In re Minogue

Decision Date29 September 2021
Docket NumberC/A No. 21-01779-JW
Citation632 B.R. 287
Parties IN RE, Brittany Frances MINOGUE, Debtor.
CourtU.S. Bankruptcy Court — District of South Carolina

Elizabeth R. Heilig, Meredith Law Firm, LLC, North Charleston, SC, for Debtor.

ORDER GRANTING DISMISSAL OF CHAPTER 13 CASE WITH PREJUDICE

This matter comes before the Court for expedited hearing on the Motion to Dismiss Case ("Motion") that Debtor Brittany Frances Minogue ("Debtor" or "Ms. Minogue") filed pursuant to 11 U.S.C. § 1307(b) and objections thereto filed by the Chapter 13 Trustee and Johnny Ray Godwin and Rachel Godwin ("Creditors"). Prior to the filing of the Motion, the Chapter 13 Trustee filed a Motion to Convert Case to Chapter 7 pursuant to 11 U.S.C. § 1307(c) based upon allegations of undisclosed assets and inconsistent or incomplete representations in the Schedules and Statements filed by Debtor. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A).

By Order entered on September 22, 2021, the Court set a hearing on the Motion to Dismiss and noticed the possible expansion of relief and/or sanctions for any bad faith conduct if the case were dismissed. On September 23, 2021, the Court conducted a hearing on the confirmation of Debtor's Chapter 13 plan and objections thereto with Debtor in attendance, and during the confirmation hearing, Debtor's counsel reaffirmed that Debtor did not intend to continue to seek bankruptcy relief. The Court indicated an intention to deny confirmation of the Debtor's plan. Based upon the record, statements, and representations of the parties' counsel, the Court makes the following findings of fact and conclusions of law.

FINDINGS OF FACT

1. On July 6, 2021, Ms. Minogue filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code.

2. Along with the petition, Ms. Minogue filed her Bankruptcy Schedules and Statement of Financial Affairs. On Schedule A/B, Ms. Minogue claimed a fee simple interest in real property at 2001 S. Ocean Boulevard, Unit 1006, Myrtle Beach, S.C. ("Myrtle Beach Property"). She also disclosed that she held an interest in Brittany Frances Minogue, LLC, which was a real estate holding company for the Myrtle Beach Property. Ms. Minogue placed ownership of the Myrtle Beach Property with her LLC because she initially intended to use the Property as rental property.

3. According to the disclosures in her Schedules, Ms. Minogue began residing at the Myrtle Beach Property sometime in January 2021, and she also claimed a homestead exemption for the Property on Schedule C. According to Ms. Minogue's Statement of Financial Affairs, she resided at 1302 Timber Court, Murrells Inlet, SC 29576 from July 2019 to January 2021, and before that she resided 301 North Lake Point, Columbia, SC 29229 from August 2014 through July 2019. Ms. Minogue also disclosed that she sold the property at 301 North Lake Point in July 2019 through a sale to an unrelated third party.

4. In her Statement of Financial Affairs, Ms. Minogue indicated that her LLC existed from December 2014 through January 2021, which coincided with the date she began to reside at the Myrtle Beach Property. In addition to the conclusion of the LLC, Ms. Minogue also disclosed a pending foreclosure action that the Creditors filed against her in state court in Horry County, South Carolina under Common Pleas No. 2020-CP-26-03672 ("Foreclosure Acton"), in which Ms. Minogue indicated that judgment had been awarded to the Creditors.

5. After Debtor filed the petition, the Court issued a Notice of Chapter 13 Bankruptcy that scheduled a meeting of creditors under 11 U.S.C. § 341(a) on August 10, 2021, at 10:30 a.m. ("341 Meeting"). The Notice listed the location of the 341 Meeting as King and Queen Building, 145 King Street, Room 225, Charleston, SC 29401.

6. During the 341 Meeting, which was conducted telephonically, counsel for the Creditors asked Ms. Minogue some questions that raised further questions by the Chapter 13 Trustee. Before the Chapter 13 Trustee had an opportunity to follow-up with Ms. Minogue, she hung up. At the conclusion of the 341 Meeting, the Chapter 13 Trustee advised Ms. Minogue's counsel that the 341 Meeting would be continued to September 7, 2021.

7. Additionally, the Chapter 13 Trustee filed a notice for the continued meeting on August 10, 2021.

8. Despite providing notice of the continued meeting to Ms. Minogue's bankruptcy counsel and the filing and serving of a notice, Ms. Minogue failed to appear at the continued meeting of creditors. During the continued meeting, counsel for Ms. Minogue indicated that she was unable to speak with Ms. Minogue and that she had received an email in which Ms. Minogue indicated that she no longer wished to proceed with the bankruptcy case.

9. Three days after the continued 341 Meeting, the Chapter 13 Trustee filed a Motion to Convert Case to Chapter 7.

10. In the Motion to Convert, the Chapter 13 Trustee questioned the truthfulness of the disclosures that Ms. Minogue made regarding the conclusion of her LLC and her residency at the Myrtle Beach Property. According to the Chapter 13 Trustee, Ms. Minogue filed articles of dissolution for her LLC post-petition with the South Carolina Secretary of State on July 22, 2021.

11. Additionally, the Chapter 13 Trustee contends that on November 16, 2020, Debtor, as the sole member of the LLC, transferred the Myrtle Beach Property to Olando Steadman Hall and Angyleke S. Gibson through a land sale contract recorded in Horry County. Further, the Chapter 13 Trustee noted that Ms. Minogue's driver's license lists 301 N. Lake Pointe Drive as her address and that tax returns that Ms. Minogue submitted to the Trustee listed property at 742 Mink Avenue as Ms. Minogue's home address.

12. The Chapter 13 Trustee also challenged Ms. Minogue's failure to disclose a corporation known as BFM Real Estate Services, LLC, which, according to the Trustee, received certain real property that Ms. Minogue owned in Moore County, North Carolina in 2018. The Trustee also noted that the South Carolina Secretary of State's records reflected that an article of dissolution for BFM Real Estate Services, LLC was filed post-petition on July 22, 2021.

13. Because of Ms. Minogue's failure to fully and accurately disclose her assets and her failure to attend the continued 341 Meeting, the Chapter 13 Trustee requested that Ms. Minogue's Chapter 13 case be converted to a Chapter 7 pursuant to 11 U.S.C. § 1307(c).

14. After the Chapter 13 Trustee filed his Motion to Convert, Ms. Minogue filed a Motion to Dismiss her Chapter 13 pursuant to 11 U.S.C. § 1307(b). In response, the Chapter 13 Trustee and the Creditors filed written objections to the Motion to Dismiss.

15. In their objection to the Motion to Dismiss, the Creditors joined the Chapter 13 Trustee's argument and further highlighted Ms. Minogue's purported bad faith by her intentional evading of service of process in their foreclosure action.

16. To fully address the arguments presented by the parties, the Court scheduled an expedited hearing on Ms. Minogue's Motion to Dismiss on September 28, 2010. Within the order setting the hearing, the Court provided notice that it may consider dismissal with prejudice dependent on proof of the allegations of improper conduct asserted by the Chapter 13 Trustee and Creditors.

CONCLUSIONS OF LAW
I. Dismissal and Conversion of a Chapter 13 under the Bankruptcy Code.

11 U.S.C. § 1307(b) provides a Chapter 13 debtor with the ability to voluntarily dismiss her Chapter 13 case if the case was not previously converted from another chapter of the Bankruptcy Code as follows:

(b) On request of the debtor at any time, if the case has not been converted under section 706, 1112, or 1208 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable.

11 U.S.C. § 1307(b). Section 1307(c) authorizes the Court to convert a Chapter 13 case to a case under Chapter 7 of the Bankruptcy Code if conversion is in the best interest of creditors and the estate, for cause, as follows:

(c) Except as provided in subsection (f) of this section, on request of a party in interest or the United States trustee and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 7 of this title, or may dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, for cause, including—
(1) unreasonable delay by the debtor that is prejudicial to creditors....

11 U.S.C. § 1307(c). In this case, the Chapter 13 Trustee and Creditors allege that Ms. Minogue is not participating in her Chapter 13 case in good faith and is not willing to disclose the extent of her assets fully and honestly at the 341 Meetings or in her bankruptcy Schedules and Statement of Affairs.

As an alternative to conversion, the Chapter 13 Trustee also contends that even if Ms. Minogue's Motion to Dismiss is granted, the Court has the authority to impose sanctions, such as barring the discharge of claims involved in her Chapter 13 or dismissing Ms. Minogue's bankruptcy case with prejudice under 11 U.S.C. § 349(a), which, in relevant part, provides as follows:

Unless the court, for cause, orders otherwise, the dismissal of a case under this title does not bar the discharge, in a later case under this title, of debts that were dischargeable in the case dismissed; nor does the dismissal of a case under this title prejudice the debtor with regard to the filing of a subsequent petition under this title, except as provided in section 109(g) of this title.

11 U.S.C. § 349(a).1

II. Split of Authorities Regarding a Debtor's Right to Dismiss a Chapter 13 Case in Response to a Motion to Convert.

The parties' dispute raises the legal issue of whether § 1307(b) provides a Chapter 13 debtor with an absolute and unqualified right to voluntarily dismiss his or her unconverted Chapter 13 case despite allegations of bad faith and/or a pending motion...

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1 books & journal articles
  • Putting With a Pitching Wedge: Indiscriminating Termination of the Automatic Stay
    • United States
    • Emory University School of Law Emory Bankruptcy Developments Journal No. 38-2, June 2022
    • Invalid date
    ...motion to dismiss under Section 1307(b) to address a debtor's bad faith conduct or abuse of the bankruptcy process. In re Minogue, 632 B.R. 287, 293-94 (Bankr. D.S.C. 2021).157. Id. § 707(a) (providing that the court may dismiss a chapter 7 case "only after notice and a hearing and only for......

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