In re Marshall, BAP No. 08-6051.
| Decision Date | 23 June 2009 |
| Docket Number | BAP No. 08-6051. |
| Citation | 407 B.R. 359 |
| Parties | In re Theresa MARSHALL, Debtor. Theresa Marshall, Debtor-Appellant, v. Mark T. McCarty, Chapter 13 Trustee, Movant-Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Eighth Circuit |
Kimberley F. Woodyard, North Little, AR, for Appellee.
Before FEDERMAN, MAHONEY and SALADINO, Bankruptcy Judges.
Debtor Theresa Marshall appeals from an order of the Bankruptcy Court1 which denied her motion to extend the automatic stay, dismissed her Chapter 13 case with prejudice, and barred her from filing another bankruptcy case for one year. The Debtor claims that the Court erred in dismissing her case when she had made a substantial number of her payments in previously filed cases. For the reasons that follow, we affirm.
The Debtor filed this Chapter 13 petition on June 9, 2008. This is her fourth Chapter 13 case since 1995, all of which were filed on the eve of foreclosure. Throughout her various bankruptcy proceedings, the Debtor filed numerous motions contesting the amount she owes on her mortgage. She has hired and fired eight attorneys and is now representing herself pro se on appeal.
In each of those prior cases, the Debtor paid a substantial amount of money into the plan before ultimately failing to complete her requirements. The first case was filed in November 1995 and was dismissed in December 2001. Because the Debtor had not made all of her plan payments, she exited that case with an arrearage on her mortgage obligation. Two months later, the Debtor again filed for bankruptcy protection. That case was dismissed in May 2005 for the Debtor's failure to comply with an agreed "strict compliance order" requiring her to make timely payments to her trustee. These missed payments caused the arrearage on her mortgage to increase since no funds remained above her regular monthly mortgage debt to settle this amount and its accumulating interest. After three months, in August 2005, the Debtor filed yet another bankruptcy case. During this case, the parties again agreed to a strict compliance order requiring the Debtor to make all her payments in full and on time from January 2008 to June 2008. After the Debtor failed to comply with the order, that case was dismissed.
Four months later, on June 9, 2008, the Debtor filed the instant case within the period of the strict compliance order in the last case. Both the mortgage holder and the Chapter 13 Trustee moved to dismiss the case for bad faith. In dismissing this case, the Bankruptcy Court found this filing was "abusive in the extreme" because it allowed the Debtor, for a second time, to circumvent her strict compliance agreement. After a hearing on the motions to dismiss, which included another challenge of the amount owed on the arrearage, the Court dismissed the current Chapter 13 case, denied her motion to extend the stay as moot, and barred her from filing again for one year. It is that order from which the Debtor now appeals.
We review findings of fact for clear error and legal conclusions de novo.2 The Bankruptcy Court has discretion to dismiss a Chapter 13 case and to impose limitations on refiling.3 Both decisions are reviewed under an abuse of discretion standard.4 An abuse of discretion occurs when the Bankruptcy Court "fails to apply the proper legal standard or bases its order on findings of fact that are clearly erroneous."5
The Debtor claims that the Bankruptcy Court's dismissal of her Chapter 13 case was an abuse of discretion.6 The Bankruptcy Court dismissed the case due to the abusive effect of the Debtor's repeated attempts to relitigate the amount she owed on the mortgage arrearage and to circumvent strict compliance orders by filing new cases. Courts may dismiss a case under § 1307(c) if such case was filed in bad faith.7 Whether a Chapter 13 debtor is acting in bad faith is an issue of fact for the Bankruptcy Court to determine and will only be overturned if clearly erroneous.8
The bad faith determination focuses on the totality of the circumstances, including whether the debtor has stated his debts and expenses accurately; whether he has made any fraudulent misrepresentation to mislead the bankruptcy court; or whether he has unfairly manipulated the Bankruptcy Code.9 For automatic stay purposes, a case is presumed to be filed in bad faith if a debtor's previous case "was dismissed within [the preceding] 1-year period, after the debtor failed to ... perform the terms of a plan confirmed by the court" or "there has not been a substantial change in the financial or personal affairs of the debtor since the dismissal of the next most previous case...."10 The Debtor may rebut this presumption only by a showing of clear and convincing evidence.11
The Debtor has failed to meet this burden. While she has, throughout her various bankruptcy cases, made significant payments to her creditors, her failure to comply with more than one strict compliance order was properly considered in determining her bad faith. The Bankruptcy Court also properly considered the amount of time the Debtor has "reposed herself in bankruptcy," her pattern of making unsuccessful filings on the eve of foreclosure, and her history of filing excessive motions throughout the various bankruptcy cases. The Bankruptcy Court's finding that the Debtor's conduct in refiling her petition to circumvent the strict compliance order was "abusive in the extreme" is not clearly in error. In these circumstances, the Bankruptcy Court properly found that the Debtor unfairly manipulated the Code and was operating in bad faith.
While not directly raised in the Debtor's appeal, since she is filing pro se, we will consider the propriety of the Bankruptcy Court's order barring her from refiling for one year. Whether a bankruptcy court has the authority to bar subsequent Chapter 13 filings presents a question of law which is reviewed under a de novo standard.12 If the court has the power to issue that order, its decision to do so will be reviewed under an abuse of discretion standard.13
Bankruptcy courts "invariably derive from § 105(a) or § 349(a) of the Code ... the power to sanction bad-faith serial filers ... by prohibiting further bankruptcy filings for [over] 180 days."14 In evaluating whether to bar subsequent filings, courts have recognized that "a dismissal order that bars subsequent litigation is a severe sanction warranted only by egregious misconduct."15 Court orders prohibiting refiling often occur "where a debtor files a series of bankruptcy petitions that are strategically timed to thwart a secured creditor from foreclosing on its collateral" or where the debtor files a subsequent petition in violation of a previous order.16 Thus, Courts in this circuit have barred refiling to allow a creditor to exercise its rights under state law where serial filings abuse the bankruptcy process and cannot be prevented by an injunction under § 109(g).17
The Bankruptcy Court did not abuse its discretion in dismissing the Debtor's petition with prejudice to refiling for one year. While the Debtor in previous cases has made an effort to pay money into the plan, the Bankruptcy Court had the discretion to determine that her manipulation of the filing process to avoid her strict compliance agreements is sufficiently egregious to justify a year long ban.
The Bankruptcy Court did not abuse its discretion in dismissing the Debtor's Chapter 13 case and barring her from filing for one year. Accordingly, the Bankruptcy Court's judgment is affirmed.18
1. The Honorable James G. Mixon, United States Bankruptcy Judge for the Eastern and Western Districts of Arkansas.
4. Id. at 341.
6. Debtor also appeals the Bankruptcy Court's decision to deny as moot her motion to impose the automatic stay under § 362(a). Since we are affirming the dismissal, we need not address this issue.
7. In re Molitor, 76 F.3d 218, 220 (8th Cir. 1996). See also Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365, 127 S.Ct. 1105, 166 L.Ed.2d 956 (2007) ().
10. 11 U.S.C. § 362(c)(3)(C)(i).
11. Id.
12. See In re Casse, 198 F.3d at 334.
13. Id. at 341.
14. Id. at 337, 338. Appellate courts in the Second and Fourth Circuits...
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