Opinion
Bankr. No. 02-40129, Chapter 7
May 17, 2002
The matter before the Court is the Motion to Dismiss Case filed by Debtors. This is a core proceeding under 28 U.S.C. § 157(b)(2). This letter decision and accompanying order shall constitute the Court's findings and conclusions under Fed.Rs.Bankr.P. 7052 and 9014. As set forth below, the Court will deny Debtors' Motion.
Summary
Darci and John Stanford ("Debtors") filed a Chapter 7 petition on February 8, 2002. In their schedules and statements of financial affairs, also filed February 8, 2002, Debtors stated that they owned a home, which was fully secured and which they declared exempt as their homestead. Debtors also stated that they owned $66,580 in personalty. They declared all the personalty exempt except for a 1993 Subaru, a 1995 Chevrolet Blazer, and a 1999 Kawasawki Vulcan, which had a total value of $21,000. Debtors scheduled as secured creditors those who held an interest in the three non exempt vehicles, a 2001 Bobcat, and their home. This schedule indicated all this property was fully encumbered with no equity. Debtors listed their student loans of $25,000 as unsecured, priority claims. Debtors also scheduled four unsecured, general claims that totaled $19,283.
Administration of the case progressed after the petition. In mid-March 2002, one secured creditor sought abandonment of the Blazer from the bankruptcy estate and another creditor sought relief from the automatic stay regarding the Kawasawki. Debtors filed a reaffirmation agreement with their home mortgage lender on March 21, 2002. It indicated that Debtors' remaining balance on their home was $8,103.38 and that the home's value was $74,365. On April 10, 2002, Debtors filed a motion to voluntarily dismiss their case. They stated a couple changes in circumstances would now allow them to "get current with creditors without filing bankruptcy." In early April, Debtors amended their schedule to add an unsecured creditor. On April l2, a bank obtained an order that abandoned the 1995 Blazer from the bankruptcy estate. On April 19, 2002, the case trustee objected to Debtors' claimed exemptions on the grounds that the value of the items declared exempt exceeded the allowance under S.D.C.L. § 43-45-4. The trustee also indicated that she had requested additional information from Debtors. The trustee filed an amended objection to exemptions on May 16, 2002, that provided some additional details. A hearing on the creditor's request for relief from the automatic stay regarding the Kawasaki was held April 30, 2002. The Court directed the parties to negotiate because it was anticipated that Debtors' motion to dismiss their case would not be granted. Since the hearing, the case trustee and creditor have reached an agreement on the Kawasawki.
Applicable law. A Chapter 7 case may be dismissed only for cause. 11 U.S.C. § 707(a). There is no absolute right for the Chapter 7 debtor to voluntarily dismiss his case. Compare 11 U.S.C. § 707(a), 1208(b), and 1307(b); Turpen v. Eide (In re Turpen), 244 B.R. 431, 434 (B.A.P. 8th Cir. 2000); In re Wilde, 160 B.R. 625, 626-27 (Bankr.W.D.Mo. 1993).
Whether to grant a Chapter 7 dismissal is within the discretion of the Court. Turpen, 244 B.R. at 433-34. The burden to show cause rests with the debtor. Id. at 434. The motion is generally denied if there is any showing of prejudice to creditors. Id. (cites therein); Wilde, 160 B.R. at 627. The Court must balance the interests of the debtor and creditors. In re Churchill, 178 B.R. 478, 479 (Bankr.D.Neb. 1995). Factors to be weighed include whether all creditors have consented, the good faith of the debtor, whether dismissal would result in any prejudicial delay in payment; whether dismissal would re-order priorities; and whether an objection to discharge, an objection to exemptions, or a preference action is pending. Turpen, 244 B.R. at 434; see In re Eichelberger, 225 B.R. 437, 439 (Bankr.E.D.Mo. 1998); Churchill, 178 B.R. at 479. Equitable considerations are relevant only in the absence of dispositive legal arguments. In re Leach, 130 B.R. 855, 857 (B.A.P. 9th Cir. 1991). Legal considerations must take precedence. Id. at 858.
Discussion
Based on the present record, it appears that the case trustee will have non exempt assets that she can liquidate to pay a meaningful portion of unsecured creditors' claims. Creditors will thus benefit from this bankruptcy case continuing. They would not have to resort to state court proceedings to recover on their claims. Accordingly, under the circumstances presented here, the Court will not allow Debtors to voluntarily dismiss their case.
Debtors still have the option of converting their Chapter 7 case to a Chapter 13 case. That would allow them to pay creditors through a three to five-year plan with their disposable income rather through the liquidation of non exempt assets. Should they decide to exercise this option, Debtors should immediately seek the assistance of a bankruptcy attorney so that a conversion motion and a Chapter 13 plan can be filed as soon as possible.
An order denying Debtors' Motion to Dismiss Case will be entered. The Court will also extend until June 17, 2002, the entry of Debtors' Chapter 7 discharge order so that Debtors will have time to consider a conversion of their Chapter 7 case to a Chapter 13 case.