536 B.R. 469
Bankr. M.D. Ala.2015Background
- Debtor Lateefah Muhammad (self‑employed attorney) filed a third Chapter 13 petition on Feb. 27, 2015 after two prior Chapter 13 cases (2001 dismissed pre‑confirmation; 2012 dismissed after multiple defaults).
- In the 2012 case Muhammad admitted a $10,000 mortgage delinquency to Tuskegee Federal; by November 2014 the parties entered a consent ("Hoggle") order fixing the delinquency at $14,963.37 and requiring $400/month cure plus regular payments.
- Muhammad defaulted again (mortgage delinquency grew to roughly $18,000), the Trustee filed multiple motions to dismiss in the prior case, and the prior case was dismissed for failure to perform.
- Muhammad moved to extend the automatic stay under 11 U.S.C. § 362(c)(3)(B); the bankruptcy court denied the extension, finding she failed to prove her filing was in good faith by clear and convincing evidence.
- At the evidentiary hearing Muhammad offered no billing/collection records or other hard evidence of changed financial circumstances—only an unsubstantiated budget and testimony—while Tuskegee Federal documented the growing delinquency.
- Muhammad’s Rule 9023 (Rule 59) motion to alter or amend was denied because she presented no intervening law, newly discovered evidence, or clear error to justify relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the automatic stay should be extended under §362(c)(3)(B) | Muhammad: re‑filing was in good faith; she is no longer running for office and will have more time to practice law and fund the plan | Tuskegee Federal/Trustee: prior defaults, growing mortgage arrearage, and no proof of changed finances rebut good faith | Denied — debtor failed to prove good faith by clear and convincing evidence |
| Whether presumption of bad faith under §362(c)(3)(C) arose | Muhammad: did not sufficiently rebut presumption; relied on promises and future budget | Creditor: prior failures to provide adequate protection, perform under plan, and lack of substantial change trigger the presumption | Court found the presumption arose (adequate protection failure; plan nonperformance; no substantial change) |
| What quantum of proof is required to rebut presumption | Muhammad: argued general testimony and budget suffice | Creditor: clear and convincing evidence required to rebut presumption | Court applied clear and convincing standard and found evidence lacking |
| Whether the Rule 9023 motion to alter/amend should be granted | Muhammad: requested reconsideration of stay‑extension denial | Trustee/Creditor: no new law or evidence, no clear error identified | Denied — motion did not meet grounds (intervening law, new evidence, or manifest injustice) |
Key Cases Cited
- In re Hoggle, 12 F.3d 1008 (11th Cir. 1994) (permits curing post‑petition mortgage arrears in a Chapter 13 plan but recognizes post‑petition defaults are a warning sign)
- In re Montoya, 333 B.R. 449 (Bankr. D. Utah 2005) (procedural requirement to file and complete stay‑extension hearing within 30 days)
- In re Castaneda, 342 B.R. 90 (Bankr. S.D. Cal. 2006) (good‑faith determination employs totality of the circumstances)
- In re Berry, 340 B.R. 636 (Bankr. M.D. Ala. 2006) (court practice of treating late §362(c)(3)(B) motions skeptically where 30‑day window has passed)
- Colorado v. New Mexico, 467 U.S. 310 (U.S. 1984) (discusses the meaning of clear and convincing evidence standard)