499 B.R. 683
Bankr. D.N.D.2013Background
- involuntary Chapter 7 petition filed by Lureen against Mikkelson; debt to Lureen exceeds $5.28 million (judgment) and is undisputed.
- Mikkelson sought dismissal or abstention under § 305, asserting state-law remedies suffice and that this is a two-party debt-collection dispute.
- Mikkelson’s post-release financials show substantial assets and income, including IRAs, life insurance, and retirement accounts, with most assets exempt under North Dakota law.
- Transfers and dissipation in the period before and after incarceration include transfers to sons, sale of a Bobcat loader, and large cash withdrawals.
- Lureen sought relief under § 303(h) arguing Mikkelson is generally not paying debts as they come due, with substantial nonpayment to her.
- Court conducted four-factor analysis under § 303(h)(1) and found, overall, Mikkelson is generally not paying his debts as they become due and granted relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether debtor is generally not paying debts as they become due | Lureen argues Mikkelson is delinquent on the large judgment and dissipates assets. | Mikkelson contends he pays other debts and that the petition seeks to litigate a two-party dispute. | Yes; court finds debtor not paying debts as they become due due to predominance of the judgment. |
| Whether bankruptcy relief provides remedies unavailable under state law | Lureen claims bankruptcy allows liquidation and recovery not available under ND law. | Mikkelson argues most property is exempt and state remedies suffice. | Court finds bankruptcy offers unique remedies, supporting relief notwithstanding exemptions. |
| Whether abstention under § 305 is appropriate | Lureen seeks abstention to allow state remedies; bankruptcy not necessary. | Mikkelson argues abstention is appropriate due to two-party dispute. | Abstention not appropriate; relief granted to provide equitable distribution and protect creditors. |
Key Cases Cited
- In re Murrin, 477 B.R. 99 (D. Minn. 2012) (courts weigh debtor’s overall financial position to determine general nonpayment)
- In re Feinberg, 238 B.R. 781 (8th Cir. BAP 1999) (four-factor test including number and amount of unpaid claims and overall conduct)
- In re Fischer, 202 B.R. 341 (E.D.N.Y. 1996) (debt largely substantial and defaulted on major claims can show general nonpayment)
- Concrete Pumping Serv., Inc. v. King Constr. Co., 943 F.2d 627 (6th Cir. 1991) (proportion of debt and creditors paid used to assess general nonpayment)
- In re Nordbrock, 772 F.2d 397 (8th Cir. 1985) (discusses single-creditor petitions and fraud/special need considerations)
- In re Century/ML Cable Venture, 294 B.R. 9 (S.D.N.Y. 2003) (context of substantial sole creditor and general nonpayment)
- In re Garland Coal & Mining Co., 67 B.R. 514 (Bankr. W.D. Ark. 1986) (illustrates impact of nonpayment on overall liabilities)