645 B.R. 711
Bankr. M.D. Penn.2022Background
- State court (Susquehanna County) entered a 2017 equitable distribution order requiring Debtor Ronald W. Kipps to convey certain real property and pay an equalization sum of $419,871.09 to ex-spouse Margaret Stinavage‑Kipps; deeds were recorded in June 2019 after the Debtor failed to execute them.
- Debtor filed Chapter 13 on April 22, 2019 (on the eve of state-court contempt/enforcement proceedings). He listed roughly $1.7M in assets but very low monthly income (~$1,267) and large monthly expenses, and acknowledged a 3‑year commitment on Official Form 122C‑1.
- Stinavage‑Kipps timely filed Proof of Claim No. 5 for $447,964.28 (equalization payment plus interest) and asserted a secured claim against Clifford Township property; other timely claims totaled only about $5,343.
- Debtor filed multiple defective/amended Chapter 13 plans culminating in a Fifth Amended Plan proposing a 60‑month payment term (largely funded by speculative litigation proceeds and asset sales); Trustee and Stinavage‑Kipps objected that, as a below‑median debtor, any plan over 36 months requires a court finding of "cause" under 11 U.S.C. §1322(d)(2).
- Debtor brought an adversary stay‑violation action; this Court granted summary judgment to Stinavage‑Kipps in that adversary. The Debtor did not request — nor present evidence to support — a §1322(d)(2) finding of cause to extend the plan beyond 36 months.
- Court concluded Debtor filed bankruptcy to delay/enjoin enforcement of the state equitable distribution, denied plan confirmation, overruled Debtor’s objection to Claim No. 5, granted Stinavage‑Kipps relief from the automatic stay, and set a hearing on dismissal or conversion.
Issues
| Issue | Stinavage‑Kipps / Trustee (Plaintiff) Argument | Kipps (Debtor) Argument | Held |
|---|---|---|---|
| Whether Debtor established "cause" under §1322(d)(2) to extend plan beyond 36 months | No; Debtor is below‑median and proposed a 60‑month plan without requesting or proving cause; plan is infeasible and not in good faith | Plan should be approved as proposed: will pay creditors in full; delays (COVID, judge changes) and reliance on litigation proceeds justify extension | Held: Debtor failed to meet burden; no cause shown; confirmation denied |
| Whether Claim No. 5 should be reclassified, reduced, or disallowed (objection to proof of claim) | Claim is valid, stems from fully litigated state equitable distribution order, and is properly asserted as secured | Claim should be reclassified as unsecured or reduced for stay violations and re‑valued as of later deed dates; offsets argued | Held: Objection overruled; bankruptcy court will not relitigate or revalue a fully litigated state‑court equitable distribution award |
| Whether Stinavage‑Kipps is entitled to relief from the automatic stay to enforce the 2017 order | Yes; Debtor subverted enforcement, failed to comply with the order, and lacks a confirmable plan; cause exists under §362(d)(1) | Debtor asserted stay protections, but conduct and failure to propose confirmable plan undermine that position | Held: Relief granted for cause under §362(d)(1) to permit enforcement of state court rights |
| Whether the case should be dismissed or converted given futility of further amendments | Trustee/creditor seek an end to continued delay and relief from serial unconfirmable plans | Debtor seeks opportunity to reorganize (but provided no viable plan evidence) | Held: Court will schedule a hearing to decide dismissal or conversion (noted further amendments would be futile) |
Key Cases Cited
- In re Roebuck, 618 B.R. 730 (Bankr. W.D. Pa. 2020) (chapter 13 confirmation requirements and burdens)
- Fries, 68 B.R. 676 (Bankr. E.D. Pa. 1986) (cause to extend plan for repayment of priority or secured claims)
- In re Scott, 488 B.R. 246 (Bankr. M.D. Ga. 2013) (finding cause may exist when extension increases dividend to unsecured creditors)
- In re Santa Maria, 128 B.R. 32 (Bankr. N.D.N.Y. 1991) (rejecting extension that merely delays unsecured payments)
- Sutliff v. Sutliff, 518 Pa. 378 (Pa. 1988) (date of valuation for equitable distribution is date of distribution order)
- Miller v. Miller, 617 A.2d 375 (Pa. Super. 1992) (passage of time and appeals do not require revaluation after a proper distribution order)