In re Robinson, Bankruptcy No. 95-78739.

• Decision Date: 25 July 1996
• Docket Number: Bankruptcy No. 95-78739.
• Citation: 198 BR 1017
• Parties: In re Terrence ROBINSON, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

198 B.R. 1017 (1996)

In re Terrence ROBINSON, Debtor.

Bankruptcy No. 95-78739.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

July 25, 1996.

COPYRIGHT MATERIAL OMITTED

Herbert E. Heitman, Atlanta, GA, for Debtor.

Lynn Wood, Shapiro & Swertfeger, Atlanta, GA, for Defendant/Respondent.

ORDER

MARGARET H. MURPHY, Bankruptcy Judge.

This matter arises on Debtor's motion to dismiss and the motion of Fleet Finance, Inc. ("Fleet") for imposition of sanctions against Debtor and Debtor's attorney. Pursuant to Debtor's motion to dismiss, an order was entered February 28, 1996, dismissing this case, but on the same day, Fleet filed an objection to the dismissal. By order entered March 19, 1996, the dismissal order was vacated and hearing was scheduled. At the hearing, Debtor's attorney and Fleet's attorney were present. Debtor did not appear.

STATEMENT OF FACTS

The instant case is Debtor's second Chapter 13 case. Debtor's first case was filed June 6, 1995, Case No. 95-67770 (the "First Case"). Fleet was the only creditor listed in Debtor's First Case. Fleet's claim is secured by Debtor's residence. At the time the First Case was filed, Debtor was in default on its debt to Fleet and the property was scheduled for foreclosure sale. Debtor's prepetition arrearage was $20,908.73.

Debtor failed to make postpetition payments to Fleet during the First Case until Fleet filed a motion for relief from stay. An order requiring Debtor to make timely postpetition payments to Fleet was entered in September, 1995, but Debtor made only one payment to Fleet thereafter. Debtor's case was dismissed in November, 1995 on the Chapter 13 Trustee's report of delinquency in plan payments.

Following dismissal, Fleet proceeded with its plans to foreclose on Debtor's property. On December 29, 1995, on the eve of foreclosure, Debtor filed the instant case. This case commenced upon the filing of a skeletal petition. A "skeletal" petition is one in which no schedules and plan are filed with the petition. Without the Schedules, the one-time opportunity for creditors to examine the Debtor at the meeting of creditors held pursuant to 11 U.S.C. § 341(a) (the "341 Meeting"), without incurring special costs, is a wasted expenditure of time, abusive to creditors and the proper operation of bankruptcy law. Debtor filed no Schedules, filed no plan,¹ and listed only Fleet on the mailing matrix.² Both Debtor and Debtor's attorney failed to attend the 341 Meeting and Debtor made no plan payments to the Chapter 13 Trustee as required by 11 U.S.C. § 1326. On the day of Debtor's 341 Meeting, apparently in response to a representation by Debtor's attorney that he would be filing that day a voluntary dismissal of the case, Fleet filed a motion for relief from stay.³

While only Debtor's motion to dismiss is addressed in this order, a review of the timing of and the pleadings filed by both Fleet and Debtor is in order. Debtor's 341 Meeting was scheduled for February 15, 1996; on the same day, Fleet filed its Motion For Relief from Stay in order to proceed with foreclosure. On February 21, 1996, Fleet filed an Objection to Confirmation and Request for Dismissal with Prejudice (see n. 7) and on February 22, 1996, filed a Motion for Sanctions. The hearing on confirmation of Debtor's (unfiled) plan was scheduled for February 29, 1996. With its responses to Fleet's various pleadings, Debtor also filed, on March 29, 1996, a Motion for Sanctions against Fleet and its attorneys, which was withdrawn April 5, 1996.

In response to Fleet's motion for imposition of sanctions, Debtor's attorney explained that Debtor informed Debtor's attorney very early in the case, approximately a week or ten days after filing, that Debtor would be dismissing this case because Debtor had obtained refinancing of the Fleet loan. Therefore, Debtor concedes that, almost from the inception of the case, he had no intention to reorganize under Chapter 13. It developed that finalizing the details of the refinancing took longer than Debtor expected. Debtor's attorney determined that, to protect Debtor from action against the property by Fleet, he would not dismiss the case, but, to save his client money, he would also not file the Schedules or attend the 341 Meeting. Debtor finally filed a voluntary dismissal of this case February 26, 1996, approximately two months after the filing date. In connection with this case, Fleet has incurred attorneys fees and expenses, including $350 for preparation and prosecution of Fleet's motion for relief from stay in this case, plus the $60 filing fee, and foreclosure attorneys fees of $400 plus $303.50 for expenses. A reasonable fee for preparing and prosecuting the motion for sanctions is $500. Debtor's attorney was paid a prepetition retainer of $200.

CONCLUSIONS OF LAW

Section 1325(a) of the Bankruptcy Code sets forth a good faith requirement in Chapter 13. 11 U.S.C. § 1325(a). Bankruptcy courts have a duty to preserve the bankruptcy process for its intended purpose and may dismiss a Chapter 13 case which is filed in bad faith. Shell Oil Co. v. Waldron, 785 F.2d 936 (11th Cir.1986). The standard for determining whether a petition is filed in good faith is a "totality of the circumstances" test. Johnson v. Home State Bank, 501 U.S. 78, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991); Jim Walter Homes, Inc. v. Saylors, 869 F.2d 1434 (11th Cir.1994); Kitchens v. Georgia Railroad Bank and Trust Co., 702 F.2d 885 (11th Cir.1983). The factors to be considered in determining whether a petition was filed in good faith are the "Kitchens Factors":

1. The amount of the debtor\'s income from all sources;

2. The living expenses of the debtor and his dependents;

3. The amount of attorney\'s fees;

4. The probable or expected duration of the debtor\'s Chapter 13 plan;

5. The motivations and sincerity of the debtor in seeking relief under the provisions of Chapter 13;

6. The debtor\'s degree of effort;

7. The debtor\'s ability to earn and the likelihood of fluctuation in earnings;

8. Special circumstances such as inordinate medical expenses;

9. The frequency with which the debtor has sought relief under the Bankruptcy Code.

10. The circumstances under which the debtor has contracted debts and has demonstrated bona fides, or lack thereof, in dealings with creditors;

11. The burden which the plan\'s administration would place on the Trustee;

12. The extent to which claims are modified and the extent of preferential treatment among classes of creditors;

13. Substantiality of repayment to the unsecured creditors;

14. Consideration of the type of debt to be discharged and whether such debt would be nondischargeable under a Chapter 7 case;

15. The accuracy of the plan\'s statements of debts and expenses and whether any inaccuracies are an attempt to mislead the court; and

16. Other factors or exceptional circumstances.

Kitchens, 702 F.2d 885.

In the event of serial petitions, to avoid dismissal on the grounds of bad faith, a debtor usually should be able to show a change in circumstances between the two filings. In re Jones, 105 B.R. 1007 (N.D.Ala. 1989).⁴ A finding of bad faith does not require a finding of actual fraud, malice, scienter or an intent to defraud. Waldron, 785 F.2d 936 (11th Cir.1986).

Filing even a skeletal petition secures the protection of the automatic stay of 11 U.S.C. § 362(a) for both the honest debtor and the abusive debtor. The automatic stay serves to protect the honest debtor in desperate financial circumstances from creditor action and to provide a much-needed "breathing spell" to marshal resources and prepare to deal with creditors in a fair and orderly manner. NLRB v. Bildisco & Bildisco, 465 U.S. 513, 104 S.Ct. 1188, 79 L.Ed.2d 482 (1984). The abusive debtor also obtains the protection of the automatic stay but employs it to delay or thwart creditor action while refusing to fulfill the duties imposed by the Bankruptcy Code. The uses of the automatic stay as both a shield and a weapon are well-known to debtors' attorneys and to some debtors.

In the instant case, Debtor and, to a greater extent, Debtor's attorney, knew that by doing nothing to prosecute the Chapter 13 case properly, Debtor could reasonably expect to receive the protection of the stay until the confirmation hearing, which was scheduled for February 29, 1996.⁵ Debtor listed no creditor on the mailing matrix other than Fleet.⁶ Because Debtor failed to file Schedules or a plan and failed to attend the 341 Meeting, little or no information is known relevant to most of the Kitchens Factors. Logical inferences may be drawn based upon the information which was disclosed and based upon the absence of information that supports contrary inferences.

Evaluation of the relevant Kitchens Factors compels a conclusion that Debtor filed this case in bad faith. The timing of the filing of Debtor's two cases shows that Debtor's motivation for filing this bankruptcy petition was to deal with one specific problem — the imminent foreclosure sale of his residence. Debtor made no effort in this case to reorganize. Debtor filed none of the Schedules he was required to file, filed no Chapter 13 plan, failed to appear at the 341 Meeting, and made no payments to the Chapter 13 Trustee or to Fleet. Debtor included only one creditor on the mailing matrix — Fleet, so only Fleet received notice of the case. In short, Debtor utterly failed to carry out any of the duties of an honest Chapter 13 debtor. Debtor showed no change in circumstances between the filing of the First Case and the instant case. Finally, no illness, catastrophe or other excuse was alleged as reason for Debtor's filing or failure to prosecute this case. Debtor's attorney unequivocally stated that no Schedules or plan were filed and Debtor failed to attend the 341 Meeting because Debtor was planning to dismiss this case as soon as the refinancing deal was consummated. Further, Debtor's attorney admitted that Debtor's failures to...