540 B.R. 468
Bankr. M.D. Ala.2015Background
- Stacy and Stephanie Danley filed multiple bankruptcies (2007, 2008, 2014, 2015) while two Liberty Bank loans (rental properties and personal residence) remained substantially delinquent and uninsured; Liberty Bank sought relief from the automatic stay in the 2015 Chapter 11 case.
- Loan facts: Rental Properties Loan (original principal $264,000) and Personal Residence Loan (original principal $425,000) had grown by 2015 to roughly $363,398 and $474,355 respectively; combined arrears exceeded $270,000 and Liberty Bank paid force-placed insurance and taxes.
- Procedural posture: After an evidentiary hearing, the bankruptcy court (Sept. 17, 2015) granted Liberty Bank in rem relief from the automatic stay under 11 U.S.C. § 362(d)(4)(B); Danleys moved to alter/amend/vacate and to extend the stay.
- Court findings: The court found the Danleys’ prior filings and the 2015 petition were part of a scheme to delay, hinder, or defraud Liberty Bank (bad faith), the bank lacked adequate protection, and reorganization was objectively futile.
- Relief and disposition: The court denied the motion to alter/amend/vacate, left the § 362(d)(4) in rem order in effect, denied the stay extension as moot, and discharged an order to show cause re: dismissal for late schedules (court declined to dismiss despite tardy filings).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court erred in granting relief from the automatic stay for lack of adequate protection | Danleys: they offered $3,000/month as adequate protection and filed schedules post-hearing; Stephanie argued her 2014 Chapter 13 was filed in good faith | Liberty Bank: Danleys long default, large arrears, lapsed insurance/taxes, and inability to fund payments show inadequate protection | Held: Liberty Bank lacked adequate protection; $3,000 was insufficient; relief under § 362(d)(1) granted |
| Whether in rem relief under 11 U.S.C. § 362(d)(4)(B) was warranted (scheme to hinder/delay/defraud via multiple filings) | Danleys: timing near foreclosure and prior filings do not by themselves show bad faith; some payments were made in 2014 Chapter 13 | Liberty Bank: pattern of repeated filings, dismissed/unenforced plans, failure to prosecute, and ongoing nonpayment constitute a scheme | Held: Multiple filings plus conduct (dismissals, unperformed confirmed plan, nonpayment of taxes/insurance) established bad faith; in rem relief proper |
| Whether the court committed reversible error (motion to alter/amend/vacate under Rule 59(e)) | Danleys: alleged court misstatements and supplied tardy schedules/payment advices as corrected evidence | Liberty Bank: no intervening change in law or newly discovered evidence; tardy filings do not cure pattern of bad faith | Held: Motion to alter/amend/vacate denied — Danleys failed to show change in law, new evidence, or clear error/prevent manifest injustice |
| Whether the case should be dismissed for failure to timely file schedules and SOFAs (order to show cause) | Danleys: claimed misinformation from Clerk and later filed schedules | Court/Bank: tardy and incomplete compliance indicative of bad faith but not dispositive | Held: Court discharged the order to show cause and declined to dismiss despite excoriating tardiness; allowed case to proceed for now |
Key Cases Cited
- Phoenix Piccadilly, Ltd. v. Meritor Sav. Bank, 849 F.2d 1393 (11th Cir. 1988) (debtor bad faith can constitute cause for relief from the automatic stay)
- Natural Land Corp. v. Baker Farms, Inc., 825 F.2d 296 (11th Cir. 1987) (bad-faith filing supports stay relief)
- Harris v. Viegelahn, 135 S. Ct. 1829 (2015) (undisbursed Chapter 13 trustee funds returned to debtor on conversion — context re: Chapter 13 dismissal/refunds)
- In re Henderson, 395 B.R. 893 (Bankr. D.S.C. 2008) (objective futility of reorganization and pattern of filings support in rem relief)