TRAVIS P. SASSER V. MICHAEL BRANDON BURNETT

Summarized by Jennifer Lyday , Waldrep Wall Babcock & Bailey PLLC
11 months 2 weeks ago

Case Type:

Consumer

Case Status:

Affirmed in part and Reversed in part

Citation:

No. 24-1374; No. 24-1436 (4th Circuit, Mar 05,2025) Published

Tag(s):

Ruling:

The 4th Circuit affirmed the bankruptcy court's determination that the debtor's sale of her residence without prior approval of the bankruptcy court violated the terms of the Local Rule, but it vacated the judgment insofar as it ordered the dismissal of the debtor's Chapter 13 case and barred her from refiling for five years as more evidence was necessary on the debtor's bad faith, particularly how her reliance on advice of counsel affects the appropriate remedy. The 4th Circuit affirmed the bankruptcy court's imposition of monetary sanctions against the debtor's counsel.

Procedural context:

The debtor appealed from the district court’s orders affirming the bankruptcy court’s order finding that her sale of her residence, without prior court authorization, violated her confirmed Chapter 13 bankruptcy plan and that dismissal of her Chapter 13 case and barring her from filing bankruptcy for five years was an appropriate remedy for such violation. In additionally, the debtor's attorney separately appealed the district court’s affirmance of the bankruptcy court’s decision to impose monetary sanctions against him personally.

Facts:

The debtor filed a Chapter 13 bankruptcy case and claimed the equity in her residence to be exempt. The debtor confirmed her Chapter 13 plan and agreed in such plan to follow all Local Rules, one of which required bankruptcy court approval for a sale of the debtor's non-exempt property valued at more than $10,000. During the term of the debtor's plan, the Bankruptcy Administrator requested a status conference based on his belief that the debtor had contracted to sell her residence without first obtaining court authorization. After the scheduling of the status conference, the debtor moved for court approval to sell her residence. Before the status conference was held, the debtor closed on the sale without having court approval. The debtor's counsel then withdrew the pending motion to approve the sale. At the status conference, the debtor's counsel argued that the debtor did not need prior court approval to sell her residence. The bankruptcy court then issued an order to appear and show cause "why this case should not be dismissed for failure to comply with" the Local Rules. The Chapter 13 Trustee then moved, in the alternative, to modify the debtor's plan, convert the case to a Chapter 7 proceeding, or dismiss her bankruptcy proceeding. The debtor then used some of the proceeds from the sale of her residence to pay the remaining balance due under her plan. The bankruptcy court considered the show cause order and the Trustee's motion at the same hearing. At that hearing, the debtor repeatedly stated that she violated the Local Rule because her counsel told her that the Local Rule did not apply to her situation and that she was free to sell her residence without court approval. The debtor's counsel argued the unenforceability of the Local Rule. The bankruptcy court rejected the debtor's counsel's arguments as he had in prior cases. Ultimately, the bankruptcy court dismissed the debtor's case and barred her from refiling for five years, finding that her behavior was "indicative of bad faith and an unwillingness to abide by the restrictions that accompany the benefits of a Chapter 13 reorganization." The bankruptcy court further sanctioned the debtor's counsel $15,000. The district court affirmed all aspects of the bankruptcy court's order.

Judge(s):

Chief Judge Albert Diaz; Circuit Judge George Steven Agee; Circuit Judge Paul Victor Niemeyer

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