In re Garcia-Martz
U.S. Bankruptcy Court, Northern District of Indiana, South Bend Division · Bankr. N.D. Ind. · Indiana bar guidance
Conduct
The standing Chapter 13 Trustee's brief cited a bankruptcy rule the court says does not exist, quoted language not found in Bilski, and misstated several holdings.
Consequence
The court listed 13 deficiencies and issued a show-cause; after the Trustee took full responsibility, it found no sanction necessary and dissolved the order.
Lesson
Here the court said isolated errors would not have troubled it, but the number of deficiencies together led to a show-cause, which it dissolved after the Trustee took full responsibility.
Verified September 30, 2026
- Citation
- In re Garcia-Martz, No. 25-31324-pes, Order Dissolving Order to Show Cause and Vacating Hearing (Bankr. N.D. Ind. Aug. 6, 2026) (Singleton, J.), ECF No. 49; Memorandum Decision on the Trustee's Objection to Application for Compensation (Bankr. N.D. Ind. June 10, 2026), ECF No. 42
- Decided
- August 6, 2026
Summary
In a dismissed Chapter 13 case, the debtor's attorneys, Geraci Law LLC, applied for $1,785 in fees from funds the standing Chapter 13 Trustee held. The Trustee objected, was not prepared to argue the objection at the hearing, and was given time to file a supporting brief, which she filed 34 days later (Doc 41). In its June 10, 2026 Memorandum Decision, Judge Paul E. Singleton rejected the Trustee's arguments and set out, in a table titled "Deficiencies in the Trustee's Brief" (Figure 3), 13 issues. Among them: the brief quoted Bilski v. Kappos, and "[t]he bolded part of the quotation does not appear in Bilski"; it relied on "F.R.B.P. Rule 1019(6)," and "Fed. R. Bank. P. 1019(6) does not exist"; it misstated the holding of In re Ward; it took Marshall v. Johnson "out of context"; and it cited In re Hamilton without mentioning that the case involved a confirmed plan. Separately, it held that In re Sweports, which the brief called "binding case law," does not apply. It found the brief "included statements for which the Court may sanction" and that, taken together, the issues "may suggest" violations of the Indiana Rules of Professional Conduct or Bankruptcy Rule 9011.
- AI tool:
- Unidentified (neither the June 10, 2026 decision nor the August 6, 2026 order mentions AI; the court flags a nonexistent rule, a quotation not found in the cited case, and misstated case law)
How did the court address the AI-related conduct?
The June 10 decision awarded Geraci Law its fees as an allowed administrative expense under § 503(b), directed the Trustee to pay the $1,785 to the debtor's attorney before returning any remaining funds to the debtor, and stated that a second order would direct the Trustee to show cause in writing and at a hearing why she should not be sanctioned for the 13 issues in Figure 3. The August 6 order identifies that show-cause order as Doc 44 and the Trustee's response as Doc 48. On August 6, 2026, in an Order Dissolving Order to Show Cause and Vacating Hearing (Doc 49), the court recounted that the Trustee "took full responsibility for the issues the Court raised, provided honest explanations, and stated the mistakes will not happen again," found that "neither sanctions nor the show cause hearing is necessary," dissolved the show-cause order, and vacated the hearing set for August 13, 2026. No sanction was imposed.
Why does In re Garcia-Martz matter for law firms using AI?
In re Garcia-Martz is a show-cause that did not end in a sanction, and the filer was an institutional one: the standing Chapter 13 Trustee. The underlying dispute was narrow (whether the Trustee should pay the debtor’s attorneys $1,785 directly or return the funds to the debtor), but Judge Singleton’s June 10 decision devoted a separate section and a 13-row table to what was wrong with the Trustee’s brief. The court was explicit that the volume mattered: “The Court would not have a problem if the issues below were isolated, or if only a few of them appeared. But collectively, they may suggest that the Trustee has violated one or more of the Ind. R. Prof. Cond or Fed. R. Bank. P 9011.”
The court did not say how the defects arose or attribute them to any tool. A rule subsection was cited that “does not exist.” A quotation attributed to Bilski v. Kappos contained language that “does not appear in Bilski.” Other entries fault the brief for taking Marshall v. Johnson out of context, misstating Ward’s holding, omitting § 330(a)(4)(B) (which the court said “suggests a lack of competence”), and reusing argument that “appears to have been cut and pasted” from other cases. The court framed its standard with the Seventh Circuit’s line that “judges are not like pigs, hunting for truffles buried in briefs,” and noted that reasonable misconstruction of case law is not sanctionable while deliberately misstating it is.
The August 6 order is two short paragraphs. The court recounted that the Trustee “took full responsibility for the issues the Court raised, provided honest explanations, and stated the mistakes will not happen again,” and found that neither sanctions nor a hearing was necessary. The order does not describe what the explanations were. Firms documenting compliance may wish to consider that here the court named the Trustee’s acceptance of responsibility, honest explanations, and assurance against recurrence as the grounds for closing the matter.
Implications for your firm
Operational steps a firm reading this case may wish to consider documenting. Strategic and rule-application calls belong to your firm's attorneys.
- Verify every rule citation and quotation against the source before filing. Here the court found that the cited Bankruptcy Rule 1019(6) does not exist and that part of a Supreme Court quotation did not appear in the opinion.
- Review briefs reused from other matters. The court said portions of this brief appeared to have been cut and pasted from the Trustee's briefs in other cases and did not apply to these facts.
- Document the response to a show-cause. The court dissolved its order after the Trustee took full responsibility, gave explanations the court called honest, and stated the mistakes would not recur.
Sources
Primary sources
- AI attribution is a Charlotin tracker inference (listed there as "Implied"). Neither court document mentions artificial intelligence; the June 10 decision identifies a nonexistent rule, a quotation missing from the cited case, and misstated holdings without saying how they arose.
- The show-cause order itself (Doc 44) and the Trustee's response (Doc 48) were not read. The show-cause's existence comes from the June 10 decision's statement that a second order would issue and from the August 6 order, which names it as Doc 44; its date is not established by a document read; the content of the response comes only from the August 6 order's summary.