Jaspreet Kaur Attariwala
ORDER OVERRULING OBJECTION TO CONFIRMATION
The Court has before it the Amended Chapter 13 Plan (ECF No. 61) filed by the above-captioned Debtor, confirmation of which was stayed by the Consent Order on Motion to Compel and Motion to Stay Entry of Order Confirming Chapter 13 Plan entered by the Court on October 14, 2020. ECF No. 133. For the reasons stated below, the Court will overrule any outstanding objection to confirmation by BioConvergence LLC d/b/a Singota Solutions LLC and confirm the Amended Chapter 13 Plan.
I. Background1
i. Procedural History as to Confirmation
This case presents an unusual situation in a chapter 13 case, where more than three years after the filing of the petition the debtor has yet to have a confirmed chapter 13 plan. The path to confirmation of the Amended Chapter 13 Plan herein was hotly litigated throughout the pendency of this case. A thorough understanding of the history of this case is necessary in support of Court‘s final determination on confirmation of the Amended Chapter 13 Plan.
On December 17, 2019 (the “Petition Date“), Jaspreet Attariwala (the “Debtor“) filed a voluntary petition under chapter 13. Voluntary Pet., ECF No. 1. Prior to the filing of her case, Ms. Attariwala was a defendant in ongoing litigation removed from the Monroe County, Indiana Circuit Court to the United States District Court for the Southern District of Indiana (the “Indiana Litigation“), which litigation was initially stayed by the filing of the petition. After an extension of the filing deadline, the Debtor timely filed her initial proposed plan on January 12, 2020, which was objected to by BioConvergence LLC d/b/a Singota Solutions (“Singota“) on February 3, 2020. On March 4, 2020, Singota issued discovery to the Debtor on the contested matter of plan confirmation including a deposition notice and written discovery (the “Plan Discovery“). ECF No. 57. Shortly thereafter, on March 16, 2020, the Debtor filed her amended chapter 13 plan (the “Plan“), which remains the operative plan in this case. ECF No. 61. Under the applicable Local Bankruptcy Rules at the time, the filing of the Plan mooted Singota‘s pending objection to the original plan but did not impact the pending discovery requests. The Plan provides for payments of $300.00 over a period of 60 months for a plan base of $18,000.00, with proposed pro rata distributions to unsecured creditors. The Debtor proposes to make ongoing payments on her two secured obligations—her mortgage and car loan—directly to the lienholders. The secured obligations were current at the time of the filing of this case and there are no arrears cured through the Plan. Nor does the Debtor have any priority unsecured claims. Therefore, except for the chapter 13 trustee‘s statutory fees, the entirety of the Plan‘s funding is proposed to be paid to unsecured creditors.2
On August 21, 2020, this Court (Teel, J.) conducted an evidentiary hearing on confirmation of the Plan, at which hearing4 the Debtor was the only witness and testified in support of confirmation. In addition to the Debtor‘s testimony at the 2020 Confirmation Hearing, the Court took judicial notice of its oral opinion from June 24, 2020 granting Singota relief from the automatic stay to continue the Indiana Litigation, as well as the Debtor‘s testimony and evidence produced in prior hearings in the case. See generally Tr. Oral Ruling at 13:7–14:19, 34:2–42:21, ECF No. 109. Upon conclusion of the evidence, Singota and the Debtor argued the question of whether the Debtor‘s Plan should be confirmed. Tr. Oral Ruling at 14:20–32:11. During argument, the Court entered into evidence the Debtor‘s history of payments to the chapter 13 trustee (the “Trustee“). Tr. Oral Ruling 20:9–21:2. The Trustee, by counsel, participated in the 2020 Confirmation Hearing, did not object to confirmation of the Plan, and did not take a position on the other issues raised during the hearing. Tr. Oral Ruling at 3:2–11. At no time during the 2020 Confirmation Hearing did Singota move to continue or otherwise delay the consideration of confirmation of the Debtor‘s Plan as a result of the outstanding Plan Discovery or pending Motion to Compel. See generally Tr. Oral Ruling. At the conclusion of the 2020 Confirmation Hearing, the Court took a recess, after which it issued an extensive oral ruling (the “Oral Ruling“) on the question of confirmation. Tr. Oral Ruling 32:24–25. The Oral Ruling included both findings of fact and conclusions of law, which will be discussed in more detail below. The Court ultimately decided that the Debtor and the Plan met the requirements of
Shortly after the 2020 Confirmation Hearing, on September 8, 2020, the Trustee filed her Recommendation Regarding Confirmation of Plan Filed March 16, 2020 (ECF No. 111) recommending confirmation and submitted a proposed confirmation order to the Court for entry.
On September 14, 2020,5 the Debtor filed an objection to the Stay Motion and the next day Singota filed a reply in support of the same. The Court held an initial hearing on the Stay Motion on September 16, 2020, which was continued to September 23, 2020, on request of the parties to allow for the continuation of settlement discussions. See Minute Entry, ECF No. 123. At the continued hearing, Singota and the Debtor advised the Court that they had reached an agreement as to the Motion to Compel and the Stay Motion. See Minute Entry, ECF No. 126. Therefore, on October 14, 2020, the Court entered the Consent Order on Motion to Compel and Motion to Stay Entry of Order Confirming Chapter 13 Plan (the “Consent Order“) (ECF No. 133) in which the parties agreed to, inter alia, certain conditions relating to the outstanding Plan Discovery. Specifically, the Consent Order required the Debtor to sit for a continued deposition and the Court‘s holding in abeyance entry of a confirmation order for sixty (60) days after the last day when the Debtor produced all required documents (the “Abeyance Period“). Id. The Debtor and Singota were to file a joint praecipe with the Court upon the completion of the agreed discovery. Id. Unfortunately, the entry of the Consent Order did not result in the final resolution of the discovery issues between the Debtor and Singota, nor was a joint praecipe advising the Court of the commencement of the Abeyance Period ever filed. Entry of the Consent Order was followed in the next twelve months by motions to extend the deadlines contained therein, a motion for protective order by the Debtor, and multiple other pleadings regarding third party discovery, all purportedly arising from information obtained through the Plan Discovery.
On December 10, 2021, almost fifteen (15) months after the 2020 Confirmation Hearing, the Debtor filed a Motion to Conclude Confirmation Hearing (the “Motion to Set“) (ECF No. 181) requesting the Court set a date to conclude the process of consideration of confirmation of the Plan. Once again, the Debtor‘s motion drew an objection from Singota, who raised issues with discovery disclosures, and a response
At the February 10, 2022 hearing, the parties represented that they had resolved the Second Motion to Compel, and the Court set a further confirmation hearing on March 11, 2022 (approximately 27 months after the Petition Date, and over 18 months after the 2020 Confirmation Hearing). See Minute Entry, ECF No. 214. However, due to the Debtor‘s health, the March 2022 confirmation hearing was continued by consent to June 2, 2022. ECF Nos. 230, 233. During this period of time, despite the representation as to the agreement of resolution on the Second Motion to Compel, the parties were unable to submit an agreed order on the Second Motion to Compel. One week prior to the continued confirmation order, on May 26, 2022, Singota filed Motion to Continue Confirmation Hearing (the “Singota Motion to Continue“), once again alleging that it had not yet gathered all “relevant and necessary evidence” from the pending discovery and requesting a further continuance of the June 2, 2022 rescheduled hearing. ECF No. 237. The Debtor objected the next day to the Singota Motion to Continue, to which Singota responded the same day. On May 31, 2022, the Court issued an Order summarizing the status of the case from February 2022 through the date thereof, set a hearing on the Singota Motion to Continue on June 2, 2022 prior to the confirmation hearing (the “Order Setting Hearing“), and ordered that if the continuance was not granted, then the confirmation hearing would be held immediately thereafter. ECF No. 241.
On June 2, 2022, the Court denied the Singota Motion to Continue and convened the continued confirmation hearing in the case on the sole remaining allegation as elaborated in the Motion to Stay—that the Debtor‘s Plan could not be confirmed due to the Debtor‘s failure to file the case in good faith as required by
ii. 2020 Confirmation Hearing Findings of Fact and Conclusions of Law
As noted supra, at the conclusion of the 2020 Confirmation Hearing the Court (Teel, J.) made detailed findings of fact and conclusions of law in support of its decision that the Debtor‘s Plan met the requirements for confirmation under
The Court began its oral factual findings reviewing the lengthy litigation history between the Debtor and Singota (through that date, and which has continued in the two and a half years between the 2020 Confirmation Hearing and the issuance of this Order), including adoption of various factual findings by the United States District Court for the Southern District of Indiana in the Indiana Litigation. Tr. Oral Ruling at 34:2–38:13. Included in these adopted findings were those related to the many orders regarding the turnover of the Debtor‘s electronic devices in the Indiana Litigation and her asserted obligation to hear the cost of the forensic work of then court-appointed expert Rebecca Green (“Ms. Green“). Tr. Oral Ruling at 36:7–38:13. The history of hearings in the Indiana Litigation, including the Debtor‘s failure to appear at a hearing in Monroe County Circuit Court in April 2019, the resulting writ of attachment for her arrest, the removal of the proceeding to federal court, Singota‘s request for a preliminary injunction (the “Motion for Preliminary Injunction“), and the failed settlement conference conducted in December 2019 shortly before the Petition Date. Tr. Oral Ruling at 38:14–40:9. Finally, the Court summarized the history of the granting of the Motion for Preliminary Injunction and entry of a preliminary injunction (the “Preliminary Injunction“) in the Indiana Litigation, including the annulment stay in this case so that the Preliminary Injunction entered December 19, 2019 would be effective and granting relief from stay to allow Singota to seek to enforce the injunction. Tr. Oral Ruling at 40:10-41:25.
After the findings as to the Debtor‘s pre-petition conduct and the resulting annulment and relief from stay in this case as to Singota, the Court turned to findings based upon the filings in this case. In this case, the Debtor‘s schedules showed a negative net monthly net income of $719, however her schedules also reflected $143,000 in various exempt retirement accounts. Tr. Oral Ruling at 42:1–11. The Debtor testified that since filing, she had reduced her expenses and was willing, if necessary, to use exempt funds to make her plan payment. Tr. Oral Ruling at 42:22–43:12. Based upon these facts and Debtor‘s consistent history of timely payments to the trustee in the case, the Court found that
Although raised in Singota‘s Objection to Confirmation, the Court did not specifically address factual findings related to the best interest of creditors test under
The final and primary issue ruled upon by the Court at the 2020 Confirmation Hearing was the question of the Debtor‘s good faith. Tr. Oral Ruling at 53:17–22. Although the Objection only referenced
The Court‘s analysis was then more thoroughly explained by discussing the ten (10) factors established by the United States Bankruptcy Court for the Western District of Virginia in In re Colston to consider the totality of circumstances related to good faith under
- Percentage of proposed repayment to creditors. In this Circuit, this is not an appropriate factor to consider for
§ 1325(a)(3) as Barnes held that there is no prerequisite minimum chapter 13 payment for confirmation. In re Barnes, 689 F.2d at 198.9 - Debtor‘s financial situation. The Court examined the scheduled claims in the case including the disputed $50,000 to Ms. Green, almost $65,000 to prior litigation counsel, personal loans from her parents of $47,000, and the unliquidated disputed claim of Singota. Tr. Oral Ruling at 47:13–48:4. With respect to assets, the Court found that the Debtor is not seeking to retain any luxury items and at the time of filing was without employment and needed to address her debts via bankruptcy. Tr. Oral Ruling at 47:6–9, 48:4–6. Thus, the Court concluded “I think the Debtor had a genuine intention in filing the case to deal with her debts, to try to obtain a discharge of those debts through chapter 13.” Tr. Oral Ruling at 48:7–9. Thus, the Court
found this factor “certainly weighs in favor” of the Debtor‘s good faith. Tr. Oral Ruling at 48: 9–11.
In addition, in support of this conclusion, the Court found that Singota had not “shown any bad faith [by the Debtor] in proposing the plan, at least, as far as post-petition conduct is concerned. It has not pointed to any false information under [the Debtor‘s] schedules. Her statement of financial affairs does not contend that she has hidden assets from the case. . .” Tr. Oral Ruling at 45:23-46:3. Further, Singota “simply hasn‘t showed [sic] anything during the case that would show bad faith” and that the Debtor‘s pre-petition misconduct “is not misconduct that has resulted in depriving Singota of rights within the bankruptcy case.” Tr. Oral Ruling at 45:6–10.
- Period of time over which creditors will receive payments. Because the Debtor voluntarily proposes to make payments for 60 months instead of the minimum required 36 months, the Court found that this factor “certainly weighs in favor of finding good faith.” Tr. Oral Ruling at 48:12-15.
- Debtor‘s employment history and current and future employment prospects. As of the 2020 Confirmation Hearing, the Debtor was unemployed and hoping to obtain future employment. The Court noted that if employment were obtained, a creditor could move the Court for a plan modification, but in the circumstances where a debtor is not employed, “she ought to be entitled to seek bankruptcy relief.” Tr. Oral Ruling at 48:16–24.
- Nature and amount of unsecured claims. The Debtor‘s primary debt is that of Singota‘s “based upon the misconduct of the Debtor.” Tr. Oral Ruling at 49:2–3. The Court noted that the Preliminary Injunction “certainly suggests that [the Debtor] has engaged in misconduct in the state court litigation and increased the claims that have been asserted against her. And I don‘t condone her misconduct in doing that, but the Debtor testified today that she did not file the bankruptcy case to thwart Singota.” Tr. Oral Ruling at 49:6–10. The Court further found that it is “obvious the Debtor is in financial distress and that the nature of her debts doesn‘t change the fact that she‘s entitled to attempt to obtain a discharge of those debts by making chapter 13 plan payments and completing the plan.” Tr. Oral Ruling at 50:1–5.
- Debtor‘s past bankruptcy filings. The Debtor has no prior bankruptcy filings. Tr. Oral Ruling at 50:6-8.
- Debtor‘s honesty in disclosing facts of the case. The Court‘s entire finding on this factor was “there‘s no contention that her schedules or statement of financial affairs or that her testimony in this case has been dishonest.” Tr. Oral Ruling at 50:10–12. Therefore, the Court did not conduct any further analysis as to this factor in the original 2020 Confirmation Hearing. Id.
- Nature of debtor‘s prepetition conduct that gave rise to the case. The primary contention of Singota at the 2020 Confirmation Hearing was the Debtor‘s prepetition conduct in the Indiana Litigation. The Court addressed the findings in the Indiana Litigation with respect to the Debtor‘s conduct, noting that her liability to Singota or Ms. Green was going to exist, maybe not in quite as large an amount as it does now, given her lack of forthrightness in the Indiana Litigation, and concluding that she was going to “face these claims regardless, at least somewhat.” Tr. Oral Ruling at 50:20–25. The Court concluded that this factor weighs somewhat in favor of Singota, but that it was not a controlling factor and had to be balanced
out with the other factors. Tr. Oral Ruling at 50:25–51:3. - Whether the debts would be dischargeable in a chapter 7 proceeding. The Court found that filing a chapter 13 instead of chapter 7 in itself cannot be bad faith, and that there was no meaningful increase in potentially dischargeable debts in the Debtor‘s case in chapter 13 as opposed to chapter 7. Tr. Oral Ruling at 52:5–22. The Court further found that there was no “attempt by the Debtor to unfairly manipulate the Bankruptcy Code.” Tr. Oral Ruling at 53:1-3.
- Any other unusual or exceptional problems facing the debtor. Finally, the Court noted that there was no challenge to the Debtor‘s eligibility for chapter 13. Tr. Oral Ruling at 53–16.
For each of those reasons, the Court reiterated its conclusion that “the Debtor has proceeded in good faith in filing the petition and also in proposing her plan.” Tr. Oral Ruling at 53:17–18. Thus, the Court‘s analysis of the Colston factors was applied to both the elements of §§ 1325(a)(3) and 1325(a)(7) in considering plan confirmation and finding confirmation of the Plan was appropriate. Tr. Oral Ruling at 53:17–22. Thereafter, the hearing was concluded pending receipt of a confirmation order from the Trustee. As set forth supra, the Stay Motion was filed, and the corresponding confirmation order was never entered.
iii. 2022 Confirmation Hearing
Given the reasoning set forth in the Stay Motion and the Consent Order, and upon the Debtor‘s Motion to Set and the Court‘s Order Setting Hearing, the Court convened the 2022 Confirmation Hearing on June 2, 2022 to consider the question of whether the Debtor‘s chapter 13 case was filed in good faith as required by
At the commencement of the 2022 Confirmation Hearing, the Court reiterated the limited scope of the renewed confirmation hearing to pertain only to the good faith filing element of
There were only two witnesses at the 2022 Confirmation Hearing, the Debtor and her husband Simranjit Singh also known as Simranjit Attariwala. Each witness was represented by counsel during the hearing. Tr. June 2 at 3:12–4:15, 10:4–5. Due to the annulment and relief from stay granted to Singota, the Indiana Litigation has continued post-petition and the Debtor and Singota are involved in significant motions practice therein. In addition, the Court notes that discovery disputes between the parties have not been limited to this Court. Singota has also sought relief against Mr. Singh several times during the Indiana Litigation, and a miscellaneous proceeding in the United States District Court for the District of Columbia is presently pending between Singota and Mr. Singh.11 Thus, it was not surprising to the Court that at all times during the testimony of the Debtor and Mr. Singh, there was an underlying tension particularly related to the Debtor‘s obligations as a litigant/debtor in this chapter 13 case and concerns regarding the ongoing Indiana Litigation. Similarly, there was an ever-present discord between the scope of relevant discovery to the confirmation of the Plan and that which may be only relevant to the Indiana Litigation. In other words, it is clear to the Court that the Debtor‘s responses in her testimony at the 2022 Confirmation Hearing and in other pleadings were informed not solely by their impact on the issue of confirmation, but also their possible impact in the Indiana Litigation.12 With this background, the Court turns to the evidence presented at the 2022 Confirmation Hearing.
a. Pre-Petition: The Indiana State Court Litigation
In early 2019, Singota filed an action in the Monroe County Circuit Court (the “Indiana State Court“) against the Debtor alleging claims against the Debtor related to her misappropriation of Plaintiff‘s trade-secret, confidential, and proprietary information from its computers, servers, and email system, as well as her breach of her Employment Agreement with Plaintiff. Comp. at ¶ 59, BioConvergence LLC v. Attariwala, AP No. 20-10009-ELG (Mar. 13, 2020), ECF No. 1 On February 28, 2019, the Indiana State Court entered a temporary restraining order against the Debtor in connection with the nascent stages of the Indiana Litigation. Tr. Hr‘g Aug. 16, 2022 at 8:6, Aug. 31, 2022, ECF No. 276 [hereinafter Tr. Aug. 16]; Ex. A. Further preliminary injunction hearings were held in the Indiana State Court on March 1 and March 4, 2019, resulting in a stipulated preliminary injunction and an agreed order for the inspection of electronic devices both entered March 4, 2019, the latter requiring the Debtor to pay Ms. Green for her work in determining what data the Debtor had on her devices that belonged to Singota. See Exs. B-E. The
The Debtor has, from the beginning of the Indiana Litigation, expressed disagreement with the orders to pay Ms. Green (the “Pay Order“) and the scope of Ms. Green‘s work. See, e.g., Tr. Aug. 16 at 54:6, 71:3–7, 111:15, 169:17. In March 2019, the Debtor paid $5,000 to Ms. Green, and despite further orders from the Indiana State Court, has never paid any additional funds towards Ms. Green‘s work in the Indiana Litigation. Tr. Aug. 16 at 19:3–9. The Debtor debates whether Ms. Green properly itemized how the initial $5,000 was spent and did not agree with her actions or summary of charges. Tr. Aug. 16 at 111:25. The Debtor filed a motion to amend Pay Order, but that pleading was denied orally when, as discussed below, the Debtor did not appear at an April 18, 2019, contempt hearing. Tr. Aug. 16 at 138:9–25, 139:1–5; Ex. H at 3:7.
In April 2019, Singota moved for sanctions in the Indiana Litigation for the Debtor‘s failure to comply with the Pay Order. Tr. Aug. 16 at 20:2–14; Ex. F. On April 16, 2019, the Indiana State Court entered a contempt order which required the Debtor to fund another $15,000 towards Ms. Green‘s work. Tr. Aug. 16 at 43:16–19; Ex. F. The Debtor disputes the validity of the civil contempt order because she argues that there was never a consideration of her ability to pay any of the ordered amounts. Tr. Aug. 16 at 71:3–7. The next day, on April 17, 2019, in a continued proceeding at which the Debtor was not present, the Indiana State Court and counsel for the parties discussed the fact that the Debtor may be responsible for up to $55,000 to fund Ms. Green‘s work, again without inquiry as to the Debtor‘s ability to fund the amounts discussed. See generally Tr. Aug. 16 at 71:3; Ex. G. During that colloquy, the Debtor‘s litigation counsel represented to the Indiana State Court that it was “my understanding [is that] Ms. Attariwala doesn‘t have that kind of money.” Tr. Aug. 16, 2022 at 31:6–9; Ex. G at 41:6. The Indiana State Court then continued the hearing until the next day and ordered that the Debtor appear in person in Monroe County, Indiana at the hearing. Tr. Aug. 16, 2022 at 31:15; Ex. G. At the continued hearing on April 18, 2019, the Debtor did not appear, and litigation counsel represented to the Indiana State Court that the Debtor was meeting with bankruptcy counsel in the District of Columbia at substantially the same time. Tr. Aug. 16, 2022 at 35:15; Ex. H at 3:7. As a result, the Indiana State Court ordered the Debtor to pay $55,000 to the clerk‘s account to fund Ms. Green‘s work, without finding or consideration of the Debtor‘s ability to pay (the “Contempt Order“). Ex. H at 92:8.
On April 30, 2019, the Debtor filed to remove the Indiana Litigation from the Indiana State Court to the United States District Court for the Southern District of Indiana (the “Indiana Federal Court“), where it remains. On May 6, 2019, after removal the Indiana State Court attempted to enter findings of fact and conclusions of law in relation to the show cause hearing on April 18, 2019, at which the Debtor was held in contempt. The Indiana State Court entered an order finding contempt and granting Singota default judgment (the “Default Judgment Order“), but this was later vacated by Indiana Federal Court. Tr. Aug. 16, 2022 at 77:13–21; Ex. TT.
b. Pre-Petition: The Indiana Federal Litigation
Significant litigation occurred in the Indiana Federal Court following removal of the Indiana Litigation and before the
setting a settlement conference with the magistrate judge in the Indiana Litigation for December 13, 2019 (the “Settlement Conference“). Order, BioConvergence LLC v. Attariwala, Case No. 1:19-cv-01745 (S.D. Ind. Aug. 5, 2019), ECF No. 54. Prior to the Settlement Conference, on November 21, 2019, the Indiana Federal Court held initial oral argument on the Motion for Further Preliminary Injunction and continued the hearing to December 4, 2019. See Minute Entry, BioConvergence LLC v. Attariwala, Case No. 1:19-cv-01745 (S.D. Ind. Nov. 21, 2019), ECF No. 104.
On December 4, 2019, at the further hearing on the Motion for Further Preliminary Injunction the Debtor‘s counsel from McNeelyLaw LLP (“McNeely“) represented to the Indiana Federal Court that the Debtor “can‘t afford it” when questioned about paying the $55,000 contempt charge. Tr. Aug. 16 at 134:17–18; Ex. L 46:10. Debtor‘s counsel from McNeely went on to inform the Indiana Federal Court that they were not being paid in full. Ex. L 48:22-25. At that time, McNeely was owed a balance of approximately $60,000 to $70,000. Tr. Aug. 16 at 142:20. At the conclusion of the hearing, the Indiana Federal Court instructed the parties to submit proposed orders on the issue of the further preliminary injunction. Ex. L.
While the Motion for Further Preliminary Injunction was pending, the Debtor and Singota attended the Settlement Conference at which no settlement was reached. The Debtor testified that she believed at the conclusion of the settlement conference that it had “failed.” Tr. Aug. 16 at 144:10-15, 149:3; Ex. N. However, as indicated by the Order issued by the magistrate judge on December 16, 2019 (the day before the Petition Date), the Settlement Conference was continued with deadlines for the Debtor to provide financial information to Singota and for Singota to provide the Debtor a draft settlement agreement “consistent with the framework discussed at the settlement conference.” Order, BioConvergence LLC v. Attariwala, Case No. 1:19-cv-01745 (S.D. Ind. Dec. 16, 2019), ECF No. 120. Two days later December 18, 2019 (the day after the Petition Date), the Indiana Federal Court entered its Order preliminarily enjoining the Debtor from working at Emergent (the “Injunction Order“).14 Prelim. Inj., BioConvergence LLC v. Attariwala, Case No. 1:19-cv-01745 (S.D. Ind. Dec. 18, 2019), ECF No. 122. Thereafter, the Debtor was terminated by Emergent. Tr. Aug. 16 at 133:3–5; Ex. UU.
c. Pre-Petition: The Debtor‘s Financial Position.
One of Singota‘s primary arguments in support of their argument of bad faith is the allegation that the Debtor had the ability to pay all, or part of the amounts ordered in the Pay Order and Contempt Order in the months prior to the Petition Date but did not. Tr. June 2 at 28:9–12. Pre-petition the Debtor held an interest in various bank accounts including a joint checking account (the “Chase Checking Account“) and a joint savings account with Mr. Singh at Chase (the “Chase Savings Account,” collectively with the Chase Checking Account the “Chase Accounts“), a joint checking account (the “BOA Checking Account“) and a joint savings account with Mr. Singh at Bank of America (the “BOA Savings Account,” collectively with the BOA Checking Account, the “BOA Accounts“), an individually owned JPMorgan Securities LLC account comprised of an investment account (the “6232 Account,” collectively with the Chase Accounts and the BOA Accounts, the “Debtor‘s Accounts“) and a managed IRA retirement account (the “Retirement Account“).15 Tr. Aug. 16 at 32:24-25, 33:1-4, 35:22-23, 39:1-6, 48:18–9; Exs. V, Z, EEE, AA. In addition to the accounts in which the Debtor held an interest, in June 2019 Mr. Singh opened
an individually owned checking and savings account at Citibank (collectively the “Singh Citibank Account”). Tr. Aug. 16 at 130:23–25131:1; Ex. DD.
As of April 2019, when the Contempt Order was entered, the Debtor had a total of $89,547.66 in the Debtor‘s Accounts16 and a balance of $113,538.81 in the Retirement Account. Tr. Aug. 16 at 52–53; Ex. AA at 921. In the intervening months, in addition to paying ongoing living expenses and monthly credit card balances, the Debtor made a number of non-ordinary course payments, as more fully discussed herein (the “Pre-Petition Payments”). Between the Pre-Petition Payments and the payment of ordinary expenses, by the Petition Date the Debtor had reduced balance in the Debtor‘s Accounts to $5,396.13.17
The Pre-Petition Payments fall into three general categories of non-ordinary course payments: (i) legal fees; (ii) additional payments on the secured obligations on her vehicle and home; and (iii) additional payments on Mr. Singh‘s student loan obligations. During the relevant period, the Debtor made payments to two law firms, namely McNeeley who represented her in the Indiana Litigation, and David E. Lynn, LLC with whom she was consulting as to bankruptcy and ultimately retained to represent her in this case. Between May 1, 2019 and the Petition Date, the Debtor paid McNeeley a total of $40,000 consisting
made three payments to Mr. Lynn totaling $16,430: $7,500 on May 1, 2019, $1,000 on or about July 5, 2019, and $7,930 on December 16, 2019, the day prior to the filing of the Petition. Tr. Aug. 16 at 70:7–9, 114:20–22, 123:16–18. Ex. J; Ex. V at 32, 26, 3. Thus, roughly 63% of the funds in the Debtor‘s Accounts in April 2019 went towards payment of legal fees in the eight months pre-petition.
On July 8 and 9, 2019, the Debtor, in addition to her regularly scheduled payments, made additional payments in approximately the amount of three months of regular payments to the holder of the secured loan on her home, her homeowner‘s association, and the holder of the secured loan on her vehicle. The total of these payments was $9,863.85, or approximately 11% of the funds in the Debtor‘s Accounts in April 2019.20 On the same dates, the Debtor and/or Mr. Singh caused two additional payments to be made to the holders of Mr. Singh‘s student loans in the total amount of $7,751.85 representing approximately three months of extra monthly payments. Tr. Aug. 16 at 115:17–24, 130:1–5; Ex. V at 26. A further allegedly additional payment to a student loan lender was made on the date of the bankruptcy filing in the amount of $2,000, for a total payment towards Mr. Singh‘s student loans of just under 11% of the funds in the Debtor‘s Accounts in April 2019. Tr. Aug. 16 at 124:1–4; Ex. V at 3. Thus, without consideration for the deposit and use of the Debtor‘s ongoing income during the same period, which was deposited into the Chase Accounts, approximately 85% of the balance in the Debtor‘s Accounts as of April 2019 can be attributed towards payments on one of the three non-ordinary course categories. The balance of $13,501.96 went to the payment of ordinary course expenses and a small amount went towards costs of the Debtor‘s business Honey Ji‘s ($2,000, approximately 2%). The Debtor testified that the non-
ordinary course payments were made, at least in part, because she was “scared” of losing what was important, her home, and car. Tr. Aug. 16 at 118:23–25.
d. Pre-Petition Consultation with Bankruptcy Counsel
The Debtor first consulted with bankruptcy counsel on or about April 18, 2019, the date of the continued hearing on Singota‘s Motion for Contempt in the Indiana State Court. Tr. Aug. 16 at 59:5–11, 60:1–10. The Debtor engaged bankruptcy counsel to prepare to file bankruptcy, if needed, while simultaneously hoping to resolve the Indiana Litigation without the need to file. Tr. Aug. 16 at 67:20, 78:12. After the initial meeting, the Debtor, with the assistance of Mr. Singh, provided documents to Mr. Lynn including a bankruptcy questionnaire, a retainer agreement, and certain financial documents. Tr. Aug. 16 at 67:20, 68:10–22, 70:12–15, 128:8–21. Not only did bankruptcy counsel consult with the Debtor and Mr. Singh, but he also consulted with the Debtor‘s litigation counsel in Indiana. As the Indiana Litigation progressed from state court into federal court,
e. The Filing of the Petition and Entry of the Preliminary Injunction
After the “failure” of the Settlement Conference, and due to both the substantial sums allegedly owed to Ms. Green and Singota and the fact that there was not enough money “to go around,” on December 15, 2019, the Debtor signed her petition, and her chapter 13 case was filed on December 17, 2019. Tr. Aug 16 at 147:17–22, 148:1–3. Shortly thereafter, upon entry of the
Injunction Order, the Debtor was terminated by her employer Emergent.21 Tr. Aug. 16 at 106:22. The Debtor testified that she did not file the bankruptcy in an attempt to stop the entry of the Preliminary Injunction in favor of Singota. Tr. Aug. 16 at 150:1–5. While it is clear from the record that there was a breakdown between the Debtor and McNeely on the Petition Date such that the notice of bankruptcy was not timely filed in the Indiana Litigation, the suggestion of bankruptcy was filed the next day on December 18, 2019. See Suggestion of Bankruptcy, BioConvergence LLC v. Attariwala, Case No. 1:19-cv-01745 (S.D. Ind. Dec. 18, 2019), ECF No. 123.
f. Post-Petition Disclosures
On December 31, 2019, the Debtor, through Mr. Lynn, filed a motion to extend time to file a chapter 13 plan, statements, and schedules in the case (the “Motion to Extend”) indicating that the case was filed on an emergency basis despite the extensive exchange of information with the Debtor prior to the filing. Mot. for Extension, ECF No. 17. It appears that the perceived failure of the settlement conference caused the Debtor to determine that “enough was enough” and that expeditious filing was the best choice. Tr. Aug. 16 at 155:16–21. The Motion to Extend also references unrelated time pressures on counsel as an additional basis for the relief requested therein. ECF No. 17. The Motion to Extend was granted without objection, and the Debtor then timely filed her required documents. Order Granting Mot. For Extension, ECF No. 21.
Singota points to certain of the Debtor‘s disclosures in this case, which Singota alleges are inaccurate and support a finding of bad faith, including: (i) the valuation of the Debtor‘s
engagement ring in Schedule A/B; (ii) the valuation of Honey Ji in Schedule A/B; and (iii) the failure to include the $0 balance 6232 Account in her original schedules. Tr. June 2 at 31:11; Tr. Aug. 16 at 165:4–8, 166:6, 167:3–11. The Court finds that the value of $7,500 in Schedule A/B for the Debtor‘s engagement ring is reasonable. Schedule A/B does not require a debtor to list an “insurance value.” The 2015 appraisal done for insurance purposes with a value in excess of $23,000 is not conclusive as to value in this bankruptcy case. The Debtor may testify as to her opinion of value, and other than the insurance appraisal, no other evidence was offered to challenge her opinion. Similarly, the Court finds that the Debtor‘s scheduled value of $0 for the defunct company, despite a small amount of money in a bank account is also appropriate. In re Stratton, 248 B.R. 177, 182 (Bankr. D. Mont. 2000) (“[U]nder Fed. R. Evid. 701 an owner is competent to give her opinion on the value of her property.”). At all relevant times, Honey Ji has been a defunct company without access to its business records and without value for sale or otherwise, but which did have ongoing minimal costs. A cash basis accounting of a company is not the same as a business valuation. As the owner of Honey Ji‘s, a company for which the principal asset was unavailable, the Court finds the Debtor‘s lay valuation reasonable.
Originally, the Debtor failed to include the 6232 Account in her schedules, which was still open with JP Morgan, appeared on her statements, but which had a $0 balance as of December 3, 2019. The Debtor ultimately added the account to her schedules in an amendment filed February 16, 2022. Am. Sched. A/B: Property at 6, ECF No. 218. The statements for the account were included in the discovery produced to Singota October 2020. Tr. Aug. 19, 2022 at 24:16–25, 26:10–24. While the Court does not condone the failure to include the open account in her original schedules, debtors are liberally allowed to amend their schedules, and a $0.00 balance account has no impact on the means test or best interest of creditors calculations for consideration of the
required funding for confirmation of a chapter 13 plan. See
The terms of the Debtor‘s Plan have been summarized elsewhere but are restated again here. The Debtor is proposing to pay $18,000 over 5 years despite being below-median income, and three years into the case is current on payments to the Trustee. Am. Chapter 13 Plan at 2, ECF No. 61. If the Debtor‘s income is insufficient to make payments, she has committed to using funds from her exempt retirement funds to fund the plan. Tr. Oral Ruling at 42:22–43:12. The Debtor is making payments to the secured lender on her car and home directly outside of the Plan. ECF No. 61 at 5. Despite the scheduling and existence of other significant creditors including over $40,000 to the Debtor‘s parents for wedding expenses, unpaid legal fees to Indiana Litigation counsel, and disputed potential claims of Ms. Green, the timely filed claims in this case represent about $5,000 in credit card debt and the claim of Singota. As Judge Teel found in the Oral Ruling, the Debtor is in need of financial rehabilitation and is seeking to complete such rehabilitation through this chapter 13 case.
II. Jurisdiction.
This Court has jurisdiction over this matter pursuant to
III. Discussion.
After adoption of the findings and conclusions reached in the 2020 Oral Ruling, the remaining issue before the Court is the applicable standard under
Having determined that
requirement. The focus of the inquiry under
In this Circuit, the starting point for a good faith analysis is the “honesty of intention” of utilizing the rehabilitative purpose of chapter 13 standard from Barnes v. Whelan (In re Barnes), 689 F.2d 193, 200 (D.C. Cir. 1982). In Barnes, the D.C. Circuit examined case law prior to the enactment of
On a practical level, several of the factors identified by courts to evaluate the totality of the circumstances analysis for “good faith” under
with which the debtor has filed for bankruptcy relief, the circumstances under which the debtor contracted their debts, and the debtor‘s good faith in dealing with creditors. See In re Powers, 554 B.R. at 59; accord In re Gutierrez, 633 B.R. 768, 802–03 (Bankr. S.D. Tex. 2021). These factors are substantially similar to those found in the Colston good faith analysis discussed supra.
Of the factors from Colston identified in the Oral Ruling to determine good faith under
a. The Debtor‘s employment history, and current and future employment prospects.
As of the Petition Date, the Debtor was facing the imminent reality of losing her lucrative employment with Emergent, which came to fruition within days of the filing of the case. In addition to enjoining her from working from Emergent, the Preliminary Injunction also enjoins the Debtor from working from “any other competitor” of Singota until certain conditions are met. Ex. UU. In other words, at the time of filing the Petition the Debtor not only faced the very real possibility of
losing her job, but also the equally possible inability to find any type of similar employment. The Debtor became unemployed shortly after the Petition Date and remained unemployed as of the 2020 Confirmation Hearing. In the intervening 2.5 years since the 2020 Confirmation Hearing, the Debtor has found partial employment in a new field as a real estate agent, but her income is significantly less than prepetition and so minimal that it appears to be insufficient even to require a modification to her chapter 13 plan. See
In addition, even if the Preliminary Injunction were lifted and the Debtor could seek employment similar to her prepetition employment, the language in the Preliminary Injunction allowing for automatic reinstatement of the injunction inherently impacts her employability. Until the Preliminary Injunction is completely vacated or otherwise disposed of, the Court finds the Debtor‘s future employment prospects in her former industry are minimal or virtually nonexistent. As Judge Teel found, by filing this case, the Debtor sought to deal with her prepetition debts based upon her actual employment and earning capacity. In light of the Preliminary Injunction, the Court finds her current and future earning capacity significantly lower than
b. The Debtor‘s honesty in disclosing facts of the case.
There is evidence in this case that the Debtor delayed or potentially intentionally failed to disclose certain assets. At the 2022 Confirmation Hearing, significant emphasis was placed on the
failure to initially disclose the $0.00 balance 6232 Account and the Debtor‘s scheduled valuations for Honey Ji‘s and her engagement ring. In addition, there have been multiple motions throughout this case seeking to compel or otherwise address discovery issues with the Debtor.24 Taking into consideration each of these, what is clear, is that the Debtor has not always made things easy on herself. The failure to timely respond to discovery, particularly discovery due prior to the 2020 Confirmation Hearing, implies an intent to not fully and completely disclose facts related to this case. The Debtor‘s testimony on this point was inconsistent. The Debtor testified that the delays were associated with her ability to gather responsive documents (specifically bank statements), while later contradictorily testifying that she was able to obtain the bank statements from the internet by simply logging into her account. If the statements were always available online, the delays in production are hard to explain in any manner but to infer that the Debtor intended to delay disclosure of at least those documents readily available online. It is unclear from the evidence as to whether all of the documents for which production was delayed were readily available online or whether a request would have had to been made to the applicable financial institution. Therefore, the Court finds that the Debtor‘s conduct as to discovery responses is either neutral or weighs slightly against a finding of good faith.
With respect to the scheduled values for Honey Ji‘s and the engagement ring, the Court finds that the Debtor‘s disclosure was appropriate under the circumstances. The Debtor‘s valuations were based not on book value or appraised value (as argued by Singota), but by Debtor‘s opinion as to of the actual value (or, as she phrased it “what [she] could sell it for”).
c. The nature of the Debtor‘s pre-petition conduct that gave rise to the case.
Prepetition, the Debtor accepted and began a job with a competitor of Singota. The Court makes no findings as to the Debtor‘s transition between employers or the actions taken related there, all of which are subject to the Indiana Litigation. What is relevant is that the Debtor‘s former employer, Singota, has filed numerous cases and pleadings alleging that in changing her employment, the Debtor engaged in the misuse of confidential information. The Debtor contests these allegations. To be sure, the Debtor has not done herself any favors with certain of her conduct
related to the turnover and treatment of her electronic devices and other discovery. However, Singota also has engaged in delays and dilatory tactics in the Indiana Federal Case with respect to electronic devices.26 Thankfully, the questions and issues regarding the electronic information and devices is not a question before this Court. Those questions are clearly before the Indiana Federal Court. As of the date of the 2022 Confirmation Hearing, the Indiana Litigation was still in mostly nascent stages without a determination as to any of the issues raised therein by Singota against the Debtor and vice versa.
For the purposes of this case and the question of confirmation, the question is the nature and character of the Debtor‘s conduct giving rise to the filing of her petition on the Petition Date. One factor is her conduct in the Indiana Litigation which resulted, in part, in out of the ordinary expenses (legal fees and court-ordered payments). Judge Teel addressed the allegations of the characterization of the Debtor‘s actions in the Indiana Litigation, and nothing has changed with his evaluation that while the Court does not condone the conduct, and that her debts are arguably much higher as a result, the Debtor is nevertheless in need of financial restructuring.
The evidence clearly shows that the Debtor began consultations as to a possible bankruptcy case in April 2019. It is not uncommon for a debtor, particularly one with a complex legal situation, to consult with counsel for weeks or months (if not longer) prior reaching a point where a bankruptcy petition is filed. See
and not need to file a bankruptcy case. She further testified that it was not until she believed the Settlement Conference failed in December 2019 that she decided to file a bankruptcy case. Other than the increased costs associated with the litigation with Singota, in the months and weeks leading up to the Petition Date, the Debtor did not incur any significant additional debts or purchase any luxury goods.
Singota points to the Debtor‘s prepetition use of the funds in the 6232 Account, including approximately three extra payments on her mortgage, car loan, homeowner‘s association fees, and her spouse‘s student loans as evidence of bad faith in the act of filing this case. However, “[t]he mere fact that pre-bankruptcy planning has occurred is not indicative of bad faith as such.” In re Chilhowee R-IV School Dist., 145 B.R. 981, 983 (Bankr. W.D. Mo. 1992). There is nothing inappropriate in an individual planning for the worst while hoping for the best. Unfortunately for the Debtor, she did ultimately need to file this case. The total value of the non-retirement portion of the 6232 Account in April 2019 was $31,501.48, and by the time her petition was filed the non-retirement portion was at $0. Ex. AA. If all the funds in the 6232 Account or even all of the Debtor‘s Accounts had been diverted to pre-payments on secured loans, HOA fees, or other debts, the question of bad faith might be more difficult. However, in this case only $9,863.85 or just over 31% of the 6232 funds went towards the pre-payments, the balance went towards the payment of ongoing expenses including a significant amount towards her counsel in the Indiana Federal Court and this case. Further 85% of her funds on hand as of April 2019 went towards payments of legitimate ongoing costs such as attorneys’ fees and living expenses. As such the Court finds that the Debtor has not “crossed the proverbial line” with respect to prebankruptcy planning.27
Therefore, the Court finds that the Debtor‘s prebankruptcy planning is not evidence of bad faith, but instead is evidence of increased prepetition costs and good prepetition legal advice.
To be sure, Singota would have much preferred for the Debtor to have used all or part of the funds during that period to pay for Ms. Green‘s fees and has sought aggressively for that result, in addition to the rest of the relief requested in the Indiana Litigation. It is far from uncommon for aggressive creditors to put debtors between the proverbial rock and a hard place. See, e.g., In re Stephens, Case Nos. 21-40817-elm-11, 21-41010-elm-11, 21-41011-elm-11, 2022 Bankr. LEXIS 433, at *24 (Bankr. N.D. Tex. Feb. 22, 2022) (“Moreover, a prospective debtor is not required to exhaust all avenues of recourse in relation to pending litigation before seeking the breathing spell refuge of bankruptcy relief.”). In addition, there is nothing outside of bankruptcy which prohibits an individual from preferring one creditor to another. The debtor spent at least eight months trying to find a way to escape or resolve the issues with Singota, but ultimately, she believed her only option was to file for bankruptcy relief. The Court finds that this factor weighs in favor of the Debtor‘s good faith.
With the exception of Singota‘s presently unliquidated and highly disputed claim, all of the Debtor‘s other claims would be dischargeable in a chapter 7 proceeding. Singota‘s claim is based upon the Indiana Litigation, which includes twelve different counts that Singota alleges would be nondischargeable under
(June 23, 2020), ECF No. 15 (Teel, J.). Since entry of that order, and because Singota was granted relief from the automatic stay in this case, the adversary proceeding has remained dormant pending resolution of the case in the Indiana Federal Court. Thus, there is an allegation that, if successful, all or part of Singota‘s claim may be nondischargeable under both
e. Any other unusual or exceptional problems the Debtor faces.
As noted by the Court above, the Debtor‘s whole case has been clouded with the exceptional situation of being conducted currently with aggressive and voluminous litigation in the Indiana Federal Court. Transcripts, documents, and statements made within this case have been routinely used with almost immediate effect by Singota in the district court proceeding and vice versa (i.e., the appraisal of the Debtor‘s engagement ring was located in the Debtor‘s computer as part of Singota‘s search of the device). This Court agrees with both Judge Teel and the Indiana Federal Court that the Debtor has, at times, not made her situation easy on herself. Throughout the pendency of the confirmation proceedings, the Court was keenly aware of the physical and mental toll both this case and the Indiana Litigation have taken on the Debtor. While the existence of litigation itself is not unusual or exceptional for a bankruptcy debtor, the very apparent hostile situation that has arisen from this particular ongoing litigation is at an unusual level for most chapter 13 debtors. This factor does not weigh specifically in favor of or against good faith, but instead is an overarching consideration applied to the Court‘s totality of the circumstances analysis.
Applying the identified the Colston factors to a good faith analysis under
each of the factors either is neutral or weighs in favor of the Debtor‘s good faith. Therefore, the Court finds that the Debtor filed this case in good faith and that all elements of
IV. Conclusion
Therefore, for the reasons set forth herein finding that the Plan meets each of the requirements of
[Signed and dated above.]
Service to: counsel of record; Debtor.