IN RE: DIANE M. DAVIS, Case No. 09-42865
| Decision Date | 31 March 2011 |
| Docket Number | Case No. 09-42865 |
| Parties | IN RE: DIANE M. DAVIS, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Texas |
OPINION TEXT STARTS HERE
This is a case about an affluent debtor who sought to manipulate bankruptcy procedures to accomplish what the Code prohibits - the elimination of all of her credit card debts despite her obvious ability to repay those debts over time. The debtor, Diane Davis, obtained confirmation of a plan in which she proposed to pay her credit card debts in full. The debtor subsequently objected to every claim filed by her creditors based on their alleged failure to attach sufficient documents to their proofs of claim. The debtor withdrew several objections after the creditors responded. The Court has before it the debtor's request for a default order sustaining the remaining objections. The Court exercises its core jurisdiction over this matter, see 28 U.S.C. §§ 157(b)(B), and makes the following findings of fact and conclusions of law, see Fed. R. Bankr. P. 7052.
The debtor filed a voluntary petition for relief under chapter 13 of the Bankruptcy Code on September 11, 2009. She is represented by Armstrong Kellett Bartholow P.C. in her bankruptcy case.
The debtor is a single woman with no dependants. She had been employed as a sales manager for more than three-and-a-half years as of the petition date. Her gross annual income was $121,760 during 2008. As of the petition date, she was receiving gross monthly wages of $10,428 and a monthly income, net of taxes and retirement contributions, of $7,425.05. Her monthly disposable income was $3,923.92.
The debtor owns a home in which she has significant equity. She was current on her payments to the mortgage holder when she filed her bankruptcy petition. She was driving a 2002 BMW 325, which she owned free and clear of any lien. Her bankruptcy schedules reveal that she initiated a chapter 13 case solely for the purpose of addressing her credit card debts. As an above-median-income debtor, the Code would have presumed her case to be abusive if she had sought to receive a discharge of her unsecured debts under chapter 7. See 11 U.S.C. § 707(b) ().1
The debtor's Statement of Financial Affairs (Official Form 7) shows that, in the months prior to bankruptcy, she made payments on her credit card accounts with Neiman Marcus and Nordstrom. She listed eight creditors with claims totaling $81,564 in her schedule of general unsecured creditors (Official Form 6, Schedule F), as follows: (1) American Express, with a disputed debt of $3,436; (2) Ameriprise Bank, with a disputed debt of $10,060; (3) Discover Card, with a disputed debt of $15,575; (4) Great Indoors Mastercard, with a disputed debt of $3,888; (5) Neiman Marcus, with a disputed debt of $15,925; (6) Nordstrom Visa, with a disputed debt $13,570; (7) Sears Gold Mastercard, with a disputed debt of $9,960; and (8) Target National Bank, with a disputed debt of $9,150. With respect to each of these debts, the debtor included the following remark in her Schedule F: "Debtor listed the balance shown on last statement; debtor [sic] not presently able to determine if balance is correct and is uncertain if trade name is correct legal creditor."
The debtor filed a proposed chapter 13 plan on same date she filed her bankruptcy petition. In paragraph 2, she proposed to make monthly payments of $3,190 to the chapter 13 trustee for 60 months. She estimated that these monthly payments would result in payment in full to all of her general unsecured creditors, whose claims she estimated at $150,360 in paragraph 7 of her proposed plan.2
The debtor estimated the amount of unsecured debts in her plan because she did not know, at the time, which unsecured creditors would file claims in her bankruptcy case. In a chapter 13 case, general unsecured creditors must file proof of their claims against the debtor in order to receive any distributions from the plan. See 11 U.S.C. § 1325(a)(4) - (5) (). If an unsecured creditor files a claim, the claim is deemed allowed in the absence of a substantive objection. See 11 U.S.C. § 502(a).
The last day to file claims against the debtor was January 28, 2010. See Fed. R. Bankr. P. 3001(c). By that date, twelve creditors had filed claims using the official proof of claim form (Official Form 10). Their claims totaled $147,400.68. The following creditors filed claims in the total amount of $121,902.50 relating to the "disputed" debts described in the debtor's Schedule F:3
(1) Discover Bank filed a claim for $15,757 and attached billing statements for June - November 2009. The debtor's schedules included a "disputed" claim for this account in the precise amount claimed by Discover Bank. The Court denominated the claim filed by Discover Bank as claim number one.
(2) Target National Bank filed a claim for $9,366.03 for a credit card account ending in numbers 7590. The debtor scheduled Target National Bank with a "disputed" claim for this account in the amount of $9,150. The Court denominated Target National Bank's claim as claim number three. Target National Bank subsequently transferred its claim to Roundup Funding, LLC, pursuant to Federal Rule of Bankruptcy Procedure 3001(e)(2).
(3) American Express Bank, FSB, filed a claim for $47,454.21 for a credit card account ending in numbers 2004. American Express attached a copy of the billing statement for the period ending September 4, 2009, to the claim. The debtor's schedules included a "disputed" claim for this account in the amount of only $3,436, which is approximately the minimum amount due each month (according to the billing statement). The Court denominated the claim filed by American Express as claim number five.
(4) Ameriprise Bank, FSB, filed a claim for $9,808.68 for a line of credit ending in numbers 9864. Ameriprise Bank attached an account history to the proof of claim. The debtor's schedules included a "disputed" claim for this account in the amount of $10,060. The Court denominated the claim filed by Ameriprise Bank as claim number seven.
(5) Nordstrom fsb filed a claim for $13,568.56 for a credit card account ending in numbers 8701. Nordstrom attached what appears to be a computer screen shot showing basic information about the account. The debtor's schedules included a "disputed" claim for this account in the amount of $13,570. The Court denominated the claim filed by Nordstrom as claim number eight.
(6) PRA Receivables Management, LLC as agent of Portfolio Recovery Assocs, successor in interest to Citibank (South Dakota), N.A. filed a claim in the amount of $9,958 for a "Sears MC" credit card account ending in numbers 4128. PRA Receivables Management attached a one-page summary of account information to its claim. The debtor's schedules included a "disputed" claim in the amount of $9,960 for a Sears Gold Mastercard account ending in numbers 4128. The Court denominated PRA Receivables' claim as claim number ten.
(7) HSBC Bank Nevada, N.A. (Neiman Marcus) filed a claim for $15,922.91 for an account ending in numbers 9392. The debtor's schedules included a "disputed claim" for Neiman Marcus in the amount of $15,925 for an account ending in numbers 9392. The Court denominated the claim filed by Neiman Marcus as claim number twelve.
The following unscheduled creditors filed claims in the total amount of $25,498.18:
(1) American Express Bank, FSB, filed a claim for $14,114.48 for a credit card account ending in numbers 2006. American Express attached a copy of the billing statement for the period ending September 14, 2009, to the claim. The Court denominated this claim as claim number two.
(2) PRA Receivables Management, as agent for Advanta Bank Corp., filed a claim for $7,236.95 for a credit card account ending in numbers 1395. PRA Receivables attached a one-page summary of account information to the claim form. The Court denominated this claim as claim number four.
(3) American Express Bank, FSB, filed a claim for $3,539 for an account ending in numbers 3005. American Express attached a copy of the billing statement for the period ending September 1, 2009, to the claim. The Court denominated this claim as claim number six.
(4) PRA Receivables Management as agent for Portfolio Recovery Associates, LLC, successor in interest to Citibank (South Dakota), N.A., filed a claim for $3,886.75 regarding a "Sears MC" credit card account ending in numbers 0216. PRA Receivables Management attached a one-page summary of account information to its claim. The Court denominated the claim filed by PRA Receivables Management as claim number nine.
(5) PRA Receivables Management as agent of Portfolio Recovery Associates, L.L.C., successor in interest to Citibank (South Dakota), N.A. filed a claim for $260 regarding a "J.Jill/D.M. Mgmt" credit card account ending in numbers 1337. PRA Receivables attached a one-page summary of account information to its claim. The Court denominated the claim filed by PRA Receivables as claim number eleven.
Not surprisingly, none of the debtor's general unsecured creditors objected to her proposed plan. The plan proposed to pay $190,400 to her creditors over 60 months, which would have been more than enough to pay their claims in full. The Court conducted a hearing on confirmation on February 10, 2010. The Court entered an order confirming the debtor's proposed plan on February 17, 2010.
On April 21, 2010, the chapter 13 trustee filed the Trustee's Recommendation Concerning Claims ("TRCC") pursuant to the Local Rules of Bankruptcy Procedure. The chapter 13 trustee recommended payment to all of the debtor's general unsecured creditors pursuant to the terms of the debtor's confirmed plan. The TRCC required any party who disagreed with the chapter 13 trustee's recommendation to object to the TRCC or to any...
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