U.S. Bankruptcy Court
Where a motion has been filed seeking to dismiss a debtor’s Chapter 13 case for “cause” as having been filed in bad faith under 11 U.S.C. §1307(c), that motion should be denied because the preponderance of the evidence does not lead to a conclusion that the debtor filed her bankruptcy case in bad faith.
“This case presents a somewhat difficult assessment of the Debtor’s good faith in filing her petition and related actions. …
“[Bernard] Gauthier has cited several of cases outside of this District that have found bad faith where parties with no financial pressure have filed bankruptcy to avoid performance under a sale agreement. … These cases are instructive, even though they are not binding on this Court, but have an undercurrent of a stable debtor attempting to get out of a deal to enrich themselves. There is no evidence that the Debtor wants to do anything other than live in her house. She has no other home, and there is no evidence that her friend would allow her to occupy an apartment rent free for an unlimited time. While Gauthier contends that the Debtor was not under financial pressure, there was evidence of a threat that her electric service would be terminated and that she was managing credit card balances. I infer that the Debtor was not financially stable and under pressure that she would lose her home. She was engaged in litigation over the Property and appears unable to pay the cost of that litigation. Taking into consideration the totality of her circumstances and weighing competing evidence, the preponderance of the evidence does not lead me to conclude that the Debtor filed her bankruptcy case in bad faith. The discrepancies on the schedules are concerning but, in the end, do not tip the scales enough to indicate that the Debtor filed the case in bad faith.
“Accordingly, I find that Gauthier has not met his burden to demonstrate sufficient cause for dismissal under §1307(c) and deny the Dismissal Motion. To be clear, I am not in any way ruling that finding a preponderance of evidence that the Debtor acted in good faith in filing her petition precludes consideration of whether the Debtor’s plan is filed in good faith, a question that is not before me and I reserve on deciding that issue until confirmation is considered. …”
Homestead issue
“The parties agree that Deeter was the record owner of the Property and properly recorded a Declaration of Homestead with the Worcester County Registry of Deeds on December 5, 2022. They disagree on whether Deeter occupied or intended to occupy the Property as her principal residence as of that date. …
“I find that the Debtor had the intention to occupy the Property as her principal residence on the date that she filed her Declaration of Homestead with the Worcester County Registry of Deeds on December 5, 2022, and that she moved back into the Property as her permanent residence shortly after that date when repairs were completed that made the Property habitable. …
“Gauthier did not meet his burden to demonstrate that Deeter did not intend to occupy the Property at the time she filed the Declaration of Homestead under a preponderance of the evidence standard.”
In re: Deeter, Kathleen M. (Lawyers Weekly No. 04-014-24) (16 pages) (Panos, J.) (Chapter 13 Case No. 23-40106-CJP) (Sept. 30, 2024).
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