Sylvester Traylor
ORDER DISMISSING CHAPTER 13 CASE WITH A TWO-YEAR BAR
I. INTRODUCTION
Rоberta Napolitano, the Chapter 13 Trustee (“Trustee“), filed the instant Motion
II. BACKGROUND
On November 22, 2019, the Debtor filed a voluntary petition along with his first Chapter 13 Plan.2 See ECF Nos. 1, 5. According to Schedules I and J, the Debtor listed a negative monthly net income of $515 (ECF No. 1, p. 28), yet proposed monthly plan payments of $740 to address outstanding real estate taxes due to the Town (ECF No. 5). In her Objection to Confirmation, in addition to highlighting material issues concerning feasibility, the Trustee also objected to confirmation on the basis of: (1) missing documentation;3 (2) failure to conform the plan to the claims filed; and (3) failure to provide for the appropriate amount of interest on the Town‘s secured claim. See ECF No. 40. The Debtor subsequently sought, and the Court thereafter granted, denial of confirmation with leave to amend (ECF Nos. 46, 51).
While confirmation of the Debtor‘s initial plan was pending, the Town moved for relief from the automatic stay regarding real and personal property located at 881 Vauxhall Street in Quaker Hill, Connecticut (the “Property“), based on outstanding taxes, interest, and fees in the amount of $74,767.84 that were duly assessed on the Property. (ECF No. 21). On March 12, 2020, the Court granted the Town‘s Motion for Relief from Stay (ECF No. 42).4
On September 15, 2020, the Debtor filed a Second Amended Plan (ECF No. 140), again without addressing any issues raised in the Trustee‘s first two objections, this time adding a non-standard provision (with exhibits) pertaining to an unrelated Connecticut Superior Court fоreclosure action and updating the “amount previously paid to trustee” to $7,400. In addition to reasserting the very same objections she raised in her two prior objections, the Trustee‘s Objection to the Second Amended Plan also assailed the Debtor‘s claim that he had paid $7,400 to the Trustee during the pendency of the case, instead contending that she had only received $6,660 (ECF No. 144). A confirmation hearing on the Debtor‘s Second Amended Plan was held on October 22, 2020, whereat the Court denied confirmation but granted the Debtor leave to amend (ECF No. 148).
On November 25, 2020, just over a year after filing his first plan, the Debtor filed a Third Amended Plan (ECF No. 151), wherein he nearly doubled the proposed monthly plan payment to $1,384 despite ostensibly operating with a negative monthly net income, removed the non-standard provision, and adjusted the arrearage on the Town‘s claim to $74,767.84. In the Trustee‘s Objection to the Debtor‘s Third Amended Plan, she pointed out that, in addition to the defects that she had specifically identified in each of the three prior objections,5 the Debtor failed to maintain plan payments and was overdue in the amount of $1,104, and that the plan serves no apparent purpose because it only purports to address the Town‘s claim—despite the Court‘s granting of stay relief as to that claim (ECF No. 156). The instant Motion to Dismiss was filed soon thereafter (ECF No. 160).
On January 20, 2021, the Debtor filed a Fourth Amended Plan which increased the proposed monthly Plan payment to $2,386.78 and provided to pay interest at 18% on the tax portion of the Town‘s claim (ECF No. 161). Given the underlying questions concerning feasibility raised by the Trustee throughout this case, the Court scheduled an evidentiary hearing to address the Trustee‘s Motion to Dismiss, the Debtor‘s Fourth Amended Plan, and the Debtor‘s Motion to Reinstate the Stay, and ordered the Debtor to “promptly deliver to the Trustee those documents reasonably requested to support his income, resources to support the Plan and financial feasibility.” ECF No. 167. The Court‘s Order also directed that the “Debtor shall open the
At the evidentiary hearing, which was held on February 12, 2021, the Debtor proffered various exhibits, including a copy of a check in the amount of $2,290.78 sent to the Trustee on February 11, 2021, which was to ostensibly demonstrate that the Debtor had brought plan payments current; bank statements showing transactions from 12/30/20-1/12/21 and 1/29/21-2/10/21 which the Debtor claimed confirms that he has sufficient income to make plan payments; a 12-month profit and loss statement, which was created by the Debtor but not substantiated by any other proffered evidence; and a document containing a written response to the Trustee‘s objections, which notably indicated that а fifth amended plan would be necessary in order to “reflect Trustee‘s computations” as well as address the shortfall of his income, which he claimed could be dealt with through his “ability to generate additional income if needed and have family members that will contribute to help me save my home.”
In keeping with her observations throughout this case, the Trustee now argues that the Motion to Dismiss and her Objection to the Fourth Amended Plan turn on feasibility, and that the Debtor has not met his burden of demonstrating an ability to make the proposed payments. Simply put, she argues that aside from the information listed in his Schedules, the Debtor has not produced any corroborating evidence that would support his claim that he has sufficient funds to make the proposed plan payments while continuing to pay his living expenses. What‘s more, to the extent that the Debtor claims there are promised or hopeful contributions from family members, he has provided no documentation or testimony to substantiate such a claim. The Town joins the Trustee‘s arguments, while also arguing for dismissal with prejudice, citing the length of time this case has been pending and the Plan‘s mootness in light of stay relief entering in the Town‘s favor.
The Court agrees that dismissаl is warranted and finds that cause exists to dismiss the Debtor‘s case based on his failure to satisfy his burden in demonstrating that he has the means and ability to comply with the terms of the proposed plan, the unreasonable and prejudicial delay in this case, and the Debtor‘s ostensible lack of good faith demonstrated by the filing of multiple unfeasible plans throughout this case.
III. DISCUSSION
Section 1307 of the Bankruptcy Code, which governs conversion or dismissal of Chapter 13 cases, provides that the court, on request of a party in interest and after notice and a hearing, may dismiss a case for cause, and further provides a non-exhaustive list of circumstances that constitute “cause.”
With respect to dismissal under subsection (c)(1), this case has been pending for over a year, and in that time the Debtor has made no meaningful progress toward the filing of a feasible and confirmable plan. For more than a year (and during his previous bankruptcy) the Trustee has requested, and the Debtor has failed to provide, those documents necessary for the Trustee to determine if the plan is feasible and if it complies with Section 1325(a)(4). Nor has the Debtor supplied the Trustee with the requisite information as directed by this Court (see ECF No. 167). The Debtor has done nothing to address the multitude of issues raisеd in each of the Trustee‘s Objections, and while the Debtor continues to file plans wrought with infirmities, the Town‘s tax debt has been accruing interest at a rate of 18% per annum and no post-petition tax payments have been made. See In re Hartley, 2020 WL 1908326, at *5 (Bankr. D. Conn. 2020) (“Prompt payment of real property taxes is indicative of the debtor‘s ability to complete a Chapter 13 Plan, and nonpayment may be cause for dismissal or conversion.“). What‘s more, given that the Debtor‘s Plan seeks only to address the Town‘s tax claim, and the Town was granted stay relief with respect to that claim, the present case does not appear to have a legitimate bankruptcy objective. In light of these delays, the lack of a proper bankruptcy purpose, and the nonpayment of post-petition taxes—all оf which are prejudicial to the Town—the Court finds sufficient cause to dismiss this case pursuant to
Next, Section 1307(c)(5) provides an additional ground for dismissal because the Debtor‘s Fourth Amended Plan (as with all earlier iterations) is patently infeasible, and thereby unconfirmable. “Subsection (c)(5), allowing a court to dismiss a case where the plan is not confirmable, references Bankruptcy Code § 1325(a)(6), ‘[b]y far the most important criterion for the confirmation of a chapter 13 plan.‘” In re Jensen, 425 B.R. 105, 109 (Bankr. S.D.N.Y. 2010) (quoting 9 COLLIER ON BANKRUPTCY ¶ 1325.07). Under Section 1325(a)(6), the court must determine whether “the debtor will be able to make all payments under the plan and to comply with the plan.”
In the present case, the Debtor has had myriad opportunities to provide the Trusteе with documentation supporting feasibility, and in fact, was ordered by the Court to do so (see ECF No. 167). When given the opportunity to provide the Trustee and the Court with evidence of sufficient income or funds to support his Plan, the Debtor simply offered up unsubstantiated testimony that new employment has resulted in higher income and that family members were willing to help with plan payments. In considering third-party contributions tо plan payments, “[i]t is incumbent on the debtor to satisfactorily establish that the contributions are sufficiently ‘stable and regular’ to enable the debtor to make payments under a Chapter 13 plan.” In re Felberman, 196 B.R. 678, 686 (Bankr. S.D.N.Y. 1995) (citation omitted). However, at the hearing on February 12, no family members appeared or testified as to their willingness to help, nor was any financial undertaking from any family member offered into evidencе. The Debtor‘s claims of family contributions are far from “stable and regular” and instead are speculative, conjectural, and unrealistic.
Due to the absence of any credible evidence that supports the Debtor‘s claims
Further, while not expressly enumerated under Section 1307(c), “it is well established that lack of good faith may also be cause for dismissal under § 1307(c).” In re Ciarcia, 578 B.R. 495, 499 (Bankr. D. Conn. 2017) (quoting In re Prisco, 2012 WL 4364311, at *4 (N.D.N.Y. 2012). A finding of a lack of good faith is based оn the totality of the circumstances. Id. at 499-500. “The totality of the circumstances should take into consideration whether the debtor has abused the ‘provision, purpose or spirit’ of the Bankruptcy Code and whether the filing is ‘fundamentally fair’ to creditors.” In re Armstrong, 409 B.R. 629, 634 (Bankr. E.D.N.Y. 2009) (citation omitted). “The determination of whether a debtor filed a petition or plan in bad faith so as to justify dismissal for cause is left to the sound discretion of the bankruptcy court.” In re Prisco, supra, 2012 WL 4364311, at *4.
Here, the Debtor continuously ignored the Trustee‘s repeated requests to provide documentation required to address the plan‘s feasibility issues, and the Section 341 meeting of creditors has yet to conclude due to the Debtor‘s failure to appear or to provide the necessary documentation (see ECF Nos. 18, 25, 43, 85, 104). This case is on the same trajectory as thе Debtor‘s previous bankruptcy, which was ultimately dismissed on a motion by the Trustee—wherein the Trustee raised nearly identical issues as she has in the present case on six separate occasions (see ECF Nos. 40, 131, 144, 156, 160, 178).
For over a year, the Debtor has filed plans bereft of sufficient funding and the appropriate treatment of his tax and mortgage claims. Notwithstanding that the Town has been granted stay reliеf, the Debtor continues to file plans which appear to have no legitimate purpose other than ostensibly frustrating the Town‘s ability to foreclose on the Property. According to the Trustee, a plan seeking to cure the tax claims would require a monthly payment of at least $2,407.27, yet the financial information provided by the Debtor on amended Schedule I (ECF No. 157) and J shows his monthly net income as $1,535 (Motion to Dismiss, ECF No. 160 at ¶ 5), making it financially impossible for the Debtor to confirm a plan that treats the Town‘s secured claim. “The filing of a bankruptcy petition merely to prevent foreclosure, without the ability or the intention to reorganize, is an abuse of the Bankruptcy Code.” Felberman, supra, 196 B.R. at 681. Here, the Debtor‘s resistance to the reconciliation of the Town‘s tax claims in state court, while failing to advance any cognizable theory assailing the outstanding taxes, amounts to an abuse of the bankruptcy process.
Accordingly, the Court also finds sufficient cause for dismissal under
In addition to the express authority to dismiss a case for cause provided under Section 349, Section 105(a) provides that “[n]o provision of this title shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.”
The facts demonstrate that the Debtor has not, and is unable to, propose a confirmable Chapter 13 Plan; he has disregarded multiple requests from the Trustee to provide necessary documentation for more than a year, and recеntly defied a Court Order to do so; he has failed to pay any post-petition taxes; the Debtor‘s case lacks a legitimate bankruptcy purpose; and the Debtor‘s dilatory tactics continue to delay and frustrate the Town‘s ability to foreclose on the Property, which is emblematic of bad faith. Additionally, while “[a] finding of bad faith can justify dismissal with prejudice,” Feldman, supra, 597 B.R. at 461, given the Debtor‘s conduct in, and bad-faith maintеnance of, both this case and his prior bankruptcy case, the lack of compliance with requests from the Trustee and orders of this Court, and his patent inability to confirm a plan, this Court finds sufficient cause to dismiss the Debtor‘s case with prejudice to the refiling of a subsequent petition.
IV. CONCLUSION
After a thorough review of the records in this case and in the Debtor‘s prior bankruptcy, in addition to the arguments advanced in the pleadings and at hearings before this Court, and for the reasons stated above, the Court finds that, pursuant to
ORDERED: The Trustee‘s Motion to Dismiss is hereby GRANTED; and it is further
ORDERED: Pursuant to
IT IS SO ORDERED at Hartford, Connecticut this 26th day of February 2021.
James J. Tancredi
United States Bankruptcy Judge
District of Connecticut