James Liukonen

BY |e ae

So Ordered.

Dated: June 9, 2025

Wf A—_—

. Michael Halfenger

Chief United States} Bankruptcy Judge

UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF WISCONSIN

In re:

James Liukonen, Case No. 24-26139-gmh

Chapter 13

Debtor.

Stephanie Johnson,

Plaintiff,

Vv. Adv. Proc. No. 25-2028-gmh

James Liukonen,

Defendant.

DECISION AND ORDER (1) GRANTING RELIEF FROM STAY TO CONTINUE

CIVIL ACTION AGAINST THE DEBTOR IN THE DISTRICT COURT AND

(2) DENYING DEFENDANT’S MOTION TO DISMISS;

AND

REPORT AND RECOMMENDATION THAT DISTRICT COURT SHOULD DENY

JOHNSON’S MOTION TO WITHDRAW THE REFERENCE

Stephanie Johnson is the plaintiff in a pending civil action in the Eastern District

of Wisconsin against chapter 13 debtor James Liukonen. That action was statutorily

stayed by 11 U.S.C. §362(a) when Luikonen filed a chapter 13 bankruptcy petition.

Johnson filed an adversary proceeding in this court in which she pleads claims that

duplicate those she was pursuing in the district court and adds a request that those

claims are not dischargeable. She seeks to have the district court continue its

adjudication of her claims against the debtor, either by this court granting relief from

the stay imposed by §362(a) of the Bankruptcy Code or by convincing the district court

to withdraw the reference of the parties’ adversary proceeding to the bankruptcy court

(or perhaps also withdrawing the reference of the debtor’s bankruptcy case—her

request is unclear). The debtor opposes these requests and asks that this court dismiss

Johnson’s adversary proceeding for failing to state a claim upon which relief can be

granted.

For the reasons explained below, this court (a) grants relief from the §362(a) stay

to allow Johnson to pursue a final adjudication of her claims in the district court, (b)

denies the debtor-defendant’s motion to dismiss the adversary proceeding but stays

that proceeding to await a final order by the district court, and (c) recommends to the

district court that it not withdraw the reference of either the adversary proceeding or

the debtor’s chapter 13 case.

I

In April 2023 Johnson sued Liukonen in the United States District Court for the

Eastern District of Wisconsin. Johnson v. Liukonen, No. 23-cv-00543 (E.D. Wis.) (Duffin,

M.J., presiding). She alleged that Liukonen, her landlord, discriminated against her

based on her race and disability and that he acted in ways that intentionally or

negligently inflicted emotional distress, violating both federal and state law. She asked

that her claims by tried by a jury and that the court award her compensatory and

punitive damages, alleging that Liukonen’s actions were “malicious and done with an

intentional disregard of [her] rights”. Johnson v. Liukonen, No. 23-cv-00543, ECF No. 1, at

6. Magistrate Judge Duffin, who, with the parties’ consent, presides over the case

through entry of a final judgment, see 28 U.S.C. §636(c), entered a final pretrial order on

November 4, 2024, setting the matter to be tried by a jury commencing November 18,

2024. Johnson, No. 23-cv-00543, ECF No. 34.

On November 14, 2024, Liukonen filed a petition commencing a bankruptcy case

under chapter 13, which stayed further proceedings in the district court. See In re

Liukonen, Case No. 24-26139 (Bankr. E.D. Wis.) & 11 U.S.C. §362(a). In February 2025

Johnson sought relief in this court, commencing an adversary proceeding in which she

repleads the claims made in the district court and further alleges that her claims are

excepted from discharge in this case under chapter 13 of the Bankruptcy Code because

they are “claims [ ] for bodily injury within the meaning of” 11 U.S.C. §1328(a)(4).

Johnson v. Liukonen, Adv. Proc. No. 25-02028, ECF No. 1, at 2 (Bankr. E.D. Wis.). She also

filed a motion for relief from the §362(a) stay to allow the district court case to proceed,

combined with a request that the district court withdraw the reference.1 In re Liukonen,

Case No. 24-26139, ECF Nos. 43 & 43-1. Liukonen objected to the motion for relief from

the stay and filed a motion to dismiss the adversary proceeding pursuant to Federal

Rule of Civil Procedure 12(b)(6) (incorporated into this proceeding by Federal Rule of

Bankruptcy Procedure 7012), arguing that Johnson’s complaint fails to state an

actionable claim for relief. Id. ECF No. 49; see also Johnson v. Liukonen, Adv. Proc. No.

1. Before seeking relief from the stay in this court, Johnson filed a motion in the district court requesting

that the district court proceed with the jury trial and modify “the stay in this matter [to] allow this case

to proceed in the District Court”. Johnson v. Liukonen, No. 23-cv-00543, ECF No. 52, at 1; see also ECF

No. 51. Johnson’s request that the district court try the case there, notwithstanding Liukonen’s pending

bankruptcy proceeding, invited further proceedings in the district court, all of which certainly offended

§362(a)(1)’s automatic stay on “the . . . continuation . . . of a judicial . . . action . . . against the debtor that

was . . . commenced before the commencement of the case under” the Bankruptcy Code. Johnson v.

Liukonen, No. 23-cv-00543, ECF Nos. 51 & 52. Judge Duffin promptly informed Johnson that she must

obtain relief from the §362(a) stay in the bankruptcy court before her district court case could continue.

Id. ECF No. 56.

25-02028, ECF No. 4. Johnson objected to the motion to dismiss. Johnson v. Liukonen,

Adv. Proc. No. 25-02028, ECF No. 7.

Johnson’s request for relief from the automatic stay, Liukonen’s motion to

dismiss Johnson’s adversary proceeding, and Johnson’s motion to withdraw the

reference of her pending adversary proceeding all involve interrelated facts and legal

issues, which this decision addresses in turn.

II

Johnson requests relief from the §362(a) stay so that the district court can try her

claims against the debtor to a jury, as it was prepared to do when Liukonen filed his

bankruptcy case, and she asserts that her claims will be deemed not dischargeable

under §1328(a)(4) after they are liquidated in the district court proceeding. Section

362(d)(1) authorizes this court to modify the §362(a) stay “for cause”, and allowing

creditors to liquidate their claims in other forums can constitute cause for relief when

litigation elsewhere is the most efficient course. See In re Stewart, 649 B.R. 755, 763

(Bankr. N.D. Ill. 2023). Opposing this course, Luikonen argues that §1328(a)(4)’s

discharge exception is inapplicable as a matter of law because it is limited to debts for

damages awarded before the debtor commences a bankruptcy case that result from

conduct that causes personal injury. Johnson v. Liukonen, Adv. Proc. No. 25-02028, ECF

No. 4, at 2–11. Liukonen argues that there is no persuasive reason to grant relief from

the automatic stay to try claims to judgment only to have the enforcement of that

judgment barred by a bankruptcy discharge. See 11 U.S.C. §524(a)(1) (“A discharge . . .

voids any judgment at any time obtained, to the extent that such judgment is a

determination of the personal liability of the debtor with respect to any debt discharged

under section . . . 1328 of this title”.). Liukonen makes the same arguments about the

scope of §1328(a)(4) to support his motion to dismiss the adversary proceeding.

Under these circumstances, to adjudicate both the motion for relief from the

automatic stay and the motion to dismiss the adversary proceeding, the court must first

decide whether, if Johnson were to prevail on her claims in the district court, those

claims could be deemed not dischargeable under §1328(a)(4).

A

Section 1328(a)(4) excepts from discharge certain debts for damages awarded in a civil

action before the entry of the chapter 13 discharge order. Section 1328(a) directs the court to

grant a chapter 13 debtor’s discharge “after completion by the debtor of all payments

under the plan”, except for debts of the type provided for in §1328(a)(1)–(4). By not

making a discharge available until the debtor completes all plan payments, §1328(a)’s

plain text provides the temporal benchmark for determining whether the debtor owes a

dischargeable debt. 2 Only when the debtor has completed the plan and the court grants

the discharge is there a reason to determine whether a debt that is excepted from

discharge under §1328(a)(1)–(4).

Section 1328(a)(4) provides that, once the debtor completes the plan payments,

“the court shall grant the debtor a discharge of all debts . . . except any debt . . . for

restitution, or damages, awarded in a civil action against the debtor as a result of willful

or malicious injury by the debtor that caused personal injury to an individual or the

death of an individual.” If no damages have been awarded before the discharge is

granted, the matter is at an end, since the discharge operates to enjoin permanently the

continuation of any civil action to collect otherwise dischargeable debts. 11 U.S.C.

§524(a)(2). Before the court grants a discharge, however, a creditor with an unliquidated

debt may pursue a damages award, either in the bankruptcy court or, with relief from

the §362(a) stay, in some other forum, and if that creditor obtains a damages award

before the discharge enters, the debt will not be discharged if it satisfies §1328(a)(4)’s

2. Contrast 11 U.S.C. §727(b), which explicitly provides, “Except as provided in [11 U.S.C.] section 523

. . . , a discharge under [11 U.S.C. §727(a)] discharges the debtor from all debts that arose before the date

of the order for relief under [ ] chapter [7] . . . .”

other requirements.

In seeking to persuade the court to deviate from this straightforward reading of

§1328(a), the debtor champions two decisions, issued shortly after Congress added

§1328(a)(4) in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005:

Parsons v. Byrd (In re Byrd), 388 B.R. 875, 876-77 (Bankr. C.D. Ill. 2007), and In re Nuttall,

No. 06-14233, 2007 WL 128896 (Bankr. D. N.J. Jan. 11, 2007). Both decisions conclude

that §1328(a)(4)’s application is limited to debts for civil damages awarded before the

debtors commenced their chapter 13 case. Byrd is procedurally similar to this

proceeding. Before the debtor, Byrd, filed for bankruptcy, Parsons had filed a civil

lawsuit against him for damages sustained in a bar fight. While the civil case was

pending, Byrd filed a chapter 13 case. Parsons then filed an adversary proceeding

seeking a declaration that the debt was not dischargeable. The court granted Byrd’s

motion to dismiss, ruling that the debt was dischargeable because Byrd filed for

bankruptcy before Parsons obtained a damages award. Id. at 877. Similarly, in Nuttall,

the creditor, a victim of the debtor’s aggravated criminal assault, asked the bankruptcy

court for relief from the stay to liquidate his personal injury claim in state court. 2007

WL 128896, at *1.

Byrd and Nuttall reason as follows: Because §1328(a)(4)’s exception to discharge

is limited to (certain) debts “for restitution, or damages, awarded in a civil action”,

§1328(a)(4), “only restitution or damages ‘awarded’ in a civil action against the debtor

are potentially non-dischargeable at the completion of payments in a Chapter 13 case.”

Byrd, 388 B.R. at 877. From this, they conclude, “a pre-petition award of restitution or

damages for willful or malicious injury is a prerequisite to a finding of a non-

dischargeability under §1328(a)(4).” Id. (emphasis added) (citing Collier on Bankruptcy

(15th Edition Revised 2006) & Keith M. Lundin, Chapter 13 Bankruptcy (3rd ed. 2000 &

Supp.2006)); see also Nuttall, 2007 WL 128896, at *3 (“Although Congress may not have

intended for victims of intentional torts to be subject to discharge of their debts where

the Debtor beats them in a race to the courthouse, this Court finds that the plain

language of the statute requiring that the debt be ‘awarded’ means that the debt is

subject to discharge until there has been a determination of liability, which has not yet

occurred in the matter before this Court.”). But neither decision explains why a damages

award must precede the petition date to satisfy the §1328(a)(4) exception when the chapter

13 discharge cannot be granted until plan completion.

Rather than answer this question, Byrd turns to differences between §1328(a)(4)

and §523(a)(6): “Section 1328(a)(4) is clearly worded differently than 11 U.S.C.

§ 523(a)(6), and, had Congress intended a different meaning, it could easily have

worded § 1328(a)(4) to include restitution or damages as being non-dischargeable

regardless of the entry of a judgment in a civil proceeding prior to the filing of a

Chapter 13 bankruptcy petition.” Id.3 True, §523(a)(6), while similar to §1328(a)(4) in

some ways, has no “awarded in a civil action” language, and Congress could have

clarified the matter, as it eventually did in §523(a)(19)’s exception for debts for

securities-related wrongdoing and §523(a)(9)’s exception for debts arising from a

debtor’s intoxicated use of a motor vehicle.4 So what? That Congress could have added

3. See also Keith M. Lundin, Lundin On Chapter 13, § 159.7, at ¶ 10,https://www.lundinonchapter13.com

/Content/Section/159.7 (last visited May 13, 2025) (“By analogy, § 101(14A) speaks of a domestic

support obligation that is ‘established or subject to establishment.’ The less expansive use of the word

‘awarded’ in § 1328(a)(4) should confine this exception to discharge to restitution or damages that

already happened at the Chapter 13 petition.”).

4. The debtor argues that “Congress understood the effect of the language in” previous versions of

§523(a)(9) and (19) to require prepetition awards, and so the fact that Congress later amended those

statutes, and thus knew how to word statutes in a way to include post-petition debts, but did not

include similar language in §1328(a)(4), demonstrates that it intended for §1328(a)(4) to apply only to

prepetition awards. Johnson v. Liukonen, Adv. Proc. No. 25-02028, ECF No. 4, at 4–7. The debtor also

argues that the relevant amendments to §523(a)(19)—which clarified that the debt from a qualifying

securities-related wrongdoing may “result[], before, on, or after the date on which the petition was

filed, from” any manner of judgments, orders, or agreements—was enacted as part of the same 2005

Act that created §1328(a)(4), and the fact that Congress did not use the same language in each section

means that Congress intended §1328(a)(4) only to apply to prepetition awards. Id. at 6–7.

more words to §1328(a)(4)—could have, for example, added “debt . . . for damages

awarded in a civil action at any time before the discharge is granted under this section . . .”—

is irrelevant. The exception’s context makes the imagined addition superfluous and its

omission irrelevant.

Nuttall simply presumes, without further explication, that the petition date is the

time to determine whether there is a damages award for purposes of §1328(a)(4):

[T]his Court finds that the plain language of the statute requiring that the

debt be ‘awarded’ means that the debt is subject to discharge until there has

been a determination of liability, which has not yet occurred in the matter

before this Court. . . . To hold other than to require a determination of

liability in order to find the debt nondischargeable under § 1328(a)(4) would

be to render the word “awarded” mere surplusage, which this Court cannot

do.

Therefore, [the creditor’s] claim for $300,000 cannot be held to be

nondischargeable because it is a contingent and unliquidated claim, not yet

reduced to judgment and awarded by a court of competent jurisdiction, and

therefore outside of the statutory exception to discharge created by the

plain language of § 1328(a)(4).

Id. at *3–4. Like Byrd and the treatises on which it relies, Nuttall does not explain why a

claim that is contingent and unliquidated when the debtor files his bankruptcy petition

can’t later become a liquidated debt for “damages[] awarded in a civil action” potentially

The debtor further observes that Congress amended §523(a)(9)’s language, removing a

requirement that the debt “arise[] from a judgment or consent decree”, in order to “close the loophole

which allowed drunk drivers to escape payment to their victims prior to entry of a judgment or

consent decree.” Id. at 6 (quoting In re Weilein, 319 B.R. 175, 178 (Bankr. N.D. Iowa 2004)) (emphasis

omitted). Other courts, however, rely on decisions interpreting that same older version of §523(a)(9)

not to require that such a claim be “reduced to judgment at the time [the debtor] filed his bankruptcy

petition.” See, e.g., Buckley v. Taylor (In re Taylor), 388 B.R. 115, 120 (Bankr. M.D.Pa. 2008) (discussing

Young v. Rose (In re Rose), 86 B.R. 86 (Bankr. E.D. Mich. 1988)); see also Woods v. Roberts (In re Roberts),

431 B.R. 914, 918–19 (Bankr. S.D. Ind. 2010) & Waag v. Permann (In re Wagg), 418 B.R. 373, 380–81

(B.A.P. 9th Cir. 2009). Ultimately, these arguments are unpersuasive because, as explained above, the

plain language of §1328(a)(4) provides a clear deadline for a creditor to obtain a qualifying civil

damages award, and that deadline is entry of the discharge order.

excepted from discharge by §1328(a)(4) if an award is made during the bankruptcy case

but before the court grants the discharge. 11 U.S.C. §1328(a)(4) (emphasis added).

As the debtor concedes, moreover, most courts have rejected the Byrd-Nuttall

interpretation of §1328(a)(4).5 Johnson v. Liukonen, Adv. Proc. No. 25-02028, ECF No. 4, at

4. Generally, these courts reason that “awarded” in §1328(a)(4) functions as a past

participle, defining a type of debt for restitution and damages: “By reading ‘awarded’

as part of a participial phrase, the word is not rendered mere surplusage, but part of a

phrase that describes what types of ‘restitution’ and ‘damage’ awards are protected

from discharge.” Taylor, 388 B.R. at 119. “’As a past participle, ‘awarded’ merely

signifies ‘completion’ or an entry of a restitution or damages award at the time of the

determination of nondischargeability. Nothing in phraseology of section 1328(a)(4)

requires, either implicitly or explicitly, entry of a prepetition judgment.’” Roberts, 431

B.R. at 918 (quoting Waag, 418 B.R. at 379) (citations omitted).6

5. See Waag v. Permann (In re Waag), 418 B.R. 373, 381 (B.A.P. 9th Cir. 2009) (“Based on the grammatical

structure of section 1328(a)(4), the context in which it is used, and its policy and object, we agree . . .

that it does not differentiate between a judgment entered prepetition and one entered postpetition.”);

Buckley v. Taylor (In re Taylor), 388 B.R. 115, 119 & 120 (Bankr. M.D. Pa. 2008) (“When § 1328(a)(4) is

interpreted within the overall grammatical structure of § 1328(a) it is plain that the statute does not

intend to differentiate between a judgment entered before and one entered after a bankruptcy petition

is filed.”); In re Abbott, No. 15-06822-5, 2016 WL 6892456, at *2 (Bankr. E.D.N.C. Nov. 22, 2016) (“The

court finds In re Byrd to reflect a minority view that has been rejected by the majority of courts to have

considered the issue, and declines to follow its reasoning.”) (collecting cases); K.C. v. Grosso (In re

Grosso), 512 B.R. 768, 773 (Bankr. D. Del. 2014) (“[T]his Court concludes that a claim for liability that has

not been reduced to a judgment at the time a debtor files a petition may nevertheless be excepted from

discharge pursuant to § 1328(a)(4).”); Adams v. Adams (In re Adams), 478 B.R. 476, 483–84 (Bankr. N.D.

Ga. 2012); In re Capote, No. 11–22087, 2012 WL 1597375, at *1 (Bankr. S.D. Fla. May 7, 2012); Miller v.

Schaub (In re Schaub), No. 11-23707, Adv. No. 11–01811, 2012 WL 1144424, at *3–5 (Bankr. D.N.J. Apr. 4,

2012); Kubera v. Edmonds (In re Edmonds), No. 11-01064, Adv. No. 11–00137, 2011 WL 5909420, at *2–3

(Bankr. E.D.N.C. Aug. 22, 2011); Woods v. Roberts (In re Roberts), 431 B.R. 914, 916–19 (Bankr. S.D. Ind.

2010); See also Hon. W. Homer Drake, Jr., Hon. Paul W. Bonapfel, & Adam M. Goodman, CHAPTER 13

PRAC. & PROC., Vol. 2, 21:17, 821–22 & n.21 (2022 ed.) (collecting cases).

6. These decisions offer additional supporting grounds. They observe that §1328(a)(3) and (4) “are parallel

and designed to distinguish between restitution imposed (‘included’) in a criminal case and restitution

imposed (‘awarded’) in a civil case[,] [n]either [of which] requires a prepetition imposition of such

The overall reasoning of Taylor and its progeny is more compelling than that of

Byrd and Nuttall. Section 1328(a)(4) is best read to direct a determination of whether a

debt is “for . . . damages[] awarded in a civil action” after the debtor has completed all

plan payments and is eligible for a discharge under §1328(a), not before the debtor

commences the chapter 13 case. Therefore, the fact that Johnson has yet to obtain a

damages award in a civil action does not now warrant a conclusion that, as a matter of

law, her unliquidated debt is dischargeable in this chapter 13 case.

B

For purposes of §1328(a)(4), “personal injuries to an individual” include both physical

and psychological (emotional) injuries. The debtor next contends that Johnson’s debt

cannot be excepted from discharge because any award she might obtain will not result

from “personal injury to an individual” within the meaning of §1328(a)(4). Johnson

asserts that her claims for emotional distress seek damages for personal injury within

the meaning of §1328(a)(4). Johnson v. Liukonen, Adv. Proc. No. 25-02028, ECF No. 1, at

5–6 & ECF No. 7, at 7–8.

The Bankruptcy Code does not define “personal injury,” either in §1328 or

elsewhere. And, as many decisions acknowledge, “personal injury” as used in that

section may “(1) refer[] solely to personal bodily injury; (2) include[] non-physical injury

but not business or financial injuries; or (3) include[] all injuries insofar as the injury is

treated as a personal injury under non-bankruptcy law.” Michael v. Denson (In re

Denson), No. 19-00070, Adv. No. 19-50014, 2020 WL 1547493, at *3 (Bankr. S.D. Ind. Mar.

restitution.” Waag, 418 B.R. at 380; see also Adams, 478 B.R. at 483–84; Schaub, 2012 WL 1144424, *3–4.

They also look to decisions interpreting the pre-1990 version of §523(a)(9), which held that the language

then in effect—which excepted “any debt . . . to the extent that such debt arises from a judgment . . .

entered in a court of record against a debtor wherein liability was . . . a result of the debtor’s operation

of a motor vehicle while illegally intoxicated”—not to require that such a claim be “reduced to

judgment at the time [the debtor] filed his bankruptcy petition.” See, e.g., Taylor, 388 B.R. at 120

(discussing Young v. Rose (In re Rose), 86 B.R. 86 (Bankr. E.D. Mich. 1988)); see also Roberts, 431 B.R. at

918; and Waag, 418 B.R. at 380–81.

30, 2020) (quoting Seubert v. Deluty (In re Deluty), 540 B.R. 41, 47 (Bankr. E.D.N.Y. 2015))

(emphasis in original).

The meaning of “personal injury” in §1328(a) is a question of federal statutory

interpretation. One starts with the text, which excepts from discharge “any debt” “for

restitution, or damages, awarded in a civil action against the debtor as a result of willful

or malicious injury by the debtor that caused personal injury to an individual or the

death of an individual.” §1328(a)(4) (emphasis added). The Seventh Circuit has

construed the word “injury” in a related context—§523(a)(6)’s discharge exception for

“debt[s] . . . for willful and malicious injury by the debtor to another entity or to the

property of another entity”—“to mean a ‘violation of another’s legal right, for which the

law provides a remedy.’” First Weber Grp., Inc. v. Horsfall, 738 F.3d 767, 774 (7th Cir.

2014) (quoting Weinstein & Assocs., Ltd. v. Lymberopoulos (In re Lymberopoulos), 453 B.R.

340, 343 (Bankr. N.D. Ill. 2011)). Presuming that the same concept of “injury” applies

equally to §1328(a)(4)’s use of “willful or malicious injury”—that injury (read: the willful

or malicious violation of a legal right) must have caused a “personal injury” (or death)

to an individual for which damages were awarded in a civil action. In this context the

“personal” modifier seems best understood to distinguish harms to the person from

financial harms or harms to one’s business or property (which can also be caused by

willful or malicious violations of legal rights but which may be discharged under

§1328(a) because §523(a)(6) does not apply to a discharge granted under that section,

see §1328(a)(2)); see also Universal Restoration Svcs, Inc. v. Hartung (In re Hartung), No.

12-21920, Adv. No. 12-2359, 2014 WL 201100, at *7 (Bankr. E.D. Wis. Jan. 17, 2014), aff’d,

511 B.R. 538 (E.D. Wis. 2014) (“Because the damages in this [chapter 13] case are to

property and not to person, the plaintiff’s arguments in favor of a nondischargeable

judgment based upon a willful and malicious injury are rejected.”).

Although “personal injury” could be interpreted in a more restrictive manner—

that the willful or malicious invasion of legal right must cause physical, rather than

psychological, harm—nothing about §1328(a)(4)’s text so requires. Contrast 11 U.S.C.

§522(d)(11)(D) (providing an exemption for the “debtor’s right to receive, or property

that is traceable to—. . . a payment . . . on account of personal bodily injury, not

including pain and suffering or compensation for actual pecuniary loss . . .” (emphasis

added)). Congress elected in 2005 to limit the chapter 13 discharge by excepting

liquidated debts for willful or malicious injuries—again, invasions of legal rights—that

cause personal injury or death to individuals, rather than by applying §523(a)(6) to

chapter 13 cases and simply excepting debts for all willful and malicious injuries the

debtor causes to entities (that is, to individuals and legal entities alike, see §101(15) &

(41)) or to their property. In context, there’s no compelling reason to limit further the

types of personal injuries to individuals covered by §1328(a)(4) beyond those suffered

by the person, in contrast to financial injuries or injuries to property, all of which are

covered by the exclusion in §523(a)(6), which Congress elected not to apply wholesale

to the chapter 13 discharge. See Schubert Osterrieder & Nickelson PLLC v. Bain (In re Bain),

436 B.R. 918, 924 (Bankr. S.D. Tex. 2010) (“Emotional distress is among the types of

injury covered by § 523(a)(6).”) (citing Hagan v. McNallen (In re McNallen), 62 F.3d 619,

625–26 (4th Cir. 1995), and Petro v. Miller (In re Miller), 403 B.R. 804, 818 (Bankr. W.D.

Mo. 2009)).

In all events, most courts interpreting the scope of §1328(a)(4)’s “personal injury”

limitation have concluded that §1328(a)(4)’s use of “personal injury” includes non-

physical harms. See Adams, 478 B.R. at 487 (“defin[ing] ‘personal injury’ in § 1328(a)(4)

to exclude injuries to property, but to include nonphysical injuries such as defamation

and emotional distress.”); Plys v. Ang (In re Ang), 589 B.R. 165, 180 (Bankr. S.D. Cal.

2018) (“The vast majority of courts define ‘personal injury’ as harm both physical and

nonphysical (such as defamation and intentional infliction of emotional distress).”);

Sales v. Bailey (In re Bailey), 555 B.R. 557, 561–63 (Bankr. N.D. Miss. 2016); B.B. v.

Grossman (In re Grossman), 538 B.R. 34, 42 (Bankr. E.D. Cal. 2015) (“The settled federal

interpretation of ‘personal injury’ includes nonphysical injuries”); Deluty, 540 B.R. at 47

(“‘[P]ersonal injury’ in the context [of] section 1328(a)(4) . . . excludes financial injury,

but includes non-physical injuries, not just bodily injury.”) (citing Adams, 478 B.R. at

487).

The debtor’s arguments to the contrary are unconvincing. The debtor relies on

decisions that construe 28 U.S.C. §157(b)(5)’s use of the distinct phrase “personal injury

tort.” See Adv. Proc. No. 25-02028, ECF No. 4, at 8–10 (citing Massey Energy Co. v. W. Va.

Consumers for Justice, 351 B.R. 348, 350–51 (E.D. Va. 2006); Perino v. Cohen (In re Cohen),

107 B.R. 453, 455 (S.D.N.Y. 1989); Byrnes v. Byrnes, (In re Byrnes), 638 B.R. 821, 826–30

(Bankr. D.N.M. 2022); Priest v. Interco, Inc. (In re Interco, Inc.), 135 B.R. 359, 362 (Bankr.

E.D. Mo. 1991); and Vinci v. Town of Carmel (In re Vinci), 108 B.R. 439, 441–42 (Bankr.

S.D.N.Y. 1989)). It is far from clear that the phrase “personal injury tort” used in

28 U.S.C. §157(b)(5) and case law interpreting that phrase should inform the

understanding of §1328(a)(4)’s use of “personal injury to an individual”, especially

given the contextual differences: Section 1328(a)(4) limits the scope of the discharge

under chapter 13, excepting from that discharge debts for nondischargeable awards of

damages for willful or malicious injuries (i.e., invasion of legal rights) that cause

“personal injury” or death to individuals, whereas 28 U.S.C. §157(b)(5) allocates

responsibility for adjudicating certain claims, instructing that “[t]he district court shall

order that personal injury tort and wrongful death claims shall be tried in the district

court in which the bankruptcy case is pending, or in the district court in the district in

which the claim arose, as determined by the district court in which the bankruptcy case

is pending.” There is no convincing textual reason to equate the type of personal injury

for which an award of damages may be excepted from discharge under §1328(a)(4) of

title 11 with Congress’s use of “personal injury” to qualify the types of torts to be heard

by the district court, rather than the bankruptcy court, under §157(b)(5) of title 28. And,

even in the §157 context, many courts have concluded that “personal injury” includes

non-physical harms. See S.V. v. Kratz, Nos. 12-C-705, 10-C-919, 2012 WL 3070979, at *2

(E.D. Wis. July 26, 2012) (“The term personal injury . . . means injury to the person of

another. The mental and emotional suffering and humiliation alleged by Plaintiff

constitute injuries to her person.”); In re Stewart, 649 B.R. at 760 (“The majority view,

though – and the most reasonable – lies in the middle, defining personal injury to

include ‘emotional and reputational harms’ but not business and financial injuries.”)

(quoting Adams, 478 B.R. at 486–87); Adams, 478 B.R. at 486-87 (noting that “many

courts” have adopted the middle approach); Adelson v. Smith (In re Smith), 389 B.R. 902,

907–08 (Bankr. D. Nev. 2008) (explaining why the middle view is the better view).

Courts in this circuit have also generally taken the middle view, reading “personal

injury tort” to include torts for non-bodily injury. See, e.g., S.V. v. Kratz, 2012 WL

3070979, at *2 (finding “personal injury tort” includes “mental and emotional suffering

and humiliation”); Lightfoot v. Bally Total Fitness Corp., No. 08 C 1733, 2011 WL 13383764,

at *2 (N.D. Ill. Jan. 6, 2011) (holding that discrimination and defamation claims are

“personal injury tort” claims under §157(b)(1)(B)); Rizzo v. Passialis (In re Passialis), 292

B.R. 346, 351–52 (Bankr. N.D. Ill. 2003) (finding slander to be a “personal injury tort”).7

Given all this, the court declines the debtor’s invitation to read “personal injury”

in §1328(a)(4) as limited to bodily injuries and to exclude psychological or emotional

injuries. At a minimum, Johnson’s claims against the debtor for intentional infliction of

emotional distress are ones for personal injuries that potentially give rise to an award of

damages made not dischargeable by §1328(a)(4).

7. “The Seventh Circuit has not weighed in except to hold that business torts are not personal injury torts,

implicitly rejecting the broad interpretation.” Stewart, 649 B.R. at 760, n.3 (citing Horwitz v. Alloy Auto.

Co., 992 F.2d 100, 103 (7th Cir. 1993)).

III

A

There is cause to modify the §362(a) stay to allow the district court to finally adjudicate

Johnson’s civil action against the debtor. Section 362(d) of the Bankruptcy Code allows this

court to modify §362(a)’s “automatic” stay on proceedings against a debtor when there

is cause to do so. 11 U.S.C. §362(d). As explained above, Johnson’s claims against the

debtor for intentional infliction of emotional distress damages are ones for personal

injuries that potentially give rise to an award of damages made not dischargeable by

§1328(a)(4), but only if Johnson obtains an award of damages before this court grants

the discharge. Currently the §362(a) stay is depriving Johnson of her ability to obtain

such an award. For that reason, the court concludes that there is cause to grant relief

from the automatic stay.

As In re Stewart aptly explains:

The procedural posture here is not novel: “a personal injury tort action . . .

initiated in State Court, interrupted by [a] chapter 13 filing[,] and . . .

followed by [a] nondischargeability adversary proceeding.” Dorris v.

Chacon (In re Chacon), 438 B.R. 725, 736 (Bankr. D.N.M. 2010). Neither is the

appropriate judicial response. Courts facing these circumstances commonly

“permit the liability and damages issues to be determined either in the state

court or the U.S. district court, and then have the parties return to the

bankruptcy court as needed for an adjudication of the dischargeability

issue.” Id. (citing cases); see also In re Cooney, No. 17-20071, 2017 WL

4119582, at *2 (Bankr. D. Kan. Sept. 14, 2017) (lifting stay to permit state

court action to continue); In re Abbott, No. 15-06822-5-SWH, 2016 WL

6892456, at *2 (Bankr. E.D.N.C. Nov. 22, 2016) (same); Miller v. Schaub (In re

Schaub), Nos. 11-23707 (DHS), 11-01811 (DHS), 2012 WL 1144424, at *5

(Bankr. D.N.J. Apr. 4, 2012) (same). There is every reason to follow the

common practice here.

649 B.R. at 763. For this reason, and because all of Johnson’s claims in the district court

(and here) arise of a common set of facts, the court will modify the §362(a) stay to allow

the district court to finally adjudicate all claims pleaded in Johnson v. Liukonen, No. 23-

cv-00543 (E.D. Wis.).

B

Because Johnson may succeed in obtaining a civil damages award that is not

dischargeable under §1328(a)(4), the debtor’s motion to dismiss Johnson’s adversary proceeding

must be denied. Liukonen has moved to dismiss Johnson’s adversary proceeding, Johnson

v. Liukonen, Adv. No. 25-02028 (Bankr. E.D. Wis.), pursuant to Federal Rule of Civil

Procedure 12(b)(6), which applies here by operation of Federal Rule of Bankruptcy

Procedure 7012. Liukonen argues that the adversary proceeding should be dismissed

because “even if all of the Complaint’s allegations are taken as true, Ms. Johnson’s

alleged claims would still be dischargeable in Mr. Liukonen’s bankruptcy” case. Adv.

Proc. No. 25-02028, ECF No. 4, at 2. For the reasons explained in part II, however, the

court concludes that Johnson has claims that, if liquidated before the debtor completes

his plan, may be determined to be not dischargeable under §1328(a)(4). Therefore, the

court will deny Liukonen’s motion to dismiss but will stay further proceedings in the

adversary proceeding to await the district court’s adjudication of Johnson’s claims in

the civil action.

C

This court recommends that the district court deny Johnson’s request to withdraw the

reference. District courts have “original . . . jurisdiction of all civil proceedings . . . related

to cases under title 11”, i.e., the Bankruptcy Code, including this one. 28 U.S.C. §1334(b).

The District Court for the Eastern District of Wisconsin, however, has referred all such

proceedings to this court. See 28 U.S.C. §157(a) (“Each district court may provide that

. . . any or all proceedings . . . related to a case under title 11 shall be referred to the

bankruptcy judges for the district.”) & Order of Reference (E.D. Wis. July 10, 1984)

https://www.wied.uscourts.gov/general-orders/order-reference (last visited June 4,

2025) (“[A]ll proceedings . . . related to a case under title 11 shall be referred to the

bankruptcy judges of this District.”). But a “district court may withdraw, in whole or in

part, any case or proceeding referred under this section . . . for cause shown.” 28 U.S.C.

§157(d).

Federal Rule of Bankruptcy Procedure 5011(a) provides that “[a] motion to

withdraw a case or proceeding under 28 U.S.C. § 157(d) must be heard by a district

judge.” As the district court has recognized, however, this court may make a report and

recommendation on a request to withdraw the reference. See Charmoli v. Aspen Am. Ins.

Co., No. 23-cv-321, 2023 WL 3984590, at *4 (E.D. Wis. June 13, 2023).

Johnson requests that the district court “withdraw the reference of this case,

returning it to the district court for trial.”8 In re Luikonen, Case No. 24-26139, ECF No. 62,

at 10. A “case” in bankruptcy parlance is the matter commenced by the filing of a

bankruptcy petition that creates a bankruptcy estate to be administered for the benefit

of creditors and in which certain debtors, including individuals who petition for

bankruptcy under chapter 13, may pursue a discharge of their debts. See 11 U.S.C.

§§301–303, 541(a), 1328; see also 28 U.S.C. §§157(a) & (b)(1), & 1334(a). In context,

Johnson does not appear to seek withdrawal of the reference of the debtor’s case, only

her adversary proceeding in which she repleads the claims against the debtor that are

already pending in the district court. Johnson offers no reason for the district court to

take over administration of the debtor’s chapter 13 case; she just wants it to try her

claims against the debtor.

Even so, this decision and order significantly undermines the justification for

withdrawing the reference of Johnson’s adversary proceeding, Johnson v. Liukonen, Adv.

Proc. No. 25-02028, because it modifies the stay to allow the district court to enter

judgment on Johnson’s claims against the debtor. If in presiding over Johnson’s district

8. While one might question whether Johnson’s motion states an adequate request to withdraw the

reference under 28 U.S.C. §157(d) and Federal Rule of Bankruptcy Procedure 5011 (see ECF No. 43),

Johnson made clear at the March 18, 2025 hearing and in a subsequent supportive filings that she does

so request (see ECF Nos. 56, 59, & 62, at 10).

court case Judge Duffin concludes for reasons of administrative efficiency or otherwise

that Johnson should be allowed to present evidence in support of her claim that any

damages award the debtor is adjudged to pay her is a debt that is not dischargeable

under §1328(a)(4), he can certainly do so. The Bankruptcy Code does not require that

the bankruptcy court make that determination, unlike determinations that debts are not

dischargeable under subsections (2), (4), or (6) of §523(a). See 11 U.S.C. §523(c)(1). Judge

Duffin—having the benefit of presiding over the parties’ litigation through judgment—

might well be best positioned to decide whether any damages award is “as a result of

willful or malicious injury by the debtor that caused personal injury” to Johnson, within

the meaning of §1328(a)(4). Alternatively, Judge Duffin might conclude that even if

Johnson obtains a damages judgment in the civil action before the debtor receives a

discharge, the goals of just, speedy, and inexpensive adjudication are best served by

leaving the bankruptcy court to determine in Johnson’s adversary proceeding whether

that award is not dischargeable under §1328(a)(4)—a question well within the

bankruptcy court’s bailiwick. Because this court’s modification of the §362(a) stay

seemingly affords Judge Duffin the authority to adjudicate both Johnson’s damages

claims against the debtor and her contention that any damages award is not

dischargeable, there is no cause for the district court to withdraw the reference of the

adversary proceeding. This court therefore recommends that the district court deny

Johnson’s request to withdraw the reference of the adversary proceeding, which this

court will stay pending the outcome of Johnson’s case against the debtor in the district

court.

IV

A

For the reasons stated above in parts I though III.A–B, it is ORDERED:

1. The stay imposed by 11 U.S.C. §362(a) is modified to allow Stephanie Johnson to

continue the litigation of her claims against the debtor in the United States

District Court for the Eastern District of Wisconsin and for that court to

adjudicate all claims alleged in Johnson v. Liukonen, No. 23-cv-00543 (E.D. Wis.);

this modification of the §362(a) stay is effective upon the entry of this order and

is not itself stayed by the pendency of the request to withdraw the reference, see

Fed. R. Bankr. P. 5011(c).

2. James Liukonen’s motion to dismiss Johnson v. Liukonen, Adv. Proc. No. 25-02028,

is denied, and that adversary proceeding is hereby stayed pending the

adjudication by the United States District Court for the Eastern District of

Wisconsin of all claims alleged in Johnson v. Liukonen, No. 23-cv-00543 (E.D.

Wis.), or the district court’s withdrawal of the reference.

3. Unless the district court withdraws the reference of Johnson’s adversary

proceeding, Johnson must file a letter in this court within 10 days of the entry of

a final determination in Johnson v. Liukonen, No. 23-cv-00543 (E.D. Wis.),

informing this court of the result of that action and requesting that this court

conduct further proceedings in the adversary proceeding, if appropriate.

B

For the reasons stated in part III.C, this court reports and recommends that the

district court deny Johnson’s request to withdraw the reference, either limited solely to

her adversary proceeding or including both that proceeding and Liukonen’s chapter 13

case.

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