In re Gutierrez
528 B.R. 1
Bankr. D. Vt.2014Background
- Debtor A. Paul Gutierrez filed a Chapter 7 petition on Nov. 5, 2013 after a creditor, Catamount Holding Co. II, pursued a state-court deficiency action following foreclosure of property owned by a Hillside entity in which Debtor had an interest.
- Catamount moved to dismiss under 11 U.S.C. § 707(b) (abuse) and § 707(a) (bad faith), alleging Debtor manipulated schedules, misstated income, and filed in the wrong venue.
- Debtor’s schedules listed total liabilities of ~$589,917, with Catamount listed as a contingent, disputed, unliquidated claim at $400,000; Debtor’s Schedule I reported combined annual income of $122,772.
- Undisputed facts: Debtor’s principal assets (real property, bank accounts, vehicles) were located in Vermont for the 180 days before filing; Debtor maintained a small Utah rental apartment for work travel and a Vermont residence used as principal home.
- Discovery produced no probative evidence contradicting Debtor’s schedules; Catamount later filed a proof of claim for $128,000 after the petition.
Issues
| Issue | Catamount’s Argument | Gutierrez’s Argument | Held |
|---|---|---|---|
| Venue (28 U.S.C. §1408) | Debtor is resident/working in Utah; case should be venued there | Debtor’s principal assets and majority contacts are in Vermont | Venue proper in Vermont because principal assets were located in Vermont during the 180-day period |
| Dismissal for lack of good faith (§707(a)) | Debtor filed to avoid single large creditor; manipulated schedules (overstated Catamount claim, listed business debts, kept two residences, failed to disclose income/bonus) | Debtor acted in good faith; schedules reflected Creditor’s pre-petition positions; dual residences justified by work; post-petition bonus not estate property | No cause to dismiss for bad faith; undisputed facts did not show egregious fraud/misconduct required for §707(a) dismissal |
| Dismissal for abuse under §707(b) (means test applicability) | Debtor’s debts are primarily consumer debts (Catamount claim should be $128,000); presumption of abuse should apply | Debtor’s schedules (petition date) show debts primarily business in nature (Catamount claim properly scheduled as disputed contingent claim at $400,000); §707(b) thus inapplicable | §707(b) analyzed as of petition date; Debtor’s debts were primarily business debts on schedules — §707(b) does not apply |
| Completeness/honesty of schedules (disclosure) | Debtor understated income (omitted potential/expected bonus) and failed to amend after receiving post-petition bonus | Bonus was post-petition earnings and not property of Chapter 7 estate; schedules reflected petition-date facts; no intentional concealment shown | Failure to disclose a post-petition bonus did not constitute lack of candid disclosure for Chapter 7 because bonus is excluded from estate under §541(6) and schedules are measured at petition date |
Key Cases Cited
- Zick v. Raymond, 931 F.2d 1124 (6th Cir. 1991) (lack of good faith may justify §707(a) dismissal only in egregious cases of fraud or similar misconduct)
- Pearson v. Comprehensive Accounting Corp., 773 F.2d 751 (6th Cir. 1985) (threshold eligibility determinations should rely on petition-date facts and debtor schedules)
- Smith v. Geltzer, 507 F.3d 64 (2d Cir. 2007) (courts should avoid converting §707(a) into a mechanism that effectively mandates Chapter 13 where Congress did not intend one)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (standard for summary judgment — no genuine issue of material fact)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment burden-shifting framework)