Rupp v. Pearson

Rupp v. Pearson, Case No. 15-4191 (10th Cir. November 7, 2016). Unpublished.
It is not necessary to show fraud when seeking to dismiss a case when a debtor is attempting to hinder or delay creditors and, at the pleading stage, it is not necessary that the inference of intent supported by the pleaded facts be the most plausible explanation of the defendant’s conduct; it is sufficient if the inference of intent is plausible. Also, the possibility that the debtor needed the funds to take care of herself or her children cannot defeat the complaint at this stage of the proceedings.
Procedural context:
The Bankruptcy Court in Utah denied trustee’s unopposed motion for default judgment and dismissed with prejudice trustee’s amended complaint seeking to deny debtor’s discharge because she had transferred property (a tax refund) contrary to her approved plan in a prior Chapter 13 bankruptcy and with the intent to hinder, delay, or defraud creditors. The Bankruptcy Court held that trustee failed to allege sufficient facts showing improper intent. The District Court affirmed. The 10th Circuit reversed reviewing the Bankruptcy Court’s dismissal of the case de novo. Debtor did not participate in the appeal.
Debtor’s confirmed chapter 13 plan required her to turn over a portion of her tax refund which debtor failed to do and her chapter 13 case was dismissed. About two weeks later, debtor filed a chapter 7 case precisely 8 years after her last chapter 7 thus making it was unnecessary to file chapter 13. Debtor had filed 7 previous bankruptcies before the dismissed chapter 13 and the current chapter 7 demonstrating debtor’s knowledge of bankruptcy law and a track record of apparent manipulation of the system. It would be a permissible, even a natural, inference from this history that debtor had filed the chapter 13 petition with no intent to comply with its requirements, except as necessary until she could file a chapter 7 petition a year later. Thus, the amended complaint stated a plausible claim that debtor’s failure to turn over to the chapter 13 bankruptcy estate the required portion of the tax refund was part of a scheme to hinder and delay creditors.
Tymkovich, Hartz, Phillips

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