443 B.R. 389
Bankr. D.S.C.2011Background
- Debtors filed a chapter 11 petition on February 3, 2011; a prior chapter 11 case was dismissed on September 24, 2010, with appeal pending.
- The automatic stay in the current case will expire March 5, 2011, 30 days after filing, unless extended.
- Debtors own a residence and three rental properties used for residential/commercial purposes; two CPI-owned businesses provide income.
- Schedules show $851,806.52 secured debt and $329,118.99 unsecured debt; income reported as $4,159.55 per month after deductions.
- Testimony and records showed inconsistent and unclear financial information, with past rent collection and leases problematic.
- Court denies the Motion to Extend Stay, finding no substantial change in finances and presuming bad faith under § 362(c)(3).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 362(c)(3) presumes bad faith. | Washington argues substantial change in finances justifies extension. | Creditor asserts no substantial change; presumption of bad faith applies. | Presumption of bad faith based on no substantial change; denial of extension. |
| Whether debtor rebuttal by clear and convincing evidence is sufficient to overcome presumption. | Debtors contend they can show good faith improvements. | Creditor argues evidence shows no convincing improvement or ability to confirm a plan. | Debtors failed to rebut the presumption; evidence not clear and convincing. |
| Whether the motion should be granted given likelihood of plan feasibility. | Debtors claim future income and expenses will enable a plan. | Creditor contends rental income is unreliable and expenses are not realistically projected. | Motion denied; unlikely to propose/confirm a feasible plan. |
| Whether the automatic stay should be extended in light of bad-faith finding. | Move to extend stay to all creditors. | No extension warranted due to presumptive bad faith. | Stay extension denied; stay will expire March 5, 2011. |
Key Cases Cited
- In re Mark, 336 B.R. 260 (Bankr.D.Md. 2006) (clear and convincing standard for rebutting presumption of bad faith)
- In re Havner, 336 B.R. 98 (Bankr.M.D.N.C. 2006) (seven factors for evaluating motion to extend stay)
- In re Thomas, 352 B.R. 751 (Bankr.D.S.C. 2006) (gloss on 'good faith' standard in context of stay extensions)
- Carolin Corp. v. Miller, 886 F.2d 693 (4th Cir. 1989) (two-factor test for stay-related good faith considerations)
- Jones v. Pitt County Bd. of Educ., 528 F.2d 414 (4th Cir. 1975) (definition of clear and convincing evidence)