611 B.R. 38
M.D. Pa.2020Background
- Christopher and Abbey Campbell filed a Chapter 13 petition two days before a sheriff’s sale (Nov. 2017), voluntarily dismissed it, then filed Chapter 7 one day before a rescheduled sheriff’s sale (Feb. 2018).
- Debtors are dairy farmers with supplemental income from a family trust (royalties) and intermittent quarry/stone and sawmill activities; farm and trust income declined sharply 2015–2018; quarry operations were suspended and license restricted after DEP enforcement and missed payments.
- Original Schedule I listed modest monthly income (~$3,211); an amended Schedule I filed days before the conversion hearing reported a large jump to ~$11,422; debt schedule showed significant secured debt to BB&T (in default since 2016) and large unsecured debt (~$529,732).
- At the conversion hearing the Bankruptcy Court excluded several debtor exhibits for lack of foundation and for being improper summaries/syntheses.
- The Bankruptcy Court denied the motion to convert to Chapter 13, finding bad faith (timing of filings, nonpayment to BB&T, unexplained income increase), likely inability to fund a confirmable Chapter 13 plan (income speculative), prejudice to creditors, and possible ineligibility for Chapter 13 due to unsecured debt levels; the district court affirmed.
Issues
| Issue | Campbell's Argument | BB&T/Trustee's Argument | Held |
|---|---|---|---|
| Exclusion of Exhibits 2, 3.1, 3.2, 4, 11 | Exhibits 2–3.2 admissible under Fed. R. Evid. 1006 as summaries; 4 and 11 are ordinary documents | Exhibits lacked foundation, underlying materials not shown or not voluminous, some exhibits were syntheses/projections requiring expert testimony, others unauthenticated | Exclusion affirmed: summaries not shown to be based on admissible/voluminous underlying materials or introduced by preparer; syntheses required expert foundation; unauthenticated documents properly excluded |
| Whether conversion to Chapter 13 should be allowed (good faith) | Filing timing excusable (prior counsel’s advice); amended Schedule I income legitimate; denial will prejudice debtors who may be ineligible for Chapter 7 | Filing timing and timing relative to sheriff’s sales show bad faith; debtors were not forthcoming (late, unexplained income increase); counsel’s errors are attributable to debtors | Denial affirmed: ample evidence of bad faith (timing, nonpayment to major creditor, unexplained income increase); counsel’s conduct attributable to debtors |
| Whether debtors can propose a confirmable Chapter 13 plan / eligibility for Chapter 13 | Amended income shows ability to fund a plan | Income projections speculative (quarry/sawmill/stone unreliable); minimal cash on hand; large unsecured debt may exceed §109(e) limits | Denial affirmed: income projections speculative, insufficient cash, likely unable to sustain plan; unsecured debt may exceed Chapter 13 eligibility limits |
Key Cases Cited
- In re Fegeley, 118 F.3d 979 (3d Cir.) (standard of appellate review in bankruptcy appeals)
- Prusky v. ReliaStar Life Ins., 532 F.3d 252 (3d Cir.) (clear-error review and deference to bankruptcy factfinding)
- United States v. Fahnbulleh, 752 F.3d 470 (D.C. Cir.) (Rule 1006 requirements for summaries)
- United States v. Pelullo, 964 F.2d 193 (3d Cir.) (summary evidence admissible only if underlying materials are admissible)
- Eichorn v. AT&T Corp., 484 F.3d 644 (3d Cir.) (calculations that go beyond data and include assumptions are expert opinion)
- Link v. Wabash R. Co., 370 U.S. 626 (1962) (clients are bound by acts/omissions of chosen counsel)