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Summarizing by Amir Shachmurove

Hansmeier v. McDermott

No. 15-6035 (BAP 8th Cir. Sept. 29, 2016)
The BAP for the 8th Circuit affirmed the ruling of the bankruptcy court (D. Minn. - Minneapolis) converting debtor's chapter 13 case to chapter 7. The BAP agreed that the bankruptcy court found sufficient cause to convert case to chapter 7 based on debtor's bad faith in inaccurately stating debts and expenses, making fraudulent misrepresentations to mislead the court, and seeking to unfairly manipulate the bankruptcy code. Debtor failed to controvert verified factual allegations of US Trustee. Debtor's proposed "100%" payment plan did not compel different outcome since debtor failed to demonstrate plan was confirmable. Debtor's plan was dependent on prevailing on objections to three large unsecured claims. Prior findings by federal district court judge and state court judge that debtor exhibited serious and studied disregard for orderly process of justice and demonstrated "relentless" willingness to lie to court were supported by debtor filing bankruptcy to avoid orders to compel in state court proceeding, and failing to disclose material transfers, assets, and expenses.
Procedural context:
Bankruptcy court granted US Trustee's motion to convert debtor's chapter 13 case to chapter 7. Debtor appealed to BAP.
After a state court judge found that the debtor intentionally gave inconsistent testimony and failed to provide responsive information throughout the proceedings, the state court judge ordered debtor to disclose financial information pursuant to order to show cause. Rather than comply, debtor filed bankruptcy under chapter 13. US Trustee moved to convert case to chapter 7 based on debtor's bad faith. US Trustee alleged in verified motion that in another prior suit, a federal district court judge found debtor "exhibited a serious and studied disregard for the orderly process of justice, and a relentless willingness to lie to the court on paper and in person." Debtor's schedules failed to disclose numerous transfers totaling over $500,000 on his statement of financial affairs. He failed to honestly disclose his household expenses on schedules I and J. He failed to notify the chapter 13 trustee and the bankruptcy court he had moved to a rental property and failed to amend his schedules to reflect the resulting reduction in his monthly living expenses. He failed to notify the chapter 13 trustee and the bankruptcy court he intended to sell his condominium. He failed to disclose significant general unsecured claims. Numerous courts had entered findings and conclusions that he had engaged in fraud and misrepresentations to the courts regarding his assets and his use of various entities to hide his assets and misrepresent his financial condition. He was the subject of a disciplinary action that could result in the revocation of his license to practice law. Debtor proposed "100%" payment plan. However, plan relied upon debtor successfully prevailing on objections to three significant unsecured claims.
Schermer, Nail, Shodeen

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