473 B.R. 331
9th Cir. BAP2012Background
- Debtors Frank and Bonnie Levesque filed Chapter 7; case later reopened and converted motion sought to convert to Chapter 11.
- Accident in 2009 worsened debtors’ finances; prior mortgage delinquency augmented financial distress.
- Debtors disclosed no unliquidated claims in schedules and testified truthfully at §341(a) meeting; discharge entered Oct 4, 2010.
- Dispute arose over undisclosed personal injury claim against Falcon Industries; claim pursued after case closing.
- Trustee moved to reopen and convert; Levesques argued Trustee lacked standing since discharged and claimant was estate asset.
- Bankruptcy court granted reopening, denied conversion, and trustee participated as party in interest; Levesques appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Trustee have standing to be heard on the Motions? | Levesques contend Trustee has no standing after discharge. | Shapiro argues Trustee is a party in interest and should serve regarding reopening. | Yes; Trustee has standing to participate. |
| Did the court abuse its discretion in denying the conversion to Chapter 11? | Levesques claim good faith reliance on counsel warrants conversion. | Trustee and court properly applied Marrama standard; no clear error in findings. | No abuse; denial affirmed. |
Key Cases Cited
- Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007) (limits absolute right to convert to prevent abuse of process)
- In re White, 104 B.R. 951 (S.D. Ind. 1989) (trustee standing to reopen undisclosed assets)
- In re Petty, 93 B.R. 208 (9th Cir. BAP 1988) (case discussion on case closure and undisclosed estate assets)
- In re Linton, 136 F.3d 544 (7th Cir. 1998) (trustee may reopen for cause; party in interest)
- In re Sweeney, 275 B.R. 730 (Bankr. W.D. Pa. 2002) (trustee authority despite discharge under certain provisions)
- In re DeLash, 260 B.R. 4 (Bankr. E.D. Cal. 2000) (pre-discharge creditor standing concerns in reopening)