OPINION
BROOKS, Bankruptcy Judge.
The creditor, The Society of Lloyd’s (“Lloyd’s” or “Creditor”), timely appeals the Order of Dismissal and Memorandum Decision (“Order of Dismissal”) entered on April 13, 2004, by the United States Bankruptcy Court for the District of Utah. The Order of Dismissal was entered after a trial on the involuntary petition filed by Lloyd’s against the putative debtor, Stephen M. Harmsen (“Harmsen”). Lloyd’s argues that the Order of Dismissal was entered in error because the bankruptcy court erroneously concluded that the Debt- or was generally paying his debts as they became due.
The Creditor’s issues on appeal are not clearly defined or carefully delineated
but can be summarized as follows:
(a) The bankruptcy court improperly imposed on the Creditor an expanded burden of proof under the Tenth Circuit’s “totality of the circumstances” test in evaluating whether an order for relief should enter in an involuntary bankruptcy case set as set forth in
Bartmann v. Maverick Tube Corp.
(b) The bankruptcy court either improperly invoked the “Almost
Per Se
Rule” or should have
not
invoked the Rule.
(c)The bankruptcy court erroneously concluded that the putative debtor, Harmsen, was generally paying his debts as they became due.
Underlying this appeal is the Creditor’s view that the putative debtor, Harmsen, through a well crafted, self-serving business structure and a carefully timed, insider-controlled business foreclosure on his assets, wrongfully deprived the Creditor of an ability to execute on its judgment against the Debtor.
Lloyd’s requests that this Court conclude that Harmsen was generally
not
paying his debts as they became due and remand this matter to the bankruptcy court to determine if Harmsen has twelve or more creditors who qualify to be counted under 11 U.S.C. § 303(b)(2) and if not, direct that the bankruptcy court enter an order for relief.
The appellee, Harmsen, responds to Lloyd’s appeal by arguing that:
(a) Lloyd’s allegation that the bankruptcy court did not properly allocate the burden of proof is incorrect and really a disguised effort to alter the “clearly erroneous” appeal standard.
(b) The bankruptcy court did not commit error in considering various factors under the “totality of circumstances” test and its findings of fact were not clearly erroneous.
The parties have consented to this Court’s jurisdiction because they have not elected to have the appeal heard by the United States District Court for the District of Utah.
For the reasons stated, the bankruptcy court’s Order of Dismissal is AFFIRMED.
I.
Background
Lloyd’s filed an involuntary Chapter 7 petition against Harmsen on August 9, 2003. Lloyd’s states that Harmsen owed it $390,983.57 based upon a judgment entered in the United States District Court for the District of Utah. On March 11 and 12, 2004, the bankruptcy court conducted a trial on the involuntary petition and issued its thirty page Memorandum Decision dismissing the petition on April 13, 2004.
Other than the facts involving the nature, amount and status of the various financial obligations of Harmsen, the facts relevant to the case are not materially disputed.
A. Harmsen’s Businesses
Harmsen manages several businesses owned by himself and his family. The finances and transactions by and among Harmsen, his family, and his related businesses are complex and convoluted. At times, Harmsen is a financial accommodator to his family businesses. At other times, the businesses are the accommodator to Harmsen. At all times, a clear and crisp delineation between Harmsen and his businesses does not emerge. Moreover, the debt owed by Harmsen to Lloyd’s is not a routine obligation. Understanding this case and the dispute between the parties requires a description of the relationships, and the financial arrangements and transactions between and among Harmsen, his businesses, and his family.
The businesses of Harmsen and his family include, among others: S.R.C. Corporation, d/b/a Steve Regan Co. (“SRC”); West American Finance Corporation (“WAF-CO”); Mud Creek Hydro Corporation; HH Land and Title Company; H.K. Hydro Inc.; and H.F.L.P., L.C. Of these various businesses, SRC and WAFCO are those businesses where Harmsen focuses his involvement. SRC and WAFCO each have an estimated value of $1 million to $1.5 million.
SRC compensates Harmsen, its manager, in the sum of $36,000.00 per annum plus a bonus, in the range of $125,000,000 to $150,000.00 per annum, if the company is profitable. SRC uses several of Harm-sen’s credit cards to purchase items needed by the business. Harmsen also uses those credit cards for personal and family expenses and purchases. At the end of the year, a reconciliation is made offsetting the commingled personal charges made on the credit cards by Harmsen against the remaining compensation that may be due to him.
WAFCO pays Harmsen, its manager, the sum of $75.00 per hour for services rendered. He is also compensated in the form of payment of all unreimbursed medical, insurance, and dental expenses of himself and his family. Until June of 2003, WAFCO was owned (1) 50% by H.F.L.P., L.C. and (2) 50% by Harmsen’s brother, Randall Harmsen, who has been identified as the president of the company since 1995. H.F.L.P., L.C. is owned by Harm-sen’s children who have a 70% ownership interest and Harmsen’s wife who has a
30% ownership interest. In June of 2003, all interests of Harmsen and his wife in these entities was terminated by foreclosure pursuant to a 1996 judgment WAFCO holds against Harmsen and his wife in the original amount of $2,215,907.11, plus interest.
While Harmsen’s brother, Randall Harmsen, was the named president of WAFCO since 1995, the testimony at trial revealed that Randall Harmsen’s role in the management of WAFCO was, at best, minimal, and, arguably, non-existent, and his knowledge of the company was very general.
Instead, the decision-maker for the company was Harmsen, who had run the company on a day-to-day basis since 1991.
Again, as with SRC, Harmsen’s personal credit cards have been used by WAFCO and business and personal charges were commingled. As of August 9, 2003, approximately $30,000 had been earned by Harmsen and remained unpaid by WAF-CO.
B. Harmsen’s Debts
1.
Obligation to Lloyd’s
Prior to the filing of the involuntary petition, Harmsen participated in certain insurance commitments by assuming a portion of a syndicate’s risks in the English insurance market regulated by Lloyd’s. In November of 1996, Lloyd’s sued Harmsen in England and a judgment was subsequently entered against Harm-sen in favor of Lloyd’s on March 11, 1998 in the sum of £208,344.57, plus interest at the rate of 8% per annum (“English Judgment”).
Lloyd’s thereafter sought to enforce the English Judgment by bringing suit against Harmsen and others in the United States District Court for the District of Utah (“District Court”). The District Court granted Lloyd’s motion for summary judgment and entered judgment against Harm-sen on March 17, 2003 for the principal amount of the English Judgment, together with interest, for a total of £235,084.48 as of December 8, 2002 (“District Court Judgment”).
Harmsen appealed the judgment and the matter is currently under advisement before the Tenth Circuit Court of Appeals. At the trial before the bankruptcy court, no evidence was produced to demonstrate that Harmsen has made any payments on the balance of the District Court Judgment after the filing of a Partial Satisfaction of Judgment, which was filed with the United States District Court on March 24, 2003, indicating that a credit against the principal amount of the English Judgment was made on August 19, 1998.
2.
WAFCO Debt
In 1992, Harmsen and a partner owned equal interests in a company that sought to develop a hydro-electric plant in Twin Falls, Idaho. Harmsen personally guaranteed a development loan from Jamaica Water and Power and pledged all assets that
he owned at the time to secure the loan. Permits for the plan could not be obtained and the project failed.
In 1996, as a result of the project’s failure, Harmsen and others entered into an agreement with WAFCO whereby (a) WAFCO paid and acquired the Jamaica Water and Power secured claim and (b) judgment was entered against Harmsen and others in favor of WAFCO in the amount of $2,215,907.11, plus interest (“WAFCO Judgment”). Accordingly, Harmsen pledged most, if not all, of his non-exempt assets to WAFCO at about the same time as Lloyd’s commenced its action in 1996 in England. In conjunction with the agreement to enter into a judgment, WAFCO agreed to forbear enforcement of the judgment until September 1, 2000. The forbearance agreement was entered into by Harmsen’s brother, Randall Harm-sen, as president of WAFCO, by Harmsen, as president of Cogeneration Intermoun-tain, Inc., Cogeneration, Inc., and SRC, as well as by Harmsen, individually, and on behalf of Kelly Harmsen, his wife.
The record reflects that the testimony of Randall Harmsen at trial was that, while he was the named president of WAFCO, he had little, if any, substantive involvement in the negotiations leading to the WAFCO Judgment.
Instead it was Harmsen who made the decisions in connection with the agreement.
Moreover, the law firm representing WAFCO in taking the judgment against Harmsen and eventually executing on his assets also had represented Harmsen for many years and had handled personal matters for Harm-sen, on occasion.
In addition, until May I, 2003, Harmsen held a power of attorney from Randall Harmsen which allowed him to sign Randall’s name to any WAFCO documents as president.
Harmsen agreed to cooperate in the orderly liquidation of the pledged collateral and certain assets were transferred to WAFCO as partial payment on its claim. Harmsen leased back his residence, one of the transferred assets, from WAFCO on the condition that he pay rent in the amount of the underlying mortgage, insurance, property taxes, utilities, and all repairs and maintenance.
On September 1, 2000, the date upon which the balance was due under the forbearance agreement, Harmsen failed to pay WAFCO the remaining balance. WAFCO then executed upon its Judgment and a constable sale (foreclosure) was held on June 17, 2003. The collateral was transferred to WAFCO pursuant to the constable’s sale and a partial satisfaction of judgment was filed January 20, 2004. According to the partial satisfaction of judgment, after credits from the sale, a balance of $865,227.50, plus applicable interest remained due. Since January 20, 2004, WAFCO has taken no action to collect the remaining balance due it. At the eviden-tiary hearing before the bankruptcy court, no evidence was produced to demonstrate that Harmsen had made any payments on
the remaining balance after January 20, 2004.
The WAFCO execution on Harmsen’s assets, in close time proximity to Lloyd’s execution on its judgment and Harmsen’s current use of those assets — including his home — is the centerpiece of Lloyd’s dissatisfaction with the bankruptcy court’s Order of Dismissal and the argument on this appeal.
3.
Other Debts
In addition to the debt to Lloyd’s and WAFCO, there were other obligations owed by Harmsen or related entities. Included in these were three not insubstantial real estate obligations. First, there was an obligation to California National Bank on apartments located in California and owned by WAFCO. There were also obligations flowing from this rental including an account with San Diego Gas and Electric as well as Time Warner Cable. Second, there was an obligation owed to Washington Mutual Bank secured by real property owned by H.F.L.P., L.C. Third, there was an obligation to Western Farm Credit Properties Bank secured by real property in Nevada owed by H.H. Land and Cattle Company. At the evidentiary hearing before the bankruptcy court, no evidence was produced to demonstrate that Harmsen was not current on any of these obligations at the time of filing. Nevertheless, it was not Harmsen who made payments on these obligations, it was his related companies.
Harmsen also had lines of credit with: American Express, Delta Sky Miles, Bank of America Flight Fund Visa, Capital One, MBNA America, Salt Lake City Credit Union Visa, and GM. At the evidentiary hearing, the evidence reflected that these accounts were current and in some instances, actually reflected a credit balance. However, at trial Harmsen indicated that he did not make the payments on these cards. Harmsen’s companies paid the monthly billings and at the year end, Harmsen’s compensation was adjusted, or offset, accordingly.
Harmsen had outstanding utility bills with Comcast, Newspaper Agency Corp., Questar, Salt Lake City Department of Public Utilities, and Utah Power and Light. At the evidentiary hearing, the evidence reflected that these accounts were current. Again, Harmsen does not pay these utilities, his related companies do.
Harmsen had doctor and professional bills to: N. Branson Call, M.D.; Thomas Liddle, D.D.S.; Gerald S. Sumerhays, DDS; HJ Associates, LC; Steven Lyb-bert; Steven Wuthrich; Melenaite Vi. With respect to the doctor and dentist bills, the evidence at trial reflected that
these billings were either current or awaiting a determination/payinent from Harmsen’s insurance. While there was a balance due on HJ Associates, LC, the bankruptcy court did not consider this debt as being “due” based upon testimony that Harmsen and HJ Associates had a long term relationship and that they were working on an agreement to reach a discount regarding the billing. Steven Lybbert and Steven Wuthrich were Harmsen’s attorneys and based upon the evidence at the evidentiary hearing, the billings to the attorneys were current. Melenaite Vi was a landscaper and the evidence at the evidentiary hearing reflected that payments to her were current.
Harmsen also had brokerage fees that were owed to two brokerage firms for margin loans. At the evidentiary hearing before the bankruptcy court, no evidence was produced as to the repayment of the principal of the margin loans and the evidence indicated that interest accrual was being paid or serviced as required.
Harmsen had a small obligation due at the time of filing to F. Weixler Company, but this amount, while past due, was $20.40 and the bankruptcy court determined that based upon the ledger history, this debt was being paid as it became due.
Harmsen had tax obligations outstanding at the time of filing, but the evidence before the bankruptcy court was that Harmsen had obtained extensions and payments were being timely made.
Finally, Harmsen had two ongoing obligations with clubs. The evidence at trial indicated that Harmsen had not made payments for his dues, but there was no evidence that these were ongoing obligations.
C. The Order of Dismissal
In a lengthy and detailed opinion the bankruptcy court concluded that it did not need to reach a determination with respect to the required number of creditors under 11 U.S.C. § 303(b)(2) because Harmsen was generally paying his debts as they became due. The bankruptcy court concluded that Lloyd’s failed to carry its burden to demonstrate that Harmsen was not, generally, paying his debts as they became due under the “totality of the circumstances test.”
II.
Standard of Review
We review the legal conclusions of the bankruptcy court
de novo.
De novo
review requires an independent determination of the issues, giving no special weight to the bankruptcy court’s decision.
On the other hand, we review the bankruptcy court’s findings upon which its legal conclusions are based under the more deferential clearly erroneous standard.
III.
Issues on Appeal
As noted at the outset of this opinion, each of the parties has identified several issues on appeal. This Court synthesizes the central issues on appeal as follows:
A. Whether the bankruptcy court erred in its application of the burden of proof in determining that the debtor was generally paying his debts as those debts came due.
B. Whether the bankruptcy court improperly adopted the “Almost
Per Se
Rule” by focusing on only select
factors or failed to properly consider the “totality of the circumstances” test as adopted by the Tenth Circuit in
Bartmann v. Maverick Tube
Corp.
C. Whether the bankruptcy court erred in dismissing the involuntary petition on the ground that Harm-sen was generally paying his debts as they became due on the date of the petition.
IV.
Discussion
A. The Bankruptcy Court Did Not Err in its Application of the Burden of Proof in Determining That the Debtor Was Generally Paying His Debts as Those Debts Came Due
The application of the burden of proof is a question of law, reviewable
de novo.
The petitioning creditor has the burden of demonstrating that the debtor is not generally paying his debts as they become due.
Once the petitioning creditor has met its burden, the burden shifts to the debtor to show that the debts in question are subject to a bona fide dispute.
Lloyd’s asserts that the bankruptcy court’s analysis of 11 U.S.C. § 303(h)(1) is flawed because the court considered several factors that have no bearing on the question of whether “the debtor is generally not paying such debtor’s debts as such debts become due unless such debts are the subject of a bona fide dispute.” According to Lloyd’s, the bankruptcy court improperly allocated to Lloyd’s the burden of proving that Harmsen was not “generally paying his debts as they became due” by requiring Lloyd’s to prove, as part of its case, that:
(a) the Involuntary Petition was in the best interests of all of the Debtor’s other creditors;
(b) Lloyd’s had no other adequate remedy under state law;
(c) Lloyd’s motives were something other than a self-centered desire to get paid;
(d) neither businesses employing the Debtor nor creditors of those businesses would be harmed by the Debtor’s bankruptcy; and
(e) Lloyd’s was not improperly forum shopping when choosing to proceed in Bankruptcy Court against the Debtor.
Consequently, Lloyd’s urges, because these factors were included in the court’s rationale, the petitioning creditor was improperly required to prove these items.
We conclude that the bankruptcy court applied the correct standard in examining whether the “debtor is generally not paying ... debts” and that Lloyd’s never met its burden. Specifically, the bankruptcy court held:
[T]he burden rests upon the petitioning creditor to prove that the debtor was not paying his debts once due. In addition, courts have consistently held that the determination of whether a debtor was paying his debts once due must be made as of the date the involuntary petition was filed.
“Congress has indicated that the primary issue in involuntary proceeding is and should be whether the debtor is
generally not paying his debts as they become due .... ” For this reason, the Court will comply with
Bartmann’s
“totality of the circumstances” test and focus its inquiry on the nature and amount of Harmsen’s debts and the general circumstances surrounding his payment or nonpayment of said debts, and then turn to the balancing test weighing the debt- or’s and creditors’ divergent interests in proceeding in bankruptcy.
As was recognized by the bankruptcy court, in determining whether a creditor has met its burden under 11 U.S.C. § 303(h)(1), the Tenth Circuit has concluded that the “bankruptcy court should examine the totality of the circumstances, balancing the interests of the debtor with those of the creditors.”
The Tenth Circuit has neither articulated a specific burden, nor set out a series of factors to consider in ascertaining whether a debtor is “generally not paying ... debts.” Instead, the Tenth Circuit utilizes a flexible case-by-case approach allowing the bankruptcy court, as the trial court, to receive and consider all admissible evidence presented, the demeanor and credibility of the witnesses, and argument of counsel, and make its determination as to whether the creditor has met its burden.
Congress, by using the term “generally” in 11 U.S.C. § 303(h)(1) and by not defining that term further, avoids a mechanical test and allows the bankruptcy court to have the ability to deal with a variety of situations as they are presented.
Thus, the bankruptcy court’s consideration of (a) whether the involuntary petition was in the best interests of the debtor and all creditors, (b) whether Lloyd’s had other available remedies under state law, (c) the harm or consequences Harmsen’s bankruptcy filing might visit on his related businesses or those businesses’ creditors or (d) whether Lloyd’s was forum shopping when choosing to proceed in bankruptcy court against the Debtor, was not improper as those questions can be considered in the panoply of factors in rendering a decision under 11 U.S.C. § 303(h)(1).
While the bankruptcy court considered such aspects of the case within the context of the “totality of circumstances” test it did not establish or impose a burden of proof beyond that contemplated in
Bartmann.
B. The Bankruptcy Court Did Not Adopt the “Almost
Per Se
Rule” and the Bankruptcy Court Correctly Applied the “Totality of Circumstances” Test Mandated by the Tenth Circuit Court of Appeals
The dominant theme contained in the appellate briefs filed by Lloyd’s is that the trial court did not correctly and fully consider the “totality of circumstances” surrounding Harmsen’s financial situation and payment of debts. The central feature of this contention is that the bankruptcy
court erred in invoking the “Almost
Per Se
Rule.”
The “Almost
Per Se
Rule” is a standard whereby the bankruptcy court treats the “generally not paying” analysis in involuntary cases brought by one creditor with a bias against granting relief.
In other words, under the “Almost
Per Se
Rule” the fact that only one creditor brings an involuntary petition is viewed as a factor— perhaps the predominant factor' — against entering an order for relief.
Lloyd’s acknowledges that the bankruptcy court never articulated or referenced the “Almost
Per Se
Rule” as a basis for its decision. And, Lloyd’s recognizes that the bankruptcy court “presaged” its analysis by using the Tenth Circuit’s “totality of the circumstances” test balancing the interests of the putative debtor with those of the creditors test.
Then, in a summary statement, Lloyd’s articulates the main thrust of its appeal stating that:
Despite acknowledgment of the correct standard, rather than look at all of the circumstances, the bankruptcy court “focused” on some of the circumstances and ignored others, for example, the fact that Harmsen had lost to WAFCO at execution sale only six weeks prior to the Involuntary Petition virtually all of his nonexempt personal property and that the sale occurred only after WAF-CO threatened Lloyd’s that it would execute on all of the Debtor’s assets if Lloyd’s would not compromise its claim against the Debtor. These facts and others showing the Debtor’s dire financial condition, and indicating also a “scheme, artifice or trick” to prefer another creditor and isolate Lloyd’s, were never mentioned by the Bankruptcy Court in its analysis as
Bartmann
requires.
Put another way, Lloyd’s argues that taking the cumulative impact of all the circumstances and evidence produced at the trial, the bankruptcy court did not consider the machinations, manipulations, and legal gymnastics of the Debtor, which constituted a “scheme, artifice or trick,” and that the Court should have entered an Order for Relief.
Although not entirely clear, Lloyd’s seemingly maintains that either the bankruptcy court (a)
did invoke
the “Almost
Per Se
Rule,” and then failed to consider an exception to that rule — “fraud, trick, artifice, or scam” — which would justify entering an order for relief against Harmsen, or (b) the Court
did not invoke
the “Almost
Per Se
Rule,” but it failed to consider and make findings relative to Harmsen’s and WAFCO’s alleged machinations and legal gymnastics, which should have been, but were not, incorporated into the
Bart-mann
“totality of the circumstances” test.
This Court concludes that the trial court
did
consider and
did
address Creditor’s contention that Harmsen’s conduct, business, and transactions — whether construed as legitimate legal machinations or “fraud, trick, artifice or scam” — supported entry of an order for relief. Thus, whether the bankruptcy court actually invoked the “Almost
Per Se
Rule” or simply followed the
Bartmann
“totality of the circumstances” test, it fulfilled its duty to consider this issue advanced by Lloyd’s. While the bankruptcy court addressed it somewhat
obliquely and by way of a footnote, it did it nonetheless. Specifically, in footnote 61, the bankruptcy court stated:
[Lloyd’s] raises a defense that Harmsen committed a fraud, artifice, or scheme which would allow the bankruptcy court to retain jurisdiction. In a single creditor case, some courts have granted relief upon such a showing. This is not a single creditor case. Even if it were, the evidence does not support a finding that Harmsen committed a fraud, artifice, or scheme in relation to the WAF-CO Judgment and execution sale.
Lloyd’s notes that in the case of
In re Fischer
the court commented that in those courts where the “Almost
Per Se
Rule” is adopted, there are two limited exceptions to its application.
The first exception arises in “an exceptional case” where the sole creditor of the debtor “would otherwise be without an adequate remedy under State or Federal law (other than bankruptcy law) if denied an order for relief [...] ” The second exception to this rule applies where there is “a showing of special circumstances amounting to fraud, trick, artifice or scam.”
Lloyd’s contends that after the bankruptcy court set up an impermissible hurdle for Lloyd’s to prove that the involuntary petition was in the “best interests of all creditors,” it concluded that the exceptions to the “Almost
Per Se
Rule” did not apply because this was not a single creditor case. Lloyd’s avers that the bankruptcy court, in making this observation, contradicted its own conclusion that this was, in essence, a two-party dispute. We do not believe that footnote 61 contradicts the conclusion that this is essentially a two-party dispute. The finding that this is not a single creditor case is not clearly erroneous. Indeed, there are
at least
two major unpaid creditors, Lloyd’s and WAFCO.
Moreover, based on the record before the bankruptcy court and the arguments made on this appeal, it cannot be said that Lloyd’s
has not
argued that if the “Almost
Per Se
Rule” exists, an order for relief should enter on the involuntary petition because Harmsen has ostensibly “committed a fraud, artifice, or scheme.” In effect,
Lloyd’s,
not the bankruptcy court, is the party that raised this issue at trial and the bankruptcy court evidently relegated the import of such defense to a footnote in the Order of Dismissal.
We conclude that the reference of the bankruptcy court that “the evidence does not support a finding that Harmsen committed a fraud, artifice, or scheme in relation to the WAFCO Judgment and execution sale” is not clearly erroneous. The elements of “fraud, artifice, or scheme...” require the trier of fact—the bankruptcy court—to assess the credibility of witnesses. This panel shall give due regard to the bankruptcy court in judging the credibility of the witnesses as related to the evidence.
Where, as here, the evidence is plausible in light of the record viewed in its entirety, an appellate court may not reverse the findings of the bankruptcy court “even though convinced that had it been sitting as the trier of fact, it would have weighed the evidence different
ly.”
Moreover, “[w]here there are two permissible views of the evidence, the fact-finder’s choice between them cannot be clearly erroneous.”
This panel has reviewed the decision of the bankruptcy court in detail and concludes that contrary to the suggestion of Lloyd’s, the bankruptcy court did
not
adopt the “Almost
Per Se
Rule.” Did the bankruptcy court consider the fact that (1) this case was brought by one creditor, (2) no other creditors joined the involuntary complaint, and (3) there were other appropriate forums to resolve the dispute? Yes. But, these considerations were not isolated from other considerations and analysis in the bankruptcy court’s decision. The bankruptcy court’s discussion does not constitute an adoption by that court of the “Almost
Per Se
Rule” in light of the detailed analysis in the bankruptcy court’s decision of the various other factors in this case.
C. The Bankruptcy Court Did Not Err in Dismissing the Involuntary Petition on the Ground That Harmsen Was Generally Paying His Debts as They Became Due on the Date of the Petition
A bankruptcy court’s factual finding that a debtor is, or is not, generally paying his debts as they come due will not be set aside unless clearly erroneous.
As stated above, the Tenth Circuit has not set out a specific standard or narrow test in analyzing the question of whether “the debtor is generally not paying such debt- or’s debts as such debts become due,” but it looks to the “totality of the circumstances, balancing the interests of the debtor with those of the creditors.”
We believe that the bankruptcy court’s deci
sion, here, under the case-by-case approach utilized by the Tenth Circuit is correct and appropriate. It carefully balanced the grounds for entering an order for relief on the involuntary petition with the intrinsic risk involved because an involuntary bankruptcy case is “extreme in nature and carries with it serious consequences for the alleged debtor, such as a loss of credit standing, interference with its general business affairs, and public embarrassment.”
The bankruptcy court stated that in focusing its inquiry on the nature and amount of Harmsen’s debts and the general circumstances surrounding his payment or nonpayment of said debts, it found it useful to look to tests adopted in other jurisdictions for determining whether a debtor is generally paying his debts. First, the bankruptcy court looked to the four-pronged analysis utilized by the court in
In re Norris.
In
Norris,
the court looked to: (1) the number of unpaid claims; (2) the amount of such claims; (3) the materiality of the nonpayments; and (4) the debtor’s overall conduct in its financial affairs.
Second, the bankruptcy court looked to cases using a two-pronged test: (1) whether a debt should be included as a debt in “generally not paying” calculation; and (2) comparing the number and amount of unpaid debts with the number and amount of paid debts.
Third, the bankruptcy court also noted the numerous factors listed by
Collier on
Bankruptcy.
The facts surrounding Harmsen’s financial affairs and his related businesses are unique. In particular, the transactions involving Harmsen and WAFCO draw scrutiny. However, it is clear from the record and the bankruptcy court opinion that the bankruptcy court had the opportunity to ascertain the credibility of the witnesses, assess the evidence presented, and exam
ine the arguments of counsel. Moreover, the factual findings of the bankruptcy court are supported by the record. The failure, if it can be viewed as such, of the bankruptcy court to identify each and every possible factor in
making
its decision is of no avail.
Taken as a whole, the record supports the conclusion that Harmsen was generally paying his debts on a regular basis at the time of the filing of the involuntary petition with the exception of the District Court Judgment and the WAFCO Judgment. Thus, we cannot conclude that the bankruptcy court’s factual finding that under the totality of the circumstances, Harmsen is generally paying his debts as they come due is clearly erroneous.
V.
Conclusion
The decision of the bankruptcy court is AFFIRMED.