogether, the “Aggregate Damages Total” was $3,111,175.98 and “Defendant” was
thereby ordered to pay that amount. Id. at 9. The State Court also ordered “the immediate transfer
of the requested four partnership properties (currently in its possession) to Plaintiff and the release
of the funds currently held by defendants through counsel related to the sale of a property.” Id.
And the Court ordered the parties “to wind up and dissolve the partnership and related LLCs.” Id.
Finally, the Court included language to make it clear that this was a final appealable judgment,
stating “THIS IS A FINAL APPEALABLE ORDER, AND THERE IS NOT JUST CAUSE
2 Debtor’s currently proposed Amended Plan of Reorganization of Debtor David Truscott Dated May 21, 2026 (the
“First Amended Plan”) (Doc. 169) states that “DACO Custom Flooring is a registered trade name for Finishing
Touches Flooring Specialists, LLC.” First Am. Plan at 11, Art. III, § H.1, n.3.
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FOR DELAY FOR PURPOSES OF CIV. R. 54. PURSUANT TO APP. R. 4, THE PARTIES
SHALL FILE A NOTICE OF APPEAL WITHIN THIRTY (30) DAYS.” Id. (emphasis in
original).
IV. 	Analysis
A. 	Statutory Bases and Burden of Proof for Claim Objections
The Debtor’s Claim Objection was allegedly filed pursuant to 11 U.S.C. § 502(b),3
although Debtor does not specify under which subparagraph (there being (1) through (9)) it is
lodging the Claim Objection. A proof of claim filed pursuant to § 501(a), “is deemed allowed,
unless a party in interest . . . objects.” 11 U.S.C. § 502(a) (emphasis added). Moreover, with
exceptions not applicable in this circumstance, this Court “shall allow” the Claim in the amount
filed “except to the extent that” there is a basis to disallow the Claim. 11 U.S.C. § 502(b). The nine
bases to disallow a proof of claim are found in § 502(b). See In re Jenkins, 417 B.R. 462, 466
(Bankr. N.D. Ohio 2009) (discussing that “[t]he nine categories of prohibited claims in § 502(b)
are exclusive, providing the sole grounds upon which a claim may be disallowed.” (citing In re
Woods, 406 B.R. 293, 297 (Bankr. N.D. Ohio 2009))).
Bankruptcy Rule 3001(f) provides that “[a] proof of claim signed and filed in accordance
with these rules is prima facie evidence of the claim’s validity and amount.” Mr. Krachenfels,
through counsel, filed a timely signed proof of claim [4-1] prior to the bar date of June 23, 2025,
which was established by this Court (Doc. 30). Therefore, although Mr. Krachenfels bears the
ultimate burden as the creditor, the initial burden of production to challenge Mr. Truscott’s proof
of claim falls upon the Debtor. In re EH Liquidating, Inc., No. 22-90006-swd, 2023 Bankr. LEXIS
747, at *8-9 (Bankr. W.D. Mich. Mar. 24, 2023) (citing In re Plastech Engineered Prods., 399
B.R. 1, 10 (Bankr. E.D. Mich. 2008); In re All-Amer. Auxiliary, Ass’n, 95 B.R. 540, 545 (Bankr.
S.D. Ohio 1989 (Cole, J.) (similar). Then, the claimant generally bears the ultimate burden of
proof, by a preponderance of the evidence, to establish that they have a valid claim. In re Plastech
Engineered Prods., 399 B.R. at 10. A caveat is that “the burden of proof is an essential element of
the claim itself[,]” and the claimant receives the benefit of the burden allocated for the underlying
law. Raleigh v. Ill. Dep’t of Revenue, 530 U.S. 15, 21 (2000). Stated another way, the burden of
3 Hereinafter, unless otherwise specified, all statutory sections referred to are sections of title 11 of the United States
Code (the “Bankruptcy Code”).
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proof that the claimant must satisfy to establish a particular claim against the bankrupt estate is
determined by non-bankruptcy law. In re Plastech, 399 B.R. at 10 (citing 4 Collier on
Bankruptcy, ¶ 502.02[3][f] (15th ed. rev. 2008)). Thus, if an “objection to a claim is based on an
affirmative defense for which the debtor would have the burden of proof outside of bankruptcy,
the debtor must carry that same burden in prosecuting the objection.” Bavelis v. Doukas (In re
Bavelis), 571 B.R. 328, 379-80 (Bankr. S.D. Ohio 2013) (Hoffman, J.).
B. 	The Claim is Neither Contingent Nor Unliquidated.
The jumping off point, or departure from established law, for Debtor’s Objection to Claim
is that “[u]ntil such time as the Appeal is decided” the Claim is “contingent and disputed and a
dollar amount cannot be determined.” Claim Obj. at 5, ¶ 12. But a claim that has been reduced to
a final judgment by a court, which requires the defendant to pay a specific dollar amount, as is the
case here, is neither contingent nor unliquidated regardless of whether it is on appeal. Although
the term “contingent” is not defined in the Bankruptcy Code, “courts have concluded that
contingent claims are those in which a debtor will be required to pay only upon the occurrence of
a future event triggering the debtor’s liability.” In re Huffy Corp., 424 B.R. 295, 301 (Bankr. S.D.
Ohio 2010) (citing In re Parks, 281 B.R. 899, 901-02 (Bankr. E.D. Mich. 2002); In re Highland
Group, Inc.,136 B.R. 475, 481 (Bankr. N.D. Ohio 1992)).
Here, the State Court Judgment, which was entered on December 27, 2024 and which
Debtor appealed on January 5, 2025, two months before filing this chapter 11 bankruptcy, clearly
ordered Debtor to pay a sum certain amount based on events that had already occurred. Moreover,
the State Court Judgment was not stayed pending the Appeal. Therefore, there is no basis to
conclude that Debtor’s liability to Mr. Krachenfels is contingent. And obviously a sum certain
final judgment is not unliquidated.
Naturally, the Debtor disagrees with the State Court’s Judgment and he has spent a fair
amount of time and effort in conjunction with filing this bankruptcy case to pursue an appeal that
has not yet been decided. But unless and until the State Court Judgment is reversed, vacated, or
reduced, those collectively remain a final judgment, and one that would be enforceable absent the
automatic stay. Further, this Court cannot function as a de facto appellate court over the final State
Court Judgment as recently confirmed by the Supreme Court of the United States. T.M. v. Univ. of
Md. Med. Sys. Corp., 608 U.S. 	, __ S. Ct. __, 2026 WL 1751823, at *9 (June 18, 2026)
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(“Federalism principles are thus best served by continuing to apply Rooker-Feldman to federal
cases in which plaintiffs seek review of state-court judgments, regardless of whether those
judgments are final trial-court judgments or those of a State’s highest court.”) Moreover, as
discussed above, the Claim is neither contingent nor unliquidated, such that estimation under the
plain language of § 502(c) is not applicable.
A pending appeal of a final judgment, by itself, is not recognized as a basis to disallow a
claim under § 502(b). “[E]ven where a party in interest objects, the court ‘shall allow’ the claim
‘except to the extent that’ the claim implicates any of the nine exceptions enumerated in § 502(b).”
Travelers Cas. & Sur. Co. of Am. v. PG&E, 549 U.S. 443, 449 (2007). In other words, a “claim
must be allowed under § 502(b) unless it is unenforceable within the meaning of § 502(b)(1). Id.
at 450. And as it concerns § 502(b)(1), “[t]his provision is most naturally understood to provide
that, with limited exceptions, any defense to a claim that is available outside of the bankruptcy
context is also available in bankruptcy.” Id. (citing 4 Collier on Bankruptcy ¶ 502.03[2][b], at 502-
22 (rev. 15th ed. 2006) (“explaining that § 502(b)(1) is generally understood to ‘make available to
the trustee any defense’ available to the debtor ‘under applicable nonbankruptcy law’--i.e., any
defense that the debtor ‘could have interposed, absent bankruptcy, in a suit on the [same
substantive] claim by the creditor’ ”)). In fact, “the ‘basic federal rule’ in bankruptcy is that state
law governs the substance of claims, Congress having ‘generally left the determination of property
rights in the assets of a bankrupt’s estate to state law.’ ” Travelers, 549 U.S. at 450-51 (quoting
Raleigh v. Illinois Dep’t of Revenue, 530 U.S. 15, 20 (2000) (quoting Butner v. United States, 440
U.S. 48, 54, 57 (1979); citation omitted)). In short, whether a claim is valid in bankruptcy “is a
question which, in the absence of overruling federal law, is to be determined by reference to state
law[.]” Travelers, 549 U.S. at 451 (quoting Vanston Bondholders Protective Comm. v. Green, 329
U.S. 156, 161 (1946)).
Under state law, and as adjudicated by final judgment of the State Court, at the time Debtor
filed his bankruptcy case Mr. Krachenfels was determined to have a liquidated, non-contingent
claim against the Debtor for $3,111,175.98, which Debtor had been ordered to pay. See Damages J.
Debtor does not contend that there is presently a basis to object to the Claim under § 502(b)(1),
apart from some potential setoffs for which Debtor has not provided any detail and therefore has
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not carried his initial burden,4 unless and until the Appeal is decided, in whole or in part, in
Debtor’s favor. And, in his Reply, Debtor confirms that he “is not asking this Court to overturn
the Judgment.” Reply at 2, ¶ 3. Rather, Debtor is asking the Court to hold the Claim, not just the
Claim Objection,5 “in abeyance.” Claim Obj. at 5, ¶ 8. But Debtor does not cite any authority for
this Court to hold Mr. Krachenfels’ Claim, which had been reduced to judgment under state law
prior to this bankruptcy, in suspension, apart from § 105(a). And Debtor does not explain whether
this would mean that the Claim would be neither allowed nor disallowed while the plan
confirmation process continues.6 If that is the desired result, it contradicts § 1126(a) and
Bankruptcy Rule 3018(a)(4), which are structured in a way so as not to disenfranchise creditors
whose claims are either not yet allowed or have been objected to on the eve of plan voting and
confirmation. Therefore, because Debtor has not come forward with any present basis to contradict
the valid State Court Judgment, the Claim must remain allowed at this time during the plan voting
and confirmation process, and it will remain allowed unless and until Debtor comes forward with
a valid basis to disallow the Claim (in whole or in part), a plan is confirmed that provides otherwise,
or an objection to claim in which Debtor carries his initial burden of production is set forth under
§ 502(b)(1).
C. 	Debtor Has Not Stated a Compelling Basis to Hold the Claim Objection “In
Abeyance” at this Time.
Beyond a bare citation to § 105(a) of the Bankruptcy Code in the Objection, the Debtor
does not explain the basis for the Court to hold a claim in abeyance due to a pending state court
4 Debtor states, in his Claim Objection, that “the Claim does not account for funds that were attached post judgment
nor does it account for a reduction based on the value of the four parcels of real estate that were ordered to be
transferred pursuant to the Judgment.” Claim Obj. at 5, ¶ 13. But Debtor does not provide any details to flesh out or
corroborate these assertions.
5 There is some caselaw that supports the concept of holding a claim objection in abeyance until after the final
adjudication of a preference claim under § 547(b); however, that is in the context of a claim objection asserted under
§ 502(d). See In re S. Air Transp., Inc., 294 B.R. 293, 297 (Bankr. S.D. Ohio 2003) (concluding that “the preference
matter must be adjudicated prior to the Court determining if the claim can be allowed or disallowed.”). This is a far
different situation than an appeal of a final state court judgment.
6 The timing of the Claim Objection is also an issue given that § 502(a) states that a claim “is deemed allowed, unless
a party in interest . . . objects.” 11 U.S.C. § 502(a). And only a creditor holding an “allowed” claim may vote to accept
or reject the First Amended Plan. See 11 U.S.C. § 1126(a) (“The holder of a claim . . . allowed under section 502 of
this title may accept or reject a plan.” (emphasis added)); Fed. R. Bankr. P. 3018(a)(4) (concerning temporary
allowance of a claim, “after notice and a hearing” if “an objection to a claim . . . has been filed”).
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appeal. Nor does the Debtor provide any caselaw in support of this proposition. In the Reply Debtor
quotes § 105(a),7 but again does not provide anything more. As noted, a proof of claim may be
disallowed for any of the reasons enumerated in § 502(b), but Debtor does not say which, if any,
of the subsections of § 502(b) he is relying upon.8 And it appears that none of them apply in the
present situation, at least unless and until any ruling in the Appeal would change the State Court
Judgment. See 11 U.S.C. § 502(b)(1) (“the court . . . shall allow such claim in such amount, except
to the extent that . . . such claim is unenforceable against the debtor and property of the debtor,
under . . . applicable law . . . other than because such claim is contingent or unmatured.”)9 The
Claim has already been reduced to a final judgment and one of the many possible outcomes of the
Appeal is that nothing changes.
Regardless of the pending appeal, Mr. Krachenfels presently holds a final judgment
enforceable under Ohio law. Debtor does not contend that the State Court Judgment is
interlocutory or otherwise non-final. Instead, the State Court Judgment specifically states that it
“is a final appealable order, and there is not just cause for delay for purposes of Civ. R. 54.” State
Court J. at 9. Rather, Debtor specifically hired counsel to pursue an appeal of the State Court
Judgment10 and he asserts in the Claim Objection, as is known through other proceedings in this
case, that he filed a “Notice of Appeal on January 5, 2025 in the Court of Appeals Second Appellate
District, Montgomery County at Case No. CA 30349 (the ‘Appeal’).” Claim Obj. at 5, ¶ 10. Ohio
appellate courts generally do not review interlocutory orders from Ohio trial courts. Miklovic v.
7 Section 105(a) states that:
The court may issue any order, process, or judgment that is necessary or appropriate to carry out the
provisions of this title. No provision of this title providing for the raising of an issue by a party in
interest shall be construed to preclude the court from, sua sponte, taking any action or making any
determination necessary or appropriate to enforce or implement court orders or rules, or to prevent
an abuse of process.
11 U.S.C. § 105(a)
8 The Claim Objection contains two references to § 502(b), without mention of any of the nine (9) subparagraphs.
9 Even if § 502(b)(1) applied, Mr. Krachenfels’ claim is not contingent simply because it is on appeal. In re Redburn,
193 B.R. 249, 259 (Bankr. W.D. Mich. 1996).
10 See Interim Order Approving Application to Employ Special Counsel for Debtor/Debtor-In-Possession Effective as
of the Petition Date, Setting Response Time, and Setting Final Hearing (Doc. 20), entered March 14, 2025; Order
Approving Am. Application to Employ Special Counsel for Debtor/Debtor-In-Possession Effective as of the Petition
Date (Doc. 95), entered September 26, 2025.
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Shira, 2005-Ohio-3252 (5th Dist.) (citing R.C. § 2505.02 and Article IV of the Ohio Constitution).
And there is no indication that the judgment was stayed pending appeal. Therefore, but for the
automatic stay imposed by Debtor filing this bankruptcy case, the State Court Judgment would be
fully enforceable.11 See, e.g., First Third Mortg. Co. v. Wizzard, 2014-Ohio-73 (12th Dist.) (absent
a bond, the trial court retains jurisdiction to enforce a final judgment).
As for Mr. Krachenfels’ claim being scheduled as disputed, even assuming it is disputed
by virtue of the Appeal, that only means that Mr. Krachenfels needed to file a proof of claim to
participate in the bankruptcy estate; however, as explained, Mr. Krachenfels has done so. 11 U.S.C.
§ 1111(a); Fed. R. Bankr. P. 3003(c)(2). Therefore, the label “disputed” by the Debtor has no effect
on the analysis of the pending claim objection.
The Debtor also asserts that “the Claim does not account for funds that were attached post
judgment, nor does it account for a reduction of the value of the four parcels that were ordered to
be transferred pursuant to the Judgment.” Claim Obj. at 5, ¶ 13. But the Debtor does not provide
any specifics or amounts for the supposedly unaccounted funds. See Reply at 1, ¶ 1 (“As stated in
the Objection, Debtor asserts that the Claim does not properly take into account certain reductions
which should be applied to reduce the Claim amount.”). One would expect that within the section
of the Reply titled “Offsets” there would be more detail, but there is not. See id. at 3, ¶ 6. And as
Mr. Krachenfels noted, the State Court Judgment already accounts for a setoff of $21,465.56 for
“rent credit.” State Court J. at 9. Without further explanation from the Debtor of the allegedly
unaccounted for setoff, the Court does not know if the Debtor is referring to a different setoff.
Moreover, the currently proposed First Amended Plan provides for differing treatments of the
Claim depending on the outcome of the Appeal, including whether there is any change to the
requirement that Debtor transfer “[t]hree (3) additional parcels of real estate” to Mr. Krachenfels.
First Am. Plan at 11-12, Art. III, § H & n.4. Whether that is sufficient presumably will be
determined as part of the process of attempting to confirm the First Amended Plan.
11 The Debtor’s Proposed Amended Plan of Reorganization of Debtor David Truscott Dated May 21, 2026 (the “First
Amended Plan”) (Doc. 169) addresses the Krachenfels claim with two fundamental proposals. First, it proposes to
avoid judgment liens as preferences in a yet-to-be-filed adversary proceeding. First. Am. Plan at 9-10, Art. III, § G.
Mr. Krachenfels filed an unsecured proof of claim, perhaps conceding this point, although that remains to be seen.
Second, if successful on avoiding those judgment liens, the Debtor then proposes to pay the non-priority unsecured
claim of Mr. Krachenfels, such as it may exist after the Second District Court of Appeals renders its decision, subject
to certain asserted setoffs. First Am. Plan. at 11-12, Art. III, § H. Interestingly, Debtor’s First Amended Plan would
classify Mr. Krachenfels’ Claim in Class UN-K as an “Allowed” unsecured claim. Id. at 11, Art. III, § H.1.
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As noted above, this Court cannot sit in appellate review of the State Court Judgment or
otherwise entertain a collateral attack on the sum certain amount, barring any subsequent events
that have changed the landscape. See T.M., 608 U.S. __, 2026 WL 1751823, at *7-11. Moreover,
the First Amended Plan, as presently proposed, provides for any potential impact of the Appeal
upon the validity or amount of the State Court Judgment, and the Debtor can renew his claim
objection within any deadlines set forth in the First Amended Plan or any subsequently amended
plan that might be confirmed. The Claim Objection, however, is based on speculative future events
(the outcome of the pending Appeal) without a present basis under § 502(b), before we know
whether there will be any change to the State Court Judgment. Therefore, asking the Court to allow
the Claim Objection to remain pending but held in abeyance would only appear to serve the
purpose, at this time, of holding the Claim in limbo and potentially impact Mr. Krachenfels’ ability
to vote on the Debtor’s chapter 11 plan. Accordingly, the Court will not hold the Claim in limbo
at this time given the potential impact this could potentially have on voting and confirmation.
Moreover, this chapter 11 case is in many ways a two-party dispute between the Debtor and Mr.
Krachenfels as evidenced by the fact that Mr. Krachenfels’ Claim in the amount of $3,111,175.98
dwarfs the other allowed unsecured claims filed in this case, which are “estimated by the Debtor
to be $17,661.03[.]” Am. Disclosure Statement with Respect to Plan of Reorganization of David
Truscott (Doc. 168) at 9-10.
The Debtor does not ask the Court to grant any relief now; rather, he argues the Court
should use § 105(a) to hold the Claim in abeyance. But because this Claim Objection is not asserted
under § 502(d) and there is no pending adversary proceeding for relief under chapter 5 of the
Bankruptcy Code of a type that would trigger § 502(d), and because, under the circumstances, it
would be inequitable to hold the Claim in limbo while the plan confirmation process proceeds, the
Court declines to go this route. Within his Reply, Debtor argues as justification for holding the
Claim in abeyance that acknowledging his Claim as “prima facie valid” would “render[] any
decision by the Court of Appeals moot[.]” Reply (Doc. 172) at 3, § IV.7. It will not. And to the
contrary, holding the Claim in abeyance would potentially amount to a stay that goes beyond the
bounds of the automatic stay to not only halt collection outside of this bankruptcy, but to also halt
Mr. Krachenfels’ ability to assert and vote his Claim in this bankruptcy. The Court does not believe
such disenfranchisement is appropriate or supported under these circumstances.
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The Claim is presently prima facie valid and the Debtor has provided nothing to meet its
initial burden to challenge that prima facie validity, apart from observing that the State Court
Judgment is presently on appeal. The Debtor can, if needed, file a second claim objection after the
appeal is adjudicated or based of facts to support its burden of production to show that subsequent
events occurred that have changed the amount owed under the State Court Judgment, so long as it
does so prior to any deadline for objections to claims set forth in any chapter 11 plan that is
ultimately confirmed. See, e.g., Ritzen Grp., Inc. v. Jackson Masonry, LLC (In re Jackson
Masonry, LLC), 906 F.3d 494, 502 (6th Cir. 2018) (observing that “when a court denies a motion
without prejudice, a party may file a second motion if circumstances change.”). In the meantime,
the Court presumes that it will be considering whether the First Amended Plan, which, among
other things, conditions the timing and payment of Mr. Krachenfels’ Claim on the resolution of
the Appeal, is appropriate, and if the First Amended Plan otherwise meets the various standards
for confirmation under § 1129.
V. 	Conclusion
Accordingly, for the foregoing reasons the Claim Objection is hereby DENIED, without
prejudice to Debtor refilling an objection. Mr. Krachenfels’ Claim has prima facie validity, the
Debtor has not met his initial burden of production to challenge the present validity of the Claim
and, therefore, pursuant to § 502(a) and (b) the Claim shall remain allowed for the time being.
How the Claim is treated under the proposed First Amended Plan is a separate issue. But, for now,
the Claim Objection does not provide a recognized basis under § 502(b) to disallow the claim in
whole or in part, nor does the Debtor provide any support for the proposition that the claim
objection process allows a court to hold a claim “in abeyance” pending an appeal in state court
that may not be determined for months.12 Holding a claim in limbo based on a pending state court
appeal, particularly while the chapter 11 plan confirmation process is underway, is not provided
for by any of the subparagraphs of § 502(b) and, under the current circumstances, would not be
equitable under § 105(a).
IT IS SO ORDERED.
12 In the First Amended Plan, which was filed on May 21, 2026, Debtor represented that he “anticipates a decision on
the Appeal four to eight months after oral arguments conclude[,]” which were scheduled for “April 14, 2026.” First.
Am. Plan at 11, Art. III, § H.2. This would mean sometime in August to December of this year.
Case 3:25-bk-30378 Doc 179 Filed 07/03/26 Entered 07/06/26 10:37:49 Desc Main
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Copies to:
Default List
James P. Connors (Counsel for Creditor Jonathan D. Krachenfels)
Case 3:25-bk-30378 Doc 179 Filed 07/03/26 Entered 07/06/26 10:37:49 Desc Main
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