539 B.R. 879
Bankr. D. Kan.2015Background
- Mills filed a chapter 13 case with a 36-month plan; creditors objected to plan viability and plan duration.
- Mills subsequently faced objections and amendments from the trustee and creditors, including a large IRS claim increase.
- Mills’ post-petition transfers among entities (CSD, UP) and related ownership shifts raised questions of potential avoidance and bad faith.
- Creditors moved to convert to chapter 7; Mills moved to dismiss under § 1307(b), arguing an absolute right to dismiss.
- The court must decide whether § 1307(b)’s unconditional right to dismiss can be overridden by § 1307(c) to convert for creditors’ benefit.
- Key factual issues center on Mills’ conduct, schedule accuracy, post-petition transactions, and whether bad faith supports conversion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does § 1307(b) give an absolute right to dismissal? | Mills: dismissal must be granted unconditionally. | Appell/Law: § 105(a) may deny dismissal for bad faith; Marrama allows limits. | Yes; § 1307(b) absolute right to dismissal |
| May the court convert § 13 case for creditors despite a § 1307(b) dismissal request? | Debtor’s right to dismiss is absolute; conversion moot. | Court may convert for cause if in creditors' best interests. | Conversion denied as moot; dismissal granted |
| Does Law v. Siegel bar extending Marrama to create a bad-faith exception to § 1307(b)? | Law limits equitable relief; no bad-faith exception to dismissal. | Marrama broad authority may permit some equitable action. | Law v. Siegel controls; no bad-faith exception to § 1307(b) |
Key Cases Cited
- Barbieri v. RAJ Acquisition Corp. (In re Barbieri), 199 F.3d 616 (2nd Cir.1999) (absolute right to voluntary dismissal; ‘‘shall’’ is mandatory)
- Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (U.S. 2007) (limits on broad equity to convert under § 706; anti-abuse authority exists)
- Law v. Siegel, 134 S. Ct. 1188 (U.S. 2014) (restrains court from rewriting exemptions; limits on § 105(a) relief)
- In re Jacobsen, 609 F.3d 647 (5th Cir.2010) (bad faith can support conversion despite § 1307(b) dismissal request)
- In re Rosson, 545 F.3d 764 (9th Cir.2008) (denial of dismissal on bad-faith/abuse grounds under § 105(a))
- In re Molitor, 76 F.3d 218 (8th Cir.1996) (fresh start principle; wrongdoing not shielded by bankruptcy)