517 B.R. 622
Bankr. W.D. Va.2014Background
- Debtor Charles Gose Dickenson filed a Chapter 12 petition Aug. 7, 2013; over the next ten months he submitted multiple amended schedules and four proposed Chapter 12 plans, none confirmable.
- Farm Credit (largest secured creditor) moved for relief from stay; parties entered a consent adequate-protection order where debtor pledged collateral and paid $10,000.
- Debtor filed a post-petition "exchange" with his nephew that transferred real estate interests shortly before the petition; the transfer was not disclosed in schedules or the Statement of Financial Affairs.
- At several hearings the trustee and court discovered numerous nondisclosures and inconsistencies: omitted real-property interests, inconsistent valuations, undisclosed partnerships and timber/mineral interests, undocumented post-petition transfers, unreported cattle-sale proceeds, and an undisclosed life-insurance policy.
- Debtor admitted many omissions as "oversights" but also admitted intentional nondisclosure/recording decisions (e.g., not recording a deed so he would seek court approval).
- The court found a pattern of inaccurate schedules, failure to comply with court orders and reporting rules, prejudicial delays to creditors, and lack of good faith — and granted the trustee’s motion to dismiss under 11 U.S.C. § 1208.
Issues
| Issue | Trustee's Argument | Debtor's Argument | Held |
|---|---|---|---|
| Whether debtor's repeated inaccurate/omitted schedules and valuations constitute "cause" to dismiss under 11 U.S.C. § 1208(c)(1) (unreasonable delay / gross mismanagement prejudicial to creditors) | Schedules are repeatedly inaccurate; four unconfirmable plans; creditor prejudice and delay warrant dismissal | Omissions were inadvertent oversights; mistakes do not rise to dismissal | Court: Dismissal warranted under §1208(c)(1) — repeated delays/misrepresentations unreasonable and prejudicial |
| Whether debtor's post‑petition transfers, undisclosed receipts, and conduct constitute "other cause" / bad faith for dismissal under §1208(c) / (d) | Post‑petition transfers of encumbered assets, undisclosed partnership debts, timber sales, and hiding proceeds show bad faith and prejudice | Transactions were legitimate business dealings / mistakes; not sufficient to show bad faith | Court: Totality of circumstances shows lack of candor and bad faith; dismissal appropriate |
| Whether debtor complied with reporting duties (Rule 2015 / §704) regarding receipts/disbursements and operating reports | Debtor failed to report $36,000 net cattle proceeds and kept funds in sister’s account, violating reporting obligations | Proceeds were controlled via sister’s account for convenience; omissions were oversight | Court: Failure to report and concealment violates reporting duties and supports dismissal |
| Whether consent adequate-protection pledge and subsequent deeds/transfers violated creditor rights / court orders | Debtor either pledged collateral he didn’t own, restructured ownership to evade lien, or allowed partners to remove collateral without consent — harming Farm Credit | Debtor gave conflicting explanations (mistake, rescission, or arrangement with partners) and claimed oversight | Court: Conduct devalued creditor collateral and suggested transfer/obligation without approval; supports dismissal |
Key Cases Cited
- United States v. Suthers (In re Suthers), 173 B.R. 570 (W.D. Va. 1994) (upholding dismissal for delay, violations of court orders, and post‑petition misconduct)
- Euerle Farms, Inc. v. State Bank in Eden Valley (In re Euerle Farms, Inc.), 861 F.2d 1089 (8th Cir. 1988) (multiple factors may be aggregated to find "cause" to dismiss)
- In re Love, 957 F.2d 1350 (7th Cir. 1992) (totality‑of‑circumstances test for bad faith and good faith requirement)
- Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007) (court retains authority to take appropriate action for fraudulent conduct by atypical litigants)
- In re Alt, 305 F.3d 413 (6th Cir. 2002) (debtor’s candor with court/creditors is proper factor for dismissal)
- In re Kloubec, 268 B.R. 173 (N.D. Iowa 2001) (concealment of assets can undermine the bankruptcy process and justify dismissal)