596 B.R. 624
Bankr. W.D. Mich.2019Background
- Candace L. Curtis (the Debtor) filed a voluntary Chapter 13 petition the evening a District Court magistrate judge recommended she be joined in post-judgment collection proceedings brought by Madison King (a sexual-assault victim of Debtor's ex-spouse, Chad Curtis).
- King obtained a $1.8 million judgment against Chad Curtis and pursued post-judgment discovery and collection; jailhouse recordings revealed Debtor and Chad discussed shielding marital assets and using a revocable trust/other transfers to evade collection.
- Debtor schedules list ~ $1 million in assets (largest: a 23-acre horse farm owned via a revocable trust, value ≈ $875,000) and only about $13,000 in liabilities; King is a disputed, unliquidated unsecured creditor.
- Debtor filed Chapter 13 after the District Court issued a report and recommendation to join her, but before any determination of her equitable liability; she sought to avoid District Court jurisdiction and argued forum non conveniens prior to filing.
- King moved to dismiss under 11 U.S.C. § 1307(c) alleging bad faith filing to frustrate collection; after discovery and an evidentiary hearing the Bankruptcy Court found Debtor lacked good faith and granted dismissal.
Issues
| Issue | Plaintiff's Argument (King) | Defendant's Argument (Debtor) | Held |
|---|---|---|---|
| Whether Debtor's Chapter 13 filing was in good faith | Filing was a litigation tactic to stall/evade District Court collection and to protect assets from King's judgment | Filing was a bona fide attempt to obtain relief from creditors and reorganize under Chapter 13 | Court: Debtor lacked good faith; dismissal granted |
| Relevance of timing of petition (filed after report recommending joinder) | Timing shows motive to frustrate collection and avoid District Court proceedings | Filing was timely to seek bankruptcy protection and address creditors | Court: Timing probative of bad faith; weighed against Debtor |
| Debtor's motive and sincerity (sale to daughter, refusal to pay King) | Debtor intended to preserve/sell farm to insider and avoid paying King; would not commit to paying any allowed King claim | Debtor intends to pay other creditors and dispute King's claim; may sell assets if necessary | Court: Debtor lacked sincerity; unwillingness to address King's claim indicated bad faith |
| Appropriate forum for dispute between Debtor and King | District Court (post-judgment collection) is proper forum to adjudicate King's claim and alleged transfers | Bankruptcy forum appropriate to resolve claims and provide debtor relief | Court: The dispute between King and Debtor is properly adjudicated in District Court; bankruptcy filing was forum shopping |
Key Cases Cited
- Alt v. United States (In re Alt), 305 F.3d 413 (6th Cir. 2002) (sets multi-factor good-faith inquiry for Chapter 13 filings)
- Tamecki v. Frank (In re Tamecki), 229 F.3d 205 (3d Cir. 2000) (debtor must address allowed claims; refusal to pay a creditor may indicate bad faith)
- Khan v. Barton (In re Khan), 846 F.3d 1058 (9th Cir. 2017) (timing of petition near adversary proceedings can show lack of good faith)
- Condon v. Brady (In re Condon), 358 B.R. 317 (6th Cir. BAP 2007) (debtor’s motive is central to good-faith inquiry)
- Cusano v. Klein (In re Cusano), 431 B.R. 726 (6th Cir. BAP 2010) (filing on eve of collection actions is probative of bad faith)