(Slip Opinion) OCTOBER TERM, 2006 1 

Syllabus 

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is

being done in connection with this case, at the time the opinion is issued.

The syllabus constitutes no part of the opinion of the Court but has been

prepared by the Reporter of Decisions for the convenience of the reader. 

See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337. 

SUPREME COURT OF THE UNITED STATES 

Syllabus 

MARRAMA v. CITIZENS BANK OF MASSACHUSETTS 

ET AL. 

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR 

THE FIRST CIRCUIT 

No. 05–996. Argued November 6, 2006—Decided February 21, 2007 

In filing his petition under Chapter 7 of the Bankruptcy Code, petitioner Marrama misrepresented the value of his Maine property and 

that he had not transferred it during the preceding year. Respondent 

DeGiacomo, the trustee of Marrama’s estate, stated his intention to 

recover the Maine property as an estate asset. Thereafter, Marrama 

sought to convert the proceeding to Chapter 13, but the trustee and

respondent bank, Marrama’s principal creditor, objected, contending

that the request to convert was made in bad faith and would constitute an abuse of the bankruptcy process. The Bankruptcy Judge denied Marrama’s request, finding bad faith. Affirming, the First Circuit’s Bankruptcy Appellate Panel rejected Marrama’s argument that

he had an absolute right to convert under §706(a) of the Bankruptcy 

Code, which provides that a Chapter 7 debtor “may convert a case” so

long as it has not been converted previously, and that a waiver of the

right to convert is unenforceable. The First Circuit also rejected that 

argument, emphasizing, inter alia, that a bankruptcy court has the 

authority to dismiss a Chapter 13 petition based on a debtor’s bad 

faith, and that a first-time motion to convert a Chapter 7 case to

Chapter 13 should not be treated differently from the filing of a 

Chapter 13 petition in the first instance. 

Held: Marrama forfeited his right to proceed under Chapter 13. The 

broad description of the right to convert as “absolute” in Senate and

House Committee Reports fails to give full effect to the express limitation of §706(d), which provides that “a case may not be converted to 

a case under another chapter of this title unless the debtor may be a 

debtor under such chapter.” That text expressly conditioned Marrama’s right to convert on his ability to qualify as a Chapter 13 
2 MARRAMA v. CITIZENS BANK OF MASS. 

Syllabus 

“debtor.” Marrama does not qualify as such a debtor under §1307(c),

which provides that a Chapter 13 proceeding may be either dismissed

or converted to a Chapter 7 proceeding “for cause.” Bankruptcy 

courts routinely treat dismissal for prepetition bad-faith conduct as 

implicitly authorized by the words “for cause,” and a ruling that an

individual’s Chapter 13 case should be dismissed or converted to

Chapter 7 because of bad faith is tantamount to a ruling that the individual does not qualify as a Chapter 13 debtor. Congress gave 

“ ‘honest but unfortunate debtor[s]’ ” Grogan v. Garner, 498 U. S. 279, 

287, the chance to repay their debts should they acquire the means to

do so, and §706(a) protects a debtor from being forced to waive that 

right. However, a provision protecting a borrower from waiver is not 

a shield against forfeiture. Neither §706 nor §1307(c) limits a court’s 

authority to take appropriate action in response to fraudulent conduct by the atypical litigant who has demonstrated that he is not entitled to the relief available to the typical debtor. On the contrary, 

bankruptcy judges’ broad authority to take necessary or appropriate

action “to prevent an abuse of process” described in Code §105(a) is

adequate to authorize an immediate denial of a §706 motion to convert in lieu of a conversion order that merely postpones the allowance 

of equivalent relief and may give a debtor an opportunity to take action prejudicial to creditors. Pp. 5–10. 

430 F. 3d 474, affirmed. 

STEVENS, J., delivered the opinion of the Court, in which KENNEDY, 

SOUTER, GINSBURG, and BREYER, JJ., joined. ALITO, J., filed a dissenting 

opinion, in which ROBERTS, C. J., and SCALIA and THOMAS, JJ., joined. 
_________________ 

_________________ 

Cite as: 549 U. S. ____ (2007) 1 

Opinion of the Court 

NOTICE: This opinion is subject to formal revision before publication in the

preliminary print of the United States Reports. Readers are requested to

notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order

that corrections may be made before the preliminary print goes to press. 

SUPREME COURT OF THE UNITED STATES 

No. 05–996 

ROBERT LOUIS MARRAMA, PETITIONER v. CITIZENS 

BANK OF MASSACHUSETTS ET AL. 

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE FIRST CIRCUIT

[February 21, 2007] 

JUSTICE STEVENS delivered the opinion of the Court. 

The principal purpose of the Bankruptcy Code is to 

grant a “‘fresh start’” to the “‘honest but unfortunate 

debtor.’” Grogan v. Garner, 498 U. S. 279, 286, 287 

(1991). Both Chapter 7 and Chapter 13 of the Code permit 

an insolvent individual to discharge certain unpaid debts

toward that end. Chapter 7 authorizes a discharge of

prepetition debts following the liquidation of the debtor’s 

assets by a bankruptcy trustee, who then distributes the 

proceeds to creditors. Chapter 13 authorizes an individual

with regular income to obtain a discharge after the successful completion of a payment plan approved by the

bankruptcy court. Under Chapter 7 the debtor’s nonexempt assets are controlled by the bankruptcy trustee;

under Chapter 13 the debtor retains possession of his 

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 arisen with disturbing frequency is 

whether a debtor who acts in bad faith prior to, or in the

course of, filing a Chapter 13 petition by, for example, 
2 MARRAMA v. CITIZENS BANK OF MASS. 

Opinion of the Court 

fraudulently concealing significant assets, thereby forfeits

his right to obtain Chapter 13 relief. The issue may arise 

at the outset of a Chapter 13 case in response to a motion 

by creditors or by the United States trustee either to

dismiss the case or to convert it to Chapter 7, see §1307(c). 

It also may arise in a Chapter 7 case when a debtor files a 

motion under §706(a) to convert to Chapter 13. In the 

former context, despite the absence of any statutory provision specifically addressing the issue, the federal courts

are virtually unanimous that prepetition bad-faith conduct 

may cause a forfeiture of any right to proceed with a

Chapter 13 case.1 In the latter context, however, some 

courts have suggested that even a bad-faith debtor has an

absolute right to convert at least one Chapter 7 proceeding 

into a Chapter 13 case even though the case will thereafter be dismissed or immediately returned to Chapter 7.2 

We granted certiorari to decide whether the Code mandates that procedural anomaly. 547 U. S. ____ (2006). 

I 

On March 11, 2003, petitioner, Robert Marrama, filed a

voluntary petition under Chapter 7, thereby creating an

estate consisting of all his property “wherever located and

by whomever held.” 11 U. S. C. §541(a). Respondent

Mark DeGiacomo is the trustee of that estate. Respondent

Citizens Bank of Massachusetts (hereinafter Bank) is the

principal creditor.

In verified schedules attached to his petition, Marrama

made a number of statements about his principal asset, a 

—————— 

1See, e.g., In re Alt, 305 F. 3d 413, 418–419 (CA6 2002); In re Leavitt, 

171 F. 3d 1219, 1224 (CA9 1999); In re Kestell, 99 F. 3d 146, 148 (CA4 

1996); In re Molitor, 76 F. 3d 218, 220 (CA8 1996); In re Gier, 986 F. 2d 

1326, 1329–1330 (CA10 1993); In re Love, 957 F. 2d 1350, 1354 (CA7 

1992); In re Sullivan, 326 B. R. 204, 211 (Bkrtcy. App. Panel CA1 2005). 2See, e.g., In re Martin, 880 F. 2d 857, 859 (CA5 1989); In re Croston, 

313 B. R. 447 (Bkrtcy. App. Panel CA9 2004); In re Miller, 303 B. R. 471 

(Bkrtcy. App. Panel CA10 2003). 
Cite as: 549 U. S. ____ (2007) 3 

Opinion of the Court 

house in Maine, that were misleading or inaccurate. For 

instance, while he disclosed that he was the sole beneficiary of the trust that owned the property, he listed its value 

as zero. He also denied that he had transferred any property other than in the ordinary course of business during

the year preceding the filing of his petition. Neither 

statement was true. In fact, the Maine property had

substantial value, and Marrama had transferred it into 

the newly created trust for no consideration seven months

prior to filing his Chapter 13 petition. Marrama later 

admitted that the purpose of the transfer was to protect

the property from his creditors. 

After Marrama’s examination at the meeting of creditors, see 11 U. S. C. §341, the trustee advised Marrama’s

counsel that he intended to recover the Maine property as

an asset of the estate. Thereafter, Marrama filed a “Verified Notice of Conversion to Chapter 13.” Pursuant to 

Federal Rule of Bankruptcy Procedure 1017(c)(2), the 

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 the

Maine property from his creditors,3 the trustee contended 

that the request to convert was made in bad faith and 

—————— 

3The trustee also noted that in his original verified schedules Marrama had claimed a property in Gloucester, Mass., as a homestead 

exemption, see 11 U. S. C. §522(b)(2); Mass. Gen. Laws, ch. 188, §1

(West 2005), but testified at the meeting of creditors that he did not

reside at the property and was receiving rental income from it, App. 

71a–72a. Moreover, when asked at the meeting whether anyone owed

him any money, Marrama responded “No,” id., at 50a, and in response

to a similar question on Schedule B to his petition, which specifically

requested a description of any “tax refunds,” Marrama indicated that

he had “none.” Supp. App. 6. In fact, Marrama had filed an amended 

tax return in July 2002 in which he claimed the right to a refund, and 

shortly before the hearing on the motion to convert, the Internal 

Revenue Service informed the trustee that Marrama was entitled to a 

refund of $8,745.86, App. 30a–31a. 
4 MARRAMA v. CITIZENS BANK OF MASS. 

Opinion of the Court 

would constitute an abuse of the bankruptcy process. The 

Bank opposed the conversion on similar grounds. 

At the hearing on the conversion issue, Marrama explained through counsel that his misstatements about the

Maine property were attributable to “scrivener’s error,”

that he had originally filed under Chapter 7 rather than 

Chapter 13 because he was then unemployed, and that he 

had recently become employed and was therefore eligible

to proceed under Chapter 13.4 The Bankruptcy Judge

rejected these arguments, ruling that there is no “Oops”

defense to the concealment of assets and that the facts 

established a “bad faith” case. App. 34a–35a. The judge 

denied the request for conversion.

Marrama’s principal argument on appeal to the Bankruptcy Appellate Panel for the First Circuit5 was that he 

had an absolute right to convert his case from Chapter 7 to 

Chapter 13 under the plain language of §706(a) of the 

Code. The panel affirmed the decision of the Bankruptcy 

Court. It construed §706(a), when read in connection with

other provisions of the Code and the Bankruptcy Rules, as 

creating a right to convert a case from Chapter 7 to Chapter 13 that “is absolute only in the absence of extreme 

—————— 

4The parties dispute the accuracy of this representation. The trustee’s brief notes that Schedule I to Marrama’s original petition indicates that he had been employed by a flooring company at the time the 

case was filed. See Brief for Respondent Mark G. DeGiacomo 10, n. 7

(citing Supp. App. 18, 30). Marrama’s counsel stated during oral

argument, however, that the income listed in Schedule I represented an

estimate based on employment that had not yet begun. Tr. of Oral Arg. 

24. Since the sufficiency of the evidence of bad faith is not at issue, we 

may assume that Marrama did have more income available when he 

sought to convert than when he commenced the Chapter 7 case. 5The judicial council of any circuit is authorized by statute to establish a bankruptcy appellate panel service, comprising bankruptcy 

judges, to hear appeals from the bankruptcy courts with the consent of

the parties. See 28 U. S. C. §158(b); Connecticut Nat. Bank v. Germain, 

503 U. S. 249, 252 (1992). The First Circuit has established this 

service. 
Cite as: 549 U. S. ____ (2007) 5 

Opinion of the Court 

circumstances.” In re Marrama, 313 B. R. 525, 531 (2004). 

In concluding that the record disclosed such circumstances, the panel relied on Marrama’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 Massachusetts, and his nondisclosure of 

an anticipated tax refund. 

On appeal from the panel, the Court of Appeals for the

First Circuit also rejected the argument that §706(a) gives

a Chapter 7 debtor an absolute right to convert to Chapter 

13. In addition to emphasizing that the statute uses the

word “may” rather than “shall,” the court added: 

“In construing subsection 706(a), it is important to 

bear in mind that the bankruptcy court has unquestioned authority to dismiss a chapter 13 petition—as

distinguished from converting the case to chapter

13—based upon a showing of ‘bad faith’ on the part of

the debtor. We can discern neither a theoretical nor a 

practical reason that Congress would have chosen to

treat a first-time motion to convert a chapter 7 case to 

chapter 13 under subsection 706(a) differently from

the filing of a chapter 13 petition in the first instance.” In re Marrama, 430 F. 3d 474, 479 (2005) (citations omitted). 

While other Courts of Appeals and bankruptcy appellate 

panels have refused to recognize any “bad faith” exception

to the conversion right created by §706(a), see n. 2, supra, 

we conclude that the courts in this case correctly held that

Marrama forfeited his right to proceed under Chapter 13. 

II 

The two provisions of the Bankruptcy Code most relevant to our resolution of the issue are subsections (a) and 

(d) of 11 U. S. C. §706, which provide: 

“(a) The debtor may convert a case under this chapter 
6 MARRAMA v. CITIZENS BANK OF MASS. 

Opinion of the Court 

to a case under chapter 11, 12, or 13 of this title at 

any time, if the case has not been converted under 

section 1112, 1208, or 1307 of this title. Any waiver of 

the right to convert a case under this subsection is 

unenforceable. 

“(d) Notwithstanding any other provision of this section, a case may not be converted to a case under another chapter of this title unless the debtor may be a 

debtor under such chapter.” 

Petitioner contends that subsection (a) creates an unqualified right of conversion. He seeks support from language in both the House and Senate Committee Reports

on the provision. The Senate Report stated: 

“Subsection (a) of this section gives the debtor the onetime absolute right of conversion of a liquidation case

to a reorganization or individual repayment plan case. 

If the case has already once been converted from

chapter 11 or 13 to chapter 7, then the debtor does not

have that right. The policy of the provision is that the 

debtor should always be given the opportunity to repay his debts, and a waiver of the right to convert a

case is unenforceable.” S. Rep. No. 95–989, p. 94

(1978); see also H. R. Rep. No. 95–595, p. 380 (1977) 

(using nearly identical language). 

The Committee Reports’ reference to an “absolute right”

of conversion is more equivocal 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 Chapter 13, the statement that he should 

“always” have 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 under, Chapter 

13. More importantly, the broad description of the right

as “absolute” fails to give full effect to the express limita-
Cite as: 549 U. S. ____ (2007) 7 

Opinion of the Court 

tion in subsection (d). The words “unless the debtor may

be a debtor under such chapter” expressly conditioned 

Marrama’s right to convert on his ability to qualify as a

“debtor” under Chapter 13. 

There are at least two possible reasons why Marrama 

may not qualify as such a debtor, one arising under

§109(e) of the Code, and the other turning on the construction of the word “cause” in §1307(c). The former provision 

imposes a limit on the amount of indebtedness that an

individual may have in order to qualify for Chapter 13

relief.6 More pertinently,7 the latter provision, §1307(c),

provides that a Chapter 13 proceeding may be either 

dismissed or converted to a Chapter 7 proceeding “for

cause” and includes a nonexclusive list of 10 causes justifying that relief.8 None of the specified causes mentions 

—————— 

6Subsection (e) of 11 U. S. C. §109 provides:

“Only an individual with regular income that owes, on the date of the 

filing of the petition, noncontingent, liquidated, unsecured debts of less

than $250,000 and noncontingent, liquidated, secured debts of less than 

$750,000, or an individual with regular income and such individual’s 

spouse, except a stockbroker or a commodity broker, that owe, on the

date of the filing of the petition, noncontingent, liquidated, unsecured

debts that aggregate less than $250,000 and noncontingent, liquidated,

secured debts of less than $750,000 may be a debtor under chapter 13 

of this title.” 

These dollar limits are subject to adjustment for inflation every three 

years. See §104(b). 7Marrama initiated a new Chapter 13 case the day after we granted 

certiorari in the present case. The new case was dismissed on the 

grounds that, under §109(e), he was ineligible to be a Chapter 13 

debtor. See In re Marrama, 345 B. R. 458, 463–464, and n. 10 (Bkrtcy. 

Ct. Mass. 2006). As the Bankruptcy Judge made no such determination on the record before us in this case, and as it is not necessary to

our decision that such a determination be made, we do not consider 

whether Marrama fails to meet the §109(e) debt limit. 8Title II U. S. C. §1307(c) provides, in relevant part: 

“Except as provided in subsection (e) of this section, on request of a

party in interest or the United States trustee and after notice and a

hearing, the court may convert a case under this chapter to a case 
8 MARRAMA v. CITIZENS BANK OF MASS. 

Opinion of the Court 

prepetition bad-faith conduct (although subparagraph 10

does identify one form of Chapter 7 error—which is necessarily prepetition conduct—that would justify dismissal of 

a Chapter 13 case).9 Bankruptcy courts nevertheless 

routinely treat dismissal for prepetition bad-faith conduct 

as implicitly authorized by the words “for cause.” See n. 1, 

supra. In practical effect, a ruling that an individual’s

Chapter 13 case should be dismissed or converted to

Chapter 7 because of prepetition bad-faith conduct, including fraudulent acts committed in an earlier Chapter 7

proceeding, is tantamount to a ruling that the individual 

does not qualify as a debtor under Chapter 13. That 

individual, in other words, is not a member of the class of 

“‘honest but unfortunate debtor[s]’” that the bankruptcy

laws were enacted to protect. See Grogan v. Garner, 498 

U. S., at 287. The text of §706(d) therefore provides adequate authority for the denial of his motion to convert. 

The class of honest but unfortunate debtors who do 

possess an absolute right to convert their cases from 

—————— 

under chapter 7 of this title, or may dismiss a case under this chapter, 

whichever is in the best interests of creditors and the estate, for cause, 

including—

“(1) unreasonable delay by the debtor that is prejudicial to creditors; 

“(2) nonpayment of any fees and charges required under chapter 123 

of title 28; 

“(3) failure to file a plan timely under section 1321 of this title; 

“(10) only on request of the United States trustee, failure to timely

file the information required by paragraph (2) of section 521.” 

Section 521(2), which has since been amended and redesignated as

§521(a)(2), see 119 Stat. 38, imposes a duty on a debtor in a Chapter 7

proceeding to file within a certain time period a statement of intent

with respect to the retention or surrender of property being used to

secure debts. See 11 U. S. C. A. §521(a)(2), (2004 ed. and Supp. 2006). 9 Indeed, because §521(2) by its terms applies only to Chapter 7 debtors, at least one prominent treatise has assumed that this subsection

could only apply to a debtor who has converted a case from Chapter 7 to 

Chapter 13. See 8 Collier on Bankruptcy ¶1307.04[9] (15th ed. rev. 

2006). 
Cite as: 549 U. S. ____ (2007) 9 

Opinion of the Court 

Chapter 7 to Chapter 13 includes the vast majority of the

hundreds of thousands of individuals who file Chapter 7

petitions each year.10 Congress sought to give these individuals the chance to repay their debts should they acquire the means to do so. Moreover, as the Court of Appeals observed, the reference in §706(a) to the 

unenforceability of a waiver of the right to convert functions “as a consumer protection provision against adhesion 

contracts, whereby a debtor’s creditors might be precluded

from attempting to prescribe a waiver of the debtor’s right 

to convert to chapter 13 as a non-negotiable condition of 

its contractual agreements.” 430 F. 3d, at 479. 

A statutory provision protecting a borrower from waiver 

is not a shield against forfeiture. Nothing in the text of

either §706 or §1307(c) (or the legislative history of either

provision) limits the authority of the court to take appropriate action in response to fraudulent conduct by the 

atypical litigant who has demonstrated that he is not 

entitled to the relief available to the typical debtor.11 On 

the contrary, the broad authority granted to bankruptcy 

judges to take any action that is necessary or appropriate

“to prevent an abuse of process” described in §105(a) of the 

—————— 

10We are advised by the Administrative Office of the United States

Courts that 833,148 Chapter 7 cases were filed in fiscal year 2006.

Memorandum from Steven R. Schlesinger, Administrative Office of the 

United States Courts, to Supreme Court Library (Dec. 13, 2006) (available in Clerk of Court’s case file). 11We have no occasion here to articulate with precision what conduct 

qualifies as “bad faith” sufficient to permit a bankruptcy judge to

dismiss a Chapter 13 case or to deny conversion from Chapter 7. It 

suffices to emphasize that the debtor’s conduct must, in fact, be atypical. Limiting dismissal or denial of conversion to extraordinary cases is 

particularly appropriate in light of the fact that lack of good faith in

proposing a Chapter 13 plan is an express statutory ground for denying

plan confirmation. 11 U. S. C. §1325(a)(3); see In re Love, 957 F. 2d, at 

1356 (“Because dismissal is harsh . . . the bankruptcy court should be

more reluctant to dismiss a petition . . . for lack of good faith than to

reject a plan for lack of good faith under Section 1325(a)”). 
10 MARRAMA v. CITIZENS BANK OF MASS. 

Opinion of the Court 

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 merely postpones the allowance of 

equivalent relief and may provide a debtor with an opportunity to take action prejudicial to creditors.13 

Indeed, as the Solicitor General has argued in his brief 

amicus curiae, even if §105(a) had not been enacted, the

inherent power of every federal court to sanction “abusive 

litigation practices,” see Roadway Express, Inc. v. Piper, 

447 U. S. 752, 765 (1980), might well provide an adequate

justification for a prompt, rather than a delayed, ruling on

an unmeritorious attempt to qualify as a debtor under 

Chapter 13.

Accordingly, the judgment of the Court of Appeals is

affirmed. 

It is so ordered. 

—————— 

12Title II U. S. C. §105(a) provides: 

“The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in

interest shall be construed to preclude the court from, sua sponte, 

taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an

abuse of process.” 13Both the Chapter 7 trustee and the United States as amicus curiae 

argue in their briefs that in the interval between the allowance of a

motion to convert under §706(a) and the subsequent granting of a

motion to dismiss under §1307(c), the fact that the debtor would have

possession of the property formerly under the control of the trustee

would create an opportunity for the debtor to take actions that would

impair the rights of creditors. Whether or not that risk is significant,

under our understanding of the Code, the debtor’s prior misconduct 

may provide a sufficient justification for a denial of his motion to 

convert. 
_________________ 

_________________ 

Cite as: 549 U. S. ____ (2007) 1 

ALITO, J., dissenting 

SUPREME COURT OF THE UNITED STATES 

No. 05–996 

ROBERT LOUIS MARRAMA, PETITIONER v. CITIZENS 

BANK OF MASSACHUSETTS ET AL. 

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE FIRST CIRCUIT

[February 21, 2007] 

JUSTICE ALITO, with whom THE CHIEF JUSTICE, 

JUSTICE SCALIA, and JUSTICE THOMAS join, dissenting. 

Under the clear terms of the Bankruptcy Code, a debtor

who initially files a petition under Chapter 7 has the right 

to convert the case to another chapter under which the 

case is eligible to proceed. The Court, however, holds that 

a debtor’s conversion right is conditioned upon a bankruptcy judge’s finding of “good faith.” Because the imposition of this condition is inconsistent with the Bankruptcy

Code, I respectfully dissent. 

I 

The Bankruptcy Code unambiguously provides that a

debtor who has filed a bankruptcy petition under Chapter 

7 has a broad right to convert the case to another chapter.

Title 11 §706(a) states: 

“[A] debtor may convert a case under this chapter to a

case under chapter 11, 12, or 13 of this title at any 

time, if the case has not been converted under section 

1112, 1208, or 1307 of this title.” 

The Code restricts a Chapter 7 debtor’s conversion right

in two—and only two—ways. First, §706(a) makes clear 

that the right to convert is available only once: A debtor

may convert so long as “the case has not been converted 
2 MARRAMA v. CITIZENS BANK OF MASS. 

ALITO, J., dissenting 

[to Chapter 7] under section 1112, 1208, or 1307 of this

title.” Second, §706(d) provides that a debtor wishing to

convert to another chapter must meet the conditions that 

are needed in order to “be a debtor under such chapter.” 

Nothing in §706(a) or any other provision of the Code

suggests that a bankruptcy judge has the discretion to 

override a debtor’s exercise of the §706(a) conversion right 

on a ground not set out in the Code. Thus, a straightforward reading of the Code suggests that a Chapter 7 debtor 

has the right to convert the debtor’s case to Chapter 13 (or

another chapter) provided that the two express statutory

conditions contained in §706 are satisfied. 

This reading of the Code is buttressed by the contrast

between the terms of §706 and the language employed in 

other Code provisions that give bankruptcy judges the 

discretion to deny conversion requests. As noted, §706(a)

says that a Chapter 7 debtor “may convert” the debtor’s 

case to another chapter. Chapters 11, 12, and 13 contain

similar provisions stating that debtors under those chapters “may convert” their cases to other chapters. See 

§§1112(a), 1208(a), and 1307(a) (2000 ed. and Supp IV). 

Chapters 11, 12, and 13 also contain separate provisions 

governing conversion requests by other parties in interest. 

For example, the applicable provision in Chapter 11 

provides: 

“On request of a party in interest and after notice and 

a hearing, the court may convert a case under this 

chapter to a case under chapter 11 of this title at any 

time.” §706(b) (emphasis added). 

See also §§1112(b), 1208(b), (d), and 1307(c).

In these sections, parties in interest are not given a

right to convert. Rather, parties in interest are authorized 

to request conversion. And the authority to convert, after

notice and a hearing, is expressly left to the discretion of 

the bankruptcy court, which “may convert” the case if the 
Cite as: 549 U. S. ____ (2007) 3 

ALITO, J., dissenting 

general standard of “cause” is found to have been met. If 

the Code had been meant to give a bankruptcy court similar authority when a Chapter 7 debtor wishes to convert,

the Code would have used language similar to that in 

§§1112(b), 1208(b), (d), and 1307(c). Congress knew how

to limit conversion authority in this way, and it did not do

so in §706(a). 

In Chapter 7, Congress did directly address the consequences of the sort of conduct complained of in this case.

In §727(a)(3), Congress specified that a debtor may be

denied a discharge of debts if “the debtor has concealed . . . 

records, and papers, from which the debtor’s financial

condition or business transactions might be ascertained.” 

The Code further provides that discharge may be denied if 

the debtor has “made a false oath or account” or “presented or used a false claim.” §727(a)(4). In addition to 

blocking discharge, Congress could easily have deemed 

such conduct sufficient to bar conversion to another chapter, but Congress did not do so.

Instead of taking that approach, Congress included in

the statutory scheme several express means to redress a

debtor’s bad faith. First, if a bankruptcy court finds that 

there is “cause,” the court may convert or reconvert a

Chapter 11 or Chapter 13 restructuring to a Chapter 7 

liquidation. §§1112(b), 1307(c). Second, a Chapter 13

debtor must propose a repayment plan to satisfy the 

debtor’s creditors—a plan that is subject to court approval

and must be proposed in good faith. §§1325(a)(3), (4);

accord, §1328(b)(2). Third, a debtor’s asset schedules are 

filed under penalty of perjury. 28 U. S. C. §1746; Fed. 

Rule Bkrtcy. Proc. 1008. Fourth, a Chapter 13 case is

overseen by a trustee who is empowered to investigate the 

debtor’s financial affairs, to furnish information regarding 

the bankruptcy estate to parties in interest, and to oppose 

discharge if necessary. 11 U. S. C. §§704(4), (6) and (9). 

See also §1302(b) (defining the powers of a Chapter 13 
4 MARRAMA v. CITIZENS BANK OF MASS. 

ALITO, J., dissenting 

trustee in part by reference to the powers of a Chapter 7

trustee). These measures, as opposed to the “good faith” 

requirement crafted by the Court, represent the Code’s 

strategy for dealing with debtors who engage in the type of

abusive tactics that the Court’s opinion targets.1 

In sum, the Code expressly gives a debtor who initially 

files under Chapter 7 the right to convert the case to 

another chapter so long as the debtor satisfies the requirements of the destination chapter. By contrast, the

Code pointedly does not give the bankruptcy courts the 

authority to deny conversion based on a finding of “bad

faith.” There is no justification for disregarding the Code’s 

scheme. 

II 

In reaching the conclusion that a bankruptcy judge may 

override a Chapter 7 debtor’s conversion right based on a 

finding of “bad faith,” the Court reasons as follows. Under 

§706(d), a Chapter 7 debtor may not convert to another 

chapter “unless the debtor may be a debtor under such

chapter.” Under §1307(c), a Chapter 13 proceeding may 

be dismissed or converted to Chapter 7 “for cause.” One 

such “cause” recognized by bankruptcy courts is “bad 

faith.” Therefore, a Chapter 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 Chapter 

13 because the debtor’s case would be subject to dismissal

or reconversion to Chapter 7 pursuant to §1307(c). I cannot agree with this strained reading of the Code. 

The requirements that must be met in order to “be a

debtor” under Chapter 13 are set forth in 11 U. S. C. A.

§109 (main ed. and Supp. 2006), which is appropriately 

titled “Who may be a debtor.” The two requirements that 

—————— 

1And as noted above, 11 U. S. C. §727(a)(4) also addresses such conduct, making it a bar to discharge, but not to conversion. 
Cite as: 549 U. S. ____ (2007) 5 

ALITO, J., dissenting 

are specific to Chapter 13 appear in subsection (e). First, 

Chapter 13 is restricted to individuals, with or without

their spouses, with regular income. Second, a debtor may

not proceed under Chapter 13 if specified debt limits are 

exceeded.2 

As the Court of Appeals below correctly understood, 

§706(d)’s requirement that a debtor may convert only if 

“the debtor may be a debtor under such chapter” obviously 

refers to the chapter-specific requirements of §109. In re 

Marrama, 430 F. 3d 474, 479, n. 3 (CA1 2005). 

Rather than reading §§109(e) and 706(d) together, the

Court puts §109(e) aside and treats §706(d) as a separate 

repository of additional requirements (namely, the absence of the grounds for dismissal or reconversion under

§1307(c)) that a Chapter 7 debtor must satisfy before 

conversion to Chapter 13. But §1307(c) plainly does not 

set out requirements that an individual must meet in 

order to “be a debtor” under Chapter 13. Instead, §1307(c) 

sets out the standard (“cause”) that a bankruptcy court 

must apply in deciding whether, in its discretion, an already filed Chapter 13 case should be dismissed or converted to Chapter 7. Thus, the Court’s holding in this case 

finds no support in the terms of the Bankruptcy Code. 

In holding that a bankruptcy judge may deny conversion

based on “bad faith,” the Court of Appeals appears to have

been influenced by the belief that following the literal 

terms of the Code would be pointless. Id., at 479–481. 

—————— 

2 “Only an individual with regular income that owes, on the date of

the filing of the petition, noncontingent, liquidated, unsecured debts of

less than $307,675 and noncontingent, liquidated, secured debts of less

than $922,975, or an individual with regular income and such individual’s spouse, except a stockbroker or a commodity broker, that owe, on

the date of the filing of the petition, noncontingent, liquidated, unsecured debts that aggregate less than $307,675 and noncontingent, 

liquidated, secured debts of less than $922,975 may be a debtor under

chapter 13 of this title.” §109(e) (Supp. 2006) (footnote omitted). 
6 MARRAMA v. CITIZENS BANK OF MASS. 

ALITO, J., dissenting 

Specifically, the Court of Appeals observed that if a debtor 

who wishes to convert from Chapter 7 to Chapter 13 has

exhibited such “bad faith” that the bankruptcy court 

would immediately convert the case back to Chapter 7

under §1307(c), then no purpose would be served by requiring the parties and the court to go through the process

of conversion and prompt reconversion. Id., at 481. 

It is by no means clear, however, that conversion under 

§706(a) followed by a reconversion proceeding under 

§1307(c) would be an empty exercise. The immediate 

practical effect of following the statutory scheme is compliance with Bankruptcy Rule 1017(f), which applies

Bankruptcy Rule 9014 to the reconversion. Fed. Rule 

Bkrtcy. Proc. 1017(e)(1). Rule 9014 (a), in turn, requires

that the request be made by motion and that “reasonable 

notice and opportunity for hearing . . . be afforded the

party against whom relief is sought.” The Court’s decision 

circumvents this process and forecloses the right that a 

Chapter 13 debtor would otherwise possess to file a Chapter 13 repayment and reorganization plan, 11 U. S. C. 

§1321, which must be filed in good faith and which must

demonstrate that creditors will receive no less than they

would under an immediate Chapter 7 liquidation,

§§1325(a)(3) and (4); accord, §1328(b)(2). While the plan

must be filed no later than 15 days after filing the petition 

or conversion, the debtor may file the plan at the time of 

conversion, i.e., before 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 bankruptcy court must consider the debtor’s plan (if already filed) and, if the plan

must be considered, whether the court must take into 

account whether the plan was filed in good faith, whether

it honestly discloses the debtor’s assets, whether it demonstrates that creditors would in fact fare better under the 

plan than under a liquidation, and whether the plan in 
Cite as: 549 U. S. ____ (2007) 7 

ALITO, J., dissenting 

some sense “cures” prior bad faith. Today’s opinion renders these questions academic, and little is left to guide 

what a bankruptcy court must consider, or may disregard, 

in blocking a §706(a) conversion.3 

The Court notes that the Bankruptcy Code is intended

to give a “‘“fresh start”’” to the “‘“honest but unfortunate 

debtor.”’” Ante, at 1, 9 (quoting Grogan v. Garner, 498 

U. S. 279, 286, 287 (1991)). But compliance with the 

statutory scheme—conversion to Chapter 13 followed by

notice and a hearing on the question of reconversion—

would at least provide some structure to the process of

identifying those debtors whose “‘bad faith’” meets the 

Court’s standard for consignment to liquidation, i.e., “‘bad 

faith’” conduct that is “atypical” and “extraordinary.” 

Ante, at 10, n. 11. 

III 

Finally, the Court notes two alternative bases for its

holding. First, the Court points to 11 U. S. C. §105(a), 

which governs a bankruptcy court’s general powers.4 

Second, the Court suggests that even without a textual

basis, a bankruptcy court’s inherent power may empower 

it to deny a §706(a) conversion request for bad faith. 

Obviously, however, neither of these sources of authority

authorizes a bankruptcy court to contravene the Code. On 

the contrary, a bankruptcy court’s general and equitable

powers “must and can only be exercised within the con-

—————— 

3 Indeed, the only procedural guidance for such a situation is Federal 

Rule of Bankruptcy Procedure 1017(f)(2), which requires the filing of a

motion to convert by the debtor and service thereof. 4 “The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in

interest shall be construed to preclude the court from, sua sponte, 

taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an

abuse of process.” §105(a). 
8 MARRAMA v. CITIZENS BANK OF MASS. 

ALITO, J., dissenting 

fines of the Bankruptcy Code.” Norwest Bank Worthington v. Ahlers, 485 U. S. 197, 206 (1988); accord, SEC v. 

United States Realty & Improvement Co., 310 U. S. 434, 

455 (1940) (“A bankruptcy court . . . is guided by equitable 

doctrines and principles except in so far as they are inconsistent with the Act”).

Ultimately, §105(a) and a bankruptcy court’s inherent 

powers may have a role to play in a case such as this. The 

problem the Court identifies is a real one. A debtor who is 

convinced that he or she can successfully conceal assets

has a significant incentive to pursue Chapter 7 liquidation

in lieu of a Chapter 13 restructuring. If successful, the 

debtor preserves wealth; if unsuccessful, the debtor can

convert to Chapter 13 and land largely where the debtor

would have been if he or she had fully disclosed all assets

and proceeded in Chapter 13 in the first instance.

Bankruptcy courts have used their statutory and equitable authority to craft various remedies for a range of bad 

faith conduct: requiring accountings or reporting of assets 5; enjoining debtors from alienating estate property 6; 

penalizing counsel 7; assessing costs and fees 8; or holding 

—————— 

5See, e.g., In re All Denominational New Church, 268 B. R. 536 

(Bkrtcy. App. Panel CA8 2001) (affirming dismissal for failure to

comply with required monthly reporting); In re Martin’s Aquarium, 

Inc., 225 B. R. 868, 880 (Bkrtcy. Ct. E. D. Pa. 1998) (“[A] debtor may, in

an appropriate case, be required to produce an accounting, and . . . a

bankruptcy court does indeed have the power to so order [this equitable 

remedy]”). 6See, e.g., In re Bartmann, 320 B. R. 725, 732–733 (Bkrtcy. Ct. N. D. 

Okla. 2004); In re Newport Creamery, Inc., 293 B. R. 293 (Bkrtcy. Ct. 

R. I. 2003); In re Peklo, 201 B. R. 331 (Bkrtcy Ct. Conn. 1996). 7See, e.g., In re Everly, 346 B. R. 791, 797 (Bkrtcy. App. Panel CA8

2006) (bankruptcy court’s §105 powers include authority to sanction

counsel); In re Brooks-Hamilton, 329 B. R. 270 (Bkrtcy. App. Panel CA9

2005) (upholding sanction and suspension of debtor’s counsel); In re 

Washington, 297 B. R. 662 (Bkrtcy. Ct. S. D. Fla. 2003). 8See, e.g., In re Deville, 280 B. R. 483 (Bkrtcy. App. Panel CA9 2002); 

In re Johnson, 336 B. R. 568, 573 (Bkrtcy. Ct. S. D. Fla. 2006); In re 
Cite as: 549 U. S. ____ (2007) 9 

ALITO, J., dissenting 

the debtor in contempt 9. But whatever steps a bankruptcy

court may take pursuant to §105(a) or its general equitable powers, a bankruptcy court cannot contravene the

provisions of the Code.

Because the provisions of the Code rule out the procedure that was followed in this case by the bankruptcy 

court, I would reverse the judgment of the Court of 

Appeals. 

—————— 

Couch-Russell, No. 00–02226, 2003 W L 25273863 (Bkrtcy. Ct. Idaho 

2003); In re Gorshtein, 285 B. R. 118 (Bkrtcy. Ct. S. D. N. Y. 2002). 9See, e.g., In re Sekendur, 334 B. R. 609 (Bkrtcy. Ct. N. D. Ill. 2005) 

(imposing contempt sanction for serial and vexatious bankruptcy 

filing); In re Tolbert, 258 B. R. 387 (Bkrtcy. Ct. W. D. Mo. 2001) (same); 

In re Swanson, 207 B. R. 76 (Bkrtcy. Ct. N. J. 1997) (imposing civil 

contempt under §105 for failure to vacate property).