In re Aquino

• Decision Date: 25 May 2021
• Docket Number: Case No.: 19-12664-abl
• Citation: 630 B.R. 499
• Court: U.S. Bankruptcy Court — District of Nevada
• Parties: IN RE: Divina AQUINO, Debtor.

630 B.R. 499

IN RE: Divina AQUINO, Debtor.

Case No.: 19-12664-abl

United States Bankruptcy Court, D. Nevada.

Hearing Date: April 29, 2020

Signed May 25, 2021

Jennifer Isso, Isso and Hughes Law Firm, Henderson, NV, for Debtor.

Kathleen A. Leavitt, Las Vegas, NV, Pro Se.

MEMORANDUM AND ORDER DENYING TRUSTEE'S MOTION TO DISMISS AND DENYING CONFIRMATION OF AMENDED CHAPTER 13 PLAN #2

Honorable August B. Landis, United States Bankruptcy Judge

On April 29, 2020, two pending matters came before the Court for hearing. The first matter was confirmation of Chapter 13 Plan #2¹ filed by debtor Divina Aquino ("Ms. Aquino"). The second matter was a Motion to Dismiss² filed by Kathleen A. Leavitt, the standing chapter 13 trustee assigned to administer Ms. Aquino's case ("Trustee").

At the April 29, 2020 hearing, attorney Jennifer Isso, Esq. appeared telephonically for Ms. Aquino. Attorney Danielle N. Gueck-Townsend appeared telephonically for Trustee.

ISSUES

1. Whether Trustee proved by a preponderance of the evidence that cause exists to dismiss Ms. Aquino's bankruptcy case under Section 1307(c).

2. Whether Trustee proved by a preponderance of the evidence that Section 1325(b)(1)(B) bars confirmation of Plan #2 because that plan fails to provide that all projected disposable income to be received during the applicable commitment period will be applied to make payments to unsecured creditors; and if so, whether Ms. Aquino then proved by a preponderance of the evidence that Trustee's objection to confirmation of Plan #2 based upon Section 1325(b)(1)(B) lacks merit.

3. Whether Ms. Aquino proved by a preponderance of the evidence that Plan #2 was filed in good faith as required by Section 1325(a)(3).

FINDINGS OF FACT

A. Procedural History

1. Ms. Aquino Files a Voluntary Chapter 7 Bankruptcy Petition, And the United States Trustee Moves to Dismiss Her Case As a Presumed Abuse of the Bankruptcy Code

This case commenced on April 30, 2019, when Ms. Aquino filed a voluntary petition³ under chapter 7 -- not chapter 13 -- of the Bankruptcy Code.⁴ Despite subsequent amendments to her chapter 7 schedules⁵ and chapter 7 means test forms,⁶ the United States Trustee ("UST") identified Ms. Aquino's case as an abuse of chapter 7 of the Code. Resultantly, on August 1, 2019, the UST filed the written notice required by 11 U.S.C. § 704(b)(1)(A) in Ms. Aquino's case.⁷ The 10 Day Statement reads:

As required by 11 U.S.C. Section 704(b)(1)(A), the United States Trustee has reviewed the materials filed by the debtor(s). Having considered these materials in reference to the criteria set forth in 11 U.S.C. Section 707(b)(2)(A), and, pursuant to 11 U.S.C. Section 704(b)(2), the United States Trustee has determined that: (1) the debtor's(s’) case should be presumed to be an abuse under section 707(b) ; and (2) the product of the debtor's current monthly income, multiplied by 12, is not less than the requirements specified in section 704(b)(2)(A) or (B). As required by 11 U.S.C. Section 704(b)(2) the United States Trustee shall, not later than 30 days after the date of this Statement's filing, either file a motion to dismiss or convert under section 707(b) or file a statement setting forth the reasons the United States Trustee does not consider such a motion to be appropriate. Debtor(s) may rebut the presumption of abuse only if special circumstances can be demonstrated as set forth in 11 U.S.C. Section 707(b)(2)(B).⁸

The UST then filed a Motion to Dismiss Case Pursuant to 11 U.S.C. §§ 707(b)(1), 707(b)(2), and 707(b)(3).⁹ The UST Dismissal Motion was supported by the sworn declaration of Paralegal Specialist Anabel Abad Santos.¹⁰ The UST Declaration contains a detailed summary of financial data the UST had obtained from Ms. Aquino, with various source documents attached. The UST Dismissal Motion was set for hearing on September 11, 2019.¹¹

2. Facing Dismissal of Her Chapter 7 Bankruptcy As An Abusive Filing, Ms. Aquino Converts Her Case to Chapter 13, And Trustee Is Appointed

On September 10, 2019, the day prior to the scheduled hearing on the UST Dismissal Motion, Ms. Aquino filed a Motion to Convert Case.¹² The Conversion Motion sought to convert Ms. Aquino's case from chapter 7 to chapter 13 of the Bankruptcy Code, and was granted by order dated September 17, 2019.¹³ Trustee was appointed to administer Ms. Aquino's case that same day.¹⁴

3. Ms. Aquino Files Amended Schedules And Various Proposed Plans; Trustee Opposes Confirmation And Seeks Dismissal

After her case was converted from chapter 7 to chapter 13, on October 20, 2019, counsel for Ms. Aquino filed amendments to her bankruptcy schedules and statement of financial affairs.¹⁵ On that same date, she filed a Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period,¹⁶ a Chapter 13 Calculation of Your Disposable Income,¹⁷ and her first proposed chapter 13 plan.¹⁸ The absence of Ms. Aquino's signatures on the Chapter 13 Schedules, Chapter 13 CMI Form, and Chapter 13 Disposable Income Form, as well as the use of an outdated CMI form, caused the Clerk of Court to issue Notice of Docketing Error forms related to those filings the following day, October 21, 2019.¹⁹ In response to the NODEs, on October 27, 2019, Ms. Aquino filed another set of schedules,²⁰ another Chapter 13 CMI Form,²¹ and another Chapter 13 Disposable Income Form.²²

Trustee's Opposition to Confirmation of Plan #1 Combined with Trustee's Recommendation for Dismissal was filed on November 1, 2019.²³ In TSOP #1, Trustee cited a myriad of reasons for dismissal of Ms. Aquino's chapter 13 bankruptcy case under Section 1307(c). A non-inclusive list of those reasons is as follows:

• Debtor(s) failed to commence Plan payments. 11 U.S.C. §§ 1326(a)(1), 1307(c)(4).

• Debtor(s) is/are delinquent in plan payments. 11 U.S.C. § 1307(c)(1).

• Debtor(s) failed to comply with notice/renotice requirements. Failure to set a confirmation hearing according to 11 U.S.C. § 1324(b) ; Bankruptcy Rule 2002(a) and (b), and 11 U.S.C. § 1307(c)(1).

• Plan is not feasible as required by 11 U.S.C. § 1322 based on: Toyota Motor Credit Corporation.²⁴

• The Plan fails to provide for all of the Debtor(s)’ disposable income pursuant to 11 U.S.C. § 1325(a)(3) and (b) based on: Trustee objects to $1,509.50 retirement contribution while paying 0% to general unsecured creditors.²⁵

TSOP #1 was electronically served on Ms. Aquino's counsel, and mailed to both Ms. Aquino and her counsel, when it was filed on November 1, 2019.²⁶ TSOP #1 was not supported by a declaration or any other admissible evidence.

Three days later, on November 4, 2019, counsel for Ms. Aquino filed a Summary of Your Assets and Liabilities and Certain Statistical Information.²⁷ Although Ms. Aquino's Chapter 13 Schedules and Amended Chapter 13 Schedules did not include Schedule D: Creditors Who Have Claims Secured by Property, the Statistical Summary listed secured debt in the amount of $19,500.00.²⁸

On November 4, 2019, counsel for Ms. Aquino also filed modified Chapter 13 Plan #2.²⁹ Between November 4, 2019 and January 30, 2020, various unsuccessful attempts were made by Ms. Aquino's counsel to provide proper notice of a confirmation hearing on Plan #2.³⁰

On January 30, 2020, Trustee filed a Motion to Dismiss Ms. Aquino's bankruptcy case.³¹ In the Dismissal Motion, Trustee identified a variety of reasons why dismissal was warranted under Section 1307(c) including, without limitation, the following:

• Debtor(s) is/are delinquent in plan payments. 11 U.S.C. § 1307(c)(1).

• Debtor(s) failed to comply with notice/renotice requirements: Failure to set a confirmation hearing according to 11 U.S.C. § 1324(b), Bankruptcy Rule 2002(a) and (b), and 11 U.S.C. § 1307(c)(1).

• The Plan fails to provide for all of the Debtor(s)’ Disposable Income pursuant to 11 U.S.C. § 1325(a)(3) and (b) based on: Debtor contributes $1,509.50 per month to her 401(k) while paying 0% to unsecured creditors. 11 U.S.C. § 1325(a)(3).

• Trustee objects to the voluntary retirement contribution as this expense is not permitted during the pendency of the bankruptcy case. Parks v. Drummond, 475 B.R. 703 (9th Cir. BAP 2012).³²

The Dismissal Motion was electronically served on Ms. Aquino's counsel when it was filed on January 30, 2020.³³ The Dismissal Motion was not supported by a declaration or any other admissible evidence.

The hearing on the Dismissal Motion was originally set on the Court's chapter 13 duty judge calendar for March 12, 2020.³⁴ Ms. Aquino's counsel was electronically served with notice of the March 12, 2020 hearing on the Dismissal Motion, and notice was also mailed to Ms. Aquino and her counsel on January 30, 2020.³⁵

On February 2, 2020, counsel for Ms. Aquino succeeded in scheduling and noticing a confirmation hearing on Plan #2. The confirmation hearing on Plan #2 was set for March 12, 2020, the same date as the scheduled hearing on Trustee's Dismissal Motion.³⁶ On February 10, 2020, Trustee filed an Opposition to Confirmation of Plan #2 Combined with Trustee's Recommendation for Dismissal.³⁷ In TSOP #2, Trustee stated:

Trustee objects to confirmation of the Chapter 13 Plan and recommends that this case be dismissed pursuant to 11 U.S.C. § 1307(c) for one or more of the following reasons:

• Debtor(s) are delinquent in plan payments. 11 U.S.C. § 1307(c)(1).

.....

The Plan fails to provide for all of the Debtor(s)’ disposable income pursuant to 11 U.S.C. § 1325(a)(3) and (b) based on:

• Debtor contributes $1,509³⁸ per month to her 401(k) while paying 0% to general unsecured creditors. 11 U.S.C. § 1325(a)(3). Trustee objects to the voluntary retirement contribution as this expense is not permitted during the pendency of the bankruptcy case. Parks v. Drummond, 475 B.R. 703 (9th Cir. B.A.P. 2012).

TSOP #2 was electronically served on Ms. Aquino's counsel when it was filed on February 10, 2020. It was also mailed to Ms. Aquino and her counsel on that date.³⁹ TSOP #2 was not supported by a declaration or any other admissible...