486 B.R. 404
Bankr. E.D. Mich.2012Background
- Debtor filed a voluntary Chapter 7 petition on January 26, 2012; motion to convert to Chapter 11 filed September 4, 2012.
- Over seven months before conversion, Chapter 7 Trustee and UST were active; Trustee collected $52,000 in estate funds.
- UST filed adversary complaint on March 20, 2012 seeking denial of discharge under 11 U.S.C. §727(a); Debtor answered.
- Court issued scheduling orders and pretrial orders; UST filed two partial summary judgment motions on August 9 and August 16, 2012.
- Debtor failed to timely respond to the summary judgment motions; Court granted motions and denied discharge on September 7, 2012, dismissing Counts I–II and denying discharge under §727(a)(4)(A) and §727(a)(5).
- Objections to the proposed conversion were lodged by UST, TCF National Bank, and Carol Savage; Savage’s objections were not withdrawn and were heard at the October 17, 2012 hearing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Marrama bad-faith conduct bar conversion to Chapter 11? | Savage contends prepetition bad faith warrants denial under Marrama. | Debtor argues Marrama should not apply or that bad faith is not proven. | Yes; the court denies conversion based on Marrama-level bad faith. |
Key Cases Cited
- Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007) (prepetition bad-faith conduct can forfeit right to convert (Chapter 7 to 11))
- Keeney v. Smith (In re Keeney), 227 F.3d 679 (6th Cir. 2000) (establishes elements for false oath in bankruptcy as relevant to §727(a)(4)(A))
- Levesque v. Shapiro (In re Levesque), 473 B.R. 331 (9th Cir. BAP 2012) (applies Marrama reasoning to Chapter 7 to Chapter 11 conversions)