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FILED

MAY 29 2015

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. EC-14-1067-KuPaJu

)

GLENN GREGO, ) Bk. No. 14-20064

)

Debtor. )

______________________________)

)

GLENN GREGO, )

)

Appellant, )

)

v. ) MEMORANDUM*

)

UNITED STATES TRUSTEE, )

)

Appellee. )

______________________________)

Argued and Submitted on May 14, 2015

at Sacramento, California

Filed – May 29, 2015

Appeal from the United States Bankruptcy Court

for the Eastern District of California

Honorable Robert S. Bardwil, Bankruptcy Judge, Presiding

 

Appearances: Wiley Peteet Ramey, Jr. argued for appellant Glenn

Grego; Robert Joseph Schneider, Jr. argued for

appellee United States Trustee.

 

Before: KURTZ, PAPPAS and JURY, Bankruptcy Judges.

*This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have (see Fed. R. App. P. 32.1), it has no precedential value. 

See 9th Cir. BAP Rule 8024-1.
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INTRODUCTION

Glenn Grego appeals from the bankruptcy court’s order sua

sponte converting Grego’s chapter 111 case to chapter 7. While

we do not perceive any reversible error in the bankruptcy court’s

determination that Grego filed his petition in bad faith, the

bankruptcy court should have considered dismissal of the

chapter 11 case as an alternative to conversion.

Accordingly, we will VACATE the bankruptcy court’s

conversion order and will REMAND for consideration of dismissal

as an alternative to conversion.

FACTS

Anxious about an impending foreclosure sale, Grego commenced

a personal chapter 11 bankruptcy case on January 3, 2014. At the

time of that bankruptcy filing, another related bankruptcy case

already was pending in the Eastern District of California, a case

filed by Grego as trustee for a trust formed by his father, who

is deceased. The trust apparently owned 50% of the subject

parcels of real property and Grego personally owned the other

50%. As Grego puts it, he needed to personally file bankruptcy

because the trust’s case was subject to dismissal based on an

eligibility issue. Rather than contest the United States

Trustee’s motion to dismiss in the trust case, Grego decided that

the better course of action was for him to commence a personal

chapter 11 case. 

1Unless specified otherwise, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and

all "Rule" references are to the Federal Rules of Bankruptcy

Procedure, Rules 1001-9037.

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This was not Grego’s first personal bankruptcy case. In

January 2011, he filed a personal chapter 11 case in the Central

District of California. In April 2011, a chapter 11 trustee was

appointed, and in February 2012 that case was converted to

chapter 7. He ultimately received a chapter 7 discharge in the

Central District case in September 2013. According to Grego, his

interest in the real property never was administered in the

Central District case.

Grego states that he felt pressured to commence his new

chapter 11 case as soon as possible because the foreclosure sale

was scheduled for one hour after the January 8, 2014 hearing on

the United States Trustee’s motion to dismiss the trust case. 

The trust case was dismissed by court order entered January 13,

2014, but Grego’s new personal bankruptcy case already was

pending.

Within days of Grego’s new bankruptcy filing, the bankruptcy

court issued what appears to be a routine order scheduling a

chapter 11 status conference for roughly one month into the new

bankruptcy case. A few days before the status conference, the

bankruptcy court issued a three-page tentative ruling that was

anything but routine. The court announced that it had a number

of concerns about Grego’s latest bankruptcy filing. The

tentative ruling pointed out that there were a number of

significant omissions and obvious inaccuracies in Grego’s

schedules. For instance, in Grego’s Schedule A, he listed five

parcels of real property and identified himself as “co-owner” but

did not identify who else held an ownership interest in these

properties. In a related problem, even though he identified each

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of the properties as encumbered by deeds of trust, he did not

identify the co-owner as a co-debtor on his Schedule H. 

Meanwhile, for every single category of personal property listed

on his Schedule B, Grego checked the box stating “none,” thereby

indicating that he had no personal property at all. As for the

declaration certifying the accuracy of all of Grego’s “foregoing”

bankruptcy schedules, the declaration was attached before rather

than after the schedules, and the number of pages of schedules

included was left blank, so Grego failed to properly certify the

accuracy of any of his schedules. 

Grego also filed Schedules I and J listing total monthly

expenses of more than $17,000 and total monthly income of less

than $4,000 – all derived from his four rental properties. The

bankruptcy court noted that, assuming the accuracy of the income

and expense schedules and the accuracy of Grego’s representation

that he did not expect either his income or his expenses to

change in the next year, Grego did not have anywhere close to

enough cash flow to cover the $8,300 in monthly living expenses

incurred by him and his dependent daughter, let alone enough to

fund a chapter 11 plan. 

Grego also filed a statement of financial affairs, but the

bankruptcy court once again was concerned about obvious 

inaccuracies and omissions. With the exception of rental income

from Grego’s four rental properties, which he listed in his

answer to question one on his statement, Grego answered “none” to

every other question in the statement. In addition, there were

mathematical errors in Grego’s current monthly income statement,

and his credit counseling statement alleged that he had completed

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the required credit counseling course but failed to attach the

required credit counseling certificate. 

The bankruptcy court also expressed concern about Grego’s

status conference report, in which he stated that he hoped to

survive on his rental income while he litigated with his secured

lender in state court over the lender’s alleged predatory lending

practices – a lawsuit he indicated that he recently had

commenced. Among other things, the court noted that Grego’s

status conference report referenced his intent to use his

lender’s cash collateral and to seek compensation for managing

his rental properties but that Grego had not yet filed any motion

seeking court approval for either activity.

Based on these and other concerns, the tentative ruling

stated that the court was inclined to continue the chapter 11

status conference but that the court was “not likely to permit

[Grego] to delay the prosecution of this chapter 11 case for any

significant length of time.” Tent. Ruling. (February 2014) at

pp. 1-3.

After issuance of the tentative ruling but before the status

conference, Grego filed amended schedules and an amended

statement of financial affairs. In his amended Schedule B, Grego

now listed at least some personal property, including

miscellaneous jewelry of $1,500 and a 2014 Ford Focus with a

value of $27,000. Whereas his initial Schedule F listed no

unsecured creditors, his amended Schedule F listed roughly fifty

unsecured creditors holding in aggregate over $3 million in

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claims.2 In addition, whereas his initial Schedule G listed no

executory contracts or unexpired leases, his amended Schedule G

disclosed his car lease (for the Ford Focus) as well as the four

tenants who were leasing his rental properties. In his amended

Schedule H, Grego disclosed for the first time the trust as codebtor. As for his amended statement of financial affairs, Grego

still answered “none” for most of the questions. He did disclose

four lawsuits in which he was involved in answer to question 4,

but his lawsuit against his lender for predatory lending

practices was not listed among them. 

At the February 5, 2014 status conference, the bankruptcy

court reiterated many of the same concerns stated in its

tentative ruling and indicated that the filing of the amended

schedules only increased rather than decreased those concerns. 

The court further pointed out that Grego did not disclose with

his initial schedules his Central District bankruptcy case or the

trust’s bankruptcy case.3 The court also noted that there was no

change to Grego’s income and expense schedules showing negative

net income of over $13,700 per month.

Based on all of the concerns expressed in the tentative

ruling and at the hearing, the court stated numerous times that

2At the chapter 11 status conference, Grego indicated that,

out of an abundance of caution, he had listed in his amended

Schedule F all of the unsecured creditors from the Central

District case, even though their claims presumably were

discharged in that case.

3While Grego did not disclose the Central District case or

the trust case when he filed his initial schedules on January 3,

2014, he did disclose both cases when he filed his statement of

related cases on January 14, 2014.

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Grego’s chapter 11 petition either was filed in bad faith or as

the result of gross incompetence. In his defense, Grego argued

that it was inadvertent that he did not list any personal

property and that he did not see the tentative ruling before

filing the amended schedules. In response, the bankruptcy court

clarified that the lynchpin for its bad faith or gross

incompetence finding was the discrepancy between the schedules

and Grego’s egregious and complete disregard of the requirement

to file accurate and complete schedules under oath. The

following statement by the court sums up the court’s comments at

the status conference:

All right. I listened to what you said. Nothing

dissuades me. The fact that there was the threat of a

foreclosure, it's done on a very, very routine basis

where a petition is filed and schedules are not filed

for two weeks, or even [longer] if an application to

extend time is given.

But the discrepancy between the initial petition and

the amended schedules, which were filed after the court

issued its tentative ruling identifying all of the

faults and problems is, in the court's eye, one of two

things. It's either a complete disregard for the

requirements to file documents under oath and bad

faith, or alternatively, the result of gross

incompetence.

Either way, . . . with those considerations, coupled

with the prior bankruptcy that was not listed on this

petition, and the prior Chapter 11 that was dismissed

very recently, that you say is almost the same as the

debtor here, leads me to conclude that there is

absolutely sufficient cause to either appoint a

Chapter 7, excuse me, a Chapter 11 trustee or convert

the case to Chapter 7.

Hr’g Tr. (Feb 5, 2014) at 7:10-8:4.

In addition to announcing that its tentative ruling would

become its final ruling, the bankruptcy court asked counsel for

the United States Trustee whether the best interest of creditors

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would be better served by the appointment of a chapter 11 trustee

or the conversion of the case to chapter 7. Counsel for the

United States Trustee responded that, given his familiarity with

the trust case, and given that there appeared to be nothing to

reorganize, conversion to chapter 7 likely was the better choice. 

According to counsel, all of Grego’s parcels of real property

were “under water.” It is unclear exactly what the United States

Trustee’s counsel was basing this assessment on. Indeed, Grego’s

schedules were consistent on one point if nothing else: the value

of his real property and the amount of debt secured thereby. At

all times, the schedules indicated that there was at least some

equity in at least some of the parcels of real property. Even

more strangely, the bankruptcy court apparently did not consider

the option of dismissing the case even though there did not

appear to be much in the way of unencumbered nonexempt assets to

administer under either set of schedules. 

On February 6, 2014, the bankruptcy court entered its order

converting the case to chapter 7. Grego timely filed his notice

of appeal on February 7, 2014.

JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

§§ 1334 and 157(b)(2)(A). We have jurisdiction under 28 U.S.C.

§ 158.

ISSUE

Did the bankruptcy court abuse its discretion when it

converted Grego’s chapter 11 bankruptcy case to chapter 7?

STANDARDS OF REVIEW

We review the bankruptcy court’s order converting Grego’s

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chapter 11 case to chapter 7 for an abuse of discretion. 

Pioneer Liquidating Corp. v. U.S. Trustee (In re Consol. Pioneer

Mortg. Entities), 264 F.3d 803, 806 (9th Cir. 2001).

The bankruptcy court abuses its discretion when it applies

an incorrect legal standard or when its findings are illogical,

implausible or without support in the record. See United States

v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc). 

DISCUSSION

Under § 1112(b)(1), when the court finds “cause” to dismiss

or convert a chapter 11 case, the court must decide which of

several court actions will best serve the estate’s creditors. It

must:

(1) decide whether dismissal, conversion, or the

appointment of a trustee or examiner is in the best

interests of creditors and the estate; and (2) identify

whether there are unusual circumstances that establish

that dismissal or conversion is not in the best

interests of creditors and the estate.

Sullivan v. Harnisch (In re Sullivan), 522 B.R. 604, 612 (9th

Cir. BAP 2014).

Here, the bankruptcy court found that there was cause to

convert on two alternate grounds: (1) gross incompetence, or

(2) Grego’s petition was filed in bad faith. Section 1112(b)(4)

enumerates sixteen non-exclusive grounds that constitute cause

for dismissal. Gross incompetence is not among them, but gross

mismanagement of the estate is. See § 1112(b)(4)(B). On appeal,

the United States Trustee contends that, by stating that Grego

(or his counsel) had been grossly incompetent, the court meant to

find that cause existed under § 1112(b)(4)(F): “[an] unexcused

failure to satisfy timely any filing or reporting requirement

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established by this title or by any rule applicable to a case

under this chapter.” We are not persuaded by the United States

Trustee’s contention. The bankruptcy case was not much more than

one month old, and the bankruptcy court did not identify any

filing or reporting requirement Grego had failed to timely comply

with. To the contrary, the court suggested that, instead of

filing inaccurate and incomplete schedules, Grego should have

held off on filing any schedules until he could have provided

correct and substantially complete information. Thus, we

conclude that the bankruptcy court’s finding of cause was not

meant to invoke § 1112(b)(4)(F). 

While the bankruptcy court used the term gross incompetence

instead of gross mismanagement, we believe that the court meant

to invoke § 1112(b)(4)(B). None of the other enumerated types of

cause comes closer to fitting the court’s comments, and if the

court had meant to identify its own unique category of cause for

dismissal or conversion, we presume the court would have

elaborated on the new category it was articulating. The court

did not attempt to offer any such elaboration.

The bankruptcy court’s finding of cause under

§ 1112(b)(4)(B) is problematic. The § 1112(b)(4)(B) inquiry

typically focuses on how the debtor or the debtor’s agents have

managed the estate’s assets or business during the pendency of

the chapter 11 proceeding and how they have reported and handled,

postpetition, income and expenses derived from the

assets/business. See, e.g., In re McTiernan, 519 B.R. 860,

866-67 (Bankr. D. Wyo. 2014); In re Fall, 405 B.R. 863, 868

(Bankr. N.D. Ohio 2009) aff'd sub nom. Fall v. Farmers &

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Merchants State Bank, 2009 WL 974538 (N.D. Ohio Apr. 9, 2009);

see also In re Prods. Int'l Co., 395 B.R. 101, 111 (Bankr. D.

Ariz. 2008) (listing additional cases).

Here, there is no evidence in the record regarding Grego’s

postpetition management of his bankruptcy estate’s real property

assets, nor did the court identify postpetition management or

postpetition reporting of income and expenses as one of its

concerns. In fact, given that the bankruptcy case was roughly

one month old, and given the complete absence of any evidence in

the record, the bankruptcy court was in a poor position to make

any material findings regarding postpetition management and

reporting.

We do not mean to imply that the term “gross mismanagement

of estate assets” as used in § 1112(b)(4)(B) should be given a

narrow or limited meaning. As the cases cited above indicate,

the term covers a broad range of postpetition activity affecting

the estate’s assets, income, expenses and reporting. 

Nonetheless, no matter how broad the term is construed, we think

it requires more than a finding that the debtor initially filed

inaccurate and incomplete schedules and an inaccurate and

incomplete statement of financial affairs.

Because the bankruptcy court’s findings of cause did not

correctly invoke § 1112(b)(4)(B), we turn to the bankruptcy

court’s alternate grounds for finding cause – its determination

that Grego filed his petition in bad faith.

While not enumerated in § 1112(b)(4), the bad faith filing

of a bankruptcy petition is recognized as cause for dismissal or

conversion. Marsch v. Marsch (In re Marsch), 36 F.3d 825, 828

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(9th Cir. 1994); In re Sullivan, 522 B.R. at 614. In seeking to

determine whether the petition was filed in good faith, “the

debtor’s subjective intent is not determinative.” In re Marsch,

36 F.3d at 828. Rather, the good faith inquiry focuses on the

manifest purpose of the petition filing and whether the debtor is

seeking to achieve thereby “objectives outside the legitimate

scope of the bankruptcy laws.” Id.

Put another way, a bankruptcy court making a finding

regarding whether a chapter 11 petition was filed in good faith

must ascertain “whether [the] debtor is attempting to

unreasonably deter and harass creditors or attempting to effect a

speedy, efficient reorganization on a feasible basis.” Id.

(citing Idaho Dep't of Lands v. Arnold (In re Arnold), 806 F.2d

937, 939 (9th Cir. 1986)). 

In making the good faith determination, the bankruptcy court

typically must consider an amalgam of factors, instead of relying

on a single dispositive fact. Id. At the same time, the

determination is to be made on a case by case basis, and there is

no talismanic list of factors that must be present in each case

in order to find bad faith; the weight given to any particular

factor depends on all of the circumstances of the individual

case. Laguna Assocs. Ltd. P'ship v. Aetna Casualty & Sur. Co.

(In re Laguna Assocs. Ltd. P'ship), 30 F.3d 734, 738 (6th Cir.

1994); see also de la Salle v. U.S. Bank, N.A. (In re de la

Salle), 461 B.R. 593, 605 (9th Cir. BAP 2011) (holding that, in

chapter 13 cases, bankruptcy courts must consider the “totality

of the circumstances” before making a bad faith determination). 

That being said, bankruptcy courts typically look for and

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find more than one of the following factors before making a

finding of bad faith in a chapter 11 case:

(1) the debtor has one asset;

(2) the pre-petition conduct of the debtor has been

improper;

(3) there are only a few unsecured creditors;

(4) the debtor's property has been posted for

foreclosure, and the debtor has been unsuccessful in

defending against the foreclosure in state court;

(5) the debtor and one creditor have proceeded to a

standstill in state court litigation, and the debtor

has lost or has been required to post a bond which it

cannot afford;

(6) the filing of the petition effectively allows the

debtor to evade court orders;

(7) the debtor has no ongoing business or employees;

and

(8) the lack of possibility of reorganization.

In re Laguna Assocs. Ltd. P'ship, 30 F.3d at 738 (citing Little

Creek Dev. Co. v. Commonwealth Mortg. Corp. (In re Little Creek

Dev. Co.), 779 F.2d 1068, 1072 (5th Cir. 1986)). Accord,

Can–Alta Props., Ltd. v. State Sav. Mortg. Co. (In re Can–Alta

Props., Ltd.), 87 B.R. 89, 91 (9th Cir. BAP 1988). 

In addition, the factors typically found in bad faith

chapter 13 bankruptcy filings can be instructive in assessing

good faith in personal chapter 11 bankruptcy cases.4 In

chapter 13 cases, the bankruptcy courts typically look for the

following:

(1) whether the debtor misrepresented facts in his

petition or plan, unfairly manipulated the Code, or

otherwise filed his petition or plan in an inequitable

manner; (2) the debtor's history of filings and

dismissals; (3) whether the debtor intended to defeat

4We have observed that, because the provisions governing

dismissal or conversion of chapter 13 and chapter 11 cases are

similar, cases under one chapter often are helpful in resolving

cases under the other chapter. See Nelson v. Meyer

(In re Nelson), 343 B.R. 671, 674-75 (9th Cir. BAP 2006).

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state court litigation; and (4) whether egregious

behavior is present.

Ellsworth v. Lifescape Med. Assocs. (In re Ellsworth), 455 B.R.

904, 917–18 (9th Cir. BAP 2011).

Here, in spite of the thin evidentiary record, Grego’s prior

and current filings patently demonstrate the existence of a

number of the typical bad faith factors. Grego had virtually no

personal property and only five parcels of real property, all of

which were heavily encumbered. Prior to Grego’s latest filing,

in 2011, he had filed a personal chapter 11 case in which a

chapter 11 trustee was appointed, and that case ultimately was

converted to chapter 7. Meanwhile, he also filed a case on

behalf of a trust established by his deceased father, which case

was dismissed based on the trust’s lack of eligibility to be a

debtor. Grego listed in his amended schedules roughly fifty

unsecured creditors holding millions of dollars in claims, but

admitted at the chapter 11 status conference that most or all of

these claims were discharged in his prior chapter 7 case, thereby

leaving him with little or no unsecured debt. Grego also

admitted at the status conference (and in his appeal brief) that

he felt pressured to file his new bankruptcy case because of an

imminent foreclosure sale. Other than his rental property, Grego

has no ongoing business and no employees.

While the above factors, by themselves, might indicate a bad

faith filing, there were three other factors evident that are of

even greater concern. The prospects for reorganization appeared

extremely slim at best given Grego’s admission of over $13,000 in

negative monthly cash flow and in light of the history of Grego’s

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unsuccessful chapter 11 bankruptcy filings (both for himself and

on behalf of the trust). Most importantly, the court found that

Grego’s initial schedules and statement of financial affairs

contained many inaccuracies and omissions and that the filing of

those documents under oath was egregious. 

We cannot disagree with any of these findings. Grego argues

that the omissions and inaccuracies in his initial filings can

largely be explained (and perhaps excused) by the pressure he

felt given the impending foreclosure proceedings and by the fact

that he filed amended schedules and an amended statement of

financial affairs within days of his filing the original

documents. However, we agree with the bankruptcy court that

there was no excuse for filing these documents under oath knowing

that they were inaccurate and incomplete or with complete

disregard for their accuracy and completeness. Grego knew by no

later than December 23, 2013, when he filed a non-opposition to

the United States Trustee’s motion to dismiss his trust case,

that he would be filing a new personal chapter 11 case. Grego

never has offered any legitimate explanation why he could not

have filed accurate and complete documents in support of his

January 2014 chapter 11 bankruptcy filing either at the time of

that filing or shortly thereafter.

Our bankruptcy system is dependent upon accurate, timely and

complete self-reporting by debtors in their schedules, in their

statements of financial affairs, and in their other filings. See

Cusano v. Klein, 264 F.3d 936, 945–946 (9th Cir. 2001); Cheng v.

K & S Diversified Invs., Inc. (In re Cheng), 308 B.R. 448, 458

(9th Cir. BAP 2004). Consequently, Grego’s filing of his initial

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documents knowing them to be inaccurate and incomplete or without

regard to their accuracy and completeness is of grave concern to

us. In short, we perceive no reversible error in the bankruptcy

court’s bad faith findings.

Grego has asserted, on appeal, that this Panel should

reverse the bankruptcy court’s ruling in its entirety because the

bankruptcy court disregarded his due process rights by converting

the case sua sponte at the status conference. We disagree. The

bankruptcy court had the authority under § 105(a) to sua sponte

consider dismissal or conversion. See Rosson v. Fitzgerald

(In re Rosson), 545 F.3d 764, 774-75 (9th Cir. 2008); Tennant v.

Rojas (In re Tennant), 318 B.R. 860, 869-70 (9th Cir. BAP 2004). 

Furthermore, if Grego truly believed that he needed a better

opportunity to respond to the bankruptcy court’s concerns, he

should have raised the issue in the bankruptcy court, but he did

not do so. See Rains v. Flinn (In re Rains), 428 F.3d 893, 902

(9th Cir. 2005). Moreover, in this instance, any due process

error was harmless. There is nothing in Grego’s bankruptcy court

papers or in his appeal papers indicating that, if given further

opportunity, the factors pertinent to the bad faith determination

could or would materially change. See In re Rosson, 545 F.3d at

774-75.

The only other issue we must address is whether the court

committed reversible error by not considering dismissal as an

alternative to conversion. Recall that we noted at the outset of

this discussion that a bankruptcy court finding “cause” within

the meaning of § 1112(b) needs to consider whether to dismiss,

convert, or appoint a trustee or examiner, or whether unusual

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circumstances exist militating against any of the abovereferenced court actions (from the perspective of the estate’s

creditors). In re Sullivan, 522 B.R. at 612. Here, the

bankruptcy court did not consider dismissal. While we recently

stated in an unpublished decision that the debtor may forfeit

this issue by not raising it either in the bankruptcy court or on

appeal, Kenny G Enters., LLC v. Casey (In re Kenny G Enters.,

LLC), 2014 WL 4100429, at *12 (9th Cir. BAP Aug. 20, 2014), we

also have stated recently, in a published opinion: 

[R]egardless of the parties' arguments, the bankruptcy

court [has] an independent obligation under § 1112 to

consider what would happen to all creditors on

dismissal and, in light of its analysis, whether

dismissal or conversion would be in the best interest

of all creditors . . . .

In re Sullivan, 522 B.R. at 612-13.

That the bankruptcy court here did not consider whether

dismissal was in the best interests of creditors troubles us for

three reasons. First, Grego’s secured creditor(s) received no

advance warning that the court actually would consider 

conversion and/or dismissal at the status conference. As a

result, the secured creditor(s) likely were deprived of any

meaningful opportunity to appear and be heard on the issue.5

5The United States Trustee pointed out during oral argument

that the status conference order, which was served on at least

some of Grego’s creditors on January 17, 2014, stated that the

court might dismiss or convert the case if Grego did not comply

with the status conference order. However, the bankruptcy docket

reflects that Grego substantially complied with the status

conference order, so the creditor(s) had no reason to suspect

that the court had actual grounds to consider either dismissal or

conversion at the status conference.

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Second, the record suggests that Grego had almost no unsecured

creditors and almost no unencumbered nonexempt assets, thus

indicating that there would be little or no chapter 7 estate to

administer and no unsecured creditor body to administer the

estate on behalf of. And third, Grego did have one or more

secured creditors, who might have preferred dismissal over

conversion, so that they could proceed immediately with their

state court remedies.

Under these circumstances, and in light of our holding in

In re Sullivan, we must VACATE the bankruptcy court’s conversion

order and REMAND for consideration of whether conversion or

dismissal is in the best interests of the estate’s creditors, and

whether there exist any unusual circumstances militating against

both conversion and dismissal (from the perspective of the

estate’s creditors). We express no opinion regarding how, on

remand, the bankruptcy court should address these issues, but we

do note that the bankruptcy court, if it deems it appropriate,

may require that notice be given to interested parties, and may

decide either to reopen the record or to make additional findings

based on the existing record.

CONCLUSION

For the reasons set forth above, we VACATE the court’s

conversion order, and we REMAND for further proceedings

consistent with this Panel’s decision.

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