- Case Type:
- Case Status:
- Ninth Circuit Bankruptcy Appellate Panel Case No. CC-20-1254-SGF (9th Circuit, Apr 07,2021) Not Published
- The bankruptcy court did not abuse its discretion by relying exclusively on the schedules to calculate chapter 13 Debtor's eligibility. The BAP also rejected Appellant’s argument that the bankruptcy court was bound to include the stated amount of its proof of claim in determining Debtor’s chapter 13 eligibility because Debtor did not object to its claim.
- Procedural context:
- Appellant objected to Debtor's Chapter 13 Plan focusing on 2 primary issues. First, the bankruptcy court should have considered Appellant's proof of claim when determining if Debtor's unsecured debt exceeded the limit provided in 11 U.S.C. Sec. 109(e). Second, the Chapter 13 Plan was filed in bad faith based on the Debtor purportedly diverting funds from an entity the Debtor owned to the Debtor's sister and not contribute the same to the Debtor's Chapter 13 Plan. The bankruptcy court held a confirmation hearing overruling the objections and determined that unless the Debtor's schedules were not filed in good faith, the court should rely on the schedules for purposes of determining Sec. 109(e). Additionally, primarily adopting the Debtor's argument, that there was not any bad faith. The entity owned by the Debtor was in a pending Chapter 11; therefore, any issue with the payments to Debtor's sibling should be addressed in the Chapter 11 case. The Appellant appealed the Court's ruling.
- When the Debtor filed her Schedules she listed Appellant 3 separate times. First, as a general creditor with a $0.00 amount due (notice only), second in relation to pre-bankruptcy trademark litigation, and third in relation to pre-bankruptcy breach of contract litigation. For each claim, the Debtor identified the claim as "disputed". Shortly after the commencement of the case, the Appellant filed a motion for relief, request the stay be terminated so it could liquidate its claims in the pre-bankruptcy litigation. Appellant filed a Proof of Claim attaching the complaints from the 2 pre-bankruptcy claims. Additionally, Appellant attached a 3rd complaint in which the Debtor was not named, but the 3rd lawsuit included a judgment incorporating findings of facts and conclusions of law. This state court made a number of findings involving an entity in which the Debtor held an ownership interest, but the bankruptcy court could not discern whether the entity was even named. Therefore, the Appellant contends that its Proof of Claim is prima facie evidence of a valid claim; therefore, the Debtor's obligations exceed the limit provided in Sec. 109(e). The Debtor amended her schedules to include additional characterization as either "unliquidated" or "contingent". Taking into consideration the Appellant seeking stay relief to liquidate its claim, the BAP determined that the Appellant's claim did not establish a legal certainty that the Debtor's Schedules were filed in bad faith.
- Honorable Spraker, Gan, and Faris, Bankruptcy Judges
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