Where a U.S. Bankruptcy Court judge overruled a debtor’s objection to a proof of claim filed by the Massachusetts Department of Revenue, the debtor lost standing to appeal the order when his Chapter 13 case was converted to one under Chapter 7.
Appeal dismissed for lack of jurisdiction.
“The MDOR filed a proof of claim for unpaid taxes in the total amount of $24,031 (the ‘MDOR Claim’), consisting of a $14,933 secured claim (the ‘Secured Tax Claim’), an $8,370 priority unsecured claim, and a $726 general unsecured claim. The Debtor objected to the MDOR Claim (the ‘Claim Objection’), challenging the MDOR’s classification of the Secured Tax Claim as secured. …
“After the hearing, the bankruptcy court entered an order overruling the Claim Objection (the ‘Order’). …
“The First Circuit recognizes two exceptions to the general rule that only the chapter 7 trustee has standing to appeal from bankruptcy court orders affecting estate property. … ‘First, a chapter 7 debtor may establish standing by adducing sufficient evidence to demonstrate that a successful appeal by the debtor ‘would generate assets in excess of liabilities, entitling the debtor to a distribution of surplus’ once the bankruptcy case is closed.’ … ‘Second, a chapter 7 debtor may demonstrate standing by establishing that the challenged order “would adversely affect the terms and conditions of his chapter 7 discharge.”’ …
“… In short, the Debtor has failed to establish that reversal of the Order would result in a surplus to which he would be entitled. …
“Turning to the second exception for establishing chapter 7 debtor standing, the Debtor has not argued — let alone demonstrated — that the Order adversely affects his chapter 7 discharge. …
“Because there are so many contingencies and variables, the Debtor cannot meet his burden of establishing that the Order has a ‘direct’ adverse impact on his pecuniary interests. …
“Based on this record, the Debtor is several ‘steps removed from any possible diminution’ of his property. …
“We conclude, therefore, that any adverse financial impact that the Order may have on the Debtor is, at this juncture, purely speculative and contingent upon the occurrence of several events. … The bottom line is that the Debtor has failed to establish that he has been ‘directly and adversely’ harmed by the Order. Consequently, the Debtor is not a person aggrieved by the Order and lacks appellate standing to challenge it.”
In Re: Karamoussayan, Serge Ohannes (Lawyers Weekly No. 03-004-24) (14 pages) (Finkle, C.J.) Appealed from a decision by Bostwick, J., in the U.S. Bankruptcy Court for the District of Massachusetts. David G. Baker on brief for the appellant debtor; Stephen G. Murphy on brief for the Massachusetts Department of Revenue (BAP NO. MB 22-041) (April 11, 2024).
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