In re Baribeau, 603 B.R. 797

Debtor Paulette Baribeau filed Chapter 11 on June 3, 2019; Hill Country Partners moved to convert to Chapter 7 on June 14, 2019. The court orally converted the case to Chapter 7 after a June 24, 2019 hearing.
At the time of conversion Debtor had appealed a state-court money judgment entered against her; she had not posted a supersedeas bond.
Debtor’s reported monthly income was modest (wages from husband’s practice and Social Security); Schedule J showed negative net income.
After conversion the Chapter 7 trustee settled Hill Country’s claim, reducing the judgment; the Fourth Court of Appeals later affirmed the state-court judgment.
Debtor moved under Fed. R. Civ. P. 59(e) (Bankr. R. 9023) to reconsider conversion, arguing changed circumstances, ability to confirm a plan (including via new-value contributions from husband), and that conversion was not in creditors’ or the estate’s best interests.
The court denied reconsideration, finding no newly discovered evidence, no legal error, and that Debtor could not invoke the § 1112(b)(2) exception because the conversion was based on § 1112(b)(4)(A) (continuing loss/diminution and lack of reasonable likelihood of rehabilitation).

Issue	Debtor's Argument	Hill Country / Trustee's Argument	Held
Whether conversion to Chapter 7 should be reconsidered under Rule 59(e)	Changed circumstances (trustee settlement, appellate disposition) and other facts warrant reversal	No newly discovered evidence or manifest error; Rule 59(e) not a vehicle to rehash earlier arguments	Denied — no newly discovered evidence or clear error shown
Whether Debtor can meet § 1112(b)(2) exception to conversion	Debtor can likely confirm a plan within a reasonable time (income + new-value contributions)	Burden not met; Debtor failed to identify "unusual circumstances" and conversion was for § 1112(b)(4)(A) grounds	Denied — statutory exception inapplicable because conversion grounded in § 1112(b)(4)(A)
Whether conversion was in creditors’ best interests	Conversion benefits only Hill Country and adds trustee professional fees	Conversion allowed trustee to settle and reduce Hill Country’s claim, benefiting creditors overall	Denied — court weighed Little Creek factors and found conversion appropriate
Whether Chapter 7 administration (trustee actions, professionals) improperly harms estate	Trustee’s employment of professionals and settlement are prejudicial	Trustee acted within statutory duties; settlement and professionals serve estate administration	Denied — trustee actions proper; objections to specific actions must be raised in adversary/pleadings

In re Transtexas Gas Corp., 303 F.3d 571 (5th Cir.) (Rule 59(e) as challenge to correctness of judgment)
Templet v. HydroChem, 367 F.3d 473 (5th Cir.) (Rule 59(e) not for rehashing arguments)
In re Benjamin Moore & Co., 318 F.3d 626 (5th Cir.) (standards for Rule 59(e) relief and § 1112(b)(2) exceptional circumstances)
Little Creek Dev. Co. v. Commonwealth Mortg. Co. (In re Little Creek), 779 F.2d 1068 (5th Cir.) (factors for assessing debtor’s motives and financial condition)
Bank of Am. Nat’l Tr. & Sav. Ass’n v. 203 N. LaSalle St. P’ship., 526 U.S. 434 (U.S.) (new-value corollary to absolute priority rule)
Elmwood Dev. Co. v. Gen. Elec. Pension Tr., 964 F.2d 508 (5th Cir.) (multiple filings not per se bad faith)
Simon v. United States, 891 F.2d 1154 (5th Cir.) (Rule 59(e) cannot be used to raise arguments that should have been made earlier)