In re Abebe

466 B.R. 63, 2012 WL 115411, 2012 Bankr. LEXIS 166
CourtUnited States Bankruptcy Court, E.D. Virginia
DecidedJanuary 13, 2012
DocketNo. 11-11374-BFK
StatusPublished

This text of 466 B.R. 63 (In re Abebe) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Abebe, 466 B.R. 63, 2012 WL 115411, 2012 Bankr. LEXIS 166 (Va. 2012).

Opinion

MEMORANDUM OPINION

BRIAN F. KENNEY, Bankruptcy Judge.

This matter comes before the Court on the Motion of the Chapter 13 Trustee for Stay Pending Appeal of this Court’s Order of December 16, 2011, which denied the Trustee’s Motion to Vacate the Order Dismissing this Case, pursuant to Bankruptcy Rule 8005 (Docket No. 91). The Debtor has filed an Opposition to the Trustee’s Motion (Docket No. 97). For the reasons stated below, the Court will grant the Motion to Stay.

The case was filed on February 28, 2011. The Debtor filed an amended plan on May 23, 2011, which was confirmed by this Court’s Order of July 13, 2011 (Docket No. 58). The plan called for payments totaling $45,900.00, which were to provide for the payment of 100% of the estimated unsecured claims.

On October 17, 2011, the Court entered an Order approving the sale of the Debt- or’s real property located at 8045 Newell Street, Apt. # 319, Silver Spring, MD (Docket No. 76). The Order contemplated total sale proceeds of $213,860.16. Of that amount, $188,860.16 was to be paid to JPMorgan Chase, which held a first priority lien on the property. In addition, $19,000.00 was to be paid to the Chapter 13 Trustee, Thomas P. Gorman, and $6,000.00 was to be paid to the Debtor.

On October 26, 2011, the Debtor filed a Motion to Dismiss the case (Docket No. 78). The Court granted the Debtor’s motion, and, on October 28, 2011, entered an Order of Dismissal (Docket No. 79).1

The Trustee subsequently received a $19,000.00 check dated November 1, 2011, representing the bankruptcy estate’s share of the proceeds from the sale of the Debt- or’s property. On November 10, 2011, the Trustee filed a Motion (Docket No. 83) to vacate the Order of October 28, 2011, which had dismissed the Debtor’s case. A hearing was held December 14, 2011, on the Trustee’s motion. At the hearing, the Trustee stated that he wanted to reopen the case so that he could administer the $19,000.00 for the benefit of the creditors. The Trustee argued that the Debtor had not been forthright in disclosing her reasons for pursuing a short sale of her property, and that it was not until after consid[65]*65erable urging that the Debtor disclosed the $25,000.00 distribution she was to receive from the sale. Relying on the 9th Circuit case of In re Rosson, 545 F.3d 764 (9th Cir.2008), and the Supreme Court case of Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365, 127 S.Ct. 1105, 166 L.Ed.2d 956 (2007), the Trustee argued that the Debtor did not have an absolute right to dismiss the case because the case was filed in bad faith. The Court disagreed, and, without making a finding as to whether the Debtor had acted in bad faith, found that 11 U.S.C. § 1307(b) provides a Chapter 13 Debtor with an absolute right to dismiss a case that had not previously been converted, and denied the Trustee’s motion to vacate the Order of December 16, 2011.

Discussion

Before the Court is the issue of whether the Court should grant the Trustee’s Motion for Stay Pending Appeal. In Nken v. Holder, the Supreme Court outlined four factors that are to be considered in evaluating the appropriateness of a motion for stay pending appeal; namely, “(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.” 556 U.S. 418, 460-61, 129 S.Ct. 1749, 173 L.Ed.2d 550 (2009) (quoting Hilton v. Braunskill, 481 U.S. 770, 776, 107 S.Ct. 2113, 95 L.Ed.2d 724 (1987)).

1. Likelihood of Success on the Merits.

With regard to the first factor, “whether the stay applicant has made a strong showing that he is likely to succeed on the merits,” the Supreme Court indicated that “[i]t is not enough that the chance of success on the merits be ‘better than negligible.’ ” Nken at 566, 129 S.Ct. 1749 (quoting Sofinet v. INS, 188 F.3d 703, 707 (7th Cir.1999)). Here, the Trustee argues that both the Fifth and Ninth Circuits have “held that 11 U.S.C. § 1307(b) does not provide a debtor an absolute right to dismiss a Chapter 13 case when the debtor is acting in bad faith.” Trustee’s Motion at ¶ 9. Moreover, the Trustee argues that the Supreme Court’s recent ruling on a similar issue, wherein the Supreme Court held that “[njothing in the text of either § 706 or § 1307(c) ... limits the authority of the court to take appropriate action in response to fraudulent conduct by the atypical litigant who has demonstrated that he is not entitled to the relief available to the typical debtor,” Marrama, 549 U.S. at 374-75, 127 S.Ct. 1105, increases the likelihood of a favorable ruling in this case. Trustee’s Motion at ¶ 9.

The Court notes the existence of numerous cases on both sides of the issue, with “most reported decisions [holding] that Chapter 13 debtors have an absolute right to dismissal of an unconverted case,” and numerous other decisions holding that “the right to dismissal is lost if the debtor acted in bad faith.” In re Williams, 435 B.R. 552, 555-56 (Bankr.N.D.Ill.2010) (listing cases). The Bankruptcy Court’s decision in In re Kotche, 457 B.R. 434 (Bankr. D.Md.2011), is a particularly helpful discussion of the issue, ultimately holding that there were bad faith circumstances that, under Marrama, prevented a dismissal of the Debtor’s case. In the Kotche case, however, the Court granted the United States Trustee’s Motion to Convert the case to Chapter 7, noting that a debtor may not be “held captive” in a Chapter 13 case. Id. at 440. In this case, there was no Motion to convert pending, and the Court agreed that under Section 1307(b), the Debtor could not be forced to continue, involuntarily, in a Chapter 13 ease. Neither [66]*66the Chapter 13 Trustee, nor the United States Trustee, sought a conversion to Chapter 7 in this case. In virtually all of the cases in which Courts have denied a Debtor’s motion to dismiss, e.g., Rosson, Kotche, the choice was between dismissal and a conversion to Chapter 7, not between dismissal and an involuntary stay in Chapter 13, as was presented in this case.

This notwithstanding, the Court notes that no court to which this case might be appealed (the U.S. District Court for the Eastern District of Virginia, the Fourth Circuit Court of Appeals, nor the Supreme Court) has yet to rule definitively on the issue. Upon due consideration of the rationale set forth in the cases listed in In re Williams,

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Related

Hilton v. Braunskill
481 U.S. 770 (Supreme Court, 1987)
Marrama v. Citizens Bank of Mass.
549 U.S. 365 (Supreme Court, 2007)
Nken v. Holder
556 U.S. 418 (Supreme Court, 2009)
Ioan Sofinet v. Immigration and Naturalization Service
188 F.3d 703 (Seventh Circuit, 1999)
Mac Panel Company v. Virginia Panel Corporation
283 F.3d 622 (Fourth Circuit, 2002)
Rosson v. Fitzgerald (In Re Rosson)
545 F.3d 764 (Ninth Circuit, 2008)
Carr v. King (In Re Carr)
321 B.R. 702 (E.D. Virginia, 2005)
In Re Williams
435 B.R. 552 (N.D. Illinois, 2010)
In Re Kotche
457 B.R. 434 (D. Maryland, 2011)

Cite This Page — Counsel Stack

Bluebook (online)
466 B.R. 63, 2012 WL 115411, 2012 Bankr. LEXIS 166, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-abebe-vaeb-2012.