Opinion
Case No. 02-02121
November 8, 2002
MEMORANDUM OF DECISION
I. INTRODUCTION
Edwin Guth and Debra Guth ("Debtors") filed a pro se voluntary chapter 7 petition on July 2, 2002. They later determined that they wanted the case dismissed. When waiting for an involuntary dismissal proved unsuccessful, in part because the chapter 7 Trustee, Lois Murphy ("Trustee"), determined there were assets to administer for the benefit of creditors, Debtors sought to voluntarily dismiss their case. The Office of the United States Trustee ("UST") opposes that request. Though she earlier agreed not to oppose a dismissal (provided certain conditions were met), the Trustee now resists the motion as well.
Debtors' motion came on initially for hearing on September 26, 2002. The Court continued the matter for further hearing on October 31 and required, among other things, that Debtors file their schedules, statement of affairs, and other required disclosures, prior to the time their dismissal motion was heard on the merits.
Debtors and their counsel, the Trustee and the UST appeared at the hearing on October 31 on the Debtors' motion to dismiss. Following the presentation of testimonial and documentary evidence and argument by counsel, the matter was taken under advisement. The Court herein determines that the motion shall be denied. This Decision constitutes the Court's findings of fact and conclusions of law. F.R.Bankr.P. 9014, 7052.
Though they filed the case pro se, Debtors obtained an attorney, Randal J. French, who appeared on August 8. He appeared on behalf of Debtors at both the September 26 and October 31 hearings. Debtors were present at both hearings.
Following the October 31 hearing, Debtors filed a pleading indicating that they were discharging their attorney, Mr. French, and were once again representing themselves. See Doc. No. 49. They also filed a supplemental pleading, Doc. No. 51, addressing the merits of the motion, which the Court has reviewed and considered.
II. BACKGROUND AND FACTS
The following facts were established by the testimony of Mr. Guth at the October 31 hearing, or are based on the schedules, statements and affidavits filed in this matter by Debtors, or other documents of record.
The Court has, with the concurrence of the parties, taken judicial notice of the entirety of its files and records in this case. Fed.R.Evid. 201. The Debtors' affidavits, and their petitions, schedules and statements, submitted under oath or under penalty of perjury, are subject to treatment as admissions. Fed.R.Evid. 801(d); In re Kaskel, 269 BR. 709, 715 (Bankr. D. Idaho 2001).
Edwin Guth received a bachelor's degree in business administration. He has been involved in the radio broadcasting industry since 1975. Commencing in the early 1980's, he developed two Boise FM-radio stations and actively owned and managed those stations until he sold them on April 25, 1997. The sales price was $7,500,000.00. After payment of taxes and other debt, Debtors netted approximately $3,000,000.00.
The sale terms included a 5-year covenant of Mr. Guth not to compete in the area's radio industry. However, Debtors now had a significant amount of capital, and no debt other than living expenses and short term consumer debt. Their assets included, in addition to the proceeds of the sale of the stations, a residence which was free of debt. An appraisal in January, 2000 estimated the fair market value of this residence at $1,050,000.00.
Thus, at least in part due to the positive financial situation resulting from the sale, Mr. Guth did not work subsequent to April 1997 Mrs. Guth, who has some junior college education and at one time worked as a physician's assistant, has not worked since Debtors moved to Idaho in the 1980's. Mr. Guth indicated his post 1997 "game plan" was to wait for an opening to develop in the upper-level management or marketing side of the local radio market. He indicated there were approximately four such positions in that market, though they were all currently filled. In addition to perhaps obtaining one of these positions, he also had ideas about other developments or concepts in the broadcasting industry which he might explore. He was aware that he could not actively work in that industry, at least in the local area, until the covenant not to compete expired in April 2002.
The statement of affairs indicates, in response to question no. 1, that Mr. Guth also received $4,166.66 per month for the duration of the covenant not to compete.
By January, 2000, Debtors obtained a line of credit from Key Bank in the amount of $700,000.00. The line of credit was secured by a deed of trust on Debtors' residence.
The reason(s) why Debtors needed a line of credit of this magnitude less than 3 years from the sale of the stations was not cogently explained.
Debtors accumulated more debt including credit cards and other consumer debt. By mid-2000, Debtors were aware of cash flow problems. Mr. Guth's approach to these problems included waiting for a potential inheritance. That event did not occur.
By September 2001, Debtors determined that they should sell their residence and use the equity in that property to address their outstanding debt, including satisfaction of their obligations to Key Bank on the line of credit. Debtors indicate they encountered a "soft" real estate market, and were unable to sell the home. Key Bank was unwilling to continue to defer debt service, or grant a "bridge loan" to Debtors. It instead initiated nonjudicial foreclosure of the deed of trust on Debtors residence in February 2002. The foreclosure became known to potential purchasers, which Debtors indicate led in turn to bargain-hunting and sub-market offers.
Just how quickly the January 2000 line of credit had been exhausted is not clear from the testimony. Key Bank's § 362(a) motion indicates that a total of $738,000.00 was due as of July 2002, and that no payments had been made since September 2001.
Credit card use and sales of personal property addressed cash flow needs of Debtors and their three children during 2002. Neither Mr. Guth nor his wife obtained employment.
In April 2002, Debtors had the first of several meetings with two attorneys in order to evaluate their options. In total, at least 2 to 3 hours of time was spent in these consultations. According to Mr. Guth, Debtors left these meetings with the belief or understanding that they could file a "single-creditor, single-asset" chapter 7 bankruptcy, listing only the house and naming only Key Bank, and thus halt the impending foreclosure. This would also, they believed, allow additional time for a sale to be obtained, by them, at a price they felt more in line with the residence's real value.
Telephone conversations with Key Bank representatives on Thursday, June 28, led Debtors to believe that the foreclosure sale, scheduled for the following Tuesday, July 2, would not be postponed. They went to the office of Christian Brown, one of the attorneys they had consulted, in order to obtain assistance in filing a bankruptcy petition, but found that Mr. Brown was on vacation. Mr. Guth testified that Mr. Brown's assistant prepared a 3-page bankruptcy petition for Debtors. Debtors added another page containing a legal description of their residence, and then filed that petition with the clerk the morning of July 2. See Doc. No. 1. This commenced the instant case, No. 02-02121. Debtors contacted Key Bank and advised the creditor of the filing.
The other attorney consulted prior to filing was Barry Peters.
Debtors did not file schedules, a mailing matrix, or other required documents at the time they filed their petition. They prepared a motion for extension of time to file these materials, and obtained an order of the Court granting that request. See Doc. Nos. 4, 11. Thereafter, they talked to a different attorney, Brian McColl, and realized that, contrary to their expectations, the bankruptcy encompassed all their creditors and all their assets, and further gave the Trustee the right to possess, control and liquidate all property of the estate. At this lawyer's suggestion, they decided to wait for entry of an order involuntarily dismissing their case for failure to comply with document filing requirements. The Trustee interceded, having become aware of the significant assets of the estate, and the case was not dismissed for failure to timely comply with the filing requirements.
Debtors retained an attorney, Mr. French, who appeared of record on August 8. He negotiated an agreement with the Trustee and her counsel under which the Trustee would not object to dismissal but only upon certain conditions. A stipulation to dismiss was filed on August 13. A motion to dismiss under § 707(a) was thereafter prepared and filed by Debtors on September 3. This motion came on for hearing on September 26, as noted above. A second § 707(a) motion to dismiss was filed by Debtors on October 11.
Debtors' motions contend, in part, that the clerk did not, at or before the time the petition was filed, provide Debtors with a written form or document equivalent to Procedural Form B 201 which advises debtors of the various chapters available under Title 11 of the U.S. Code. Based on the only testimony presented at hearing, and for purposes of this Decision, the Court will presume that such form was not provided.
Debtors argue that only after they saw this form, at some point after filing the petition, did they realize their error in filing the bankruptcy petition. They further contend that, if allowed to dismiss their case, they intend to pay all creditors in full. See, e.g, Affidavit of Edwin Guth, Doc. No. 30, at 3 (describing method of satisfying creditors through a portion of proceeds from asset sales). This, they insist, was always their intention, and the bankruptcy was motivated by Key Bank's refusal to work with them to ensure a sale of the residence at a price Debtors believed appropriate.
Additional facts are needed in order to fully evaluate Debtors' contentions and the rejoinders of the Trustee and UST. Many of these facts are disclosed by the schedules, which Debtors had been ordered to file.
At the September 26 hearing, Debtors attempted to support their dismissal request by use of an "affidavit" selectively addressing certain aspects of their financial situation. The Court refused to allow that approach to satisfy Debtors' disclosure obligations, and instead made complete schedules and statements, executed under penalty of perjury, a precondition to hearing the motion.
Debtors' schedules reflect total secured debt of $733,000.00 to Key Bank and approximately $4,000.00 in real property taxes. While an individual creditor is listed as holding a lien in one of Debtors' automobiles, the schedules indicate he is likely unperfected. Debtors list no priority unsecured debts. They list approximately $98,000.00 of general unsecured debt.
Debtors schedule I states that they receive only $1,667.00 per month in income. This is consistent with Mr. Guth's testimony which indicated he receives $5,000.00 every three months from a spendthrift trust. Despite the financial issues apparently existing in 2000 which led to obtaining the line of credit, and those manifested by the foreclosure process commenced in early 2002, Mr. Guth has not obtained employment, even of a short term or temporary nature. Nor has Mrs. Guth. This is true even though their schedule J indicates that monthly living expenses total $7,422.00, and even though Mr. Guth testified that one of Debtors' three children has special medical needs.
Mr. Guth testified regarding his concern over uninsured medical costs for his daughter. Schedule J estimates $1,605.00 per month in medical expenses. It also asserts a $1,370.00 per month cost for medical insurance.
Debtors claim personal property assets of $273,000.00 on schedule B. This includes almost $212,000.00 in household goods and furnishings, $8,600.00 in heirlooms, $5,600.00 in jewelry, and two vehicles, a $22,000.00 Mercedes Benz and a $11,000.00 Jeep.
The residence, as noted, was at one time appraised at $1,050,000.00. Debtors use this value on their schedule A. Debtors contended at hearing that the present value of the home is in excess of $900,000.00. Key Bank's claim against the residence, according to its § 362(a) motion, was about $738,000.00 as of July.
III. CONTENTIONS OF THE PARTIES
Debtors argue that the failure of the clerk to provide a form equivalent to Procedural Form B 201 constitutes a violation of § 342(b). That section provides:
(b) Prior to the commencement of a case under this title by an individual whose debts are primarily consumer debts, the clerk shall give written notice to such individual that indicates each chapter of this title under which such individual may proceed.
§ 342(b). For this reason, Debtors argue that the petition was a nullity, and the Court should dismiss the case in recognition of that fact.
Alternatively, Debtors argue that if the petition was effective to commence the case, Debtors' misunderstanding of the consequences of their conduct and actions, together with their desire to pay creditors outside bankruptcy, constitutes sufficient "cause" to enter an order of dismissal under § 707(a). The Trustee and UST dispute both propositions.
IV. DISCUSSION AND DISPOSITION
A. Motion to dismiss (effectiveness of filing)
As mentioned, Debtors believe the filing was a null and void act, based on the failure of the clerk to provide a written notice in accord with § 342(b). For several reasons, the Court rejects this contention.
Section 301 of the Code provides:
A voluntary case under a chapter of this title is commenced by the filing with the bankruptcy court of a petition under such chapter by an entity that may be a debtor under such chapter. The commencement of a voluntary case under a chapter of this title constitutes an order for relief under such chapter.
The petition is filed with the clerk. See F.R.Bankr.P. 1002(a). The effectiveness of the petition as of the moment of filing is critical in bankruptcy practice. The petition not only "commences" the case under § 301, it automatically gives rise to a stay of all creditor action. See § 362(a). It establishes the date for determining what is property of the estate. See § 541(a). It invokes the jurisdiction of the Court, which extends over the case and all property of the estate. See 28 U.S.C. § 1334(a), (e). These are but a few of the myriad consequences of the filing of a petition. The effectiveness of the initiation or commencement of the bankruptcy case relies on no other act or event. Indeed, the clerk may not refuse to accept a petition tendered along with the required fee. See F.R.Bankr.P. 5005(a)(1). Debtors have not established that any further act, specifically the provision of a § 342(b) notice, is prerequisite to an effective and valid filing.
A petition must be accompanied by the requisite filing fee, unless the debtor seeks to pay that fee in installments. F.R.Bankr.P. 1006(a), (b). The fee was here paid at the time Debtors' petition, Doc. No. 1, was presented.
Long ago the Supreme Court observed that
the point of time which is to separate the old situation from the new in the bankrupt's affairs is the date when the petition is filed. This has been recognized in our decisions. Thus we have said that the law discloses a purpose "to fix the line of cleavage" with special regard to the conditions existing when the petition is filed and that "it is then that the bankruptcy proceeding is initiated, that the hands of the bankrupt and of his creditors are stayed and that his estate passes actually or potentially into the control of the bankruptcy court"[.] (continued . . .)
White v. Stump, 266 U.S. 310, 313 (1924) (citations omitted). Passage of time has, if anything, only solidified this as a basic proposition of American bankruptcy law.
That Rule states in pertinent part: "The clerk shall not refuse to accept for filing any petition or other paper presented for filing solely because it is not presented in proper form as required by these rules or any local rules or practices."
Section 342(b) was enacted as part of the 1984 consumer bankruptcy amendments so that consumer debtors would be aware of their option to repay debts through a chapter 13 and to encourage such alternative. See 3 L. King, Collier on Bankruptcy, ¶ 342.03, p. 342-7 (rev. 15th ed. 2002); see also In re Bryant, 51 B.R. 729, 731 (Bankr. ND. Miss. 1985). While the Congressional intent may have been sincere, the mechanism adopted in this provision to effectuate that intent is seriously defective.
It is not at all explained how the clerk is to determine "prior to the commencement of a case" (i.e., before a petition is filed), whether an individual debtor has "primarily consumer debts" and therefore is to receive such a notice. Nor is it apparent how the clerk is to ensure that a written form is provided to all such debtors prior to the commencement of their cases. And § 342(b) requires that the clerk's prefiling, written notice advise such an individual debtor of "each chapter of [Title 11] under which such individual may proceed." Since chapter 12 and chapter 13 have strict eligibility requirements, see §§ 109(e), 109(f), how the clerk is to determine the debtor's qualifications and meet § 342(b)'s command is likewise unexplained.
A large number of bankruptcy cases are commenced by the filing of a petition alone, with no schedules to indicate to the clerk whether the debtor has primarily consumer debts.
It is a fact of life that many cases are filed through lawyers who have the petition and filing fee delivered to the clerk. Some petitions are filed via mail. In such situations, no mechanism exists to ensure that the clerk can deliver notice to the debtor prior to commencement of the case.
Collier notes that in most cases it is physically impossible for the clerk to deliver any form of notice to the debtor before the case is filed, and the notice is typically given only to pro se debtors (if notice is given at all) and even then only to the pro se debtors who physically appear at the clerk's intake counter. Id at ¶ 342.03[2], p. 342-9. Collier concludes:
In view of its impracticability in most cases, the utility of section 342(b) is dubious. Since it imposes on the clerk a duty that cannot be met in most cases, it should probably be amended to apply only to pro se debtors or repealed altogether.
Id.
Courts have, on occasion, been required to consider and construe statutory provisions that fail to achieve their essential purpose or are otherwise flawed. The Ninth Circuit, for example, has concluded that certain amendments to the Bankruptcy Code in 1994 should not be applied strictly as written. United States Trustee v. Carvey, Schubert Barer (In re Century Cleaning Services, Inc.), 195 F.3d 1053 (9th Cir. 1999). This Court probably should, and does, stop short of repeal of § 342(b) by judicial fiat. However, it can, and does, reject the Debtors' suggestion that violation of § 342(b) has the consequence of nullifying the effectiveness of the filed petition for relief.
If the rationale for the inclusion of § 342(b) was encouragement of individual consumer debtors' use of chapter 13 as an alternative to chapter 7, the logical consequence of a failure of prefiling notice is arguably a provision of postfiling notice and liberality of conversion in order that the debtor can pursue chapter 13 relief. Unlike the § 707(a) dismissal motion presently before the Court, which requires a showing of cause, the ability of a chapter 7 debtor to convert to chapter 13 is essentially unqualified. See § 706(a).
Next, it must be recognized that the 1984 amendment creating § 342(b) was not the only way in which the issue of advising debtors of alternative available chapters was addressed. Attorneys are obligated to sign "Exhibit B" to the petition, which verifies that the lawyer "informed the petitioner that [he or she] may proceed under chapter 7, 11, 12, or 13 of title 11, United States Code, and . . . explained the relief available under each such chapter." See Official Form No. 1. The portion of the petition for the debtor's signature was also revised. It presently states:
I declare under penalty of perjury that the information provided in this petition is true and correct.
[If petitioner is an individual whose debts are primarily consumer debts and has chosen to file under chapter 7] I am aware that I may proceed under chapter 7, 11, 12 or 13 of title 11, United States Code, understand the relief available under each such chapter, and choose to proceed under chapter 7.
I request relief in accordance with the chapter of title 11, United States Code, specified in this petition.
Id. Here, Debtors signed the petition immediately following this language. In doing so, Debtors affirmed, under penalty of perjury, their understanding of the alternatives available to them and their knowing choice of chapter. That affirmation cannot be lightly discounted.
The language of initial revisions to Official Form No. 1 was slightly different. See Bryant, 51 B.R. at 731; see also Collier, at ¶ 342.03[1], p. 342-8. The differences are without consequence to the present discussion.
Debtors also argue that the clerk's failure to provide the § 342(b) written notice in the sort of format and detail shown in Procedural Form B 201 is critical. This proposition does not hold. First, the form is not an "Official From" which is obligatory. Cf F.R.Bankr.P. 9009. Rather, it is a "Procedural Form" which may be used but is not required. Since use of this specific form is not required or mandatory, its absence cannot logically form the basis for finding the filing a nullity.
Second, Form B 201 goes further than § 342(b) actually appears to require. This Code provision only instructs the clerk to "give written notice to such individual that indicates each chapter of this title under which such individual may proceed." Debtors liken the duty imposed, and the function served by Procedural Form B 201, to a "Miranda-style" warning, requiring an explanation of the nature of bankruptcy relief generally and of the differences between chapters in how assets are treated, the rights of debtors, and so on. Nothing in § 342(b) requires such an explanation.
General explanations of bankruptcy law abound. The Internet is a particularly fertile source of information, with numerous sites providing descriptions of how the bankruptcy process works, the differences between chapters, and answers to frequently asked questions. Even the Court's internet website (www.id.uscourts.gov) has such information. Debtors as sophisticated as the Guths have access to such information. (Schedule J indicates a monthly expense for Internet access.) And, as discussed herein, Debtors also obtained and had the assistance of legal counsel.
The basic idea advanced by Debtors, that they would not have filed a bankruptcy petition at all had the clerk given them the information shown in Form B 201, is not credible. Perhaps a different chapter might have been selected. But electing not to file was not an option on the morning of July 2 with Key Bank's foreclosure sale only hours away, and with that creditor having advised Debtors that the foreclosure would not be postponed. The Court is persuaded by the totality of the facts and circumstances that Debtors would have filed the petition in order to avoid the loss of their house at foreclosure no matter what the clerk's office may have provided on July 2.
This perhaps illuminates the real grievance of Debtors. The failure of the clerk to provide a § 342(b) notice of some sort provides a convenient basis upon which to assail the filing. But Debtors' fundamental complaint is that they did not understand the limitations of filing as well as they understood the benefits. That was an issue born weeks, if not months, before July 2.
Third, Debtors have not identified or provided any authority supporting their contention that the failure of the clerk to provide a § 342(b) notice, in B 201 form or otherwise, has the result of rendering the filing void. To the contrary, Collier indicates that "[t]he failure of the clerk to give the [§ 342(b)] notice does not invalidate the petition." Id at ¶ 342.03[2], p. 342-9, citing Bryant, 51 B.R. 729.
Bryant indeed expressly so holds. Id at 731-32. Debtors' (former) counsel correctly notes that Bryant was a chapter 13 case, and that the court there commented that a different conclusion could be reached in a chapter 7 context. Id at 732. This comment, however, is dictum. Moreover, such a conclusion would appear to be at odds with the logic and analysis otherwise presented in Bryant.
Whether any one of these several reasons is alone sufficient basis to reject the contention that Debtors' petition was a null and void act, in combination, the conclusion is inescapable. Debtors' motion to dismiss, predicated on the lack of compliance with § 342(b), is found not well taken and it will be denied.
B. Motion to dismiss (under § 707(a) for cause)
Debtors alternatively moved for dismissal under § 707(a) should their petition be found valid and effective to commence their case. That provision states:
(a) The court may dismiss a case under this chapter only after notice and a hearing and only for cause including —
(1) unreasonable delay by the debtor that is prejudicial to creditors;
(2) nonpayment of any fees or charges required under chapter 123 of title 28; and
(3) failure of the debtor in a voluntary case to file, within fifteen days or such additional time as the court may allow after the filing of the petition commencing such case, the information required by paragraph (1) of section 521, but only on a motion by the United States trustee.
This Court has earlier recognized that this statutory listing of cause is nonexclusive. In re Frey, 99.2 I.B.C.R. 73, 1999 WL 33486719 (Bankr. D. Idaho 1999), citing § 102(3) and In re Padilla, 214 BR. 496, 498 (9th Cir. BAP 1997). Though the "relevancy" of the cause requirement has been questioned when it is the debtor, rather than a creditor or party in interest, who seeks the dismissal, some sort of cause must be alleged even if it is "simply . . . that dismissal is in the best interests of the debtor and not prejudicial to creditors." Id, quoting Collier, at ¶ 707.03[3]. Frey emphasized the importance of the second element: that creditors will not be prejudiced by a dismissal. Id, citing In re Hall, 15 B.R. 913, 915 (9th Cir. BAP 1981); In re Miller, 93 I.B.C.R. 270, 271 (Bankr. D. Idaho 1993); In re Clampitt, 92 I.B.C.R. 153 (Bankr. D. Idaho 1992).
Consideration of cause and lack of prejudice requires an evaluation of the entirety of facts and circumstances. The Court has considered carefully Debtors' arguments as to the nature of their "error" in filing, their intentions to fully pay all creditors, and their lack of desire for a bankruptcy discharge. But it has been required to measure those assertions against the balance of the record.
Initially, the Court must again note that Debtors intentionally sought relief under Title 11 of the U.S. Code. Setting aside for the moment their asserted confusion about the precise nature of the bankruptcy process, they still clearly intended to use a bankruptcy filing to stop and thwart the impending foreclosure of Key Bank. They desired to avail themselves of a clear and tangible benefit of a bankruptcy filing; they necessarily assumed at the same time all the consequences of such an act including any detrimental effects.
Next, these were not stereotypical unsophisticated pro se debtors. There was
no apparent impediment or disability that would render these Debtors unable to learn or appreciate what they were doing. They were literate, and capable of acquiring information about the bankruptcy alternatives which might exist. They had access to resources, together with the time to prepare for the possibility of a foreclosure by Key Bank. Importantly, they availed themselves of these opportunities and resources, and engaged the services of not one but two attorneys in considering and planning their options.
That Debtors, after almost three hours of legal consultation addressing their specific financial problems, were left with such a gross misunderstanding of the law is hard to accept. But even if true, it does not rise to the level of cause supporting dismissal of the case as a "mistake." Debtors indicated on their petition that they "understood the relief available" under each chapter of the Code and chose to file a chapter 7 case. Alleging that this statement made under penalty of perjury was false is not the answer. If their understanding was flawed because of the nature of the legal advice they received, their complaint is not with the bankruptcy system but with the lawyers.
The two lawyers were not called to testify.
Debtors' schedule B indicates certain contingent or unliquidated causes of action exist. These include claims against a contractor for breach of contract, against Key Bank arising out of the foreclosure, and against a "tennis court contractor." Mr. Guth's testimony implies that possible causes are also believed to exist against the lawyers providing the advice which led to the filing.
Perhaps most important in this case is the question of prejudice to creditors. Here the schedules indicate that Debtors' estate contains sufficient real and personal property assets, after consideration of all exemptions available under applicable Idaho law, to pay all Debtors' creditors in full. Continuation of the case appears clearly in the creditors' best interest.
Debtors claim both the desire and ability to pay creditors outside bankruptcy. Even if the desire is sincere, the ability is not shown. Debtors have insufficient income to cover even a minimal portion of their monthly expenses. Any payment to creditors would presumptively come from liquidation of assets (as it would inside bankruptcy), but some significant portion of the proceeds would be consumed prior to creditor payment.
Also, a significant impediment exists to the nonbankruptcy scenario Debtors advance. Key Bank has already commenced the process of foreclosure. It was scheduled to hold a nonjudicial sale the day the petition was filed. If freed of the automatic stay of § 362(a), as would occur upon dismissal, see § 362(c), Key Bank would be entitled to renew its foreclosure process under Idaho law. Under Idaho Code § 45-1506A, it would appear that a rescheduled sale could occur rather quickly. Debtors' ability to meet their professed commitment to creditors regarding payment is suspect. Their suggested "alternative" of dismissal and paying creditors outside bankruptcy does not overcome the prejudice to creditors.
Section 45-1506A(1) provides that, if a nonjudicial sale under a deed of trust cannot be held at the time scheduled by reason of a § 362(a) bankruptcy stay, the sale can be rescheduled and conducted following expiration or termination of that stay. Under § 45-1506A(2) and (3), there must be at least a 30 day notice of the rescheduled sale and publication for 3 successive weeks. Section 45-1506B(1) addresses a related situation, where the stay is lifted or terminated prior to the originally scheduled date of sale. The Court does not opine as to the precise operation of these provisions in the present case, and cannot do so on the documentary record before it. It can simply note that Debtors would be confronted with the possibility of a short window of opportunity to sell the residence before Key Bank could conclude the foreclosure process it has manifested an intention to pursue. Also, any attempts of Debtors to sell within this window would continue to suffer from the "taint" of pending foreclosure which Debtors believe depresses the willingness of potential purchasers to pay fair value.
The Court will make one final observation regarding the commitments made by Debtors and prejudice. During this bankruptcy case, Debtors were obligated to honor the Trustee's sole authority to control and/or dispose of property of the estate. See §§ 541, 704(1), 521(4). This Court, at the September 26 hearing which Debtors attended, specifically noted that Debtors could not sell or liquidate assets. As established by Mr. Guth's testimony at the October 31 hearing, Debtors nevertheless sold some $24,000.00 of personal assets, which were property of the estate. They did so without authority and without approval. They disposed of all proceeds received. This included the complete dissipation of $18,000.00 in proceeds of a piano sold two weeks prior to the October 31 hearing. There has been, as yet, no accounting of the disposition of the proceeds of these assets.
V. CONCLUSION
Upon the foregoing findings of fact and conclusions of law, the Debtors' motions to dismiss this bankruptcy case under § 707(a) will be denied. An appropriate order will issue.