643 B.R. 828
Bankr. W.D. Pa.2022Background
- Debtor Laura Reppert filed Chapter 13 in February 2017 and confirmed a plan that paid 0% to general unsecured creditors.
- She did not list general unsecured creditors on the creditor matrix, so many creditors received no notice of the case.
- In March 2021 (four years into the case) the Debtor took title to an unencumbered 2021 BMW but failed to disclose it to the court or trustee; the BMW came to light nearly a year later via her husband’s bankruptcy filings.
- The Debtor amended schedules after disclosure, claiming the BMW was an early birthday gift held in trust for her then-14-year-old daughter; the affidavit and testimony were inconsistent and uncorroborated.
- The court found the BMW was property of the estate, concluded the nondisclosure and defective matrix prejudiced creditors, and held an evidentiary hearing on an Order to Show Cause.
- The court dismissed the Chapter 13 case with prejudice and imposed a two-year filing bar, rejecting the argument that completion of plan payments mooted the dismissal proceedings.
Issues
| Issue | Reppert's Argument | Trustee / Opponent's Argument | Held |
|---|---|---|---|
| Whether completion of plan payments moots a dismissal motion for bad faith | Completion of plan payments requires entry of discharge under §1328(a), so dismissal is moot | Court/Trustee: §1328(a) should not immunize bad-faith conduct discovered before discharge; dismissal remains available under §1307(c) | Completion of payments does not bar dismissal for cause; court rejects a literal §1328(a) reading that would reward last-minute misconduct |
| Whether a postpetition, non-monetary gift (the BMW) acquired during Chapter 13 is property of the estate | Non-monetary gifts acquired postpetition after 180 days should not automatically be estate property; alternatively, Debtor holds title in trust for daughter | Trustee/Court: §1306(a) makes postpetition acquisitions estate property in Chapter 13; presumption is property of estate unless trust proven | BMW is property of the estate; Debtor failed to prove she held only legal title or a valid trust for the daughter |
| Whether nondisclosure of the BMW and the defective creditor matrix show lack of good faith warranting dismissal | Debtor offered trust story and argued practical considerations; completion of payments made sanction inappropriate | Trustee: Concealment of a substantial unencumbered asset plus failure to serve creditors demonstrates bad faith and prejudice | Court finds bad faith: nondisclosure and failure to list creditors materially prejudiced creditors and support dismissal under §1307(c) |
| Appropriate sanction and duration of filing bar after dismissal | Debtor preferred dismissal to preserve ability to file Chapter 7 | Trustee recommended dismissal with prejudice given concealment | Court ordered dismissal with prejudice and imposed a two-year bar on future filings as proportionate sanction given prejudice from defective matrix and nondisclosure |
Key Cases Cited
- Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007) (no equitable "oops" defense; bad-faith conduct can bar relief)
- Grogan v. Garner, 498 U.S. 279 (1991) (bankruptcy discharge standards and the "honest but unfortunate debtor" principle)
- In re Klaas, 858 F.3d 820 (3d Cir. 2017) (courts may grant brief grace periods after plan term; factors for exercising discretion)
- In re Frank, 638 B.R. 463 (Bankr. D. Colo. 2022) (held completion of plan payments barred dismissal; discussed here and distinguished)
- In re Cenk, 612 B.R. 323 (Bankr. W.D. Pa. 2020) (addressed interplay of §§1307 and 1328 and the debtor’s right to dismiss)