In re Lin, 499 B.R. 430

Debtor Chia-mu May Lin sold real property in 2005 and received about $2.57 million net, creating a 2005 federal tax liability the IRS asserts remains unpaid.
Debtor contends she was extorted of approximately $1.5–1.7 million in cash shortly before/after the sale: she alleges multiple threatening calls, spread cash across accounts, and delivered $1.7 million to two unidentified women in a taxi; she never reported the incident to police or family until years later.
After the alleged extortion, Debtor opened brokerage accounts, generated substantial trading proceeds from 2005–2009 (millions annually in some years), made large cash withdrawals and luxury expenditures, and paid other creditors (credit cards) while not paying the IRS.
Debtor filed Chapter 7 in 2009, later converted to Chapter 13 in 2011; the Government (IRS) moved to dismiss under 11 U.S.C. § 1307(c) alleging bad faith, dishonest concealment of assets, a two-party dispute, and prejudicial delay.
At the evidentiary hearing the court found inconsistencies in Debtor’s story (changes in amounts, gender of extortionist, timing of disclosure), implausible conduct for a sophisticated debtor, and that her Chapter 13 plan is infeasible because it would not pay priority tax claims in full without IRS consent.

Issue	Plaintiff's Argument (IRS)	Defendant's Argument (Lin)	Held
Whether case should be dismissed for cause under §1307(c)	Case should be dismissed for cause because Debtor filed in bad faith and concealed assets	Debtor argues she acted in good faith under totality of circumstances	Granted: dismissal for cause under §1307(c) based on totality of circumstances
Credibility of alleged extortion and truthfulness	Extortion story is fabricated; Debtor was dishonest and changed accounts; failure to report undermines credibility	Debtor maintains extortion occurred and explains fear for family as reason for nondisclosure	Court found extortion story implausible and Debtor dishonest; this supports bad faith finding
Whether this is a two‑party dispute targeted at the IRS	Debtor isolated IRS as sole creditor by paying others and preserving IRS debt; filing targeted at single creditor	Debtor disputes characterization, asserting broader bankruptcy purposes	Court held case is essentially a two‑party dispute and that supports dismissal for bad faith
Whether delay is unreasonable and prejudicial to creditors	Debtor’s prolonged proceedings and infeasible plan prejudice IRS; plan would not pay priority taxes in full	Debtor proposes phased/serial Chapter 13 filings to address payments	Court concluded delay and infeasible plan are prejudicial; dismissal warranted

Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (U.S. 2007) (pre-petition concealment relevant to bad faith and relief conversion)
Grogan v. Garner, 498 U.S. 279 (U.S. 1991) (dishonesty indicates lack of good faith in bankruptcy context)
In re Eatman, 182 B.R. 386 (Bankr. S.D.N.Y. 1995) (bad faith filings constitute cause under §1307(c))
In re Blumenberg, 263 B.R. 704 (Bankr. E.D.N.Y. 2001) (bad faith factors include misrepresented assets and lavish expenditures)
In re Zick, 931 F.2d 1124 (6th Cir. 1991) (bad faith dismissal appropriate in egregious cases)
In re C-TC 9th Ave. P’ship, 118 F.3d 1304 (2d Cir. 1997) (bad faith is a highly factual inquiry and may be broadly applied)
In re Leavitt, 171 F.3d 1219 (9th Cir. 1999) (dishonesty and nondisclosure can warrant dismissal)
In re Klevorn, 181 B.R. 8 (Bankr. N.D.N.Y. 1995) (factors for bad faith include candor, accuracy of disclosures, and abuse of bankruptcy)