FILED APR 16 2020 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: BAP No. SC-18-1190-SLG
JORDANA BAUMAN, Bk. No. 3:17-bk-06250
Debtor.
JORDANA BAUMAN,
Appellant,
v. MEMORANDUM*
DAVID L. SKELTON, Chapter 13 Trustee,
Appellee.
Argued and Submitted on March 26, 2020
Filed – April 16, 2020
Appeal from the United States Bankruptcy Court for the Southern District of California
Honorable Christopher B. Latham, Bankruptcy Judge, Presiding
* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value. See 9th Cir. BAP Rule 8024-1. Appearances: Appellant Jordana Bauman argued pro se.
Before: SPRAKER, LAFFERTY, and GAN, Bankruptcy Judges.
INTRODUCTION
Chapter 131debtor Jordana Bauman appeals from orders dismissing
her bankruptcy case and denying her motion under Rule 9023. Because
none of Bauman’s arguments on appeal have merit, we AFFIRM.
FACTS
A. Bauman’s initial schedules and plan.
Bauman commenced her fifth bankruptcy since 2010 by filing a
voluntary chapter 13 petition on October 16, 2017.2 The bankruptcy
documents she filed were largely blank or incomplete. In her schedules, she
1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of Civil Procedure. All “Local Rule” references are to the Local Bankruptcy Rules for the Southern District of California. 2 Prior to this bankruptcy filing, Bauman filed four other bankruptcies in the Southern District of California: (1) Case No. 10-18930-PB7; (2) Case No. 11-11223-CL13; (3) Case No. 13-01890-CL7; and (4) Case No. 16-00301-CL13. Subsequent to her 2017 bankruptcy filing, Bauman filed her sixth bankruptcy case, Case No. 18-02875-CL13. With the exception of Case No. 13-01890-CL7, all of her bankruptcies eventually were dismissed. Bauman took numerous appeals from these dismissals. In all but one instance, her appeals were unsuccessful. After the one successful appeal, the bankruptcy court later dismissed the case a second time, and her appeals from that case dismissal also were unsuccessful.
2 listed the value of many of her assets as unknown, claiming that her ex-
husband had all of the relevant records and indicating that he would not
cooperate in providing her with the necessary records. Even so, she still
listed assets valued at several million dollars.
As for her creditors, she identified the Internal Revenue Service
(“IRS”), the Franchise Tax Board (“FTB”), her divorce counsel, and an
attorney service as her only unsecured creditors though she only stated
amounts owed for the IRS’s and FTB’s unsecured claims. Wells Fargo was
the only secured creditor listed in her schedules, and she listed its claim as
disputed in the amount of $365,000.00.
Bauman’s Statement of Monthly Income and Calculation of
Commitment Period was essentially blank, though she did indicate that her
applicable commitment period was five years. Similarly, she filed a blank
Calculation of Your Disposable Income, again noting that her financial
records were held by others. Meanwhile, in her Schedules I and J she listed
$3,000.00 per month in retirement income, but monthly expenses of
$7,150.00.
In her initial plan, Bauman left much of the required form blank. But
she did specify that, in lieu of making payments to the chapter 13 trustee,
she anticipated acting as her own “disbursing agent.” Therefore, she stated
that she would make $0 in estimated payments over the course of her plan
term.
3 The plan identified Wells Fargo as a secured creditor with a claim
amount of $230,370.00. But Bauman did not propose any payments to the
secured creditor either. Though she did not list her brother Mel Marin as a
secured creditor in her schedules, she included him in her plan as a
claimant with a lien on her real property. She did not specify any amount
for this lien or the property encumbered. While she did not propose
making any payments to the trustee, she oddly proposed that the trustee
would pay her $3,200.00 monthly in domestic support obligations.
Bauman’s plan disclosed priority claims owed to the IRS for
$28,810.00 and to the the FTB for $4,784.00. But the plan did not provide for
payments to either of these priority creditors.
Within her plan Bauman calculated that $10,057.00 would be
available to pay her general unsecured creditors in a chapter 7 bankruptcy.
Bauman separately classified the IRS’s unsecured, nonpriority claim for
$8,006.00 and the FTB’s unsecured, nonpriority claim for $2,051.00. Her
plan stated that these amounts would be paid in full over the life of the
plan even though the plan provided for no payments.
At the end of her plan, Bauman attached four pages of nonstandard
provisions. Of particular note, Bauman stated that she contested each and
every claim mentioned in her plan and that her statement of dispute
constituted her formal objection to each and every claim against her.
Additionally, she reiterated that she was electing to self-disburse any
4 payments on any claims that ultimately might be allowed over her
objections, that she rejected the trustee as a disbursing agent, and that she
would not make any plan payments unless and until each claims dispute
was resolved against her. She further indicated that any necessary
payments would be funded from whatever litigation recoveries she
obtained from her husband or others.
B. Wells Fargo’s plan objections.
Wells Fargo objected to Bauman’s plan.3 It noted that the plan
provided for no payments on account of its claim, for the debtor to act as
the disbursing agent, and excluded the trustee from administering the plan.
The court sustained Wells Fargo’s objections, but also granted Bauman
leave to amend. The court required Bauman to file her amended plan by
February 13, 2018.
C. The trustee’s plan objection and motion to dismiss.
The day after the hearing on Wells Fargo’s objections, January 18,
2018, David Skelton, the chapter 13 trustee, filed a lengthy objection to the
initial plan and also moved to dismiss the case. The objection and motion to
dismiss were noticed for hearing on February 28, 2018. As Skelton put it,
3 Actually, Wells Fargo filed two objections to the plan, each by a different counsel, within a day of each other. One plan objection pertained to a claim for roughly $167,000 arising from a loan secured by a senior deed of trust against Bauman’s residence on Albatross Street. The other plan objection pertained to a claim for roughly $240,000 arising from a line of credit, also secured by her Albatross Street residence.
5 dismissal was justified under § 1307(c)(1) for prejudicial delay and under
§ 1307(c)(4) for failure to timely commence plan payments. In addition,
Skelton said that dismissal was appropriate under §§ 521(a)(1)(B)(iv) and
(e)(2)(B) for failure to provide copies of payment advices and federal tax
returns.
As for Skelton’s plan objections, they were numerous. Generally
speaking, Skelton observed that Bauman failed to provide proof of the
amount and source of her income and failed to adequately provide for any
of her creditors. Skelton further noted that Bauman’s plan was internally
inconsistent and that her schedules and plan contained numerous
omissions and errors. Nor was the plan feasible, administrable, or
comprehensible. In particular, Skelton pointed to the provision requiring
him to disburse $3,200.00 per month in domestic support obligations to
Bauman. He also pointed to the provisions naming Bauman as the
disbursing agent and omitting any trustee’s fees. As Skelton additionally
noted, Bauman’s nonstandard provisions contemplated lots of litigation
but no payments for an indefinite period of time. In light of all of the
above, and in light of Bauman’s serial bankruptcy filings, Skelton asserted
that Bauman had not proposed her plan in good faith or for a legitimate
bankruptcy purpose.
A few days later, the Harbor View Villa Homeowners Association
(“Harbor View”) filed an objection to Bauman’s plan. Harbor View
6 asserted that it was a secured creditor, that the plan failed to deal with its
secured claim, and that the plan was not proposed in good faith.4 The
hearing on Harbor View’s objection also was scheduled for February 28,
2018.
D. Bauman’s response to Skelton’s plan objection and motion to dismiss.
On February 8, 2018, Bauman responded to Skelton’s plan objections
and motion to dismiss. Bauman contended that Skelton waived his
grounds for dismissal by not presenting any legal authority. She alternately
maintained that the dismissal motion was a contested matter, which
necessitated an evidentiary hearing because the contested matter presented
disputed factual issues.
She further asserted that her plan’s omnibus objection to all claims
meant that she did not need to make any payments to any creditor unless
and until the creditors’ claims were subsequently allowed. She also claimed
that she could self-disburse any and all necessary payments. According to
4 Per Bauman’s schedules and SOFA, her condominium unit on Albatross Street was her principal residence. She listed her condominium association as a former litigant and as a party to an executory contract with her. But Bauman did not list Harbor View as a creditor, disputed or otherwise. Nor was Harbor View mentioned in the body of Bauman’s form plan. Harbor View is mentioned for the first time in her nonstandard provisions. She only spoke about her prospective litigation against Harbor View as a potential source of future funds that she might eventually disburse to holders of allowed claims, if any. She did not deal with any liability she might have to Harbor View or propose any treatment for Harbor View’s claim.
7 her, Skelton did not need to be involved at all in the administration of her
case as chapter 13 trustee. She also maintained that she presented her 2016
tax return to Skelton at her second § 341(a) meeting of creditors, though she
did not provide any evidence to support this statement.
E. The amended plan.
Shortly thereafter, on February 13, 2018, Bauman filed amended
schedules and an amended chapter 13 plan. Bauman’s amended
documents raised as many concerns as her originals.5 This time she listed
the aggregate amount of her debt as exceeding $800,000.00 but still insisted
that all claims against her were disputed. Additionally, her amended
Schedule E/F listed only two nonpriority unsecured claims – her utility
company and divorce counsel. She listed both of these unsecured claims as
disputed and did not specify any amount for either claim.
Bauman also amended her Schedules I and J to restate her monthly
income and expenses. As to her monthly income, she revised her monthly
pension or retirement income to $3,600.00 but added an additional
$3,838.00 in monthly pension or retirement income for her nondebtor
spouse. To these amounts, Bauman also included an additional $20,412.00
5 For example, they listed the same three parcels of residential real property, but now disclosed that the house on Archer Street had been foreclosed prepetition. Furthermore, the listing and values of Bauman’s specific financial assets changed drastically. Whereas her original Schedule A/B listed the aggregate value of all of her financial assets as just over $21 million, her amended Schedule A/B listed the aggregate value of all of her financial assets as just under $176 million.
8 for “liquidate Wilbur & bank accts.” According to Bauman’s amended
Schedule J, her monthly expenses were $7,752.00, leaving a total of
$21,098.00 in monthly net income.
Bauman’s amended plan, however, still objected to all claims, still
asserted that she was entitled to act as the disbursing agent for her plan,
and still maintained that no payments needed to be made until each claim
was formally allowed. Bauman did include the following provision at
paragraph 2.5 for Additional Payments:
If the court orders debtor to pay unsecured creditors through the trustee, she will pay trustee monthly starting 30 days after husband’s secret accts have been transferred to debtor’s control. Except FTB, IRS and SD Tax will be paid its allowed priority claims at $500 a month, if approved.
In keeping with her plan proposals, Bauman never commenced
making any plan payments.
F. Proofs of claim filed against the estate.
While no creditor had filed a proof of claim when Bauman filed her
initial plan in October 2017, that situation had changed by the time she
filed her amended plan. By mid-November 2017, Wells Fargo and the FTB
already had filed their proofs of claim. Wells Fargo filed a secured claim in
the amount of $240,508.94, though it disclosed no arrears. The FTB filed a
claim in the total amount of $7,249.89, of which it claimed $5,077.58 was
entitled to priority under § 507(a)(8). In December, the San Diego County
9 Treasurer-Tax Collector filed a secured claim in the amount of $2,331.78.
Wells Fargo filed an additional secured claim in December for a separate
obligation in the amount of $166,735.34, and stated that $77,886.02 was due
and owing as of the petition date.
The day before Bauman filed her amended schedules and chapter 13
plan, her brother, Mel Marin, filed a secured claim in the amount of
$400,000. Two days after Bauman filed her amended plan, Harbor View
filed a secured claim in the amount of $105,072.31.
In January 2018, Bauman commenced separate adversary
proceedings against Harbor View and Wells Fargo seeking to disallow
their claims and various other relief including damages.
Finally, on March 7, 2018, the IRS filed its proof of claim in the total
amount of $53,043.47, of which it claimed $26,951.63 was entitled to
priority under § 507(a)(8).
G. Skelton’s case status report and his amended plan objection and motion to dismiss.
On February 21, 2018, Skelton filed a case status report. Two days
later he filed an amendment to his plan objection and motion to dismiss.
The documents largely overlap, though the amended plan objection and
motion to dismiss continued to request dismissal for failure to commence
plan payments and failure to provide tax returns under § 521(e)(2)(B),
among other grounds. In short, these documents pointed out that
10 Bauman’s amended schedules and plan did not fix the numerous problems
referenced in Skelton’s original plan objection and motion to dismiss.
Skelton particularly noted that Bauman still had neither made, nor
expressed any intent to make, any plan payments to the trustee in spite of
Skelton’s original plan objection and motion to dismiss.
As for the tax return, Skelton disputed Bauman’s claim that she
presented him with a copy of her 2016 federal tax return at the second
§ 341(a) meeting of creditors. He also explained that, even if the 2016 return
had been presented at that time, it was still untimely because it should
have been submitted at or before the time of the first § 341(a) meeting of
creditors held on January 12, 2018. Skelton further emphasized that
Bauman conditioned any recovery for her creditors on her success in her
litigation against her husband and other parties.
H. The hearing on Skelton’s plan objection and motion to dismiss.
On February 28, 2018, the bankruptcy court heard Skelton’s plan
objection and motion to dismiss. Bauman did not provide us with the
transcript from this hearing, but the minute order from that hearing
indicates that the court dismissed the bankruptcy principally based on
Bauman’s failure to provide her 2016 tax return or other proof of income to
Skelton, and on her failure to make any plan payments since the case was
commenced in October 2017. The court additionally noted that Bauman’s
plan as amended impermissibly proposed no plan payments to Skelton and
11 impermissibly contemplated that Bauman would self-administer her own
plan. The court further found that Bauman had been given ample
opportunity to address the various plan objections and had opposed the
operative plan objections in writing.
The bankruptcy court entered its order dismissing the case on March
7, 2018.6
I. Bauman’s Rule 9023 motion.
On March 21, 2018, Bauman filed her timely motion for rehearing and
reconsideration under Rule 9023 and Civil Rule 59. She attached to her
motion a declaration stating that she presented to Skelton copies of both
her 2015 and her 2016 tax returns at the second § 341(a) meeting of
creditors.7 She also claimed in her declaration that, at the February 28, 2018
plan objection hearing, she offered to have a witness testify regarding her
presentation of the tax returns to Skelton.
In support of her Rule 9023 motion, Bauman asserted that neither
Skelton nor the objecting creditors had standing to challenge her plan. She
argued that the court incorrectly treated the creditors’ disputed claims as if
they already had been allowed, and that disputed claims do not confer
6 On March 5, 2018, the court entered a separate order sustaining Harbor View’s plan objection. But Bauman’s appeal focuses on the case dismissal order. So shall we. 7 The contents of the declaration appear somewhat inconsistent with Bauman’s prior unsworn statements made in her response to Skelton’s plan objection, which only refer to the 2016 tax return.
12 either standing or any entitlement to immediate payment. Alternately, she
insisted that, even if she was wrong about the immediate need to make
plan payments, she had offered in her amended plan to commence making
payments if the court ordered her to do so.
She further contended that she was denied due process because she
was not afforded adequate time to respond to Skelton’s amended plan
objection and motion to dismiss. Along similar lines, she claimed that, by
separately sustaining Wells Fargo’s plan objections, the court lulled her
into believing that if she addressed Wells Fargo’s plan objections, she was
sufficiently in compliance with her chapter 13 duties.
Bauman offered additional arguments of lesser import. In part, she
relied on events that transpired in her prior, dismissed bankruptcy cases to
support her contention that the bankruptcy court should reconsider its
dismissal ruling. For instance, she posited that creditors who failed to file
proofs of claim in her prior, dismissed bankruptcy cases had waived their
right to be treated as creditors in her current bankruptcy case. She also
reasoned that, because the district court had vacated a case dismissal order
in one of her prior bankruptcy cases, the bankruptcy court’s current case
dismissal order was improper for those same reasons. Finally, according to
Bauman, the court cited to the wrong local rule in support of its concurrent
dismissal of Bauman’s related adversary proceedings.
The court held a hearing on the Rule 9023 motion on May 23, 2018.
13 Bauman did not appear. The court took the matter under submission on the
papers. On July 3, 2018, the bankruptcy court entered an order denying
Bauman’s motion. The order addressed at length, and rejected, virtually all
of Bauman’s arguments though the court agreed with Bauman that it had
inadvertently referenced the wrong local rule.
Bauman timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334
and 157(b)(2)(A) and (L). We have jurisdiction under 28 U.S.C. § 158. 8
ISSUES
1. Did the bankruptcy court commit reversible error when it dismissed
Bauman’s chapter 13 case?
2. Did the bankruptcy court abuse its discretion when it denied
Bauman’s Rule 9023 motion?
STANDARDS OF REVIEW
We review a decision to dismiss under § 1307(c)(4) for failure to
8 A BAP motions panel previously raised the issue of whether this appeal is moot because the bankruptcy court’s dismissal order did not restrict Bauman from commencing a new bankruptcy case. Indeed, Bauman filed a subsequent bankruptcy case, Case No. 18-02875-CL13, which the bankruptcy court dismissed on November 8, 2018, for failure to make plan payments, for bad faith, and for failure to propose a feasible plan. Even so, this appeal is not moot. The BAP has held that even the relatively minor detriment of having to pay a new case filing fee is sufficient to prevent a prior case dismissal order from becoming moot. See Tennant v. Rojas (In re Tennant), 318 B.R. 860, 868 (9th Cir. BAP 2004).
14 commence plan payments for an abuse of discretion. Ellsworth v. Lifescape
Med. Assocs., P.C. (In re Ellsworth), 455 B.R. 904, 914 (9th Cir. BAP 2011);
Sievers v. Green (In re Green), 64 B.R. 530, 530 (9th Cir. BAP 1986). We also
review for an abuse of discretion the bankruptcy court’s ruling on
Bauman’s Rule 9023 motion. Dicker v. Dye (In re Edelman), 237 B.R. 146, 150
(9th Cir. BAP 1999). The court abuses its discretion if it applies an incorrect
legal rule or its factual findings are clearly erroneous. TrafficSchool.com, Inc.
v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).
In contrast, dismissal under § 521(e)(2)(B) for failure to file a
prepetition tax return is mandatory unless the debtor demonstrates that the
failure was the result of circumstances beyond his or her control. In re
Rathbone, Case No. 11-29544-E-13, 2011 WL 10725949, at *3 (Bankr. E.D. Cal.
Sept. 19, 2011). We review the bankruptcy court’s interpretation of the
Code under the de novo standard of review, Hopkins v. Cerchione (In re
Cerchione), 414 B.R. 540, 545 (9th Cir. BAP 2009), and we review the court’s
factual findings for clear error, Retz v. Samson (In re Retz), 606 F.3d 1189,
1196 (9th Cir. 2010). “A court's factual determination is clearly erroneous if
it is illogical, implausible, or without support in the record.” Id. (citing
United States v. Hinkson, 585 F.3d 1247, 1261–62 & n.21 (9th Cir. 2009) (en
banc)).
15 DISCUSSION
A. The motion to dismiss did not deny Bauman due process.
Bauman first argues that the bankruptcy court violated her due
process rights. According to Bauman, the due process violation arose when
the court dismissed her case shortly after she complied with the court’s
prior order sustaining Wells Fargo’s plan objections and amended her plan.
She maintains that she was entitled to more time to respond to Skelton’s
amended plan objections, which were filed less than a week before the
hearing on the motion to dismiss. She further claims that the bankruptcy
court violated its own Local Rule – Local Rule 3015-5 – which requires that
an objection to the original plan “must be noticed for hearing at least 28
days after filing the objection.”
The notice requirement subsumed within the Constitution’s Due
Process Clause is a relatively minimal standard. Strickland v. U.S. Tr. (In re
Wojcik), 560 B.R. 763, 768–69 (9th Cir. BAP 2016). It merely requires “‘notice
reasonably calculated, under all the circumstances, to apprise interested
parties of the pendency of the action and afford them an opportunity to
present their objections.’” Id. (quoting Mullane v. Cent. Hanover Bank & Tr.
Co., 339 U.S. 306, 314 (1950)).
Bauman discounts the pending motion to dismiss filed on January 18,
2018, along with Skelton’s original plan objection. Skelton noticed the plan
objection and motion to dismiss to be heard on February 28, 2018, well
16 beyond the 28-day notice requirement in the Local Rule. Bauman had
ample notice and time to respond. In fact, she did file a lengthy written
response.
As for Skelton’s amended plan objection and motion to dismiss filed
on February 23, 2018, it did not materially change Skelton’s position on
Bauman’s plan or on case dismissal. Skelton sought dismissal of the
bankruptcy in both his initial and amended motions to dismiss. The
grounds for dismissal were identical. Consequently, the filing of Skelton’s
amended papers did not prejudice Bauman. Because the record establishes
that Bauman had “the opportunity to be heard at a meaningful time and in
a meaningful manner,” Mathews v. Eldridge, 424 U.S. 319, 333 (1976)
(citation and internal quotation marks omitted), Bauman’s due process
rights were not violated.
B. Bauman’s failure to make plan payments constituted cause to dismiss.
Bauman concedes that she never made any plan payments to the
trustee. Section 1326(a)(1) requires chapter 13 debtors to commence making
plan payments to the trustee within 30 days of filing their bankruptcy case.
See Zapata v. U.S. Tr. (In re Zapata), BAP No. CC–11–1184–PaKiNo, 2012 WL
4466283, at *5 (9th Cir. BAP Sept. 28, 2012); see also Keith M. Lundin,
Lundin On Chapter 13 § 44.1, at ¶ [1], https://lundinonchapter13.com (last
visited April 6, 2020) (“Without regard to when a plan is filed, every
17 Chapter 13 debtor must commence payments not later than 30 days after
filing the petition or seek a court order for relief from that requirement.”).
Section 1307(c)(4) provides that a bankruptcy court may dismiss a case for
failure to timely commence such payments. In re Zapata, 2012 WL 4466283,
at *5 (citing In re MacDonald, 118 F.3d 568, 570 (7th Cir. 1997)); accord,
Witkowski v. Boyajian (In re Witkowski), 523 B.R. 300, 305 (1st Cir. BAP 2014).
It necessarily follows that the bankruptcy court had the discretion to
dismiss Bauman’s bankruptcy case for failing to commence plan payments
by the date of the hearing on the motion to dismiss.
Bauman’s arguments on appeal are scattered. First, she directs us to
her amended plan and argues that she was willing to make plan payments
if directed to by the bankruptcy court. This argument misperceives the
affirmative requirement imposed upon chapter 13 debtors by § 1326(a)(1)
to begin making plan payments within 30 days of their bankruptcy filing.
Alternatively, § 1326(a)(1) enables a debtor to obtain an order from the
court to alter this requirement. Here, Bauman neither made plan payments
nor sought an order from the court excusing such payments.
Second, Bauman contends that no plan payments were required
because no creditor had established that it held an allowed claim. Bauman
directs us to her general statement of dispute challenging all creditors’
claims included as a nonstandard provision in both her initial and
amended plans. As the bankruptcy court pointed out in its order denying
18 her Rule 9023 motion, Bauman’s argument misconstrues the claims
allowance process.
Rule 3007 governs objections to claims. It provides that “[a]n
objection to the allowance of a claim and a notice of objection that
substantially conforms to the appropriate Official Form shall be filed and
served at least 30 days before any scheduled hearing on the objection or
any deadline for the claimant to request a hearing.” The rule further
provides for specific service of an objection to any claims filed by the
United States or an insured depository institution. Absent objection, a
timely filed proof of claim is deemed allowed. § 502(a). The creditor
holding the allowed claim does not need to take any further action in order
to participate in the proposed chapter 13 distribution. Rule 3021.
Bauman failed to comply with any of these requirements. In support
of her argument, Bauman primarily relies on Litton Loan Servicing LP v.
Garvida (In re Garvida), 347 B.R. 697, 704 (9th Cir. BAP 2006), for the
proposition that “a creditor’s claim” may be objected to through a
proposed plan if the subject creditor is given full and proper notice. Id. But
Garvida never says that a debtor can satisfy Rule 3007 as to each and every
creditor in their case by filing a generalized, blanket objection to all claims.
To the contrary, Garvida states that caution must be exercised whenever
“ersatz procedure” is used to object to claims, in order to ensure that each
creditor is given the “specific notice” and the one-on-one opportunity to
19 litigate contemplated by Rule 3007. Id. (citing Varela v. Dynamic Brokers, Inc.
(In re Dynamic Brokers, Inc.), 293 B.R. 489, 497–500 (9th Cir. BAP 2003)).
Alternately, Bauman claims that she did file formal claim objections.
But she only cites to the two adversary proceedings she commenced prior
to the dismissal hearing: one against Wells Fargo and the other against
Harbor View. Assuming that these adversary complaints subsumed claim
objections, see Rule 3007(d), this still means that Bauman never properly
filed and served specific objections to other proofs of claim, including those
filed by the IRS and FTB, which included priority and unsecured
components. Indeed, Bauman’s amended plan committed to pay at least
the priority components of these creditors’ claims. This required Bauman to
commence plan payments within 30 days of her bankruptcy filing.
Bauman further argues that she was not required to make plan
payments to the trustee because she elected to disburse plan payments
herself. Both her initial and amended plan sought to write the chapter 13
trustee out of her bankruptcy. She contends that Cohen v. Lopez (In re Lopez),
372 B.R. 40 (9th Cir. BAP 2007), aff’d and adopted, 550 F.3d 1202 (9th Cir.
2008), supports her position. Lopez acknowledged that “the power to make
payments in Chapter 13 directly to creditors has never been in doubt. The
problem, however, lies in setting proper boundaries to the power contained
in Section 1326(c).” Id. at 46 (citation omitted). The debtor in Lopez
committed to make plan payments to the trustee for all arrears on his
20 secured debt, his delinquent property taxes, priority debt to the California
Employment Development Department, his attorney’s fees, and the
trustee’s fee. Id. at 42. He was, however, permitted to pay directly debts
coming due postpetition to secured creditors and the Orange County Tax
Collector. Id. at 42-43.
As in Lopez, chapter 13 debtors are most often permitted to pay
secured creditors directly to maintain their postpetition obligations. See,
e.g., In re Stinebaugh, Case No. 13-20447-TLM, 2013 WL 5883765, at *3
(Bankr. D. Idaho Oct. 30, 2013) (“Lopez validated the cure of prepetition
defaults to a secured creditor by a chapter 13 debtor’s plan payments
disbursed by the trustee . . . , but with the post-petition ongoing payments
made directly by the debtor, bypassing the trustee and the trustee’s fee.”).
Debtors do not, however, have an absolute right to make direct payments
to all creditors. See Giesbrecht v. Fitzgerald (In re Giesbrecht), 429 B.R. 682,
690-91 (9th Cir. BAP 2010) (“Bankruptcy courts may require that payments
be made through the plan based on specific factors or reasons such as
administrative efficiency, tracking of payments, fairness and treatment of
creditors, and the determination that there is a reduction of plan failure
when all payments are made through the plan.”). Bauman points to no case
that has permitted a chapter 13 debtor to excise the trustee and make all
payments directly to creditors. Rather, as a leading commentator on
chapter 13 notes, “[t]hough the separate classification of some fully secured
21 claims for direct payment by the debtor has been permitted, most courts
refuse the separate classification of unsecured claims for payment directly
by the debtor.” Lundin, supra, § 89.1, at ¶ [2] (emphasis in original).
Lopez does not provide Bauman with a sweeping authorization to
self-disburse under a chapter 13 plan as she contends. It does not permit a
chapter 13 debtor to avoid making any plan payments simply because she
elects to pay all of her creditors directly. Bauman may not usurp the
chapter 13 trustee’s statutory role. Among other things, the trustee has
many of the same financial oversight and administrative duties as a
chapter 7 trustee has. See § 1302(b)(1). Furthermore, the chapter 13 trustee
must “ensure that the debtor commences making timely payments under
section 1326 of this title.” § 1302(b)(5); see also Lundin, supra, § 53.9, at ¶ [1].
Permitting a debtor to make all chapter 13 payments outside of the plan
would undermine the trustee’s ability to carry out these duties or render
them impracticable. See id. at § 44.6, at ¶ [6] (“Direct payments by a debtor
to a creditor are difficult or impossible to account for. Debtors don’t keep
adequate records. Creditors are often incorporeal and have no obligation to
report the receipt of payments to Chapter 13 trustees. There is no ready
mechanism for informing the Chapter 13 trustee exactly what payments
have been made or how the money was allocated before the trustee must
administer a confirmed plan.”).
Unlike the debtors in Lopez and Giesbrecht, who sought merely to
22 continue making their recurring postpetition payments directly to their
secured creditors, Bauman has never articulated any reason justifying her
proposal to pay all of her creditors directly. At bottom, she was required to
make some plan payment to the trustee and to begin making those
payments by November 16, 2017. She failed to do so.
Courts have rejected interpretations of § 1326(a)(1) that would permit
debtors to avoid or condition the commencement of their payments under
§ 1326(a)(1). See, e.g., In re Burgos, 476 B.R. 107, 112 (Bankr. S.D.N.Y. 2012)
(indicating that failure to file plan did not excuse debtor from commencing
plan payments as required by § 1326(a)(1) and holding that failure to
commence plan payments can be sufficient cause, by itself, to justify
dismissal under § 1307(c)(4)); In re Nowak, 143 B.R. 154, 159–60 (Bankr. N.D.
Ill. 1992) (“Clearly, chapter 13 was not enacted to grant debtors a hiatus
from paying bills while their liability is adjudicated and a payment plan
worked out.”). Bauman’s proposed plans attempted to do just that by
reciting a generalized dispute as to all of her claims and by electing to pay
her creditors directly to the exclusion of the chapter 13 trustee’s
involvement and participation. Her proposed plans did not absolve her of
the duty to commence plan payments under § 1326(a)(1). After several
months of failing to make plan payments while enjoying the automatic
stay, dismissal of her case under § 1307(c)(4) was appropriate.
23 C. Bauman’s failure to provide her 2016 tax return also justified dismissal.
Alternately, the court’s dismissal was sufficiently supported by
Bauman’s failure to submit to Skelton her 2016 tax return. Section
521(e)(2)(A) required Bauman to submit this return to the trustee no later
than seven days before her first meeting of creditors, which was held on
November 17, 2017. In turn, § 521(e)(2)(B) required the bankruptcy court to
dismiss the case when Bauman failed to comply, unless she demonstrated
that her “failure to so comply [was] due to circumstances beyond the
control of the debtor.” § 521(e)(2)(B); see also In re Rathbone, 2011 WL
10725949, at *3 (upholding dismissal under § 521(e)(2)(B)); In re Walker,
Case No. 06-10879, 2006 WL 4671832, at *2 (Bankr. D. Md. July 20, 2006)
(ordering case dismissed based on debtor’s failure to provide tax return).
As of January 18, 2018, when Skelton filed his initial plan objection
and motion to dismiss, he asserted that Bauman had failed to provide him
with her 2016 tax return. In her February 8, 2018 response Bauman claimed,
without submitting any proof, that she presented the 2016 tax return to
Skelton at the continued § 341(a) meeting of creditors held on January 12,
2018. But the original meeting of creditors was scheduled for November 17,
2017. Bauman has never attempted to claim that she timely submitted the
return in compliance with § 521(e)(2)(A) or that she failed to do so for
reasons beyond her control as contemplated in § 521(e)(2)(B).
24 With her Rule 9023 motion, Bauman submitted a declaration in which
she swore that she presented the tax return to Skelton at the continued
meeting of creditors on January 12, 2018. We separately deal with the Rule
9023 motion below. But it suffices to say here that, even if the court had
accepted this belated evidence as timely presented and credited its
contents, the 2016 return still was untimely. And Bauman never offered
any excuse for her noncompliance. This was a sufficient ground for
dismissal based on §§ 521(e)(2)(A) and (B). In re Walker, 2006 WL 4671832,
at *2.
D. None of Bauman’s other arguments justify reversal.
Bauman advances several other arguments, but none of them justify
reversal. Bauman claims that the district court’s decision in Bauman v.
Billingslea (In re Bauman), Case Nos. 12cv2476-IEG (RBB) & 12cv2482-IEG
(BLM), 2013 WL 4679987 (S.D. Cal. 2013), mandates reversal. But her
reliance on Billingslea is misplaced. Billingslea vacated the bankruptcy
court’s dismissal order in a prior bankruptcy under § 1307(c)(5) based on
Bauman’s failure to address plan deficiencies in that case – deficiencies that
the bankruptcy court never adequately apprised her of. Id. at *2. Nor did
Bauman have in Billingslea “an opportunity to either argue that the plan
was not deficient or to correct the plan to meet the perceived problems.” Id.
(quoting Minkes v. LaBarge (In re Minkes), 237 B.R. 476, 478–79 (8th Cir. BAP
1999)). Here, in contrast, the bankruptcy court granted dismissal based on §
25 1307(c)(4) for failure to commence plan payments and under § 521(e)(2)(B)
for failure to timely submit her 2016 tax return. As held above, Bauman
had ample time to respond to these grounds for dismissal, and she did
respond in writing. Thus, the prior decision in Billingslea is inapposite to
this appeal.
Bauman next argues that Skelton lacked standing. 9 She is simply
wrong. Any “party in interest” may seek conversion or dismissal of a
chapter 13 bankruptcy under § 1307(c). The phrase “party in interest” is
“widely understood by judges, practitioners, and commentators to include
the standing trustee even though there is no specific definition for party in
interest in chapter 13, as there is in chapter 11.” In re Slaughter, 191 B.R. 135,
144 (Bankr. W.D. Wis. 1995) (collecting authorities). This is because chapter
13 trustees have an independent statutory duty to exercise financial
oversight over the case and the specific duty to appear and be heard
regarding plan issues. See § 1302; Andrews v. Loheit (In re Andrews), 49 F.3d
1404, 1406–07 (9th Cir. 1995). Thus, it has long been established that a
chapter 13 trustee has standing as a “party in interest” to seek dismissal
under § 1307(c). See Lundin, supra, § 53.14, at ¶ [1] (listing cases).
In contrast, § 521(e)(2)(B) does not specify who has standing when
9 Bauman also challenges the standing of any of her creditors to object to her plan. But this argument could not possibly justify reversal of the order on appeal, which granted Skelton’s motion to dismiss.
26 the debtor does not submit tax returns to the trustee as required under
§ 521(e)(2)(A). The statute merely says that the court “shall” dismiss the
case unless the debtor establishes that noncompliance was the result of
circumstances beyond his or her control. Nonetheless, the role of the
trustee in the chapter 13 case in general, and in the submission of tax
returns more specifically, ineluctably leads to the conclusion that the
chapter 13 trustee must be able to bring before the court a request for
dismissal under § 521(e)(2)(B). To hold otherwise would undermine the
clear statutory scheme and the central role of the chapter 13 trustee. See
generally In re Escarcega, 573 B.R. 219, 234 (9th Cir. BAP 2017) (discussing
need for chapter 13 trustees’ involvement in the confirmation process).
The only other issue we need to address is the denial of Bauman’s
motion under Rule 9023. Bauman’s principal argument pertaining to her
Rule 9023 motion concerns her declaration submitted with the motion in
which she stated that she presented her tax returns to Skelton at the
continued meeting of creditors.10 According to Bauman, the court ignored
her declaration. But the court actually held that she did not present any
newly discovered evidence. This was not error.
To qualify as newly discovered evidence under Rule 9023 (which
10 Skelton submitted his own declaration in opposition to the Rule 9023 motion and stated that he did not receive Bauman’s tax return until the February 28, 2018 hearing on his motion to dismiss.
27 incorporates Civil Rule 59(e)), Bauman needed to demonstrate: “(1) the
evidence was discovered after trial, (2) the exercise of due diligence would
not have resulted in the evidence being discovered at an earlier stage and
(3) the newly discovered evidence is of such magnitude that production of
it earlier would likely have changed the outcome of the case.” Defenders of
Wildlife v. Bernal, 204 F.3d 920, 929 (9th Cir. 2000). On this record, it is
obvious that Bauman could not meet any of these three standards. She
certainly could have presented her own declaration testimony before the
court ruled on the dismissal motion. And she clearly knew what transpired
at the continued meeting of creditors, as she attended it.
Equally important, this evidence would not have changed the
outcome of the dismissal motion. As explained above, even if the court had
accepted this evidence and found it credible, it merely shows that Bauman
submitted the required tax return more than two months after it was due
pursuant to § 521(e)(2)(A). Nor did Bauman ever tender any evidence of
any circumstances beyond her control that prevented her from timely
submitting the return, as contemplated by § 521(e)(2)(B).
Bauman makes several other arguments in her papers. For instance,
she assails the court for citing Local Rule 7041-3 instead of Local Rule 7041-
1 in support of its concurrent dismissal of her related adversary
proceedings. She further complains that the bankruptcy court should have
ordered the turnover of her husband’s financial records. She also discusses
28 at length events that transpired and rulings that were made in her prior
bankruptcy cases. Finally, she contends that we should order the presiding
bankruptcy judge to recuse himself even though she never brought a
recusal motion in the underlying bankruptcy case. None of these points
have any bearing on the orders appealed and do not establish that the
bankruptcy court erred when it dismissed her case or denied Bauman’s
Rule 9023 motion. Accordingly, we need not further address these points in
order to dispose of this appeal.
CONCLUSION
For the reasons set forth above, we AFFIRM the bankruptcy court’s
case dismissal order and its order denying Bauman’s motion under Rule
9023.