Case Information
*1 SIGNED.
Dated: November 29, 2007 ________________________________________ JAMES M. MARLAR U.S. Bankruptcy Judge ________________________________________ IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF ARIZONA
In re: ) ) ) ) ) Chapter 7
KURT ALTON GALPIN, No. 4:07-bk-01089-JMM Debtor. MEMORANDUM DECISION
Before the court is the Debtor's motion for reconsideration of an order which re-converted the case to one under chapter 7. The court, pursuant to F P. 9023, treats this as a motion to alter, amend, or set aside its order of November 1, 2007 (Dkt. #44).
PROCEDURAL BACKGROUND
The Debtor filed a voluntary chapter 7 liquidation proceeding on June 15, 2007. A Trustee was appointed who, over the next 2 1/2 months, began administering the Debtor's estate.
As the Trustee began to investigate certain matters in the Debtor's pre-petition handling of his affairs, and filed an adversary proceeding to set aside a vehicle lien, the Debtor decided to convert his case to a proceeding under chapter 13. On September 5, 2007, the Debtor filed a motion to convert to chapter 13.
Believing the matter to be a routine conversion, the court signed the lodged order five days later, on September 10, 2007 (Dkt. #24). However, the chapter 7 Trustee, properly believing he had five days within which to object, pursuant to A 9014-2(b)(3), filed an objection to the *2 conversion on the same day as the court signed the order, but it was docketed later in the day, and after the court signed the conversion order. The Trustee's objection was within the five days permitted by local rule.
Thus, the court's premature order and the and the Trustee's timely objection "crossed in the mail."
The next event that occurred was that the court then set the Trustee's objection for hearing on October 29, 2007. The Debtor filed no response, and made no appearance on October 29, 2007, to oppose the Trustee's objection. The court then ordered the chapter 13 case re-converted to chapter 7, and signed that order on November 1, 2007 (Dkt. #44).
The Debtor, apparently having gotten wind of the unfavorable outcome of the October 29, 2007 hearing, filed a motion to set aside the re-conversion order (Dkt. #43), even before the court's order was docketed. That motion was then set for hearing on November 26, 2007, at which time all parties appeared and argued their respective positions.
THE LAW
Before February 21, 2007, it was an "anomaly" in the law (as well as a conflict between the Circuits) as to whether a chapter 7 debtor had an automatic right to convert a chapter 7 case to a chapter 13 at any time. 11 U.S.C. § 706(a).
Then, on February 21, 2007, the United States Supreme Court filed its decision in Marrama v. Citizens Bank of Mass. , _ U.S. _, 127 S. Ct. 1105 (2007). In that case, the court was specifically confronted with whether such relief was an automatic entitlement, or whether a judicial decision was needed if such relief was challenged.
In a 5-4 decision, the Court concluded that a debtor did not have an absolute right to convert from a chapter 7 proceeding to a chapter 13. Now, a debtor's opposed motion to convert requires a court's ruling as to whether the debtor has evidenced the good faith necessary to convert from one chapter to another.
In the instant case, the court order granting the conversion motion occurred within five days of the motion. The chapter 7 Trustee's opposition thereto was filed later that same day. Thus, the legal *3 question is: did a five-day delay in entering what, at the time, appeared to be an unopposed and routine motion, allow such "reasonable notice and opportunity for a hearing [to] . . . the party against whom relief is sought."
The court concludes that it did not. The local rules require that a five-day period intervene between the filing of a motion and an opposition before a court rules on what should otherwise be a contested matter under F P. 9014. A 9014-2(b)(3). In this case, the chapter 7 case had been pending over 2 1/2 months; the § 341(a) meeting had been concluded five weeks earlier; the Trustee had engaged counsel; the Trustee had commenced an adversary proceeding to recover Marrama standards for chapter 13 eligibility.
assets seven weeks earlier (Adv. No. 4-07-ap-00056); and the case appeared to be moving toward the prompt liquidation and collection of non-exempt assets. [1]
Under the circumstances, the court acted improvidently in moving too quickly to allow conversion without an opportunity for the chapter 7 Trustee to timely respond, and to be heard in opposition thereto.
Whatever problems were created, however, by the too-quick conversion to chapter 13 have now been remedied by the November 1, 2007 order which moved the case back into chapter 7. Should the Debtor seek another attempt at converting the case into chapter 13, then, in accordance with Marrama , he should file a new motion, accompanied by a request for evidentiary hearing, and prove that his request is not improperly motivated.
There is no need to set aside the order of re-conversion. The case has been returned to the appropriate procedural posture, awaiting only a future showing, should the Debtor desire, that satisfy the
RULING
The Debtor's motion to set aside the conversion order of November 1, 2007 will be denied.
A separate order will be entered. F P. 9021.
DATED AND SIGNED ABOVE.
COPIES served as indicated below on the date signed above: Judicial Assistant
Eric Slocum Sparks Law Office of Eric Slocum Sparks, P.C. 110 South Church Ave., #2270 Tucson, AZ 85701-3031 Attorneys for Debtor
Email eric@ericslocumsparkspc.com Dina L. Anderson Trudy A. Nowak Anderson & Nowak, PLC 2211 E. Highland Avenue, Suite 211 Phoenix, AZ 85016 Attorneys for Chapter 7 Trustee Email dla@anlawfirm.com
Email tan@anlawfirm.com Stanley J. Kartchner, Chapter 7 Trustee 7090 N. Oracle Rd., #178-204 Tucson, AZ 85704
Email trustee@kartchner.bz Craig Morris Craig Morris, PC 1790 East River Road Suite 245 Tucson, AZ 85718 Attorneys for Chapter 13 Trustee
Email: craigmorrispc@qwest.net Dianne C. Kerns, Chapter 13 Trustee 7320 N. La Cholla #154 PMB 413 Tucson, AZ 85741-2305
Email mail@dcktrustee.com Office of the United States Trustee 230 North First Avenue, Suite 204 Phoenix, AZ 85003-1706
U.S. Mail
By /s/ M. B. Thompson
[1] The adversary proceeding sought to set aside a preference, and recover a lien for the benefit of creditors. §§ 547, 550, and 551.