FILED DEC 06 2016 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL 2 OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 6 In re: ) BAP No. WW-15-1377-JuTaKu ) 7 SHAUN MICHEIL MARTIN and ) Bk. No. 13-42847-DBL PATRICIA MAUREEN MCCARTHY, ) 8 ) Debtors. ) 9 ______________________________) FEARGHAL MCCARTHY, ) 10 ) Appellant, ) 11 ) v. ) M E M O R A N D U M* 12 ) SHAUN MICHEIL MARTIN; PATRICIA) 13 MAUREEN MCCARTHY; MICHAEL G. ) MALAIER, Chapter 13 Trustee, ) 14 ) Appellees. ) 15 ______________________________) 16 Argued and Submitted on November 17, 2016 17 at Pasadena, California 18 Filed - December 6, 2016 19 Appeal from the United States Bankruptcy Court for the Western District of Washington 20 Honorable Brian D. Lynch, Chief Bankruptcy Judge, Presiding 21 ________________________ 22 Appearances: Appellant Fearghal McCarthy argued pro se. ___________________________ 23 Before: JURY, TAYLOR, and KURTZ, Bankruptcy Judges. 24 25 26 * This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 28 See 9th Cir. BAP Rule 8013-1.
-1- 1 Appellant Fearghal McCarthy (Mr. McCarthy) appeals from the 2 bankruptcy court’s order dismissing the chapter 131 case of 3 debtors, Shaun Micheil Martin (Mr. Martin) and Patricia McCarthy 4 (Ms. McCarthy) (collectively, Debtors),2 without prejudice. On 5 appeal, Mr. McCarthy assigns error to the bankruptcy court’s 6 decision to dismiss Debtors’ case without prejudice, contending 7 that the underlying facts supported dismissal with prejudice. 8 For the reasons stated below, we discern no error and AFFIRM. 9 I. FACTS 10 A. Prepetition Events 11 In 2005, the McCarthys were involved in a contentious and 12 acrimonious divorce proceeding. In October 2006, while the 13 divorce was pending, Ms. McCarthy filed a chapter 7 bankruptcy 14 petition and obtained a discharge. The rancor evident in the 15 divorce persisted in the bankruptcy case. In January 2010, a 16 final divorce decree was entered. The state court appointed 17 Mr. McCarthy as custodian of the couple’s two sons and ordered 18 Ms. McCarthy to pay child support and provide health insurance 19 for the children. During the divorce proceedings, Mr. McCarthy 20 moved for contempt numerous times resulting in over $30,000 in 21 sanctions against Ms. McCarthy. 22 In April 2013, Mr. McCarthy applied for a judgment based on 23 a promissory note for $225,000 that Ms. McCarthy had signed as 24 1 Unless otherwise indicated, all chapter and section 25 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 26 “Rule” references are to the Federal Rules of Bankruptcy Procedure. 27 2 Neither Debtors nor the chapter 13 trustee have appeared 28 in this appeal.
-2- 1 part of the dissolution proceeding. While Mr. McCarthy’s motion
2 for judgment was pending, Debtors purchased a new 2013 Dodge
3 Caravan minivan for $20,794 which they financed at 21% interest.
4 Mr. McCarthy obtained entry of $224,000 judgment on April 24,
5 2013. He then threatened to garnish Ms. McCarthy’s wages.
6 B. Bankruptcy Events
7 On April 28, 2013, Debtors filed their chapter 13 petition
8 to prevent any garnishments based on the judgment. Debtors’
9 Schedule F showed approximately $350,000 in unsecured debt,
10 including Mr. McCarthy’s $224,000 judgment.3 Ms. McCarthy was
11 also delinquent on her support payments. Debtors’ chapter 13
12 plan stated that they would make monthly payments of $2,000 for
13 thirty-six months and that they elected not to contribute their
14 tax refunds. Secured debt payments were $300 monthly, payable
15 on the Dodge minivan and a 2008 Kia Spectra (Kia).
16 1. Debtors First Amended Plan
17 Debtors filed a first amended plan dated May 31, 2013.
18 This plan raised the monthly payment to $2,104 with the
19 commitment period still at thirty-six months. Debtors also
20 proposed to use their tax refunds to fund the plan, with the
21 exception of the first $1,400 of each refund. The plan also
22 showed monthly domestic support payments to Mr. McCarthy of
23 $1,000 and raised the monthly payments on their secured car debt
24 25 3 Mr. McCarthy asserts that the debts listed in Schedule F 26 are overstated by $91,583, consisting of a mortgage debt that was discharged in Ms. McCarthy’s chapter 7 case. He further contends 27 the scheduled debts are understated because the $30,000 in sanctions Mr. McCarthy obtained in the divorce proceedings was 28 not listed.
-3- 1 to $800. 2 Mr. McCarthy objected to the confirmation of Debtors’ 3 amended plan, contending that Debtors’ Form B22C failed to 4 accurately report their household size (three versus five) and 5 their average monthly income. He also alleged that Debtors’ 6 plan was proposed in bad faith because they purchased the new 7 minivan prior to filing their bankruptcy case and accelerated 8 payments in the plan on that debt. Mr. McCarthy further argued 9 that Debtors’ living expenses included excessive or unwarranted 10 amounts and complained that the plan failed to commit Debtors’ 11 federal and state income tax refunds in their entirety.4 12 2. Confirmation of Debtors’ Second Amended Plan 13 About a week before the hearing on Mr. McCarthy’s objection 14 to Debtors’ first amended plan, Debtors filed their second 15 amended plan dated July 30, 2013, causing the evidentiary 16 hearing on confirmation to be rescheduled. Debtors also amended 17 their Schedules I and J. Amended Schedule I showed that 18 Mr. Martin was unemployed and listed his income as between 19 $1,800-$2,200 a month whereas the previous Schedule I showed 20 Mr. Martin’s income as $1,004 per month. The amended Form B22C 21 reduced Debtors’ household size to three, noted that Debtors 22 were above median income with negative disposable income, and 23 showed the applicable commitment period as five years. 24 The second amended plan indicated monthly payments of 25 $2,104 for four months and $2500 thereafter for a term of sixty 26 27 4 Mr. McCarthy, an accountant by trade, continued to raise 28 issues related to Debtors’ tax returns throughout this case.
-4- 1 months. Debtors’ treatment of their tax refunds stayed the 2 same, but they lowered the payment on the minivan to the 3 contractual rate of $519. The plan showed that Debtors would 4 pay at least $95,081.23 to allowed nonpriority unsecured claims 5 for a return of 27% on allowed claims. 6 Mr. McCarthy objected to Debtors’ second amended plan, 7 alleging that the plan was not proposed in good faith due to 8 Debtors’ purchase of the minivan prior to their filing. 9 Although some expenses had been adjusted in their amended 10 Schedule J, Mr. McCarthy continued to object to certain expenses 11 as excessive or unwarranted. He further asserted that Debtors 12 offered no reason or authority for their retention of the first 13 $1,400 of any tax refund. He also pointed out that, although 14 Debtors acknowledged a prepetition support payment default of 15 over $11,000, they failed to make a provision for payment of 16 that debt in the plan. Finally, Mr. McCarthy complained that 17 Debtors’ Schedule I and J were misleading. 18 The chapter 13 trustee submitted a brief in support of 19 confirmation. 20 On November 6, 2013, the bankruptcy court held an 21 evidentiary hearing on confirmation. Mr. Martin, Ms. McCarthy, 22 and Mr. McCarthy testified and numerous exhibits were offered 23 into evidence. The bankruptcy court took the matter under 24 advisement. 25 On November 21, 2013, the bankruptcy court issued an order 26 setting forth its findings of fact and conclusions of law. The 27 court overruled Mr. McCarthy’s objections and confirmed Debtors’ 28
-5- 1 second amended plan.5 The court found that Debtors had filed 2 their petition in good faith after applying the factors set 3 forth in Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 1224 4 (9th Cir. 1999). The court also found the plan was proposed in 5 good faith and committed substantially more than their projected 6 disposable income for the sixty month commitment period of the 7 plan. 8 In addressing Mr. McCarthy’s bad faith argument based on 9 the purchase of the minivan, the court concluded that Debtors’ 10 purchase did not indicate a lack of good faith when they 11 successfully modified the interest rate from over 20% down to 6% 12 and demonstrated that their family needed a reliable car. 13 The bankruptcy court also found that the discrepancies in 14 the schedules and Form B22C were mistakes primarily due to the 15 sloppiness of Debtors’ attorney and Debtors. The court opined 16 that neither understood the basic strategy of chapter 13 17 practice applicable to Debtors’ situation. The court observed 18 that had Debtors’ attorney and Debtors properly analyzed the 19 case, Debtors would have rushed to claim they were above median 20 debtors for two reasons. 21 First, once they corrected the household size to three it 22 was obvious that their monthly projected disposable income was 23 $1080 in the negative. According to the court, for purposes of 24 25 5 Mr. McCarthy also filed a motion to dismiss Debtors’ case 26 with prejudice and an order shortening time to have the motion heard the same day as the evidentiary hearing on confirmation. 27 The bankruptcy court denied the order shortening time without prejudice to Mr. McCarthy’s refiling of the motion and scheduling 28 a hearing in due course.
-6- 1 the disposable income test, Debtors would have no obligation to 2 pay any money to nonpriority unsecured creditors such as the 3 claim filed by Mr. McCarthy for the $224,000 judgment and the 4 vast majority of the over $30,000 in monetary sanctions arising 5 out of the dissolution. 6 Second, the court noted that at the time Debtors filed 7 their case, there was no applicable commitment period for 8 debtors with negative income under the holding in Maney v. 9 Kagenveama (In re Kagenveama), 541 F.3d 868 (9th Cir. 2008). 10 Accordingly, the bankruptcy court concluded: “Instead of running 11 away from status as above median debtors, they should have been 12 embracing it, as they could have been arguing for an even 13 shorter plan.” 14 In the end, the bankruptcy court decided that the facts 15 showed Debtors were not manipulating the schedules or their 16 income to their advantage but, rather, that they and their 17 attorney did not handle the case competently from the outset. 18 The court also found that given the size of the proposed 19 plan payment, the budget submitted in the most recent schedules, 20 and the substantial disbursement to unsecured creditors, 21 Debtors’ proposal to keep the first $1,400 of any tax refund was 22 reasonable and prudent. 23 3. Postconfirmation Modification: Third Amended Plan 24 Debtors filed a third amended plan dated April 3, 2014, and 25 requested modification of their confirmed plan based on 26 increased income and expenses. The third amended plan showed 27 plan payments in the amount of $23,224.68 through March 2014 and 28 $2900 per month commencing May 1, 2014. The third amended plan
-7- 1 also indicated that Debtors would pay $109,000 to unsecured 2 creditors for a return of 30% of their allowed claims. 3 On April 29, 2014, Mr. McCarthy filed an objection to 4 Debtors’ third amended plan. There, he stated that he received 5 information that Mr. Martin had returned to regular, union 6 assignment work shortly following the November 6, 2013 hearing 7 on confirmation and that he had been regularly employed 8 thereafter. Mr. McCarthy informed the court that he told the 9 chapter 13 trustee about this development but that the trustee 10 did not seek payroll information from Mr. Martin. According to 11 Mr. McCarthy, Mr. Martin’s income was a moving target. 12 Mr. McCarthy also argued that Debtors’ increased income and 13 reasonable expenses showed an after-tax income of $1,790 per 14 month; yet, Debtors proposed only a $400 per month increase in 15 the plan payment. Mr. McCarthy further asserted that there was 16 no justification or explanation as to why the difference of 17 $1,390 was not included in the plan. Finally, Mr. McCarthy 18 objected to numerous increased expenses relating to cell phones, 19 food, clothing and personal care. 20 The court scheduled an evidentiary hearing for September 3, 21 2014. Mr. McCarthy moved for a continuance and to compel 22 discovery related to Debtors’ income and expenses. On 23 September 2, 2014, Debtors filed a notice withdrawing the motion 24 to modify their confirmed plan. Eight days later, the 25 bankruptcy court ordered a 2004 examination of Mr. Martin’s 26 employer, Western Partitions, and Ms. McCarthy’s employer, 27 DM2 Software. In response, Debtors filed fifth amended 28 Schedules I and J stating higher income for Mr. Martin.
-8- 1 4. Postconfirmation Modification: Fourth Amended Plan 2 Debtors filed a fourth amended plan dated September 27, 3 2014, and again moved to modify their plan due to increased 4 income and expenses. This plan showed payments in the amount of 5 $40,209.28 through September 2014, $633 per month for six months 6 commencing October 2014, and $2300 per month thereafter. The 7 plan indicated that Debtors would pay $73,402 to nonpriority 8 unsecured claims for a return of 27.3% on their allowed claims. 9 Debtors also moved for permission to incur debt for the 10 purchase of a second new car. They declared that the Kia was 11 not driveable and disclosed that they sold the car to a repair 12 shop for $2,000. The sale price, according to Debtors, was the 13 amount Ms. McCarthy was offered for the Kia as a trade-in. 14 Mr. McCarthy again objected to Debtors’ fourth amended 15 plan. He complained that Debtors’ amended Schedule J increased 16 most of their expenses without showing any change in 17 circumstances to support the increases. Mr. McCarthy also 18 objected to Mr. Martin’s child support obligation which was 19 listed as an expense in an amended Schedule J for the first 20 time. Finally, Mr. McCarthy argued that Debtors did not need a 21 another new vehicle. 22 The chapter 13 trustee supported Debtors’ requested 23 modification. The trustee noted that Debtors voluntarily 24 increased their monthly plan payment (from $2,307.00 to 25 $2,676.92) in May 2014, following their disclosure of increased 26 income. The trustee also supported Debtors’ request to purchase 27 a new car. Finally, the trustee informed the court that 28 Debtors’ request to temporarily allocate $1,667.00 per month for
-9- 1 appellate attorney fees was necessitated by Mr. McCarthy’s 2 conduct because the underlying appeal was being prosecuted by 3 him and not by Debtors. 4 On November 4, 2014, the bankruptcy court held a hearing on 5 the matter. The bankruptcy court allowed a reduction in the 6 plan payments, granted Debtors’ request to employ an appellate 7 attorney for the pending state court appeal, and allowed 8 Mr. Martin to make his child support payment. The bankruptcy 9 court made no rulings with respect to other issues raised by 10 Mr. McCarthy relating to Debtors’ expenses. Those issues were 11 reserved for a later evidentiary hearing. 12 On November 20, 2014, the bankruptcy court entered an order 13 modifying Debtors’ chapter 13 plan. The court ordered that on 14 the effective date of the plan, October 1, 2014, their monthly 15 payment obligation was reduced to $1124 per month to reflect 16 Debtors’ ongoing legal fee expenses. The court further ordered 17 that Debtors could submit a request for a vehicle purchase 18 which, upon trustee approval, could result in further reduction 19 of Debtors’ plan payment obligation. Finally, the court ordered 20 that Mr. Martin’s ongoing child support obligation was approved 21 as an allowable expense.6 22 Debtors subsequently obtained a court order authorizing 23 them to purchase a new vehicle. 24 5. Mr. McCarthy’s Motion to Dismiss 25 On December 31, 2014, Mr. McCarthy filed an updated motion 26 27 6 According to Mr. Martin, the state court ordered him to 28 pay $1,328 a month in child support effective October 1, 2014.
-10- 1 to dismiss Debtors’ case with prejudice, alleging bad faith. He 2 argued that (1) Debtors misrepresented facts in their petition 3 and supporting schedules; (2) Debtors commenced the case to 4 defeat state court litigation, i.e., enforcement of the $224,000 5 judgment; (3) Debtors exhibited bad faith in the continuing 6 manipulation of their income and living expenses schedules, 7 seeking to minimize their apparent, disposable income 8 commitment; (4) Debtors disposed of personal property, the Kia, 9 without court authority and without a timely accounting of such 10 disposal to the court; (5) Debtors concealed Mr. Martin’s income 11 from the court and the trustee; (6) Debtors routinely inflated 12 and misstated their Schedule J living expenses; (7) Debtors 13 evaded discovery of their income and expenses; (8) Debtors 14 appeared to have filed a materially false Form 1040 income tax 15 return for 2013; and (8) Ms. McCarthy improperly used her 16 company credit card for personal expenses which increased her 17 debt. Based on these allegations, Mr. McCarthy argued that 18 Debtors’ conduct was “egregious”, warranting dismissal of their 19 case with prejudice under the factors set forth in Leavitt. 20 The chapter 13 trustee supported dismissal if the 21 allegations were proved at an evidentiary hearing. 22 In opposition, Debtors maintained that most of the issues 23 raised by Mr. McCarthy were previously adjudicated. They 24 further explained that Mr. Martin was unemployed at the time of 25 confirmation and receiving unemployment benefits. They 26 explained that his income increased postconfirmation because 27 Mr. Martin was assigned to a project in Beaverton, Oregon. At 28 the beginning of December 2013 he was laid off for one week and
-11- 1 then dispatched for work in Pullman, Washington and then to 2 Moscow, Idaho. Debtors maintained that they provided evidence 3 of Mr. Martin’s income to the trustee on February 24, 2014. 4 Debtors also explained their “alleged” fraudulent tax 5 returns contained errors and had been corrected by a CPA. They 6 further argued that Ms. McCarthy’s use of her company’s credit 7 card was authorized as her employer allowed her to use the card 8 for non-business expenses during her travel and those amounts 9 were reimbursed to her employer. 10 As explained below, Mr. McCarthy’s motion to dismiss was 11 scheduled for an evidentiary hearing at the same time as 12 Debtors’ request to further modify their confirmed plan and to 13 resolve outstanding issues related to their fourth amended plan. 14 6. Postconfirmation Modification: Fifth Amended Plan 15 Debtors filed a fifth amended plan dated March 23, 2015, 16 based on increased income and expenses. They also filed amended 17 Schedules I and J. In the fifth amended plan, they proposed 18 payments of $1124 for six months, then $1,044 for two months, 19 and then had payments resume at at $2711 per month. This plan 20 showed that Debtors would pay at least $85,665 to nonpriority 21 unsecured claims which was approximately 32.43% of their allowed 22 claims. 23 On April 28, 2015, Mr. McCarthy objected to the fifth 24 amended plan on several grounds including, among others, that 25 Debtors were not acting in good faith in either the filing of 26 their case or the proposal of their modified plan. He further 27 complained that Debtors had understated Mr. Martin’s income and 28 Ms. McCarthy’s earnings by omitting bonus payments made to her
-12- 1 which averaged $500 per month from December 2013 through January 2 2015. Finally, he pointed out that Debtors’ 2013 and 2014 tax 3 returns showed that Debtors improperly took deductions. As a 4 result, Mr. McCarthy asserted that Debtors owed over $23,000 in 5 taxes for those years. Mr. McCarthy also alleged that Debtors 6 intentionally under-withheld taxes and spent the extra income 7 which, in turn, created a large postpetition obligation that 8 diverted disposable income from their creditors. 9 7. The Evidentiary Hearing 10 An evidentiary hearing on Mr. McCarthy’s motion to dismiss 11 and Debtors’ motion to modify their plan commenced on May 6, 12 2015, and continued on September 1-2, 2015. At the May hearing, 13 Ms. McCarthy testified concerning various issues including her 14 use of her employer’s company credit card for personal expenses 15 and discrepancies on her tax returns.7 16 Mr. Ford, the owner of the repair shop that purchased the 17 Kia, also testified. He testified that the car was not safe to 18 drive, that he quoted a price of $1,500 minimum to make the car 19 safe, and that he purchased the car for $2,000 and sold it for 20 $4,700 once it was in salable condition. To make it salable, 21 Mr. Ford replaced the brakes and put two new tires on the car. 22 Mr. Burkard, a fifty percent owner of DM2 Software, Inc., 23 testified that there was no prohibition to Ms. McCarthy using 24 the company credit card for personal expenses at the time she 25 incurred those expenses. Since then, the company changed its 26 27 7 The transcripts contain only excerpts of the witness’s 28 testimony.
-13- 1 policy and now prohibits employees from charging non-business 2 expenses on the credit card. He also testified as to the amount 3 of Ms. McCarthy’s bonuses and indicated that they were likely to 4 continue. 5 Finally, Mr. Erickson, the CPA who prepared Debtors’ tax 6 returns, testified as to how he identified errors on Debtors’ 7 2013 tax return and prepared their 2014 tax return. 8 Mr. Erickson testified that Debtors appeared to owe several 9 thousand dollars over the amount they had withheld for 2014 10 taxes. He also testified that he had made errors himself on the 11 returns which were based on Debtors’ representations. 12 On September 1, 2015, Mr. Martin testified about his 13 employment in 2013. He did not recall whether he worked for 14 Western Partitions, his employer, for the bulk of that year. 15 On September 2, 2015, Mr. Martin testified that he no 16 longer had the $2,000 from the sale of the Kia. He was also 17 questioned about $3,250 that Debtors spent on rental cars from 18 Hertz after they sold the Kia for $2,000. Although Mr. Martin 19 said he could not recall the brands of the cars that were 20 rented, he later recalled that at one point it was a Dodge 21 minivan and at another point a GMC pick-up truck. He also could 22 not recall how long the cars had been rented for. Mr. Martin 23 further testified that Debtors had not saved any money for a 24 down payment on a new car. 25 Mr. Martin conceded that it was error to claim one of the 26 McCarthy’s sons as an exemption on their tax return and further 27 testified that it was error to claim a $5,000 deduction for a 28 contribution to an IRA account since he had no such account in
-14- 1 2013. 2 Mr. Martin further testified that Debtors continued to send 3 their daughter to a private school for $600 a month because the 4 school offered a higher quality education than the public 5 school. 6 Finally, Mr. Martin testified that he was delinquent in his 7 support payments but was not certain as to how many months. 8 Mr. McCarthy also testified that Mr. Martin was four months 9 delinquent in his support payments. He further opined that 10 Debtors budgeted $2,000 more than necessary for the payment of 11 attorney’s fees to Ms. McCarthy’s state court lawyer. 12 Closing arguments were held on September 14, 2015. 13 Debtors’ counsel argued that dismissal was not necessary and 14 that there were other remedies available to the court besides 15 dismissal with prejudice. Counsel noted that a six month bar to 16 re-filing would force Debtors to forego over $60,000 and 17 29 months of progress towards discharge. Counsel also noted 18 that Mr. McCarthy would be able to execute on his judgment over 19 the course of the next six months and observed that he would 20 collect a greater portion of the payments in a subsequent 21 chapter 13 because Debtors’ child support obligation to him 22 would run its course over the next few years. Finally, counsel 23 argued that the court should not dismiss Debtors’ case but 24 requested that any dismissal be without prejudice. 25 Counsel for the chapter 13 trustee represented that the 26 trustee supported dismissal of the case based on his view that 27 Debtors had not really approached the bankruptcy with an eye 28 towards reorganization of their personal finances. The trustee
-15- 1 also thought that Debtors were not truthful as to their income 2 despite repeated opportunities to disclose to the trustee 3 exactly what they expected in the future. According to the 4 trustee, evidence of any additional income had to be obtained 5 through repeated discovery requests. Finally, the trustee 6 opined that the case was a two-party dispute with no end in 7 sight. He qualified his support of dismissal, however, by 8 observing that Debtors may have presented a sufficient argument 9 against dismissal with prejudice or suggested that a lesser 10 sanction would be appropriate. 11 The court took the matter under advisement. 12 8. The Bankruptcy Court’s Order 13 On October 21, 2015, the bankruptcy court issued its 14 findings of fact and conclusions of law in an order dismissing 15 Debtors’ case without prejudice and denying Debtors’ motion to 16 modify their plan. 17 1. Findings of Fact 18 Income: The court found that Debtors had understated or 19 failed to effectively disclose their income. Based on the 20 evidence, the court noted that Ms. McCarthy did not report her 21 bonus income of $8,943 to the chapter 13 trustee or in Debtors’ 22 amended schedules and that Debtors had understated Mr. Martin’s 23 income by over $20,000 for the postconfirmation period of 24 November 2013 to September 2014. 25 Sale of the Kia: Although there was some question whether 26 Ms. McCarthy sold the Kia prior to obtaining court approval, the 27 court did not find that important. The court noted that Debtors 28 received approval from the trustee in January 2015 for the
-16- 1 purchase of a new vehicle and that since March 2015, their 2 schedules showed a $350 a month deduction for a new car payment. 3 However, Debtors testified at the evidentiary hearing that they 4 took the $2,000 from the sale, deposited it into their bank 5 account and spent it in the ordinary course. Mr. Martin 6 testified that they have been unable to buy another vehicle 7 since they no longer had funds for a down payment. 8 Tax Returns: The bankruptcy court found that the evidence 9 showed that Debtors owed over $23,000 in taxes for the 2013 and 10 2014 tax years because they had claimed numerous improper 11 deductions. Although Ms. McCarthy had testified that she found 12 the tax software confusing when she prepared Debtors’ original 13 tax returns, the court did not find her testimony credible when 14 her job was associated with computer software in the petroleum 15 industry. The court opined that had Debtors filed the 2013 16 return with the properly claimed deductions, they would likely 17 have been able to modify their plan to reflect the need to pay 18 the resulting tax liability, with little adverse consequence. 19 The court observed that Debtors’ “irresponsible claims of 20 deductions . . . simply played into the hands of Mr. McCarthy. 21 They certainly should have expected that Mr. McCarthy would have 22 scrutinized their return.” 23 Company Credit Card: The court found Ms. McCarthy’s use of 24 her company credit card to pay for her father’s airline ticket 25 on two occasions so that he could accompany her in her travel 26 was de minimis and not prohibited by the company at the time the 27 expenses were incurred. 28 Expenses. The court also noted that the costs associated
-17- 1 with Debtors’ daughter’s private schooling was $600 per month 2 which was above the National standard of $156. The court 3 observed that Debtors had claimed the expense only since March 4 2014 and that they maintained that their daughter needed to 5 attend the private school as a public school would hold her back 6 educationally. 7 Next, the court addressed Mr. Martin’s child support 8 obligation, noting that prior to confirmation, Debtors never 9 listed any child support owed by him. The court also noted that 10 no documentation regarding Mr. Martin’s support obligation was 11 put into evidence, but he testified that the obligation was 12 imposed in October 2014 and that Debtors made the payment from 13 their bank account but are frequently delinquent on the payment. 14 Spending Habits. Last, the court noted that there had been 15 extensive examination and testimony about Debtors’ expenses and 16 spending habits. There was evidence showing vacations, five 17 phone lines, and that Debtors ate out a substantial amount of 18 the time with almost daily purchase of fast food. The court 19 found that the bank statements put into evidence by Mr. McCarthy 20 showed Debtors were constantly overdrawn on their accounts. In 21 light of this evidence, the bankruptcy court found that there 22 was no indication that Debtors attempted to rein in their 23 spending and reorganize in good faith. 24 In the end, the bankruptcy court found that Debtors were 25 not forthcoming about disclosing either their income or their 26 actual expenses. The court concluded that it was clear they 27 could not obtain financial stability even with the increased 28 income and improper claims of tax deductions. However, the
-18- 1 court also found that Mr. McCarthy was equally to blame “for 2 this debacle.” The court noted that he closed his accounting 3 practice and unsuccessfully argued in state court and on appeal 4 that Ms. McCarthy was obligated to pay higher child support for 5 him to stay at home with their sons, who are both teenagers. 6 See McCarthy v. McCarthy, 2015 WL 5139089 (Wash. Ct. App. 7 Sept. 1, 2015). The court further observed that Mr. McCarthy 8 spent much of his time scrutinizing Debtors’ income and spending 9 habits and preparing exhaustive spreadsheets showing the 10 Debtors’ income and expenses. 11 The bankruptcy court reiterated that Debtors ended up 12 confirming a plan which proposed payments to unsecured 13 creditors, primarily Mr. McCarthy, which exceeded what they 14 would have had to pay if they had properly calculated their 15 projected disposable income as above median debtors from the 16 outset. The court observed that Debtors had been making 17 substantial payments to the chapter 13 trustee under their plan 18 which resulted in substantial distributions to Mr. McCarthy over 19 and above the ongoing child support obligation. 20 2. Legal Conclusions 21 In its legal conclusions, the bankruptcy court first noted 22 that although it had found in the November 2013 confirmation 23 hearing that Debtors had proposed their plan in good faith, the 24 court could review that finding postconfirmation if new 25 information had come to light. See In re Luxford, 368 B.R. 63, 26 70-71 (Bankr. D. Mont. 2007) (considering trustee’s post 27 confirmation motion to dismiss for lack of good faith after 28 discovering that debtors had confirmed a plan based on fraud,
-19- 1 where debtors had purposely omitted assets and transactions from 2 their schedules and statements such that the Chapter 13 plan did 3 not actually meet the best interests of creditors test of 4 § 1325(a)(4)). 5 Accordingly, the court considered again the four factors of 6 the Leavitt test to determine whether, under the totality of the 7 circumstances, Debtors were acting in good faith. These factors 8 are: (1) whether the debtor misrepresented facts in his 9 petition or plan, unfairly manipulated the Code, or otherwise 10 filed his petition or plan in an inequitable manner; (2) the 11 debtor's history of filings and dismissals; (3) whether the 12 debtor intended to defeat state court litigation; and 13 (4) whether egregious behavior is present. In re Luxford, 14 368 B.R. at 70. In considering these factors, the court noted 15 dismissal turned on the first and the fourth factors because it 16 had previously found the second and third factors were not met 17 in its findings on confirmation of Debtors’ second amended plan. 18 The bankruptcy court found that nothing presented at the May and 19 September 2015 hearings changed those findings. 20 First Leavitt Factor: As to misrepresentation of facts, 21 unfair manipulation of the Bankruptcy Code and/or the filing of 22 a plan in an inequitable manner, the court found that the most 23 glaring example was the understatement of both Mr. Martin’s and 24 Ms. McCarthy’s income to the tune of almost $30,000. Ms. 25 McCarthy’s bonuses were not disclosed, and Mr. Martin was listed 26 as unemployed when he was in fact employed. The court observed 27 that early in 2013 Mr. Martin’s income may have been sporadic 28 due to the economy, but his situation had improved. The court
-20- 1 noted that even when his employment was disclosed, the earnings 2 were understated. 3 According to the bankruptcy court, Debtors similarly 4 misrepresented many of their expenses. The court observed that 5 Debtors’ bank account statements which showed how Debtors spent 6 their money, little resembled their Schedule J. The court found 7 that, rather than using funds on hand to make a down payment and 8 buy a new vehicle as the Court approved, they used the $2,000 9 from the sale of the Kia for day to day expenses and then wasted 10 another $3,250 renting brand new cars from Hertz. “Their $350 11 per month budget item for the purchase of a new car remains, 12 nine months after the purchase was approved, a fiction.” The 13 court also noted that Debtors never demonstrated that Mr. Martin 14 had an actual monthly support obligation of $1328 nor did they 15 identify with any accuracy how or when that obligation was paid. 16 Finally, the court observed that Debtors had not budgeted for 17 the hundreds of dollars a month they incurred in overdraft fees 18 from their bank as a result of the irresponsible spending 19 habits.8 In the end, the bankruptcy court concluded that 20 Debtors’ schedules did not accurately reflect their actual 21 spending. Thus, this factor weighed in favor of dismissal. 22 Fourth Leavitt Factor: Next, the court considered whether 23 egregious behavior was present. The court acknowledged that 24 Debtors had not properly disclosed their income and expenses, 25 had been irresponsible in some of their spending habits, and had 26 8 27 In closing argument, Mr. McCarthy’s attorney argued that for the period of January 1 through April 31, 2015, Debtors’ 28 average monthly overdraft was $419 a month.
-21- 1 filed initial tax returns which plainly and simply misstated 2 their deductions. However, weighing against these facts was 3 that Debtors were not living a luxurious lifestyle, and the 4 court also noted they had been making substantial plan payments 5 - likely more than they would have had to pay if they had 6 properly filled out the Form B22C from the outset. The court 7 further observed that Debtors were subjected to constant and 8 unremitting scrutiny from Mr. McCarthy in their case and his 9 continued efforts in the state court to contest matters arising 10 from the dissolution of the McCarthys’ marriage. These efforts, 11 although unsuccessful, required Ms. McCarthy to incur additional 12 attorney’s fees. On balance, the court concluded that Debtors’ 13 behavior was not egregious. 14 Based upon the totality of the circumstances, the 15 misstatement of income and expenses and, as mentioned by the 16 chapter 13 trustee, a failure to demonstrate the kind of 17 responsible spending that is required in a Chapter 13 case, the 18 court found “cause” to dismiss Debtors’ case under § 1307(c). 19 The court concluded however that Debtors’ conduct did not rise 20 to the level warranting dismissal with prejudice. 21 Mr. McCarthy filed a timely notice of appeal from this 22 order. 23 II. JURISDICTION 24 The bankruptcy court had jurisdiction over this proceeding 25 under 28 U.S.C. §§ 1334 and 157(b)(2)(A). We have jurisdiction 26 under 28 U.S.C. § 158. 27 III. ISSUE 28 Whether the bankruptcy court abused its discretion by not
-22- 1 dismissing Debtors’ chapter 13 bankruptcy case with prejudice. 2 IV. STANDARDS OF REVIEW 3 We review the bankruptcy court’s case dismissal for an 4 abuse of discretion. In re Leavitt, 171 F.3d at 1222-23. 5 To determine whether the bankruptcy court has abused its 6 discretion, we conduct a two-step inquiry: (1) we review de novo 7 whether the bankruptcy court “identified the correct legal rule 8 to apply to the relief requested” and (2) if it did, whether the 9 bankruptcy court’s application of the legal standard was 10 illogical, implausible or “without support in inferences that 11 may be drawn from the facts in the record.” United States v. 12 Hinkson, 585 F.3d 1247, 1261–62 & n. 21 (9th Cir. 2009) 13 (en banc). “If the bankruptcy court did not identify the 14 correct legal rule, or its application of the correct legal 15 standard to the facts was illogical, implausible, or without 16 support in inferences that may be drawn from the facts in the 17 record, then the bankruptcy court has abused its discretion.” 18 USAA Fed. Sav. Bank v. Thacker (In re Taylor), 599 F.3d 880, 19 887–88 (9th Cir. 2010) (citing Hinkson, 585 F.3d at 1261–62). 20 When a bankruptcy court makes factual findings of bad faith 21 to support dismissal of a chapter 13 case, we review those 22 findings for clear error. In re Leavitt, 171 F.3d at 1222-23. 23 Whether or not a debtor’s conduct rose to the level of 24 egregiousness is a question of fact. A court’s factual 25 determination is clearly erroneous if it is illogical, 26 implausible, or without support in the record. Hinkson, 27 585 F.3d at 1261-62 & n.21. Under this standard, “[w]here there 28 are two permissible views of the evidence, the fact finder’s
-23- 1 choice between them cannot be clearly erroneous.” Anderson v. 2 City of Bessemer City, N.C., 470 U.S. 564, 574 (1985). 3 V. DISCUSSION 4 A. Legal Standards: Dismissal and Dismissal With Prejudice 5 Section 1307(c) sets forth nonexclusive grounds which may 6 constitute cause for dismissal of a chapter 13 case. Although 7 not specifically listed, bad faith is a “cause” for dismissal 8 under § 1307(c). Eisen v. Curry (In re Eisen), 14 F.3d 469, 470 9 (9th Cir. 1994). In this Circuit, bankruptcy courts make good 10 faith determinations on a case-by-case basis, after considering 11 the totality of the circumstances. In re Leavitt, 171 F.3d at 12 1124. In addition, a “‘court must make its good-faith 13 determination in the light of all militating factors.’” Ho v. 14 Dowell (In re Ho), 274 B.R. 867, 876 (9th Cir. BAP 2002) (citing 15 Goeb v. Heid (In re Goeb), 675 F.2d 1386, 1390 (9th Cir. 1982)). 16 Section 349(a) expressly grants the bankruptcy court 17 authority to dismiss a case with prejudice. In re Leavitt, 18 171 F.3d at 1123. A dismissal with prejudice is a severe and 19 drastic sanction that is limited to extreme situations: 20 “Generally, only if a debtor engages in egregious behavior that 21 demonstrates bad faith and prejudices creditors—for example, 22 concealing information from the court, violating injunctions, or 23 filing unauthorized petitions—will a bankruptcy court forever 24 bar the debtor from seeking to discharge then existing debts.” 25 In re Chabot, 411 B.R. 685, 705 (Bankr. D. Mont. 2009) (citing 26 Colonial Auto Ctr. v. Tomlin (In re Tomlin), 105 F.3d 933, 937 27 (4th Cir. 1997)); see also Ellsworth v. Lifescape Med. Assocs., 28 P.C. (In re Ellsworth), 455 B.R. 904, 922 (9th Cir. BAP 2011)
-24- 1 (acknowledging that dismissal with prejudice is a drastic remedy 2 reserved for “extreme situations.”). Dismissal with prejudice 3 imposes a bar on further bankruptcy proceedings between the 4 parties and is a complete adjudication of the issues. 5 In re Leavitt, 171 F.3d at 1123. “Functionally, then, a 6 dismissal with prejudice is equivalent to a judgment under § 7 523(a) that each debt that would have been discharged under the 8 debtor’s plan is thereafter nondischargeable.” In re Ellsworth, 9 455 B.R. at 922. 10 In deciding whether to dismiss a case with prejudice, 11 Leavitt directs the bankruptcy court to consider the same four 12 factors for dismissal based on “cause” and make a finding of bad 13 faith based on egregious conduct. 171 F.3d at 1224. “The court 14 is not obligated to count the four Leavitt factors as though 15 they present some sort of a box-score but rather is to consider 16 them all and weigh them in judging the ‘totality of the 17 circumstances.’” In re Lehr, 479 B.R. 90, 98 (Bankr. N.D. Cal. 18 2012). 19 B. Analysis 20 Here, in considering dismissal of Debtors’ case in 21 conjunction with confirmation of Debtors’ modified plan, the 22 bankruptcy court correctly examined the totality of the 23 circumstances and considered the four factors enunciated in 24 Leavitt to determine Debtors’ good faith. See In re Luxford, 25 368 B.R. at 70-71; see also § 1329(b)(1) (incorporating good 26 faith standard under § 1325(a)(3) for modification of a 27 confirmed plan). On appeal, Mr. McCarthy has not challenged the 28 legal standards that the bankruptcy court applied: instead, he
-25- 1 argues that the court’s factual findings on the Leavitt factors 2 were erroneous or an abuse of discretion. He also contends that 3 reversal is warranted because neither Debtors nor the court 4 provided any analysis for an alternative sanction which would 5 have afforded him a sufficient remedy. These errors, according 6 to Mr. McCarthy, demonstrate that the court abused its 7 discretion in dismissing this case without prejudice. 8 We are not persuaded. “The bankruptcy court is not 9 required to find that each [Leavitt] factor is satisfied or even 10 to weigh each factor equally.” Khan v. Curry (In re Khan), 11 523 B.R. 175, 185 (9th Cir. BAP 2014). Rather, “[t]he factors 12 are simply tools that the bankruptcy court employs in 13 considering the totality of the circumstances.” Id. By 14 applying the Leavitt factors in a totality of circumstances 15 analysis, the bankruptcy court, as the trier of fact, determines 16 whether there is “cause” for dismissal for bad faith and whether 17 such dismissal should be with prejudice based on the debtor’s 18 egregious conduct. Here, the bankruptcy court applied the 19 correct legal standards and only its factual findings are at 20 issue. The court explicitly found that under the four factor 21 test for determining bad faith set forth in Leavitt, only one of 22 the four factors was present; i.e., factor one. 23 The First Leavitt Factor: this factor questions whether 24 Debtors misrepresented facts in the petition or plan, unfairly 25 manipulated the Code, or otherwise filed their petition or plan 26 in an inequitable manner. The bankruptcy court found numerous 27 misrepresentations regarding Debtors’ income and expenses and 28 found that this factor weighed in favor of dismissal. Nowhere
-26- 1 does Mr. McCarthy argue with any specificity why the court’s 2 findings related to this factor were erroneous. Based on our 3 review of the record, we conclude that the bankruptcy court’s 4 findings under this factor were plausible and supported by 5 inferences drawn from the facts in the record and thus not 6 erroneous. 7 The Second Leavitt Factor: This factor looks at the 8 history of filings and dismissals of prior bankruptcy cases. “A 9 debtor’s history of filings and dismissals is relevant” to the 10 bad faith analysis. Nash v. Kester (In re Nash), 765 F.2d 1410, 11 1415 (9th Cir. 1985). Here, the bankruptcy court afforded 12 Ms. McCarthy’s prior bankruptcy filing little weight in its bad 13 faith analysis because Ms. McCarthy had filed her chapter 7 case 14 and received her discharge while the dissolution case was 15 pending. The bankruptcy court found her filing was 16 understandable given that Mr. McCarthy had received over $30,000 17 in sanctions against Ms. McCarthy during the dissolution 18 proceedings and the on-going animosity between the parties. 19 Mr. McCarthy does not challenge these findings on appeal. 20 Rather, he contends that the court erred by not considering 21 Debtors’ numerous filings in the case itself; i.e., they filed 22 three Form B22c’s all of which were false, seven sets of 23 Schedule I and J’s all of which falsely stated income and 24 expenses, and six plans, only one of which was confirmed due to 25 the court’s reliance on Debtors’ false testimony and Form B22c. 26 In other words, all Debtors’ filings and amendments were false. 27 These facts, however, do not make the bankruptcy court’s 28 findings on the second Leavitt factor clearly erroneous.
-27- 1 When evaluating the second Leavitt factor, a bankruptcy 2 court is concerned with prior bankruptcy case filings and 3 dismissals and not with filings within the case itself. 4 Actually, Mr. McCarthy’s arguments about Debtors’ “merry-go- 5 round” of amended filings in the case is intertwined with the 6 court’s analysis under the first Leavitt factor; i.e., Debtors’ 7 misrepresentation of facts related to their income and expenses. 8 Moreover, Mr. McCarthy ignores the bankruptcy court’s factual 9 findings regarding Debtors’ initial schedules and Form B22c. 10 The court initially found that the “mistakes” were largely due 11 to the “sloppiness of Debtors’ attorney, abetted by Debtors, 12 neither of whom understood the basic strategy of chapter 13 13 practice applicable to their situation.” In short, the 14 bankruptcy court’s findings on this factor were logical and 15 supported by inferences drawn from the facts in the record and, 16 thus, were not clearly erroneous. 17 The Third Leavitt Factor: This factor examines whether 18 Debtors intended to defeat state court litigation. The 19 bankruptcy court found that Debtors had not filed their petition 20 to defeat state court litigation. Mr. McCarthy contends this 21 was error. He points out that the facts in this case are 22 similar to the facts in Leavitt. There, the debtor filed a 23 chapter 13 petition approximately two weeks after a judgment on 24 a jury verdict was entered against him and then he proposed zero 25 payment to unsecured creditors in his first plan and 3% in his 26 second plan. According to Mr. McCarthy, Debtors filed their 27 petition just four days after Mr. McCarthy obtained his judgment 28 and Debtors’ original plan proposed paying unsecured creditors
-28- 1 2% and their amended plan proposed paying unsecured creditors 2 3%. He also asserts that this case is essentially a single 3 creditor case since he represents 89% of all non-priority 4 unsecured claims. 5 Again, these arguments do not make the bankruptcy court’s 6 findings under this factor clearly erroneous. Mr. McCarthy 7 ignores the bankruptcy court’s findings of fact under this 8 factor and does not tell us why those findings are clearly 9 erroneous. As the bankruptcy court noted, the portion of the 10 McCarthy dissolution proceedings related to the $224,000 11 judgment was concluded when Debtors filed their case. Since 12 Mr. McCarthy had threatened garnishment, the bankruptcy court 13 found it was not surprising that Debtors filed for bankruptcy 14 protection. The court also found that Mr. McCarthy’s debt was 15 not the only debt sought to be addressed by Debtors’ case. 16 Although he was the largest unsecured creditor, Debtors had 17 issues with the large secured claim arising from their 18 prepetition purchase of the minivan. Taken together, these 19 facts do not show that Debtors’ only purpose in filing was to 20 defeat the state court litigation. See In re Eisen, 14 F.3d at 21 470 (bad faith exists where the debtor’s only purpose is to 22 defeat state court litigation). 23 Finally, the facts in Leavitt are distinguishable. Unlike 24 Mr. Leavitt, Debtors confirmed a plan which paid 27% to 25 unsecured creditors. In sum, the bankruptcy court’s findings on 26 this factor were logical and supported by inferences drawn from 27 facts in the record and thus were not clearly erroneous. 28 The Fourth Leavitt Factor: This factor looks at whether
-29- 1 egregious behavior is present. This factor is relevant to 2 Mr. McCarthy’s request to dismiss this case with prejudice 3 because under Leavitt the bankruptcy court must make a finding 4 of bad faith based on egregious conduct. The bankruptcy court 5 properly noted that egregious behavior demonstrates bad faith 6 and prejudices creditors, such as concealing information from 7 the court, violating injunctions, filing unauthorized petitions, 8 hiding or undervaluing assets, making post-petition payments to 9 pre-petition creditors, violating non-bankruptcy laws or 10 otherwise demonstrating fraudulent conduct, without excuse. See 11 In re Chabot, 411 B.R. at 704-705 (citing Leavitt, 171 F. 3d at 12 1223-24) and In re Cortez, 349 B.R. 608, 613-614 (Bankr. N.D. 13 Cal. 2006). 14 The bankruptcy court acknowledged that Debtors had not 15 properly disclosed their income and expenses, had been 16 irresponsible in some of their spending habits, and had filed 17 initial tax returns which plainly and simply misstated their 18 deductions. However, in its totality of circumstances analysis, 19 the bankruptcy court also considered all mitigation factors. 20 See In re Ho, 274 B.R. at 876. Those factors included: Debtors 21 were not living a luxurious lifestyle; Debtors had been making 22 substantial plan payments - likely more than they would have had 23 to pay if they had properly filled out Form B22C from the 24 outset; and Debtors were subjected to constant and unremitting 25 scrutiny from Mr. McCarthy in their case and his ongoing efforts 26 in the state court to continue fights arising from the 27 dissolution of the McCarthys’ marriage. On this last point, the 28 court observed that, although Mr. McCarthy was unsuccessful in
-30- 1 state court, his actions required Ms. McCarthy to incur 2 additional attorney’s fees. Accordingly, on balance, the court 3 concluded that Debtors’ behavior was not egregious. 4 With respect to this factor, Mr. McCarthy argues on appeal 5 that Debtors’ conduct throughout this case cumulatively amounts 6 to nothing less than egregiousness. He further maintains that 7 the bankruptcy court’s findings concerning his conduct should be 8 stricken because the allocation of blame was without any factual 9 basis. We disagree with both contentions. 10 Mr. McCarthy’s arguments fail to appreciate the reality 11 that “bad faith” is a term which is used to describe a broad 12 range of improper conduct, only some of which is sufficient to 13 support the extreme sanction of dismissal with prejudice. In 14 Leavitt, the Ninth Circuit held that dismissal with prejudice 15 must be coupled with a finding of bad faith based on egregious 16 conduct. 171 F.3d at 1224. In other words, dismissal with 17 prejudice under § 349(a) is not meant to be a remedy for every 18 instance of debtor misconduct. 19 On the evidence before it, the bankruptcy court was not 20 persuaded that Debtors’ case was associated with sufficient bad 21 faith to justify dismissal with prejudice. The bankruptcy court 22 applied the correct legal standards and, as noted above, its 23 factual findings were plausible and supported by inferences 24 drawn from the facts in the record. We cannot reverse the 25 bankruptcy court’s findings of fact simply because we might have 26 decided the case differently. “Where there are two permissible 27 views of the evidence, the fact finder’s choice between them 28 cannot be clearly erroneous.” Anderson, 470 U.S. at 574.
-31- 1 Moreover, as already noted, the bankruptcy court was directed to 2 consider all militating factors and therefore could properly 3 consider Mr. McCarthy’s conduct throughout this case. 4 Finally, Mr. McCarthy argues that the bankruptcy court 5 abused its discretion by failing to consider alternative 6 remedies to dismissal with prejudice as instructed by Ellsworth. 7 Mr. McCarthy is mistaken. First, in its findings and 8 conclusions, the bankruptcy court expressly recognized that 9 dismissal under § 1307(c) is a two-step process: first the 10 court must determine whether there is cause for dismissal; then 11 there should be some consideration of whether a sanction less 12 than dismissal with prejudice is sufficient. In re Ellsworth, 13 455 B.R. at 922. “For example, the Court could simply dismiss a 14 case, or dismiss it with a 180 day (or some other length of 15 time) bar to re-filing.” Id. Therefore, the court approached 16 the question of dismissal with prejudice by recognizing the 17 two-step process and was well aware that lesser sanctions could 18 be imposed. 19 Second, the debtors in Ellsworth did not advocate for, or 20 present any evidence in support of, any alternative besides 21 dismissal with prejudice. In contrast, Debtors here argued that 22 dismissal was not necessary, but they also pointed out that 23 there were other remedies available to the court besides 24 dismissal with prejudice. In closing argument, counsel for 25 Debtors argued that a six month bar to re-filing would force 26 them to forego over $60,000 and twenty-nine months of progress 27 towards discharge. Counsel also noted that Mr. McCarthy would 28 be able to execute on his judgment over the course of the next
-32- 1 six months but that he would collect a greater portion of the 2 payments in a subsequent chapter 13 because Debtors’ child 3 support obligation to him would run its course over the next few 4 years. Finally, counsel argued that the court should not 5 dismiss Debtors’ case but, if it did dismiss, that it should 6 dismiss without prejudice. Therefore, alternatives to dismissal 7 with prejudice were placed squarely before the bankruptcy court. 8 Although Mr. McCarthy requested dismissal with prejudice, 9 the court did not find sufficient bad faith to justify this 10 extreme result. Therefore, it was unnecessary for the court to 11 further explore, much less analyze, whether alternative remedies 12 were appropriate. Mr. McCarthy mistakenly complains that the 13 dismissal left him with no remedies at all when he has the full 14 array of state law rights at his disposal. Moreover, from the 15 bankruptcy court’s comments, it is evident that Debtors paid 16 more to Mr. McCarthy than the amount required by the bankruptcy 17 code under their short-lived confirmed plan. 18 In sum, Mr. McCarthy offers no arguments on appeal that 19 demonstrate that the bankruptcy court’s dismissal of this case 20 without prejudice was an abuse of discretion. 21 VI. CONCLUSION 22 For the reasons stated above, we AFFIRM. 23 24 25 26 27 28
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