- Case Type:
- Case Status:
- United States Bankruptcy Appellate Panel of the Ninth Circuit No. CC-20-1061-LST (9th Circuit, Nov 05,2020) Not Published
- The BAP affirmed the bankruptcy court (C.D. Cal.) in full in that no cause for dismissal existed to allow the Debtors to dismiss their Chapter 7 under 11 U.S.C. § 707(a). The BAP noted that the Debtors conceded on appeal that bad legal advice is not cause for dismissal. The BAP also agreed that the creditors would be prejudiced by the dismissal, because there would be a substantial delay to payment, if one ever came. Dismissal under § 707(a), according to the BAP, requires payment to the creditors that is prompt and certain.
- Procedural context:
- The Debtor filed a Chapter 13 case and made payments for more than four years. Then the Debtors, on the advice of their attorney, sought to convert their case to a Chapter 7. The Chapter 7 trustee sought to sell their residence, and the Debtors moved to dismiss their case under 11 U.S.C. § 707(a). The Debtors proposed to dismiss the Chapter 7 and refile a new 60-month Chapter 13 plan. The bankruptcy court found that the delay in payment to creditors would constitute prejudice. The bankruptcy court denied the motion making a finding that poor legal advice does not create a cause for dismissal, and the Debtors failed to demonstrate that their creditors would not be prejudiced. The Debtors appealed.
- The Debtors filed a Chapter 13 case, confirmed a 60-month plan, and made payments for four and half years. One Debtor lost his job, and the Debtors’ attorney recommended a conversion to a Chapter 7 bankruptcy. At the time of the conversion the remaining unsecured claims totaled over $30,000. Also, at the time of conversion, the Debtors had significant non-exempt equity in a home in Los Angeles. The Chapter 7 Trustee alleged the equity to be over $128,000. The Debtors had the option of refinancing their home to pay unsecured creditors, acknowledged the option, and chose not to pursue it. In the declaration accompanying their Motion to Dismiss under 11 U.S.C. § 707(a), the Debtors stated that had they known their equity would have been at risk, they would not have sought conversion.
- The Hons. Lafferty, Spraker, and Taylor
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