In Re Vieweg
MEMORANDUM OPINION
This case is before the Court on the motion of an unsecured creditor to convert Robert Vieweg’s chapter 13 case, No. 87-03835-G, to a chapter 7 liquidation proceeding under the “for cause” provision of
Debtor sought the protection of the bankruptcy court on June 25, 1987 under chapter 13 of the Bankruptcy Code. This is the seventh related case which Debtor, an attorney with more than twenty years’ experience including practice before this and other bankruptcy judges of the Eastern District of Michigan, has filed since 1982. To initiate the current case, Debtor paid the filing fee and submitted a list of creditors as required for acceptance of a “short petition.” Bankruptcy Rule 1007. The case was assigned to this Court, and on the .following day we issued a form order directing the debtor to file all documents required to proceed in chapter 13 within fifteen days. (No. 87-03835-G, Docket # 3). Because Debtor did not comply with that order, we issued another form order, this time ordering Debtor to appear before the Court on August 26, 1987 to explain why he should not be sanctioned or have his case dismissed for failure to file the required documents.
Debtor did not appear in response to the court’s order. Instead, just minutes before the scheduled hearing, he filed a request to dismiss the chapter 13 petition under
Debtor argues that Title 11 permits him to file chapter 13 petitions and dismiss them under
The Bankruptcy Rules and Local Court Rules delineate the procedures employed in the bankruptcy courts. Bankruptcy Rule 1017(d), as amended in August of 1987, specifies that “dismissal pursuant to ... 1307(b) shall be on motion filed and served as required by Rule 9013.” The new Advisory Committee Note states that Rule 1017(d) was “amended to provide that dismissal or conversion ... pursuant to 1307(b) is not automatically a contested matter under Rule 9014.” It further states, “[n]o hearing is required on these motions unless the court directs.”
Under Bankruptcy Rule 9013, “[e]very written motion other than one which may be considered ex parte shall be served by the moving party on the trustee ... and on those entities specified by these rules or, if service is not required or the entities to be served are not specified by these rules, the moving party shall serve the entities the court directs.”
Motion practice in the Bankruptcy Court of the Eastern District of Michigan is governed by L.B.R. 112. Each motion is to be accompanied by a notice of hearing and a notice to “respondent” of the fifteen day time limit on the service of responses. L.B.R. 112(b)(l)(2) (E.D.M.). The Debtor complied with neither the Rules promulgated to implement Title 11 nor the Local Bankruptcy Rules of the Eastern District of Michigan.
Title 11 prohibits its use for 180 days by one whose case is dismissed by the court for willful failure to follow court orders or for failure to appear before the court. If dismissal were mandatory and effective upon filing of a debtor’s dismissal request, a bankruptcy judge would not be able to restrict that debtor’s ability to file a subsequent petition as provided in 11 U.S.C. 109(g). Neither would the bankruptcy judge be able to enter appropriate orders to vary the effect of dismissal as set forth by
At least one court has said, however, “the inescapable conclusion is that ... Congress perceived that a debtor should be afforded the uninhibited freedom to avoid liquidation if he elects to do so before the conversion of his Chapter 13 proceeding.”
In re Gillion,
The District Court reversed the bankruptcy judge’s decision to grant the
This Court prefers an analysis which harmonizes
Debtors may invoke the protection of the bankruptcy court and restructure their financial obligations under chapter 13. The Bankruptcy Code also provides a method for creditors subjected to the jurisdiction and restrictions of the federal court system and chapter 13 to force a debtor who actually qualifies for a chapter 7 liquidation proceeding to settle his obligations under the more restrictive chapter 7. This Court concludes that when a motion to convert is filed prior to the court’s entry of a
(a) The Debtor may convert a case under chapter 7 of this title at any time. Any waiver of the right to convert under this subsection is unenforceable.
(c) Except as provided in subsection (e) of this section, on request of a party in interest or the United States trustee and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 7 of this title, or may dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, for cause, including—
(1) unreasonable delay by the debtor that is prejudicial to creditors;
(3) failure to file a plan timely under section 1321 of this title;
(4) failure to commence making timely payments under section 1326 of this title;
A creditor seeking dismissal or conversion under
The petitioning creditor in the case at bar contends that Debtor has benefitted from and abused the bankruptcy process and has frustrated his and other creditors’ efforts to pursue legitimate claims for almost five years without evidencing genuine intent to restructure his debt and repay his creditors through a chapter 11 or chapter 13 plan. He argues that Debtor has used the bankruptcy court solely for the purpose of preventing creditors from using state court remedies to pursue their claims. Petitioner asserts that, if permitted to dismiss under
Debtor’s first case, a 1981 chapter 13 proceeding was dismissed on June 12, 1985 for failure to comply with his plan. (No. 82-06838-G, Docket #57 and 59). One month later, on July 16, Debtor filed a voluntary chapter 11 petition as president and attorney for A-V Dispute Resolution, Inc. (No. 85-02369-B, Petition). He declared, by signing the petition under penalty of perjury, that no social security number and no employer’s tax identification number had been obtained for the corporation. He listed the corporation’s assets as approximately $100,0000 (sic) and liabilities as $15,000 (disputed), but secured and held by one entity. Further, he declared himself to be the sole owner of A-V Dispute Resolution, Inc. In a Motion to Convert filed by the only creditor, (No. 85-02369-B, Docket # 14), a Bill of Sale signed by Debt- or on July 16, 1985 purports to convey “all the personal property of the Vendor (Debt- or) owned on April 26,1985 to A-V Dispute Resolution, Inc. for one ($1.00) dollar.” That case was dismissed with an accompanying judgment and order of sanctions for bad faith in June of 1987, just days before Debtor filed the chapter 13 petition at issue here. (No. 85-02369-B, Docket #43 and #44).
On October 28, 1985, three months after initiating the chapter 11 proceeding as the sole owner of A-V Dispute Resolution, Inc., Debtor filed a chapter 13 petition in his own name. (No. 85-03728-G, Petition). He filed no accompanying documents, and the Court issued its form order compelling compliance with the Code on the following day. In response, Debtor requested and received a ten day extension. On November 14, 1985 a secured creditor asked the Court to lift the stay to allow it to proceed with a foreclosure sale of the debtor’s home originally scheduled for October 29, 1985. (No. 85-03728-G, Docket # 6). On January 15, 1986, shortly before the hearing scheduled on that motion, Debtor signed and filed a chapter 13 statement declaring under penalty of perjury that he had made no gifts other than ordinary presents to family and charities. He failed to acknowledge the security interest given on April 26, 1985 or the sale of his personalty to A-V Dispute Resolution, Inc. on July 16, 1985. (No. 85-02369-B, Docket # 14; No. 85-03728-G, chapter 13 statement at page 5). Over Debtor’s objection, the Court lifted the stay on January 22, 1986, and the mortgagee sold the house. The Court dismissed Case No. 85-03728-G, on the motion of the creditor bringing the current motion, on April 29, 1986. (No. 85-03728-G, Docket # 48).
The next related case, a chapter 7 proceeding, was filed in the name of Debtor’s wife on August 6, 1986. (No. 86-03873-B). Debtor acknowledged, in open court, at the hearing on the pending Motion to Convert held on October 2, 1987 that he signed his wife’s name without her authority or knowledge although the petition, Exhibit “B”, does not indicate this. (No. 86-03873-B Docket # 1). A secured creditor called the court’s attention to the fact that Debtor’s house had been sold at foreclosure sale on February 7,1986. Further, he pointed out that the filing by Debtor’s wife came one day prior to the expiration of the redemption period on the sheriff's deed held by the mortgagee.
Meanwhile, Debtor had filed a chapter 13 petition in his own name on October 6, 1986. (No. 86-04976-G). The Court issued a form order for Debtor to file the documents required for continuing the case on the following day. When Debtor failed to file the papers, the Court issued its order for the Debtor to appear in court to explain why he should not be sanctioned or have his case dismissed. Debtor did not appear, and this Court dismissed the case without prejudice. (No. 86-04976-G, Docket #7). On December 5,1986 Debtor petitioned this Court for a rehearing of its dismissal order saying that he had filed schedules with insufficient copies of the plan on November 19, the date scheduled for the show cause hearing. (Docket # 9). This Court denied Debtor’s motion for rehearing on December 24, 1986. (No. 86-04976-G, Docket #11).
The Court now considers Debtor’s current chapter 13 petition filed on June 25, 1987. (No. 87-03835-G). An unsecured creditor asserts in his Motion to Convert, at page one, that Debtor willfully failed to submit a complete list of creditors, therefore precluding notice of court proceedings to some creditors including petitioner. Debtor declared, on his Voluntary Petition, again under penalty of perjury, that he intended to file a plan to reorganize under chapter 13 although he included no schedule of liabilities, chapter 13 statement, or chapter 13 plan. Debtor listed only one prior case, chapter 13 Case No. 85-03728-G, on the Bankruptcy Petition Cover Sheet which accompanied his June 25, 1987 petition despite the fact that Chief Judge George Brody of the Eastern District of Michigan had dismissed with sanctions, only three days earlier, the chapter 11 case filed by Debtor as president, sole shareholder, and attorney for A-V Dispute Resolution, Inc.
After learning of Debtor’s filing on June 25, Judge Steven Rhodes, also of the Eastern District of Michigan, issued an order holding contempt proceedings against Debtor in abeyance.
(In re Rewoldt,
No. 82-02837-R Order of June 26, 1987). The circumstances surrounding that order are as follows. On June 18, 1987 Judge Rhodes entered an order for Debtor to appear and answer why he should not be held in contempt for failure to comply with a Judge Rhodes’ order to deliver $93,881.81 to the Trustee of the Rewoldt case in which Debtor had served as Special Counsel to the Trustee. On the date set for the hearing, Debtor filed the pending chapter 13 petition and informed the parties and Court of his most recent bankruptcy case, thus invoking
It is against this set of facts that this Court considers the Motion to Convert and the Motion for Voluntary Dismissal, without sanctions, in juxtaposition. We have no difficulty in finding that Robert Vieweg has used the bankruptcy laws and procedures to his advantage for nearly five years without demonstrating any intent to comply with court orders or restructure his debt and repay his creditors while under the protection of the bankruptcy court. We are persuaded that Congress did not intend that chapter 13 petitions should or could be filed and dismissed at will with no recourse to creditors.
Filing a chapter 13 petition subjects creditors and debtors alike to the jurisdiction of the bankruptcy court. A debtor’s petition is not dismissed until the bankruptcy judge assigned to the case enters an order. The bankruptcy judge may hold a motion to dismiss under