465 B.R. 507
Bankr. E.D. Ark.2011Background
- Debtors filed a voluntary Chapter 13 petition on May 6, 2010.
- Creditors moved to dismiss on August 12, 2010, alleging debts exceed §109(e) limits.
- Debtors’ schedules show $310,140.18 in unsecured/undersecured claims; creditors filed $227,244.67 against that schedule.
- Trustee records show total filed claims of $335,722.42, including the creditor’s $227,244.67.
- Debts are not generally disputed as to amount or characterization; objections window closed.
- Court acknowledges this is a core proceeding under 28 U.S.C. §157(b)(2)(A).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| How is §109(e) debt limit measured? | Hargrove argues for using only scheduled debts. | Jones argues for including claims filed and scheduled debts to compute total. | Eligibility must be assessed as of petition; but evidence examined; not strictly limited to schedules. |
| Should the court combine scheduled debts with filed claims for eligibility? | Debtors contend only schedules matter unless bad faith shown. | Creditors contend to aggregate scheduled and filed claims for total. | Court declines to adopt creditor's aggregation method; looks for good faith and overall facial amount. |
| Is there bad faith or manipulation in debt reporting? | Debtors acted diligently; no bad faith shown. | No explicit counter-claim of bad faith beyond misalignment of amounts. | No bad faith established; schedules considered honest and thorough. |
| Does the debt amount meet §109(e) limits as of petition date? | Total unsecured debts (as scheduled and filed) are within limits. | If mischaracterized, could exceed limits; requires scrutiny of evidence. | Debtors meet §109(e) eligibility; motion to dismiss denied. |
Key Cases Cited
- In re Montgomery, 37 F.3d 413 (8th Cir. 1994) (eligibility not jurisdictional; burden on debtor to prove eligibility)
- In re Tim Wargo & Sons, Inc., 869 F.2d 1128 (8th Cir. 1989) (eligibility burden; good faith considerations)
- In re Gould, 137 B.R. 761 (W.D. Ark. 1992) (courts not bound by debtor’s characterization; may review evidence)
- In re Barcal, 213 B.R. 1008 (8th Cir. BAP 1997) (canvass schedules/claims; avoid total reliance on either)
- In re Miller, 907 F.2d 80 (8th Cir. 1990) (court need not resolve post-petition liabilities for eligibility)