Case No. 06-53114-WS.United States Bankruptcy Court, E.D. Michigan, Southern Division.
November 17, 2006
OPINION DENYING DEBTOR’S MOTION TO EXTEND STAY
WALTER SHAPERO, Bankruptcy Judge
Debtor commenced this Chapter 13 case on September 19, 2006. This is his fourth bankruptcy case since 1993, the first one being a Chapter 7 case in which he received a discharge. The second, a Chapter 13 case, #04-53711, was commenced on May 11, 2004, and dismissed, pre-confirmation on July 20, 2004, because Debtor failed to attend the 341 meeting. The third, a Chapter 13 case, #05-40724, was commenced on January 10, 2005. A plan was confirmed on May 6, 2005, and on that same date an order modifying that plan was also entered. That order said that in the event of a default in plan payments and Debtor’s fail to cure same after notice to do so, an order of dismissal would be entered, including a provision barring a further filing for 180 days. Notice of a default was issued on October 28, 2005, and on February 23, 2006, that case was dismissed pursuant to an affidavit filed by the Chapter 13 trustee stating that out of $17,770 due under the plan, only $10,200 had been paid. The instant Chapter 13 case was filed on September 19, 2006, not long after the 180 day bar expired.
Debtor has moved to extend the stay as to all creditors which under BAPCPA and by reason of Debtor’s immediately prior case having been dismissed within a year prior to September 19, 2006, would have expired on October 19, 2006, unless this Court extends it. (The Court extended
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it on an interim basis to the date of this Opinion.) An evidentiary hearing was held and an affidavit of Debtor’s spouse was requested by the Court, but was not submitted.
Under BAPCPA in these circumstances, Debtor has the burden of proof that the filing of the instant case is in good faith as to the creditors to be stayed, and where, as here, the prior case was dismissed by reason of the Debtor’s failure to perform the provisions of the plan in the prior case: (1) a presumption arises that the present case was filed in bad faith; and (2) that presumption may be rebutted only by clear and convincing evidence produced by the Debtor to the contrary. In these situations, counsel for debtors often tend to emphasize facts indicating there has been a substantial change in the financial or personal affairs of the debtor since the dismissal of the prior case, as being crucial or indeed dispositive as to their proofs. It is to be importantly noted, however, that under the statutory scheme such facts primarily and initially relate and are relevant only to whether the presumption of bad faith attaches where the presumption does not arise by reason of the non-existence of other facts (plan defaults for instance). It is true that the substantial change of facts inquiry may in effect be part of the good (or lack of bad) faith inquiry but that inquiry is much broader than that. Thus, even in a situation where there has not been the indicated substantial change, good faith might yet be able to be found if the required inquiry into the totality of circumstances satisfies the Debtors indicated burden of proof as to same.
When it comes to the criteria to be considered in that good faith inquiry, pre BAPCPA factors continue to apply. In this Circuit they appear in In re Alt 305 F3d 413 (6th Cir 2002), keeping in mind that Court’s additional statements that while the criteria involved in whether a filing (as opposed to an inquiry into good faith in proposing a plan) are similar, given the more severe consequences of a dismissal, the law also recognizes the bankruptcy court should be more reluctant
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to dismiss a petition for lack of good faith than to reject a plan for lack of good faith. Additionally, this Court sees no distinction in the indicated elements to be considered because the inquiry here under BAPCPA arises in the context of a motion to extend the stay — the statutory question being whether or not the case was filed in good faith. If the stay is not extended: query: does that mean the case must perforce be dismissed (because the Debtor failed to meet his burden as to a good faith filing) or does the case continue without a stay because of the differences in the burdens of proof, i.e.,: the possibility that good faith might have been shown by a preponderance (but not by the necessary clear and convincing evidence) until the Debtor desires it dismissed (or converted if possible to do so) or as the result of a separate motion to dismiss on bad faith filing grounds where preponderance is the standard of proof? This question need not be answered here.
The Alt case factors are:
a. Debtor’s income;
b. Debtor’s living expenses;
c. Debtor’s attorney fees;
d. Expected duration of the Chapter 13 case;
e. Sincerity with which the Debtor has filed;
f. Debtor’s potential for future earning;
g. Special circumstances such as unusually high medical expenses;
h. Frequency with which relief has been sought;
I. Circumstances under which debt(s) were incurred;
j. Amount of payment offered by Debtor;
k. Burden which administration would place on Trustee;
l. Statutorily mandated policy that bankruptcy provisions be construed; in favor of the Debtor.
Before applying them, further facts adduced in this case are relevant. As noted, Debtor’s immediately prior Chapter 13 case was dismissed due to Debtor’s failure to make the required payments. In calendar 2005, he missed two to four weeks of work due to layoffs and injuries, but during those weeks he received in the form of unemployment or other compensation some 50% to
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70% of his regular wages, and the accumulated missed plan payments amounted to much more than the diminution of Debtor’s income during those few weeks, and, some of those weeks occurred after the payment defaults. Debtor has been employed as a soft drink delivery driver regularly since 1999 or so and since 2003 he personally has regularly earned some $48,000 to $50,000 annually. His wife has been regularly employed as a clerk for the City of Detroit for some 26 years at a steady salary, producing to $2,583 gross monthly income. It appears a desire to keep their residence occasioned each of the Debtor’s bankruptcy filings. There are three mortgages on that residence — the first mortgagee opposing the Debtor’s motion. Wayne County, which has objected to the plan but not the motion, asserts the residence was sold for two years delinquent taxes. Debtor claims a small equity in the residence and testified that he was unsuccessful in attempting to refinance the mortgages.
Debtor and his wife have no dependents. For the last number of years their combined household income has been continuous at the indicated levels and their monthly expenses at levels indicated in their schedule J filed in this case, with variations that are not material.
Debtor lists only one unsecured priority creditor — the City of Detroit for property taxes of $2020. It is not clear if such are the taxes for which Wayne County alleges the property was sold. Debtor lists only one unsecured nonpriority creditor — a credit card issuer — owed $12,000.
A comparison of the schedules in this case with those in the two prior cases reveals minimal and immaterial differences or changes in Debtor’s financial condition except as related to the home mortgage defaults.
Debtor argues in this case that: (1) there was not a wage order in the prior case and there will be one in this case; (2) he intends to impose more financial discipline on himself and save more in
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order to make his plan work in this case; and (3) he intends to augment his current income by obtaining additional work.
An examination of Debtor’s schedules in this case indicates the source and nature of Debtor’s financial circumstances and how they bear on the issue before the Court. As noted, there are three mortgages on Debtor’s residence, the current monthly principal and interest payments on which appear to amount to between $1,600 and $1,700 per month. The collective mortgage arrearage payments, if they are not understated, provided for in the filed plan come to an additional $454 per month. The Wayne County Treasurer has filed a secured tax claim for $4,442.01, which is not referred to in the schedules or the plan, except to the extent the City of Detroit for $2,020.25 listed in the schedules and which appears to be erroneously provided for by Debtor in his plan as an unsecured priority claim, may be in part or in full included in the Wayne County claim. When you consider other required plan payments and expenses and the Debtor’s commitment of monthly plan payments of $2,371 for 60 months, together with what this Court feels are understated Schedule J expenses in the food ($300), home maintenance ($0) and possibly other categories, it becomes clear why (1) Debtor defaulted in his prior plans, and (2) why his existing financial circumstances likely preclude the completion of a successful plan.
As it is the plan Debtor proposes, without taking into account the foregoing offers 1% to unsecured creditors. While the latter is permissible under the law, the recited facts in this case quite clearly also indicate that realistically Debtor will be unable to even make the required payments to secured and other creditors, let alone anything to unsecured creditors. This is an overriding and the primary basis for the court’s conclusion. It is unfortunate in this case in that, unlike as is true in many cases, the Debtor and his spouse enjoy a decent and stable income that will likely continue.
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But, like other cases, the costs involved in keeping their present residence are simply beyond their realistic means. They need to realistically and appropriately address that fact — a fact which even refinancing might not solve, (and indeed at least in the short run might exacerbate), and bring their housing needs and costs more in line with their resources.
His subjective intention to obtain an additional source of income and/or to put a wage order into effect and/or to save more does not sufficiently ameliorate or satisfy his burden of proof. The failure to have a wage order in a prior case carries little weight on the issue as Debtor earned and received the funds and did not pay them over and he has had two prior cases in which to deal with that matter and failed to do so. Indeed his prior failure to do so militates against his argument he intends to impose more financial discipline on himself. The total household income is quite substantial enough to be able to take care of the lone unsecured creditor outside of bankruptcy, and there has been little or no change in the financial or personal affairs of the Debtor since the dismissal of his last case — the Court concluding that the statutory reference to a debtor’s personal and financial affairs has more to do with objective actual changes in such than with Debtor’s personal changed, and largely at this point subjective and theoretical, intentions.
Addressing some of the Alt factors specifically, keeping in mind they are not exclusive considerations, shows a mixed picture. Debtor’s income (plus that of his spouse) and his potential for future earnings, the expected duration of his proposed plan, and the circumstances under which debts were occurred, and the apparent absence of special circumstances such as unusually high medical expenses, are favorable to Debtor. On the other hand, the understatement of his living expenses, the frequency with which Debtor has sought relief, and the amount of payment offered by Debtor, are unfavorable. The others appear to be neutral in this case, particularly whether or not
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under BAPCPA there remains any clear policy that the statutory provisions involved ought to be construed in favor of the Debtor. No matter how construed, however, it will not tip the balance in this case. Alt does not indicate the weight to be given to each factor. Doing so would inappropriately reduce the inquiry to some mechanistic analysis inconsistent with the underlying conceptual totality of the circumstances good faith inquiry. Meeting a preponderance of the evidence burden requires only that the evidence be stronger no matter how slight that edge might be. Meeting a clear and convincing evidence burden requires a highly probable or reasonable certainty showing. The difference may be subtle and difficult to fathom or articulate in any given case, but the statutory mandate to determine it is clear.
In this case for the indicated reasons, the Court concludes the motion to extend the stay should be denied because Debtor has failed to rebut the presumption of bad faith by the required clear and convincing evidence. The objecting creditor shall present an appropriate order.