1 (Slip Opini o n) OCTOBER T ERM , 20 06 Sy llabu s N O TE : Wh er e it i s feas ibl e , a s y llab u s (h ead n ot e) wil lbe rel e as ed , as is bein g d o n e incon n ecti onwithth is cas e , a tth e ti me th e op in i o n is is s u ed

. Th e s y ll abu s con s titu tes n o p a r t of th e op in i o nof th e C o u r t bu t h a s be en pre p are dbyt h e Re po rte ro f De ci sio n s fo r t h e co nveni e nce of t h e reade r . Se e United Statesv. Detro it Timbe r& Lumb er Co., 200 U. S

. 3 21, 337

. 

# SUPREME CO URT O F THE UNI TED STATES
Sy llabu s 

### MARRAMA v . CITIZENS B A N K OF MA SS A C HUSE TT S ET AL


### . CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIRST C I RCUIT No. 05–9 96. Ar g u ed Nov e mber6, 2006 —D ec ided Febr u a r y21, 2007 In filing his petition under Chapter 7 of the Bankrup tcy Code, peti

tioner Marra ma misrepresented th e value of his Maine property and t h a the ha d nott r a n s ferred itduring t h e preceding yea r . Res p ondent DeGia c omo, t h e t rus t ee of Ma rra ma ’s es ta t e , s t a t e d his int e nt ion t o r e c o v e rth e Main e pr oper tyas ane s ta te a sset. Th er eaft er , M a r r a ma sou g h tto c o nv er t th e pr oc eedin gto Ch ap ter13, bu t th e tr u s tee an d res p ondentb a nk, Ma rra ma ’s principa l credit o r, obj e ct ed, cont ending th at th e r e qu est to c o n v er t w a s m a de in bad f a ith an d w o u l d c o n s ti

tu te anabu se of th e ban kr uptc ypr oc ess. Th e Ban k r u p t c yJu dg e de

nied Ma rra ma ’s req u es t , fin d ing b a d faith

. Affirming, the First Cir

cuit ’ s Ba nkru pt cy Appella t e Pa nel rej e ct ed Ma rra ma ’s argumentt h a t h e h a d anabs olu t e r i g h t to c o n v er t u n d er §706( a) of th e Ban k r u p tc y Code, w h i c hpr ov ides th ata Ch apter7 deb t or“m ayc o n v er t a c a se” s o lon gas i th a s n o t beenc o n v er ted pr ev iou s ly , an d th at a w a iv erof th e right t o conve r tis unenforce ab l e. The FirstCircuit a l s o rej e ct ed t h a t ar g u men t , emph asizin g , inter alia, th at a ban kr u p tc ycou r th a s th e au th or ityto d i smi ss a Ch ap ter13 peti tio nbasedona debtor ’ s b a d faith , an d th at a fir s t-t i me motionto c o n v er t a Ch apter7 c a se to Chapter 13 should not be treated differently from the filing of a Ch apter13 pe titioninth e fir s t in stan c e . Held: M a r r a m afor feited h i s r i g h t to pr oceed u n d erChapter13. Th e

br oad desc r i pt ionof th e r i g h t to c o n v er t as “ab solu te” inSen ate an d House Committee Reports f a ils to gi ve full effect to the express limi

tationof §7 06( d), w h i c hpr ovides th at “ac a se m a yn o t be c o n v er ted to aca s e under anot her cha pt e rof t h is t i t l e unles s t h e debt or ma y b e a deb t o r under s uch cha pt er.” Tha t t e xtexpres s l y condit ioned Ma r r a ma’s r i g h t to c o n v er t on h i s abi lityt o qu alifyas a Ch apter1 32 MARRAMA v. CITIZENS BA NK OF MASS. Sy llabu s “debtor.” Marrama does not qua lify as such a debtor under §1307(c), w h i c hpr ov ides th at a Ch ap t e r13 pr oc eedin gmaybe eith erdismissed orc o nv er ted to a Ch apter7 pr oc eedin g“forc a u s e.” Ban k r u p tc y court s rout ine l y t r ea tdis m is s a l for prepet it ion ba d-faith condu c tas implic it lyau th or ized byth e w o r d s “forc a u s e,” an d a r u lin gth at a n in div i du al’s C h apter13 c a s e sh ou ld be dismi ssedor c o n v er ted to Ch apter7 bec a u s e of bad fa ithis tan t a mo u n tto a r u lingth at th e in

div i du al does n o t qu alifyas a Ch apter13 debtor

. Con g r e ss g a v e “ ‘h on est bu t u n for tu n ate debtor [ s]’ ” Groganv. Garn er , 498 U. S. 2 79, 287, th e c h a n c e to r e payth ei rdebts sh ou ldth eyac qu ir e t h e mean s to do so, an d §706(a) pr otec ts adebtorfr om bein gfor c e d to w a iv e th at right

. Howe v e r, aprovis ionprot ect i ng ab o rrowe r from wa iver is not a sh ield ag a i n s t for feitu r e . Neith e r§706 n o r§1307(c ) li mits a c o u r t ’s au th or ityto take appr opr i a t e ac tioninrespon se to fr au du len tc o n du c tbyth e at y p ic al lit ig an t w h o h a s demo n s tr ated th at h e is n o t en

titled to th e r e lief av aila ble to th e ty pic a l debtor

. O nth e c o n t r a ry , ban kr u p tc yjudg es’ br oad au th or ityto tak e n e c e ssar yor appr opr i ate ac tion“to pr e v en t anabu se of pr oc ess” d e sc r ibed inCo de §105( a) i s adequ ate to a u th or ize ani mmedi ate den i al of a §70 6 motionto c o n vertin lieu of aconvers i on order t h a tmerely pos t pones the a llowa nce of equ i v a len tr e lief an d mayg i v e a debtor anoppor t u n i tyto take ac

tionpr eju d ic ial to c r e ditor s . Pp. 5–10. 430 F. 3d 47 4, affir m ed.

S TEVENS , J ., delivered t h e o p inion of t h e Court , in whi ch K ENNEDY , S OUTER , G IN SB U R G , an d B REYER , JJ., joined. ALITO , J., file d a dissenting opinion, in which R OBERTS , C. J., and S CALI A an d T HOMA S , JJ., joined._________________

_________________ 1 Cite as: 54 9 U

. S. ____ (2007) Opinion of t h eCourt
NOTICE: This op i n ion is subjec t to f o rma l revi si on bef o r e publicat ion in the p r eli m in ary p r in t of th e U n it edS t at es R e p o rts
. R e ad ers ar e r e qu es ted to n o tif yth e R e p o r t e rof D e c i s i on s , Su p r em e C o u r t of th e U n ited St at es , Wa s h

ington, D. C. 2054 3, of any typ o gra p hical or other f o rmal err o rs , in or der th atc o rr ect i on s m a y b e mad e b e f o r e th e p r e lim in aryp r in t go es t o p r es s . 

# SUPREME CO URT O F THE UNI TED STATES
No. 05–9 96 

### ROB ERT L O UIS MAR RAMA, P E TITIONE R v. CITIZEN S BAN K OF MASSAC HUSE TTS ET AL


### . ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEAL S FOR THE FIRST CIRCUIT [Febr u a r y21, 200 7] 

### J USTICE 

### S T EVEN S 

### delivered the opi n ion of the Court. The princi pal purpos e of the B ankrup tcy Code is to grant a“ ‘f resh start’ ” to the “ ‘h onest but unfortunate debtor.’ ” Groganv. Garn er , 49 8 U. S. 279, 286, 28 7 (1991). Bot hChapter 7 and Chapter 13 of the Code permit an insolven t individual to discharge certain unpaid debts towardtha tend. Ch apter 7 au thorizes a discharge o f prepetition debts follo wing the liquidation o f the debtor’s assets by abankru ptcy trustee, who then distributes the proceeds to creditors. Chapter 13 authorizes an individual with regula r income to obtain a discharge af ter the suc

cessful com p letion of a payment plan approved by the bankruptcy court. Un der C hapte r 7 the debtor’s non

exempt assets are controlled by the bankruptcy trustee; under Chapter 13 the debtor retains poss ession of h i s property. A proceeding that is commenced under Chapter 7 may be converted to a Chapter 13 proceeding and vice versa. 11 U. S. C. §§706(a), 1307(a) and (c). An issue that has ari s en with di sturbing frequency is whether a debtor who acts in bad faith prior to, or in the course of, filing a Ch apter 13 petition by, for example,2 MARRAMA v. CITIZENS BA NK OF MASS. Opinion of t h eCourt 

### fraudulently concealing significan t assets, th ereby forfeits his right to obtain Cha p ter 13 relief. The issue may aris e at the outset of a Chapter 13 case in response to a motion by creditors or by the United States trustee either t o dismiss the case or to convert it to Chapter 7, see §1307(c). It also may arise in a C hapter 7 ca se when a debtor files a motion under §706(a) to convert to Chapter 13. In th e former cont ext, despite the abs ence of any st atutory provi

sion specifi c ally addre ssing the issue, the federal courts are virtually unanimou s that prepetition bad-faith conduct may cause a forfeiture of any right to p r oceed with a Chapter 13 case. 1 

### In the latter c o ntext, however, some courts have suggested that even abad-faith debtor has a n absolute right to conver t at least one Chapter 7 proceeding into a Chapter 13 case even though the case will thereaf

ter be dismissed or immediat ely returned to Chapter 7. 2 

### We granted certiorari to de cide whether th e Code man

dates that procedural anoma ly. 547 U. S. ____ (2006). I On March 11, 2003, petitioner, Robert Marrama, filed a voluntary petition under Chapter 7, thereby creating a n estate consisting of all his property “whereverlocated and by whomever held.” 11 U. S. C. §541(a). Respondent Mark DeGi acomo is the trustee of that estate. Respondent Citizens Bank of Massachusetts (hereinafter Bank) is th e principal creditor. In verified schedules attached to his petition, Marrama made a number of statements about his principal asset, a

——————

1 See, e.g. , Inre A l t , 305 F. 3d41 3, 4 18– 41 9 (CA6 20 02); In re Leavitt , 171 F. 3d 1 2 1 9 , 122 4 (CA 9 199 9); In re K este l l , 99 F. 3d 146, 1 48 (C A4 199 6); In re Molitor , 76 F. 3d 218, 220 ( C A8 1 996); In re Gie r , 986 F. 2d 132 6, 132 9–1 330 (CA 10 1 9 93); In re Love , 957 F. 2d 1350, 13 54 (CA 7 199 2); In re S u llivan , 326 B. R. 204, 211 (B kr tc y . App. Pan e l CA1 20 05).

2 See, e. g. , In re Marti n , 880 F. 2d 857, 85 9 (CA5 19 89); In r e Cr o s to n , 313 B. R. 44 7 ( B kr tc y . App. Pan e l CA 9 2 0 0 4 ) ; In re Miller , 303 B. R. 471 (Bkr tc y . App. Pan e l CA10 2 003).3 Cite as: 54 9 U

. S. ____ (2007) Opinion of t h eCourt 

### house in Maine, that were misleading or inaccurate. Fo r instance, while he disc losed that he was the sole ben e fic i

ary of the tr ust that ow ned the property, he listed its value as zero. He also d e niedthat he ha d transferred any prop

erty other than in the ordinary co urse of busi n ess during the year preceding th e filing of his petition. Neither statement was true. In fact, the Maine property had substantial value, and Marrama had transfe rred it into the newly created trust for no con s ideration s e ven month s prior to filing his Cha p ter 13 petition. Marrama late r admitted t hat the pur p ose of the transfer w a s to protec t the propert yfrom his creditors. After Ma rrama’s exa m ination at the meeting of credi

tors, see 11 U. S. C. §341, the tru stee advised Marrama ’s counsel that he intended to recover the Maine property a s an asset of the estate. Thereafter, Marrama filed a “Veri

fied Notice of Conversion to Ch apter 13.” Pursuant to Federal Rule of Bankruptcy Procedure 1017(c)(2), th e notice of conversion was treated as a motion to convert, to which both the trustee and the Bank filed objections. Relying primarily on Marrama’s attempt to conceal t h e Maine property from his creditors, 3

### the trustee contended that the re quest to convert was made in bad faith and

——————

3 Th e tru s tee also n o ted th atinh i s or i g inal v e r i fied sc hedu les M a r ra maha d claimed apropert yin Glouce s t er, Ma s s ., as a homes t ead ex emption , se e 11 U. S. C. §522(b)(2); M a ss. G e n . La w s , c h

. 188, §1 (West 20 05), bu t testif ied a tth e meetin gof cr editor s th at h e did n o t res i de a tt h e propert ya n d wa s receivingrent a lincom e from it , App. 71a–7 2a. M o reov er , w h e n asked at th e m e etin gw h e th eran y o n eow ed him a n y money, Ma rra mares p onded “ N o, ” id., at 5 0a, a n d inr e spon se t o asimila r ques t i on on S chedule B t o his petit i on, which s p ecifica lly r e qu ested a d e sc r i ptionof an y“taxr efunds,” M a r r a main dic ated th a t he had “none.” Supp. App. 6. Infa ct , Ma rra maha d filed a na m ended taxr e tu r nin Ju ly2002 inw h i c hh ec l aimed th e r i g h t to a r e fu n d , a n d shortly beforethe hearin g on themotion to co nve r t, the Inte rnal Rev e n u e Ser v i c e in for med th e tr u s tee th at M a r r a ma w a s en tit l ed to a r efu n dof $8,745.86, App. 30 a–3 1a.4 MARRAMA v. CITIZENS BA NK OF MASS. Opinion of t h eCourt 

### would constitute an abuse of the b ankruptcy process. The Bankopposed the conversion on s i milar grounds. At the hearing on the conversion issue, Marrama ex

plained through counsel that his misstatements about the Maine property we re attribut able to “scrive ner’s error, ” that he ha d originally filed under Chapter 7 rather th an Chapter 13 because he was then unemployed, and that he had recently become e m ployed and was therefore el igibl e to proceed under Chapter 13. 4 

### The Bankruptcy Judge rejected th ese arguments, ruling that there is no “Oops ” defense to the concealment of assets and that the fact s establisheda “bad fait h” case. App. 34a–35a. The jud g e denied the request for conversion. Marrama’s principal argument onappeal to the Bank

ruptc yAp p e llate Panel for the First Circuit 5 

### was that h e had an absolute right to convert his case from Chapter 7 to Chapter 13 under the plain language of §706(a) of th e Code. The panel affirmed the decision of th e Bank ruptcy Court. It construed §706(a), when read in con n ection with other provi s ions of the Code and the Bankruptcy Rules, as creating a r i ght to conv ert a case from Chapte r 7 to Chap

ter 13 that “is absolu t e only in the absence of extre me

——————

4 Th e par t ies dispu t e th e ac cu r a c yof th is r e pr esen tation

. Th e tru s tee’s br ief n o tes th at Sc h e du le I to M a r r ama’s or ig in alpetitionin di

c ates th at h e h a d beenemploy ed bya floor i n g c o mpan y at th e time th e ca s e wa s filed. S ee Brief for Res p ondent Ma rk G. De Gia c omo 1 0 , n. 7 (cit ing S u pp. App. 1 8 , 3 0 )

. Ma rra ma ’s couns el s t a t ed during o r a l ar g u men t , h o w e v e r, th at th e in c o me liste d inSc h e du le I r e pr esen ted an estim ate base donemploy men tth at h a d n o t y e t beg u n . Tr . of Or al Ar g . 2 4

. Since t h e s u fficiency of t h e evidence of b a dfa it h is nota t iss u e, we ma y a s s u me tha tMa rra ma did ha ve more income a v a i lab l e when he s o ughtt o con v ertt h a nwhe nhe commen c e dt h e Cha p t e r 7 ca s e .

5 The judicial council of any circuit is authorized by statute to estab

lis h ab a n krupt c y a ppellat e pa nel s e rvice, compris i n gb a n krupt c y ju dg es, to h e a rappeals fr om th e ban kr u p t c y c o ur ts w i thth e c o n s en t of th e par t ies. S ee 28 U. S. C. §158(b); Connecti cut Nat. Ba nkv. G ermain , 503 U. S. 249, 252 (1992)

. The First Circuit has established thi s ser v ic e.5 Cite as: 54 9 U

. S. ____ (2007) Opinion of t h eCourt 

### circumstan c es.” In re Marram a, 313 B. R. 525, 531 (2004). In concluding that th e record disclosed such circum

stances, the panel relied on Marra ma’s failure to describe the transfer of the Maine residence into the revocable trust, his attempt to obtain a homestead exemption on rental property in Mas s achusetts, and his n o n d isclosure of an anticipated tax refu nd. On appeal f r om the pa nel, the Court of Appe als for the First Circui t also rejected the argu ment that § 706(a) gives a Chapter 7 debtor an absolute right to convert to Chapte r 13. In addition to emphasizing that the statute uses t h e word “ma y” rather tha n“shall,” the court add e d: “In constru ing subsection 706(a), it is impo rtant to bear in mi nd that the bankruptcy court has unques tioned authority to dismiss a chapter 13 petition—as distinguished from converting t h e case to chapter 13—based upon a showing of ‘bad faith’ on the part of the debtor. We can dis c ern neither a theoretical nor a practical re ason that Congress would have chosen t o treat a fi rst

- time motion to conver ta chap ter 7 case to chapter 13 under sub s ection 706 (a) differen t ly from the filing of a chapter 13 petition in the first in

stance.” In re Mar r am a , 430 F. 3d 474, 479 (2 005) (ci

tations omitted). While otherCourts of Appe als and bankruptcy appellate panels have refused to recogniz e any “bad faith” exception to the conversion right created b y §706(a), see n. 2, supr a , we conclude thatthe co urts in this case correct ly held that Marrama forfeited his right to proc eed under Chapter 13. II The two pr ovisions of the Bankru ptcy Code most rele

vant to our resolution of the is sue are subsec tions (a) an d (d) of 11 U. S. C. §706, which provi d e: “(a) The de btor may convert a cas e under thi s chapter6 MARRAMA v. CITIZENS BA NK OF MASS. Opinion of t h eCourt 

### to a case u n der chapter 11, 12, or 13 of this title at any time, i f the case has not been converted under section 1112, 1208, or 1307 of this title. An y waiver of the right t o convert a case under this subsection is unenforceable. “(d) Notwithstanding any other provision of this sec

tion, a case may notb e convertedto a case u n der an

other chapter of this ti tle unless the debtor may be a debtor under such chap ter.” Petitioner contends that subsection (a) creates an un

qualified ri ght of conversion. He seek s support from lan

guage in both the House and Senate Committee Reports on the provision. The S e nate Report stated: “Subsection (a) of this section gives the debtor the one

time absolu t e right of conversion o f a liquidati on case to a reorganization or individual repayment plan case. If the case has already once been converted from chapter 11 or 13 to cha p ter 7, thenthe debtor does not have that right. The policy of the provision is t hat the debtor should always b e given the opportunit yto re

pay his debts, and a waiver of the right to convert a case is unenforceable. ” S. Rep. No. 95–989, p. 9 4 (1978); see also H. R. Rep. No. 95–595, p. 380 (1977) (using nearly identical language). The Committee Report s’ reference to an “abso l ute right ” of conversi on is more equivo cal than petitioner suggests. Assuming that the described debtor’s “opportunity to repay his debts” is a short-hand reference to a right to proceed under Chapte r 13, the statement that he should “always” h a ve that right is inconsistent with the earlier recognition that it is only a one-time right that does not survive a previous conversion to, or filing un der, Chapte r 13. More importantly, the broad description of the right as “absolute” fails to give full effect to the express limita

-7 Cite as: 54 9 U

. S. ____ (2007) Opinion of t h eCourt 

### tion in subsection (d). The words “unless the debtor may be a debtor under su ch chap ter” expressly conditioned Marrama’s right to co nvert on hi s ability to qualify as a “debtor” un der Chapte r 13. There are at least two possible r e asons why Marrama may not qualify as s u ch a debtor, one ari s ing unde r §109(e) of t h e Code, an d the other turning on the construc

tion of the word “caus e” in §1307 (c). The former provision imposes a limit on the amount of indebtedness that an individual may have i norder to qualify for Chapter 13 relief. 6 

### More pertinently, 7

### the latter provision, §1307(c), provides th at a Chapter 13 pro c eeding may be either dismissed or converte d to a Ch apter 7 p r oceeding “for cause” and includes a nonexclusive list of 10 causes justi

fying that relief. 8 

### None of the specified causes mentions

——————

6 Subsection (e) of 11 U. S. C. §109 provides: “O n l yanin dividu al w i thr e gu larin c o me that ow es, onthe date of th e filing of the petition, noncont ingent, liquidated, unsecure d debts of less than $250,000 and no nconti n gent, liqui dated, secured d e bts of le ss th an $ 7 5 0 , 0 0 0 , or a nindividua l wit hregula r income a n d s uch individua l ’s spou se, ex c e pt a stoc kbr o kerora c o mmod i tybr oker , th at ow e, onth e da t e of t h e filing of t h e pet i t i on, nonco nt ingent , liq uida t e d, uns ecu r e d debts th a tag g r eg ate less th an$2 50,0 0 0 a n d n o n c o n t ingen t , liqu i da ted , secured debts of less th an $750,000 may be a de btor u n der chapter 13 of th is title.”

Th ese dollarlimits ar e su bje c t to adju stme n tfori n flatio nev er y th r e e y e ar s. See §1 04(b).

7 M a r r a ma in iti ated a n e wC h apter13 c a s e th e dayaf te rw e g r an ted cert iora ri in t h e pres entca s e . The new ca s e was dismis s e d on t h e grounds that, under §109(e), he wa s ineligible to be a Chapter 13 debtor

. See I nre M a rr ama , 345 B. R. 45 8, 46 3–4 64, a n d n

. 10 (Bkr tc y . Ct . Ma s s . 2 006 ). As t h e Bankrupt c y J u d g e ma de no s uch det e rmin a tion on the re cord before us in this case, and as it is n o t necessary to our decis i on t h a ts uch adet e rmina t i on be ma de, we do notcons ider w h e th er M a r r ama fai l s to m eet th e §109(e) debt limi t
.

8 Title II U. S. C. §1307(c ) pr ov ides, inr e lev a n tpar t : “Except as pr ovided in subsection (e ) of this s e ct ion, on req u es tof a par t yinin terest orth e Un ited St ate s tr u s tee an d aft e rn o tic e an d a hea r ing, t h e c o urtma y con v ertaca s e under t h is cha pt er t o acase8 MARRAMA v. CITIZENS BA NK OF MASS. Opinion of t h eCourt 

### prepetition bad-faith conduct (although subparagraph 1 0 does identify one form of Chapter 7 error—w h ich is neces

sarily prepetition conduct—tha twould justify dismissal of a Chapter 13 case). 9 

### Bankru p tcy cour ts nevertheless routinely tr eat dismissal for prepetition bad-faith conduct as implicitly authorized by the words “for cau s e.” See n. 1, supra . In practical effect, a ruli ng that anindividual’s Chapter 13 case should be dismissed or converted t o Chapter 7 b e cause of prepetition ba d-faith conduct, includ

ing fraudul ent acts co mmitted inan earlier Chapter7 proceeding, is tantamount to a ruling that th e individual does not q ualify as a debtor under Chapte r 13. That individual, in other wo rds, is not a member of the class of
“ ‘honest but unfortuna te debtor[s]’ ” tha tthe bankruptcy laws were enacted to protect. Se e Grogan v. Ga rner , 49 8 U. S., at 28 7. The text of §706(d) therefore provides ade

quate authority for the denial of hi s motion to convert. The class of honest but unfortunate debtors who do possess an absolute right to co nvert theircases from

—————— u n d erch apter7 of th is tit l e, ormaydism i ss a c a se u n d erth is c h a pter , whiche ver is in t h e b e s tinteres t s of credit o rs a n d t h e es t a t e , for ca us e, including—

“ ( 1 ) unrea s onab l e dela y b yt h e deb t o r t h a tis prej udicia l to credit o rs ; “(2) nonpayment of any fees and cha rges required under chapter 123 of title 28;

“(3) failu r e to file a plantime lyu n d ersec t ion1321 of th is title; “(10) on lyonr e qu est of th e Un ited S tate s tr u s tee, fai l u r e to timely file th e in for mationr e qu ir ed bypar a g r aph (2) of sec t ion521.”

Sec t ion52 1(2) , w h i chh a s si n c e beenamen ded an d r e desig n ated a s §521( a)(2), see 11 9 S tat. 38, impose s adu t yona debtor ina Ch ap ter 7 pr oc eedin gto file w i th ina c e r taintime per i od a st ate men tof in ten t wit hres p ectt o t h e ret e nt ion or s u rrende rof prope r t y b e ing us ed t o secure debts. See 11 U. S. C. A. §521(a)(2), (2004 ed. and Supp. 2006).

9 In deed, bec a use §52 1 (2) byi t s ter m s appl i e s on lyto Ch a p ter7 debt

or s, at leas t o n e pr omin en t tr eatise h a s a ssu med th att h is su b s ec tio n could only a p ply t o a debt or who ha s conve r t e d acas e from Cha p t e r 7 to Ch apter13. See 8 Col lieronBan k r u p tcy¶1307.0 4 [9] (15thed. r e v . 200 6).9 Cite as: 54 9 U

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### Chapter 7 t o Chapter 13 includes the vast majority of the hundreds of thousands of individu als who file Chapter 7 petitions each year. 10

### Congress sought to give these indi

viduals the chance to repay their debts should they ac

quire the means to do so. Moreover, as the Court of A p peals observed, the reference in §706(a) to th e unenforceability of a waiver of the right to convert fu nc tions “as a consumer protection pro v ision against adhesion contracts, whereby a debtor’s c r editors migh t be preclud e d from attempting to pre s cribe a waiver of the debtor’s righ t to convert t o chapter 1 3 as a non-negotiable condition of its contractual agreements.” 430 F. 3d, at 479. A statutory provision prote cting a borrower fr om waiver is not a shield against forfeiture. Nothing inthe text of either §706 or §1307(c) (or the legislative history of eithe r provision) limits the authorit y of the court to take appro

priate action in response to frau dulent conduct by th e atypical litigant who has demon s trated tha the is not entitled to the relief available to the typical debtor. 11 

### O n the contrary, the broa d authority granted to bankruptcy judges to ta ke any acti on that is necessary or appropriate “to prevent an abuse of process” de scribed in §105(a) of th e

——————

10 We ar e adv i sed byth e Ad min i str a tiv e O ffic e of th e Un ited St ate s Cou r t s th at 8 33,14 8 Ch ap t e r7 c a ses w e r e filed infis c al y e ar200 6

. Memorandum from Steven R. Schlesin ger , Adminis t rat i ve Office of t h e Un ited S t a t es Cou r t s, to Su pr eme Cou r tLi br ar y(D ec . 13, 200 6) (av a il

able in Clerk of Court’s case f ile). 11 We ha ve no oc ca s i on here t o a r t i cula t e with precis ion wh a tconduct qu alifie s as “bad faith ” su ffic i en t to pe r m it ab a n k r u p tc yju dg e to dismi ss a Ch a p ter13 c a se o rto den y c o nv er sionfr om Ch apter7. It su ffic e s to emph asize th at t h e debtor ’ s c o n d u c tmu st, i nfac t , be atypi

ca l. Limit i ng dis m is sa l or denia lof conver s i on t o ext r a o rdina r y ca s e s is pa rt icula r ly a ppropria t e in lightof t h e fa ctt h a tla ck of good fa it h in pr oposin ga Ch apter13 pl a nis anex pr ess st atu tor yg r ou n dfordeny ing planc o n f ir ma tion

. 1 1 U. S. C. §13 25(a)( 3 ); see In re Love , 957 F. 2d, a t 1 3 5 6 (“ Beca use dis m is sa l is ha rs h . . . t h eb a n krupt c y c o urts h ould b e mor e r e lu c tan t to di smi ss apetit i on. . . forlac kof g ood faithth an t o r ejec ta planforlac kof g ood faithu n d erS e c t ion1325( a)”).10 MARRAMA v. CITIZENS BA NK OF MASS. Opinion of t h eCourt 

### Code, 12 

### is surely adequate to authorize an immediate denial of a motion to convert filed under §706 in lieu of a conversion order that merelypostpones the allowance of equivalent relief and may prov ide a debtor with an oppor

tunity to ta ke action pr ejudicial to creditors. 13 

### Indeed, as the Solicitor General h a s argued i nhis brief amicus curi ae, even if §105(a) hadnot been enacted, the inherent power of every federa l court to sanction “abusive litigation practices,” see Roadwa y Express, Inc. v. Piper , 447 U. S. 752, 765 (1980), might well provide an adequ a te justification for a prompt, ra ther than a delayed, ruling on an unmeritorious attempt to qualify as a d e btor under Chapter 13. Accordin gly , the judg ment of the Court of Appeals is affirmed. It is so orde red.

——————

12 Title II U. S. C. §105(a) pr o v ides:
“ T he courtmay is s u e a n y or der, proces s , or j u dgmentt h a tis neces sar yorappr opr i ate to c a r r you t th e pr ov ision s of th is title. No pr ov i

sionof th is ti tle pr ov iding for the raising of an issue by a p a rty in int e res ts h a ll b e cons t rued t o preclude t h e courtfro m , s u a s p ont e , takin gan yac tionormakin gan ydeter m in ationn e c e ssar yorappr opr i

a t e t o enforceor implementcourtorders or rules , or t o preventa n abuse of proce ss.”

13 Bothth e Ch apter7 tr u s tee an d th e Un ited Sta t es a s amicus curia e ar g u e int h eir br iefs th at i nth e in terv al betw eenth e allow a n c e of a motionto c o n v er t u n d er§7 06(a) an d th e su bsequ e n t g r an tin gof a motionto dis m iss u n d er§1307(c ) , th e fac tth at th e deb t orw o u l d h a ve possession of the property formerly unde rthe control of the trustee w o u l d c r e ate anoppor t u n i tyforth e debt orto take ac ti on s th at w o u l d impairth e r i g h ts of c r e ditor s . Wh eth e rorn o t th at r i s kis sig n ific an t, under ou r un ders t a n ding of t h e Code, the deb t o r’s prior mis c onduct may provide a sufficient ju stific ationfo ra den i al of h i s motionto conve r t
._________________

_________________ 1 Cite as: 54 9 U

. S. ____ (2007) ALITO , J., dissenting 

# SUPREME CO URT O F THE UNI TED STATES
No. 05–9 96 

### ROB ERT L O UIS MAR RAMA, P E TITIONE R v. CITIZEN S BAN K OF MASSAC HUSE TTS ET AL


### . ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEAL S FOR THE FIRST CIRCUIT [Febr u a r y21, 200 7] 

### J USTICE 

### A LITO 

### , with whom T HE 

### C HIEF 

### J USTIC E 

### , J USTICE 

### S CALI A 

### , and J USTICE 

### T HO MAS 

### join, dissenting. Under the clear terms of the Bankruptc yCod e , a debtor who initially files a pet i tion under Chapter 7 h a s the righ t to convert the case to another c hapter und er which t h e case is eligib le to proceed. The Court, however, holds tha t a debtor’s conversion right is conditioned upon a ban k

ruptcy judge’ s finding of “goodfait h.” Becaus e the imposi

tion of this condition is inco nsistent with the Bankrup t c y Code, I respectfully dissent. I The Bankruptcy Code unambiguously provi d es that a debtor who has filed a bankruptcy petition under Chapte r 7 has a broad right to convert th e case to another chapter

. Title 11 §70 6 (a) states: “[A] debtor may conver t a case under this cha p ter to a case under chapter 11 , 12, or 13 of this title at an y time, if the case has not been converted under section 1112, 1208, or 1307 of this title.” The Code r e stricts a C hapter 7 de btor’s conve r sion righ t in two—an donly two —ways. Fi rst, §706(a) makes clear that the rig h t to conve rt is available only once: A debto r may conver t so long a s “the case has not be en converte d2 MARRAMA v. CITIZENS BA NK OF MASS. ALITO , J., dissenting 

### [to Chapter 7] under section 1112 , 1208, or 1307 of thi s title.” Second, §706(d) provides that a debtor wishing to convert to another ch apter must meet the co nditions that are neededin order to “be adebtor under s u ch chapter.” Nothing in §706(a) or any other provision of the Code suggests th at a bankruptcy judge has the discretion to override a debtor’s exercise of the §706(a) conversion righ t on a ground not set out in th e Code. Thus, a straightfor

ward readi n g of the Code suggests that a Chapter 7 debtor has the rig h t to conver t the debtor ’s case to C hapter 13 ( o r another ch apter) p r ovided that th e two exp r ess statutor y conditions contained in §706 are sa tisfied. This reading of the Co de is buttr essed by th e contras t between the terms of §706 and the language employedin other Code provisions that give bankruptcy judges the discretion to deny conversion requ ests. As noted, §706(a) says that aChapter 7 debtor“m ay convert ” the debtor’s case to another chapte r. Chapters 11, 12, an d 13 contain similar provisions stating t hat debtors under those chap

ters “may convert” th eir case s t o other chapters. See §§1112(a), 1208(a), an d 1307(a) (2000 ed. a n d Supp IV). Chapters 1 1 , 12, and 13 also contain separate provisions governing conversion requests by other partie s in interest. For example, the applicable provision inChapter 11 provides: “On requestof a party in in terest and after notice and a hearing, the cour t may conver ta case under this chapter to a case under chapter 1 1 of this tit l e at any time.” §706(b) (emphasi s added). See also §§1112(b), 1208(b), (d), and 1307(c). In these sections, part ies in interest are notgiven a right to convert. Rather, parti es ininterest ar e authorized to request c o nversion. And the au thority to c o nvert, afte r notice and a hearing, i s expressly left to the discretion of the bankru ptcy court, which “may convert” th e case if the3 Cite as: 54 9 U

. S. ____ (2007) ALITO , J., dissenting 

### general standard of “cause” is fou n d to have been met. If the Code had been meant to give a bankruptcy court simi

lar authority when a Chapter 7 debtor wishes to convert, the Code would have used language simil a r to tha t in §§1112(b), 1208(b), (d), and 1307(c). Congress knew how to limit conversion authority in th is way, an dit didnot d o so in §706(a)

. In Chapter 7, Congress did directly address the conse

quences of the sort of conduct complained of in this cas e . In §727(a)(3), Congres s specified that ade btor may b e denied a discharge of debts if “the debtor has co ncealed . . . records, and papers, from which the debtor’s financial condition or business transaction s might be ascertained.” The Code further provides that di scharge ma y be denied if the debtor has “made a false oath or account” or “pre

sented or used a false claim.” §727(a)(4). In addition to blocking discharge, Congress could easily have deem ed such conduct sufficient to bar conversion to another chap

ter, but Congress did not do so. Instead of taking that approach, Congress included i n the statutory scheme several express means to redress a debtor’s ba d faith. Fi rst, if a ba nkruptcy co urt finds that there is “c ause,” the court may convert or reconvert a Chapter 11 or Chapte r 13 restru cturing to a Chapter 7 liquidation. §§1112(b), 1307(c). Second, aChapter 1 3 debtor must propose a repa ym ent plan t o satisfy t h e debtor’s creditors—a pl an that is s ubject to co urt approva l and must be proposed in good faith. §§1325(a)(3), (4); accord, §13 28(b)(2). Third, a debtor’s asset s c hedules are filed under penalty of perjury. 28 U. S. C. §1746; Fed. Rule Bkrtcy. Proc. 10 08. Fourth, a Chapter 13 case is overseen by a trustee who is empo wered to investigate the debtor’s fin ancial affairs, to furnis h information regardin g the bankru ptcy estate to parties i ninterest, and to oppose discharge if necessary. 11 U. S. C. §§704(4), (6) and (9 ). See also §1 302(b) (defining the powers of a Chapter 1 34 MARRAMA v. CITIZENS BA NK OF MASS. ALITO , J., dissenting 

### trustee in p a rt byrefer e nce to the powers of a Chapter 7 trustee). These measu r es, as opposed to the “good faith” requirement crafted b ythe Co urt, represent the Code’s strategy fordealing with debtor s who engage i nthe type o f abusive tactics that th e Court’s opinion targets. 1 

### In sum, the Code expressly gives a debtor who initially files under Chapter7 the righ t to convert the case to another ch apter so long as the debtor satisfies the re

quirements of the destination chapter. B y contrast, th e Code pointedly does not give the bankruptcy courts th e authority to deny conversion bas ed on a fin d ing of “ba d faith.” There is no justification for disregardi ng the Code’s scheme. II In reaching the conclus i on that a b ankruptcy judge ma y override a Chapter 7 debtor’s con v ersion right based on a finding of “bad faith,” the Court re asons as fol l ows. Under §706(d), a Chapter 7 debtor may not convert to another chapter “u nless the d e btor may be a debtor under such chapter.” Under §1307(c), a Cha p ter 13 pro c eeding ma y be dismissed or converted to Chapter 7 “for cause.” On e such “caus e” recognized by bankruptcy courts is “bad faith.” Therefore, a Chapte r 7 debtor who has proceeded in “bad faith” and wishes to convert his or her case to Chapter 13 is not eligible to “be a debtor” under Chapte r 13 because the debtor’s case would be subject to dismissal or reconversion to Chapter 7 pu rs uant to §1307(c). I ca n not agree w i th this strained reading of the Code. The requirements that must be met in ord e r to “be a debtor” un der Chapte r 13 are set forth in 1 1 U. S. C. A

. §109 (main ed. and Supp. 2006), which is a ppropriatel y titled “Who may be a debtor.” The two requirements that

——————

1 And as noted above, 11 U. S. C. §727(a)( 4 ) also addresse s such con

du c t , makin gi ta barto disc h a r g e, bu t n o t to c o n v er sion

.5 Cite as: 54 9 U

. S. ____ (2007) ALITO , J., dissenting 

### are specific to Chapte r 13 appear in subsection (e). First, Chapter 13 is restricted to in dividuals, with or without their spouses, with reg u lar income. Second, a debtor may not proceed under Chapter 13 if specified debt limits are exceeded. 2 

### As the Court of App e als below correctly understood, §706(d)’s requirement that a debtor may convert only if “the debtor may be a debtor under such chapte r” obviously refers to the chapter-s p ecific requirements of §109. In re Marram a , 430 F. 3d 474, 479, n. 3 (CA1 2005). Rather tha nreading §§109(e) and706(d) together, the Court puts §109(e) asi d e and treats §706(d) as a separate repository of additional requirements (namely, the ab

sence of the grounds for dismissa l or reconversion unde r §1307(c)) that a Cha p ter 7 deb t or must s a tisfy before conversion to Chapter 13. But §1 307(c) plainly does not set out requirements that an in dividual must meet in order to “be a debtor” under Chapter 13. In stead, §1307(c) sets out the standard (“cause”) that a bankruptcy cour t must applyin deciding whether, in its discretion, an al

ready filed Chapter 13 case should be dismissed or con

verted to C hapter 7. Thus, the Court’s holding in this case finds no support in the terms of the Bankrup t cy Code. In holding that a bankruptcy judge may deny conversion based on “bad faith,” the Court of Appeals appears to have been inf l ue nced by the bel i ef th at followin gthe liter al terms of th e Code wo uld be pointless. Id., at 479–481.

——————

2 “O n l yanin div i du al w i thr e g u larin c o me th at ow es, on th e date of the filing of the petition, noncontinge nt, liquidated, unsecured debts of less th an$3 07 ,675 an d n o n c on tin g en t, liqu i dated, sec u r ed debts of les s t h a n$ 9 2 2 , 97 5, or a nindividua lwi t hregula r income a n d s uch individ

u a l’s spou se, ex c e pt a stoc kbr o kerora c o mmoditybr oker , th at ow e, on the date of the filing of the petiti on, noncontingent, liquidated, unse

cured debts that aggregate less th an $307,675 and nonco ntingent , liqu i da ted, sec u r e d debts of less th an$ 9 2 2 ,975 m a ybe a deb t oru n d er chapter 13 of this title.” §10 9 (e) (Supp. 2006) (footnote omitted).6 MARRAMA v. CITIZENS BA NK OF MASS. ALITO , J., dissenting 

### Specifically, the Court of Appeals observed that if a debt or who wishes to conver t from Chapt e r 7 to Cha p ter 13 has exhibited s u ch “bad faith” that the bankruptcy court would immediately convert th e case back to Chapter 7 under §1307(c), then no purpose would be served by re

quiring the parties and the court to go through the process of conversio nand prompt reconversion. Id., at 481. It is by no means clea r, however, that conversion under §706(a) fol l owed by a reco nversion proceeding under §1307(c) would be an empty e x ercise. Th e immediate practical ef fect of following the st atutory sch e me is com

pliance with Bankruptcy Rule 1017(f), which applies Bankru ptcy Rule 9014 to the reconversion. Fed. Rule Bkrtcy. Pro c . 1017(e)(1). Rule 9014 (a), in turn, requires that the request be made by moti on and that “reasonabl e notice and opportunityfor he aring . . . be afforded the party again s t whom relief is so ught.” The Court’s decision circumvent s this process and for e closes the right thata Chapter 13 debtor would otherwise possess to file a Chap

ter 13 repayment and reorganization plan, 11 U. S. C. §1321, which must be filed in goodfaith and which must demonstrate that creditors will re ceive no less than they would under an immediate Chapter 7 liquidation, §§1325(a)(3 ) and (4); accord, §1328(b)(2). While the pla n must be filed no later than 15 days after filing the petiti on or conversion, the deb t or may file the plan a tthe time of conversion, i.e., befor e the reconversion hearing. Fed. Rule Bkrtcy. Proc. 3015(b). Moreover, it is not clear whether, in converting a case “for cause” under §1307(c), a ban kruptcy cou rt must con

sider the debtor’s plan (if already filed) and, if the plan must be considered, whether the court mu st ta ke int o account wh ether the plan was filed in good faith, whethe r it honestly discloses the debtor’s a ssets, whether it demo n strates thatcreditors would infact fare bett er under th e plan than under a liquidation, and whether the plan in7 Cite as: 54 9 U

. S. ____ (2007) ALITO , J., dissenting


### some sens e “cures” pri o r bad faith. Today’s opinion ren

ders these questions a c ademic, and little is left to guide what a ban kruptcy cou rt must consider, or may disregard, in blocking a §706(a) conversion. 3 

### The Court notes that the Bankru ptcyCode i s intended to give a “ ‘ “fresh start” ’ ” to the “ ‘ “honest but unfortunate debtor.” ’ ” Ante, at 1, 9 (quoting Groganv. Garn er , 49 8 U. S. 279, 286, 287 (1991)). But complia nce with the statutory s c heme—conversion to Chapter 13 followed b y notice and a hearing on the qu estion of reconversion— would at least provide some s tructure to th e process of identifying those deb t ors whose “ ‘bad faith’ ” meets the Court’s s t andard for consignment to liquidation, i.e., “ ‘ba d faith’ ” con d uct that is “atypical” and “extraordinary. ” Ante , at 10, n. 11. III Finally, the Court no tes two alternative bases for its holding. First, the Court points to 11 U. S. C. §105(a), which gov e rns a ba nkrup tcyc o urt’s general powers

. 4 

### Second, the Court sug g ests that even without a textua l basis, a bankruptcy co urt’s i nhere nt power m a y empowe r it to deny a §706(a) conversionrequest for bad faith. Obviously, however, n e ither of these sources of authorit y authorizes a bankruptcy court to contravene the Code. On the contrary, a bankruptcy court’s general and equitable powers “m ust and ca n only be exercised wi thin the con

-

——————

3 Indeed, t h e o n ly proced ura l guida nce fo r s uch as i t u a t i on is Federa l Rule of Bankruptcy P r ocedure 1017(f)(2), which require s the filing of a motionto c o n v er t byth e debtoran d ser v i c e th er eof.

4 “ T he co urtm a y is s u e a n y o r der, p r oces s , or j u dgmentt h a tis neces sar yorappr opr i ate to c a r r you t th e pr ov ision s of th is title. No pr ov i

sionof th is ti tle pr ov iding for the raising of an issue by a p a rty in int e res ts h a ll b e cons t rued t o preclude t h e courtfro m , s u a s p ont e , takin gan yac tionormakin gan ydeter m in ationn e c e ssar yorappr opr i

a t e t o enforceor implementcourtorders or rules , or t o preventa n abu se of pr oc ess.” §105( a).8 MARRAMA v. CITIZENS BA NK OF MASS. ALITO , J., dissenting 

### fines of the Bankruptcy Code.” Norwes t Ban kWorthing

to nv. Ahlers , 485 U. S. 197, 206 (1988); accord, SEC 

### v. United S t ates Realty & Improvement Co. , 310 U. S. 434, 455 (1940) ( “A bankru ptcy court . . . is guided by equitable doctrines and principl es except in so far as they are incon

sistent with the Act”). Ultimately, §105(a) and a bankru ptcy court’s inherent powers may have a role to play in a case such as this. The problem the Court identifies is a re al one. A d e btor who i s convinced that he or she can successfully conceal assets has a signif icant incentive to pursue Chapter 7 liquidation in lieu of a Chapter 13 restructu ring. If successful, the debtor preserves wealth; if unsuccessful, the debtor can convert to Chapter 13 and land largely where the debt o r would have been if he or she had fully disclos e d all asset s and proceeded in Chapter 13 in the first instance. Bankru ptcy courts ha ve used their statutory and equi

table authority to craft various remedies for a range of bad faith conduct: requiring accountings or reporting of as

sets 5 

### ; enjoining debtors from alienating estate property 6 

### ; penalizing counsel 7 

### ; as sessing cost s and fees 8 

### ; or holding

——————

5 See, e. g. , I n re All De nominational Ne w Chur ch , 268 B. R. 53 6 (Bkr tc y . App. Pan e l CA8 200 1) (a ffirming dismissal for failure to comply wit hreq u ired mont hly report ing) ; In r e Marti n ’s Aq ua rium , Inc. , 225 B. R. 868, 8 80 (Bkr tc y . Ct. E. D

. Pa. 199 8) (“[A] debtormay , i n anappr opr i at e c a se, be r e qu ir ed to pr odu c e anac c o u n tin g , an d . .

. a b a n krupt c y co urtdoes indeed ha ve t h e power t o s o order [t his eq uitable remedy]”).

6 See, e.g . , In re Bartmann , 320 B. R. 7 25, 732 –7 33 (Bkr t c y . Ct. N. D

. O k la. 200 4); In r eNewpor t Creamery, I n c . , 293 B. R. 2 93 (Bkr tc y . Ct. R. I. 2003); In re P e k l o , 201 B. R. 331 (Bkr tc yCt. Con n . 199 6). 7 See , e. g. , I nr e Everly , 346 B. R. 791, 79 7 (Bkr tc y . App. Pan e l CA8 200 6) (ban kr u p tc yc o ur t’s §105 pow e r s i n c l u d e au th orityto san c t io n couns el); In re Brooks-Hamilton , 329 B. R. 270 (Bkr tc y . App. Pan e l CA9 2 0 0 5 ) (upholding s a nct ion a n d s u s p ens i on of deb t o r’s couns el); In re Washin g ton , 297 B. R. 662 ( B kr tc y . Ct. S. D

. Fla. 2003). 8 See, e.g . , In re Deville , 280 B

. R. 483 ( B kr tc y . App. Pan e l CA9 20 02); In re Jo hn son , 33 6 B. R. 56 8, 57 3 (Bkr tc y . Ct. S. D

. Fla. 2 006); In re9 Cite as: 54 9 U

. S. ____ (2007) ALITO , J., dissenting 

### the debtor in contempt 9



### . But whate v er steps a bankruptcy court may take pursua nt to §105(a) or its ge neral equita

ble powers, a bankru ptcy co urt cannot contravene th e provisions of the Code. Because the provision s of the Co de rule outthe proce

dure that was followed in this case by th e bankruptcy court, I w o uld reverse the judg ment of t h e Court of Appeals.

—————— Couch-Ru ssell , No. 00–02 22 6, 200 3 W L 252 73 863 (Bk r tc y . Ct. Idaho 200 3); In reG o rsht ein , 285 B. R. 118 (Bkr tc y . Ct. S. D

. N. Y

. 2002).

9 See, e. g. , I nr e Sek end ur , 334 B. R. 609 (B kr tc y . Ct. N. D

. Ill. 2005 ) (impos ing cont emptsa nct ion for s e ria la n d vexa t i ous b a n krupt c y filing); In re Tolbert , 258 B. R. 387 (Bkr tc y . Ct. W. D

. M o . 200 1) (sa m e); In re Swanso n , 207 B. R. 76 (Bkr tc y . Ct. N. J. 199 7) (imposin gc i v il c o n t empt u n d er§105 forfailu r e to v a c ate pr oper ty).