EL ECTRONI C CI TATI ON: 2007 FE D App. 0002P (6th Cir.) File Na me: 07b0002p.06
BA NK RU P TC Y A P P ELLA TE P AN EL OF THE SI XT H C IR CU IT
I n re: THOMAS C. CONDON,
Debtor.

______________________________________ THOMAS C. CONDON, Ap pe lla nt,

v. J OHN B RADY and MARY SMI TH, Ap pe lle e s.

_____________________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) No. 06-8021

Appea l from the United States B ankruptc y Court fo r t he Sou the rn

Di str ic t of

Oh io, Wes te rn

Di vis ion a t Cin c inn a ti. No. 05-23836. Argued: Novembe r 8, 2006
Dec ided and F iled: J anuar y 12, 2007
B e fo re : G REG G, PAR SON S, a nd SCO TT , B ank

ru ptc y Ap pe llate Pane l Judg e s.

____________________ CO UN SEL
ARG UED: Har

ry B. Plotnick, Cincinnati, Ohio, for Appe llant. Eric W. Goering , Cincinnati, Ohio, for Appe llees. O N B RI E F: Ha rry B. P l o t n i ck , C i n ci n n at i , Oh i o , fo r Ap p el l an t

. E ri c W

. Go er i n g, Cin c inn a ti, Oh io, fo r A

pp e lle e s.- 2- ____________________ OP IN ION

____________________ J AMES D. GREGG, Bankruptc y Appellate Panel J udg e. Thomas C

. Condon (the “ Debtor” ) appea ls the bankruptcy

court’s de nial of his motion to conver t his chapte r 7 case to chapter 13. For the re asons that follow, the ba nkruptcy court’s de cision is VACATED and REMAND ED.
I. ISS UE ON AP P EAL
What fa c tor s shou ld a bank ru ptc y c ourt e xami ne to d e te rm ine wh e the r a de bto r’ s mo tio n to

c o n v e rtf r o m c h a p t e r 7 t o c h a p t e r 1 3 s h o u l d

b e d e n i e d

b e c a u s e o f l a c k o f g o o d f a i t h ?
II. JU RI SDI CT ION AND STANDARD OF RE VI EW
Th e B ank ru ptc y Ap pe llate Pane l of the Sixth C ir c uit ha s juri sd ic tio n to de c ide thi s a pp e a l. The United States District Court for the Southern District of Ohio h as authorized appe als to the Pane l, a nd a fi na l or de r o f t

he ba nk ru ptc y c ourt may be a pp e a le d by ri ght un de r 2 8 U .S. C. § 158(a) (1). F or purpose s of appe al, an or der is fina l if it “ends t he litigation on the merits and leave s nothing f

o r t h e co urt to do but ex ecute the judg ment.” Midland Asphalt Cor p. v. United States , 4 8 9 U

. S

. 7 9 4 , 7 9 8 , 1 0 9 S

. C t

. 1 4 9 4 , 1 4 9 7 (1 9 8 9 ) ( ci t at i o n s o m i t t ed ). An o rd er d en y i n g a debtor’s r equest to conve rt from c hapter 7 to ch ap t er 13 is a final orde r. Cop pe r v . Co pp e r ( In re Cop pe r) , 314 B.R. 628, 6 3 0 (B

. A. P

. 6 t h Cir. 2004), aff’d , 426 F.3d 810 ( 6th Cir. 2005) (citations omitted). The bankruptcy court’s determination of whether a debtor acte d in g ood faith i s a finding of fac t, which is review ed on appe al for c lear err or. Id

. (c i t i n g Al t v. Un ite d Stat es ( In re Al t) , 305 F.3d 41 3, 41 9 ( 6th

Cir . 2 00 2) ; Ha rd

in v . Ca ldw e ll (

In re Cal dwe ll) , 895 F.2d 1123, 1127 ( 6th Cir. 1990)); see Ade ll v. John Richards Hom es Bldg. Co. ( In re J ohn Richards Home

s Bldg. Co.) , 439 F.3d 248, 254 (6th Cir. 2006). Finding s of fact “will only be cle arly

err oneous whe n, althoug h there may be

some ev id e n c e to s u

p p o rt th e f

in d in g , th e r e v ie w in g c o u rt o n th e e n ti r e e v id e n c e is le f t w ith the definite and firm conviction that a mistake ha s been c ommitt ed.” In re Al t , 305 F.3d at 422 (quoting United States v. Latouf

, 132 F.3d 320, 331 (6th Cir. 1997)) (a dditional citation and internal quotation marks omitted).- 3-

Th e ban kru pt cy

cou rt ’s “ con clu si on s w it h regardto th e le gal s tan dard applic a ble to g oo d f

a ith d e te r mi n a ti o n s ar e qu e s ti o n s o f la w r e v ie w e d u nder the de novo standard.” In re Love , 957 F.2d 1 3 5 0 , 1 3 5 4 (7 t h C i r. 1 9 9 2 ) ( ci t i n g United States v. Singer M fg. Co. , 3 74 U. S. 1 74 , 1 93 , 8 3 S. Ct. 17 73 , 17 83 (1 96 3) ); see Sorah v. Sorah ( In re Sorah) , 1 6 3 F. 3 d

3 9 7 , 4 0 0 (6 t hC i r. 1 9 9 8 ) ( ci t i n g Long v. C alhoun ( In re Calhoun) , 715 F.2d 1103, 1111 (6th Cir. 1983) (application of leg al standar ds and allocation of the burden of proof a re c onclusions of law)) ; Luper v. Columbia Gas of Ohio, Inc. ( In

re Carl ed , Inc.) , 91 F.3d 811, 813 ( 6th Cir. 1996) (“Althoug h the fa ctual under pinnings of the bankruptc y

co u rt ’s decision must be upheld unless c lear ly err oneous, the a

pplication of the leg al standar d to th e f

a c ts is a qu e s ti o n o f la

w th a t w e r e v ie w d e n o v o
. ” ) ( c it a ti o n o mi tt e d )

. D e novo review re q uires the a

ppellate c ourt to interpre t “‘the la w independe ntly

of the trial c ourt’s d et ermination.’” T

h i c k s t u n B r o s
. Eq u i

p
. C o
. v
. E n c o m p a s s S e r v s
. C o r p
. ( I n r e T h i c k s t u n Br os
. Equip. Co.) , 3 4 4 B. R

. 5 1 5 , 5 1 7 (B

. A. P

. 6 t h C i r
. 2 0 0 6 ) ( qu o t i n g Treinish v. Norw est Bank M inn., N.A . ( In re Pe ria nd

ri) , 266 B.R. 651, 653 (B .A.P. 6th Ci r. 2001))

.

III . F AC TS
Th e De bto r i s a

pr of e ssi on a l ph oto g ra

ph e r w ho wa s c on vic te d of mul tip le c ounts of a bu se of a c orpse in the Court of Comm on Pleas for Hamilton County , Ohio. The c onviction resulted fr om photogr aphs of dead bodies taken by the Debtor at t he Hamilton County Coroner’ s Offic e. To date, the Debtor

has ser ved at lea st twelve months in prison for these of fense s. I n addition to the criminal char g es, the De btor also fa ces c ivil li ability for hi s actions at the morgue. John Brady and Mar y Sm it h ( th e “ A p p e ll e e s ” ) r e p r e s e n t a c e rti f ie d c la s s o f p e r s o n s w h o s u e d th e D e b to r f or tortious conduct r elating to the photogr aphs in the United States District Court for the Southern D istrict of Oh io ( the “ c la ss a c tio n la

ws uit ” ). Th e c e rt if

ie d cla ss i nc lud e s r e la tiv e s o f t he de c e a se d in div idu a ls whose re mains wer e in the m org ue when the Debtor’s photogr aphs were take n. The damag es soug ht by the Appellee s in the class ac tion lawsuit are in the “ multi-mi llion doll ar . . . r ang e.” ( Tr. at 4.)
The De btor filed a voluntary petition for relief under cha pter 7 of the Ba

nkruptcy Code on October 15, 2005. The Appellee s wer e g rante d relief from stay to pursue the c lass action lawsuit by order enter ed Oc tober 27, 2005.
Sho rt ly the re a ft e r, on Dec e mbe r 1 , 2 00 5, the De bto r f ile d a mot ion to c on ve rt

his c a se to chapte r 13. The A

ppellees f iled an objec tion to the requested c onversion, and the court he ld anI n actua lity , the Debtor’ s schedule s listed $107,639.34 in unse cure d debt, not inc luding the 1 class ac tion tort claim the amount of which wa s scheduled a s “unknown.”
I t is a sto un din g that th e De bto r’ s atto rn e y , w ho has prac ti ced ba nk ru ptc y law f or tw e nty 2 y ear s, could have overlooke d the potential applica bility of 11 U.S.C. § 523(a) (6) when he advised the Debtor

to file under c hapter

7. Yet base d upon the re cord, that is what occur red in this case

.

- 4- evidentiar y hear ing on January

24, 2006. The De btor appe ared at the he aringand g ave e x tensive testimony reg ardingthe circ umstances that led to his bankr upt cy fi l i n g, his curre nt financia l situation, and the rea sons for his motion to conver t to chapte r 13. The Debtor ex plained that after his relea se fr om prison, he suffe red f rom sever e depr ession and had a difficult time obtaining employ ment . Due to the notorie ty g ener ated by

the cr iminal case, the Debtor w as unable to work in t he c omm e rc ia l phot og ra

ph y fi e ld. He a c c e pte d emp loy me nt f or sig nif ic antl y re du c e d w a g e s in

a me ta l f a br ic a tio n s ho p. With the c la ss a c tio n s uit loo min g and

lit tle po ssi bil ity

of inc re a sin g his income in the future, t he Debtor filed bankruptcy in a last ditch eff ort to move on with his financial life. T h e D e b to r e xp la in e d th a t h e h a d r e lati v e ly f e w c r e d it o r s o th e r th an th e c la s s a c ti o n tort claimants. He a lso acknowle dg ed that his primary rea son for filing bankruptc y was to dischar g e the 1 potential tort liabilit y
. The Debtor stated that he filed his c ase under chapte r 7 at the advice of hi s b ankruptc y attorney . After

the Debtor ’s initial meeting of cre ditors, the chapte r 7 t ru s t ee all eg edly asked the De bto r’ s atto rn e y

wh y he ha d a dv ise d th e De bto r t o f ile un de r c ha

pte r 7 wh e n th e po te nti a l c la ss
a c tio n d e bt w a s li ke ly

dis c ha rg e a ble in chapt e r 1 3. Th e De bto r’ s atto rn e y a pp are ntl y re a lize d h is

err or at that point, and advise d the Debtor to file a motion to convert. The motion was filed af ter 2
t h e c l a s s a c t i o nc l a i m an t s o b t a i n e d r e l i e f f r o m t h e a u t o m a t i c s t ay.
Sho rt ly be fo re the he ari ngon

the m oti on

to c on ve rt , th e De bto r f

ile d ame nd e d s c he du le s I and J. Amended schedule I disclosed the Debtor’ s monthly income as $2,166.66 but did not include any income fr om the Debtor’ s spouse. At the hea ring , the Debtor

testified that his w i fe has an inc ome of a

pp ro xima te ly $1 ,0 00 pe r mon th. Th e De bto r’ s atto rn e y c la ime d r e sp on sib ili ty

fo r t his omission, repr esenting to the court that the wife’s income wa s proper ly excluded from the sc hedules filed with the original chapter 7 petition, and that her income w as neve r adde d once c onversion wa s
so ug ht.- 5-

Amended sc hedule J disclosed ex penses totaling $2, 0 6 5

. The De btor g ave c onflicting te sti mony a bo ut the se e xpe ns e s: a t on e po int he state d th a t th e sc he du le d amou nts re pr e se nte d h is total household expenses, but he later c larified that the fig ures ref lected only

his portion of the

e x pen ses
. He a lso te sti fi e d th a t th e $2 00 mon thl y a uto pa y me nt l ist e d o n s c he du le J we nt t o h is mother to repa

y her for expenses she incurre d repa iring a jointly owned vehicle. The De btor furthe r
e xpla ine d tha t the monthl y $4 00 lis te d for “ re g ula r expe ns e s fr om o pe ra

tio n o f b us ine ss” re la te d to his re nta l of

art stu dio sp a c e . Ac c or din g to the De bto r, his sis te r le a se d the sp a c e and pe rm itt e d h im to use it to “put [ his] artistic life b ac k t o get h er.” (J.A. at 76.) Although he was not a pa rty to the le a se , th e De bto r r e imb ur se d h is s ist e r f or the re nta l c os ts. Th e De bto r a lso state d th at the s tud io space contained approxim ately ten sculptures a nd six or seve n paintings that had not been disc losed in h is b ank

ru ptc y pe tit ion

. He e xpla ine d that he ha d do ne that wo rk pr ima ri ly fo r h is e mot ion a l w e llbe ing , w a s “not act iv ely e ng a g e d in tr y ingto s e ll the wo rk ,” and ha d n ot d isc los e d th os e ite ms beca use he hone stly

did not believe they

had any value. (J.A. at 76-77.) Alternatively , he stated that he ha d a n “ un sp ok e n” a g re e me nt wit h his sist e r that th e pr oc e e ds fr om a ny wo rk do ne in t hat st ud io would belong to her.
Th e De bto r a lso fi le d a

pr op os e d c ha

pte r 1 3 p lan just pr ior to t he he ari ngon

the mot ion

to

conver t. The De btor’s propose d plan extended thirty -six months and provided a t h re e perce nt distribution t o unsecur ed cr editors.
At the conc lusion of t he hearing , the bankruptcy court took the matter

under a dvisement. On April 3, 2006, the court issued its m emora ndum opinion finding that the De btor’s motion to convert was filed in ba d faith. The court’s opini on focuse d on three main fac tors which sug g ested the D ebtor la c ke d g oo d f

a ithin s e e kin g c ha

pte r 1 3 reli ef. Firs t, the c ourt no te d th a t th e De bto r’ s mo tio n to

c on ve rt wa s mo tiv a te d b y

his de sir e to “ a va il h ims e lf of the su pe r- dis c ha

rg e un de r C hapte r 1 3 to be tte r d isc ha

rg e any po te nti a l ju dg me nt a g ain st him in t he c la ss a c tio n. ” (J.A . at 30 .) Whil e thi s
a lon e did no t e sta bli shba d f

a ith , th e c ourt

de te rm ine d t hat it

wa s a fa c tor to b e c on sid e re d in assessing the Debtor ’s g ood faith under the totality

of circ umstances. Next, the court noted that the De btor’s cha pter 13 plan la sted the statutory minimum of three y ear s and propose d to repa y only three per ce n t o f his unsecur ed debt. Althoug h the B ankruptc yThis split will likely soon be settled by the United States Supreme Court. See Marrama v. 3 Citi zens Bank of Mass. (

In re M arrama) , 430 F.3d 474, 482 ( 1st Cir. 2005) , cert. granted , 1 26 S. Ct

. 2859, 165 L . Ed.2d 894 (2006) ( argued Nove mber 6, 2006).

- 6- Cod e do e s n ot r e qu ir e the De bto r to do mor e tha n this , the c ourt fo un d tha t the pe rc e nta g e and le ng th of re pay ment sug g ested a

lack of g ood faith. Finally , and most importantly , the cour t cited i nacc urac ies in the Debtor’ s schedules a nd conflicting testimony

at the hea

ring on the motion to convert. The c ourt noted that neither the Debtor’ s mother nor his sister we re listed as c reditors in the Debtor’ s schedule s, despite the fac t that he pay s them $ 200 and $400 a month, re spectively . The c ourt also observe d that the Debtor had failed to disclose the art work in his studio and his wife’s income on his sche dules. I t found that the Debtor’ s expl anations for these omissions were inconsistent and unper suasive.

Ba sed on these f

indings, the ba

nkruptcy court e ntere d an order on April 3, 2006, denying the Debtor’ s motion. This timely appea l followed.
IV . D ISC USS ION
Conversion from c hapter

7 to c hapter 13 is g overne d by § 706(a) of the B ankruptc y Code. Se c tio n 7 06 (a ) s ta te s: The de btor may conver

t a case under t his chapte r t o a case under chapter 11, 12, or 1 3 o f this titl e at a

ny time, if the ca se has not bee n conver ted under section 1112, 12 08 , o r 1 30 7 o f t

his tit le . Any wai ve r o f t he ri g ht t o c ov e rt

a c a se un de r t

his subsection is unenfor cea

ble. 11 U. S.C. § 7 06 (a ). Th e c ir c uit c ourt s of ap pe a ls h a ve dis a g re e d w he the r a de bto r h a s an a

bs olute ri g ht t o c on ve rt fr om c ha

pte r 7 to c ha

pte r 13

. Th e Court of Ap pe a ls f or the Sixth C ir c uit

ha s h e ld 3 that a de bto r’ s r ig ht t o c on ve rt un de r § 70 6( a ) i s n ot a

bs olute and

may be de nie d und e r c e rt a in circ umstances, includinga lac k of g ood faith. Cop pe r v . Co pp e r ( In re Cop pe r) , 426 F.3d 810, 815 (6 th C i r
. 2 0 0 5 )

. I n s o h o l d i n g , t h e c o u rt o f a p p e a l s n o t e d t h a t i t h a d p r e v i o u s l y d e t e r min e d th a t a chapte r 13 petition c ould be dismiss ed if it wa s not f iled in good f

aith, and ther efor e found it “log ical to conclude that conver sion from Chapter 7 to Chapter 13 may also be denied in the absence of g ood faith . . . .” Id. at 8 1 7 (c i t i n g Al t v . U nit e d S tat es ( In re Al t) , 305 F.3d 413, 418-19 (6th Cir. 2002)). Th e c ourt ob se rv e d th a t “ [c]o mmo n s e ns e dic ta te s th a t the ba nk ru ptc y c ourt sh ou ld h a ve a

uth or ity to police the integ rity

of its proce eding s.” Id . Acc ordingl y , t h e court of a ppeals a ffirme d and- 7-

adopted the ba

nkruptcy appellate panel’ s conclusion that “if, upon its review of the fa cts, the ba nk ru ptc y c ourt fi nd s that the de bto r’ s re qu e st fo r c on ve rs ion wa s ma de in b a d f a ith , o r r e pr e se nts

an attempt to a

buse the bankruptc y proce ss, the court may deny the re quested c onversion.” Id. at 815 (q u o t i n g Cop

pe r v
. Cop

pe r ( In re Cop pe r) , 3 1 4 B. R

. 6 2 8 , 6 3 6 (B

. A. P

. 6 t hC i r. 2 0 0 4 ) ( qu o t i n g In re Br own , 293 B.R. 865, 870 (B ankr. W.D. Mich. 2003))

. L ike Copper , most reported de cisions reg ardinga debtor ’s re quest for conversion to chapter 13 fo c us on

the thr e sh old

qu e sti on of wh e the r a

de bto r’ s r ig ht t o c on ve rt un de r § 706 (a ) i s

“ a bs olute ,” and

no t on the fa c tor s to be e xami ne d to det e rm ine g oo d f a ithor la c k th e re of

. F or tho se
c ourt s th a t in te rp re t § 7 06(a) as prov idi nga “ on e -t ime a

bs olute ri g ht” to c on ve rt , e vid e nc e that a debtor lac ks g ood faith or is see king to a buse the ba

nkruptcy proce ss is irreleva

nt. See, e .g., Miller

v . U nit e d S tat es Tr us te e (

In re Mi lle r) , 303 B.R. 47 1, 475 (B .A.P. 10th Ci r. 2003) ( permitting

conver sion despite bankruptcy court’s findings that debtor had eng ag ed in eg reg ious behavior a nd abuses of the bankruptc y court and Code to “ avoid pay ing cre ditors”). I n repor

ted case s where the courts have c o n c lu d e d

th a t a d e b to r ’ s mo ti o nto c o n v e r t m ay b e d e n ie d

f o r la c k o f g o o d f a it h , the debtors’ be havior is a lmost alway s shocking ly eg reg ious. See, e .g. , Marrama v. Citizens Bank of M a s s
. ( In re M arrama) , 430 F.3d 474, 482 ( 1st Cir. 2005) , cert. granted , 1 2 6 S

. C t

. 2 8 5 9 , 1 6 5 L. Ed.2d 894 (2006) (debtor’ s actions prese nted “cla ssic profile of playing fast and loose wi t h the bankruptc y

proce ss”); In r e C opper , 426 F.3d at 815-16 (debtor “all but admitted a lac k of g ood fa ith ” ). Du e to t

he ou tr a g e ou s n a tur e of

the de bto r’ s c on du ct in

mos t of the se c a se s, the c ourt s, including the Six th Circuit Court of Appeals, h av e not been c alled upon to closely examine the standard f or dete rmining w hether

a debtor ’s motion to convert wa s made in bad fa ith. This case , by contra st, require s a more de tailed ana ly sis of the fac tors to be consider ed.

I n denying the Debtor’ s motion to conver t, the bankruptc y court acknow ledg ed that, under Copper , “[g]ood faith is de termined by using the ‘totality of the c ircumstance s’ ana ly sis” that applies “whe n deter

mining whe ther a

debtor should be pe rmitted to comme nce a cha pter 13 c ase.” (J.A. at 28; emphasis supplied.) Howe ver, the court actua lly applied the standa

rd that is used to deter

mine whether a debtor has propose d h i s ch ap t er 1 3 plan in g ood faith for purposes of § 1325( a) of the Ba nkruptcy Code. The c ourt stated that “[a] debtor must meet the cr iteria of 11 U .S.C. § 1325(a) befor e conve rting to Chapter 13” a nd “[u] n d er 1 1 U.S.C. § 1325(a)(3) , the debtor must have proposed his plan in g ood faith.” (J.A. at 27.) The court further stated that “[t] he burde n of proving- 8-

g ood faith is on the debtor.” (J.A. at 28.) Acc ording ly , in rea ching its conclusion t hat the conve rsion was in bad f

aith, the bankr

uptcy court foc used on the pe rce ntag e and le ng th of repa y ment under the De bto r’ s p ro po se d c ha

pte r 13 pla

n and the ina c c ur a c ie s in the De bto r’ s sc he du le s. Th e c ourt a lso discussed the De btor’s m o t i v e i n seekingconver sion to chapter 13. Stating that the Debtor had “openly ad m i t t ed that his Motion was based solely on a desire to avoid a dete rmination that the potential judgme nt ag ainst him would not be discharg eable under Chapter 7, and not for the purposes of re paying his c reditors,” the cour t concluded that t h e Debtor’ s motion was not broug ht in good faith. (J.A. at 31.)
Given Copper ’s re latively limit ed discussion of the circ umstances that might lead to denia l of motions to convert, it is understandable that a bankr uptcy court mig ht focus solely on the g ood faith standar ds that apply

in the plan conf

irmation context. However, f or the followingrea sons, the Panel conc ludes that the bankruptcy court erre d as a matter of law when it relied e x clusively on the plan conf irmation standard of g ood faith and the c orre sponding bur den of pr oof in its analy sis of the De bto r’ s mo tio n to c on ve rt

. The “ totality

of the c ircumstance s” test re fer ence d in Copper w a s d i s c u s s e d b y the Sixth Circuit in Al t . The issue in Al t was whe t h er a

debtor’s c hapter

13 case could be dismissed for “ca use” unde r § 1307(c ) upon a f indi n g that the ca se wa s not filed in good f aith. To answe r that question, the court f

irst refe rre d to the twelve f actor s it considers “in deter mining whe ther a

[chapter 13] plan has been pr oposed in g ood faith under § 1325(a) .” In re Al t , 305 F.3d at 419. Those fa ctors include: (1) the de btor’s income; (2 ) t he de bto r’ s li vin g e xpe ns e s; (3 ) t he de bto r’ s atto rn e y ’s fe e s; (4) the e x pecte d duration of the Cha pter 13 plan; (5) the sinc erity

with which the debtor

has petitioned for

relief under Chapte r 13; (6 ) t h e d eb t o r’ s p o t en t i al fo r f u tu re ea rn i n g; (7 ) a ny sp e c ia l c ir c ums tanc e s, su c h a s unu su a lly hig h me dic a l e xpe ns e s; ( 8 ) t h e f r e qu e n c y w i t h w h i c h t h e d e b t o r h a s s o u g h tr e l i e f

b e f o r e i nb an kr

u p t c y; (9) the c ircumstance s under whic h the debt wa s incurre d; (10 ) th e a mo u n t o f

p ay me n t o f f e r e d b y [th e ] d e b to r

a s in d ic a ti v e o f

th e d ebtor’s sin c e ri ty to r e pa y the de bt; (11) the bur den which a dminist ration would plac e on the trustee ; (1 2) the statut or ily

mand a te d p oli c y

that ba nk ru ptc y pr ov isi on s b e c on str

ue d li be ra lly in favor of

the debtor.- 9-

Id. (citi n g So cie ty Nat’ l B an k v . B arre tt (

In re Ba rre tt) , 964 F.2d 588, 592 ( 6th Cir. 1992)). The court then note d that other c ircuits had re cog nized sim ilar fact o rs when de termining whether a debtor’s c hapter

13 petition has been f

iled in good f

aith. Id

. (c i t i n g In re Love , 957 F.2d 1350, 1357 (7 th C ir . 1 99 2) ). Th os e fa c tor s are : the nature of the de bt, including the que stion of whet h er t h e debt would be nondischarg eable in a Chapter 7 proce eding ; the timing of the pe tition; how the debt arose ; the debtor’s moti ve in filing the petition; how the debtor’s a ctions aff ecte d cre ditors; the debtor’s tre atment of c reditors both bef ore a nd afte r the pe tition was filed; and whe ther the de btor has been forthcoming with the bankruptc y court a nd the c re dit or s. Id . (citin g In r e L ove , 957 F.2d at 1357) (additional citations omitted). B eca use the a bove

un e nume rate d f

a c tor s r e la te to t

he broad que sti on

of wh e the r t

he c ha pte r 1 3 c a se wa s in iti a te d in g ood faith, rather than the more na rrow que stion of wh et h er t h e plan itself was pr oposed in g ood faith, the Love and Ba rre tt fac tors are not coterminous. See I n re Love , 957 F.2d at 1360 (explaining that “while a

lack of g ood faith in the structuring of a pa rticular pla

n may block conf

irmation of that plan, the petition itself is still viable, abse nt a showing that the entire petition was filed in bad f aith”). Stil l, the factors overlap t o some extent and both tests are designed to detec t abuses of the provisions and spirit of

chapter 13 . There fore , Al t rec og nized that, when attemptin g t o d i s cer n a debtor ’s motive in initiating chapter 13 proce eding s under the totality of circumstance s, a bankruptcy court may proper ly consider a

debtor’s g ood faith as ref

lected in a proposed chapte r 13 plan. Id. The c ourt of appe als ca

utioned, howeve r, that “g iven the more sever e conse quence s
. . . ‘the ba nkruptcy court sh ou ld b e mor e re luc tant t o d ism iss a pe tit ion un de r Se c tio n 13 07 (c ) f or la c k o f g oo d f

a iththa n to reje ct a plan f

or lac k of g ood faith under Section 1325(a) .’” Id

. at 4 2 0 (q u o t i n g In re Love , 957 F.2d at 1356). The court also stated t hat t he “burden of showing the debtor’s lack of g ood faith” unde r § 1307(c) “is borne by

the par ty seekingdismiss al.” Id

. (c i t i n g In r e L ove , 957 F.2d at 1350);

c om pa re Ha rd

in v. Cal dwe ll ( In re Cal dwe ll) , 895 F.2d 1123, 1126 ( 6th Cir. 1990) (“The party who seeks a discharg e under

Chapter 13 be ars the bur den of pr oving g ood faith” unde r § 1325(a ).).

I n e ff e c t, de nying a de bto r’ s mot ion to c on ve rt fr om c ha pte r 7 to c ha

pte r 13 ha s the same “har sh re s u l t ” as d i s m i ssal of a c hapter 13 case under § 1307( c): that is, the debtor is denied the opportunity

to propose and pe rfor

m a cha pter 13 plan that would allow hi m to repa y his prepetition debt over a spec ified per iod of time consistent with his available resour ces. See ge nerally Fede ral Land Bank of Louisvill e v. Glenn ( In re Gle nn) , 760 F.2d 1428, 1433 ( 6th Cir. 1985) (discussing- 10-

ov e ra ll p ur

po se of Cha pte r 1 3) . A c c or din g ly , thi s P ane l c on c lud e s th a t ba nk ru ptc y c ourt s sh ou ld apply the same g ood faith standard when e valuating a debtor ’s motion to convert to cha pter 13 a s is utilized w hen conside ring dismiss al of a case under § 1307( c). See In re Copper , 426 F.3d at 814- 15 (quo t i n g In r e C o

pper , 314 B.R. at 636) (stating that “the sa mean aly sis sh ou ld a

pp ly in evaluating whe ther a

debtor should be pe rmitted to convert a case to chapter

13” as a pplies when

“ e va luatin g wh e the r a deb to r sho uld be pe rm itt e d to c omm e nc e a c ha pte r 1 3 c a se ” ) ( e mph a sis

a d d e d )

. I t a l s o f

o l l o w s t h a tt h e b an kr

u p t c y c o u rt s s h o u l d

e x h i b i tt h e s a m e “ r e l u c t an c e ” t o d e n y a mot ion to c on ve rt to c ha

pte r 13 that the y e mpl oy wh e n dis mis sin g a pe tit ion fo r la c k o f g oo d f a ith under § 1307( c). See id. at 8 1 4 (q u o t i n g In re Copper , 314 B.R. at 635) (noting that conver sion may be denie d in “ extre me c ircumstances ” su g g e sti ngba d f a ithor an a bu se of the ba nk ru ptc y pr oc e ss) (empha sis added). F inally , the Panel conclude s that the burden of proving a lac k of g ood faith in the context of § 706(a) is on the pa rty opposing the conver sion. This approa ch is consistent with the court of appea ls’ holding in Copper and with the g ener al policy behind § 706(a ), which sug g ests that conver sion to chapter 13 should be fre ely g rante d beca use a “ debtor should alwa y s be g iven the opportunity to repa y his debts.” Id. at 816-17 (quoting In re Copper , 314 B.R. at 637). By making denial of motions to conver t the exception, but not the rul e, ba nk ru ptc y c ourt s e ns ur e that c on ve rs ion wi ll b e g ra

nte d “ re a dil y

– b ut n ot s o r e a dil y

a s to

a ll o w an d c o n d o n e a

b u se.” In r e S t a r key , 1 79 B .R. 68 7, 69 4 ( B ank r. N. D. Ok la . 1 99 5) ; se e In re Copper , 4 2 6 F. 3 d

at 8 1 7 (q u o t i n g In re Copper , 314 B.R. at 637)

. Under this standard, whe ther a d eb t o r i s filing unde r cha pter 13 in the fir st instance or

se e kin g c ha

pte r 13 re lie f via c on ve rs ion fr om c ha pte r 7 , th e “ ke y

inq uir y ” fo r c ourt s atte mpt ingto

asce rtain a debtor’s good faith “is whether the debtor is seeking to abuse the bankruptcy proce ss.” In re Al t , 305 F.3d at 419. To assist in this deter mination, ba

nkruptcy courts weig h various fa ctors wh ic h “ may

c ircum st ant ia lly

re fl e c t th e de bto r’ s mo tiv a tio n, and ult imate ly

his ‘g oo d f

a ith ,’ ” in seeking relief under chapte r 13. In re Mc Go v e rn , 2 9 7 B. R

. 6 5 0 , 6 5 8 (S

. D. Fl a. 2 0 0 3 ) ( ci t i n g Cabral

v . S ha mb an ( In re Cab ra l) , 2 85 B .R. 56 3 (B .A .P. 1s t Cir . 2 00 2) ; In re Fl e ur y , 294 B.R. 1 (B ankr. D. Mass. 2003))

. I f, on bala nce, the various fa ctors sug g est that the debtor’ s purpose in filing for chapte r 13 re lief is consistent with the underly ing purpose and spirit of chapte r 13 – i.e., fina ncial “re habilitation through r epay ment of debt” – the filing is likely in good f aith. Id . at 658-60.- 11-

B e c a us e g oo d f

a ithis a n “ a mor ph ou s n oti on ” it i s im

po ssi ble to i de nti fy

the “ inf ini te va ri e ty of fa ctors” that might we igh in the “ g ood faith equation.” Metro Employ ees Credit Union v. Okore eh-Baah (

In r e Okoreeh-Baah) , 836 F.2d 1030, 1033 ( 6th Cir. 1988). Howeve r, whe n de te rm ini ngwh e the r a

de bto r’ s mo tio n to co nv e rt ha s b e e n b ro ug ht i n g oo d f a ith , c ourt s sh ou ld apply the fa ctors identi fied in Al t fo r d e te rm ini ngwh e the r a c ha pte r 1 3 p e tit ion

ha s b e e n f

ile d in g o o d fa i t h

. The c ourt might a lso consider fa ctors that ar e ty pically used in the plan c onfirmation context.
Se ve ra l r e po rt e d d e c isi on s a dd re ss v ari ou s f

a c tor s th a t c omm on ly

tr ig g e r d e nia l of

de bto rs ’ motions t o conver

t to chapter

13. For examp le, the debtor

in Copper

had a nine -y ear

history of “eva sive and vexatious” a ctions “to avoid paying his e x -wife

. . . amounts she was awa rded unde r the par ties’ divorce decr ee.” In re Copper , 4 2 6 F. 3 d at 8 1 1 (q u o t i n g In re Copper , 314 B.R. at 630)

. De sp ite the fa c t th a t th e de bto r w a s a c oll e g e pr of

e sso r w ithan annu al inc ome of $8 9, 00 0, the se evasive actions i ncluded f iling multiple bankruptcy petitions. Id. a t 81 1; In re Copper , 314 B.R. at 632. I n the debtor’s six th bankruptc y case , the debtor’ s ex-wife filed a complaint objecting to the de bto r’ s d isc ha

rg e and a sk ingthat th e de bto r’ s o bli g a tio ns un de r t he div or c e de c re e be he ld nondis ch ar gea b l e. The debtor moved to conve rt his case to chapter 13 on the eve of trial of the discharg eability

action, appr ox ima

te ly s e v e nte en months after

the cha pter 7 c ase w as orig inally

filed.
The Six th Circ uit Court of Appea ls concluded that the debtor’s motion to conver t to chapter 13 was simply

his latest attempt to manipulate the Ba nkruptcy Code in further ance of his nine-y ear pattern of abuse. In light of this p at tern, the c ourt of appe als ag ree d with the bankruptc y court’s

a s s e s s me n t t

h a t t h e mo ti o n to c o n v e rt w a s n o t mo ti v a te d b y a s u d d e n , h o n e s t de s ir e to r e p ay h is e xwife. Rathe r, the motion was simply an ill-concei v ed p loy

to evade the imminent trial, avoid the probable deter

mination that he was not entitled to a dischar g e (or that the obligations to hi s ex-wife

we re no nd isc ha

rg e a ble ), a nd fu rt he r d e lay pa y me nt o f a de bt he ne ve r int e nd e d to pa y
. Cou ple d w ith the serious false statements in the debtor’s schedule s and statement of financ ial aff airs and the debtor’s “ cava lier attitude and la ck of c andor” at trial, the fa cts did not sug g est that the debtor soug ht

c o n v e r s io n w it

h th e g o o d f

a it h in te n ti o n o f r e p ay in g h is c r editors. Id

. at 811-12. The court of appea ls, in ag ree ment with this appellate panel, concluded that “the [ d]ebtor’s actions constitute[d] bad faith and abuse of process such a s will just ify the denial of

a motion to convert unde r § 706(a ).” Id . at 816.- 12-

Th e c ir c ums tanc e s w hic h le d to de nia l of the de bto r’ s mo tio n to c on ve rt to c ha pte r 1 3 in Marrama wer e equal l y egreg ious. In re M arrama , 430 F.3d at 482-83. I n Marrama , the debtor tr ans fe rr e d un e nc umb e re d p ro pe rt y wi th a va lue of $8 5, 00 0 to a

re vo c a ble sp e ndthr if

t tr us t, desig nati ng himself as the sole be nefic iary and his g irlfriend a s the sole trustee. T he debtor later

a dmi tte d th a t hi s in te nt in mak in g t he tr ans fe r w a s to ins ulate the pr op e rt y fr om t he c la ims of

his

cre ditors. Seven months later, the debtor filed a voluntar y chapte r 7 petition in which he disclosed that he wa s the bene ficiar y of the trust, but valued t h e t ru s t res at zero and denie d making any transfe rs of prope rty

within the previous y ear . The de btor also s t ated that he was owe d no tax ref unds, when in ac tuality , he wa s due a tax re fund exceeding $11,000. After the cha pter 7 trustee questioned the de btor about t he property and the tax ref und, the debtor r esponded by filing a motion to conver t his case to cha

pter 13. The Court of Appe als for the First Circuit af firmed the ba

nkruptcy court’s d en i al of the debtor’s motion to conver t due to the debto r’ s bad fa ith. The court of appea ls noted that debtor’s actions in the ca se “compor t[ ed] in a ll material re spects with the cla ssic profile of playing f ast and lo o s e w it h th e b an kr

u p tcy proce ss.” Id . at 482. Prior to filing his bankr uptcy petition, the debtor transfe rre d a valua

ble asset with the i ntent of protecting it fr om cre ditors. When he filed his chapte r 7 case , he fa il ed t o h o nestly disclose the tra

nsfer and other

valuable a ssets. The debtor ’s alleg ed de sir e to r e pa

y his c re dit or s in

a chapt e r 1 3 a

ro se on ly a ft e r t he se a tte mpt s and

c on c e a lin g a sse ts fa ile d. F ur

the r, pe rm itt ingthe de bto r t o c on ve rt to c ha pte r 13 c ou ld h a ve be e n h ig hly pr e jud ic ia l to

c re dit or s, in that con ve rs ion wo uld have “ div e st[e d] the c ha pte r 7 tr us te e of any a uth or ity to a c t in behalf of the estate to sa feguard its a ssets” – the ve ry assets the de btor had attempted to conce al. Id

. These f acts “ amply ” supported the bankr uptcy court’s c onclusion that the motion to convert was not filed in g ood faith. Id

. The de btor in Br own filed a c hapter 7 petition on his own behalf. In re Br own , 293 B.R. 865, 86 6 n .1 (B a nk

r. W.D . M ic h. 20 03 ). Th e de bto r’ s p ri mary ass et was his re sid e nc e . A ft e r t he c a se was filed, the debtor c onstantly attempted to pre vent the sale of this property . The de btor

un de rv a lue d th e pr op e rt

y on his sc he du le s, fa ile d to a tte nd and te sti fy at § 3 41 me e tin g s, fa ile d to pay his filing fe e, and “ consistently ref used to g ra n t the Trustee , his realtor, a nd the prospec tive purcha ser a cce ss to the . . . property .” Id

. a t 8 7 1

. B a s e d o n th e s e a c ti o n s , th e b an kr u p tc y court conclude d that the debtor’ s motion t o conver t was merel y an other attempt to “manipulate the- 13-

bankruptc y

proce ss and preve nt the sale” of the prope rty

. Id . A s a re su lt o f t

he de bto r’ s e ff

or ts t o thwart the sa le of the pr operty , the sale pr ice wa s reduc ed and the estate was har med. Ther efor e, the court de nied the motion based upon lac k of g ood faith.
Al tho ug h e a c h o f the se de bto rs ha d the ir ow n indi vid ua l ty pe s o f o utr a g e ou s b a d f

a ith , it is po ssi ble to d isc e rn

c omm on c ha ra c te ri sti c s sh are d b y

a ll o f t he de bto rs . E a c h o f t

he m e ng a g e d in a patter n of eg reg ious behavior, both prior to filing and during the pende ncy of the ir c ha pte r 7 c a se s, which strong ly

sug g ested that they

wer e manipulating an d abusing the bankr uptcy proce ss in a continued ef

fort to avoid re pay ing the ir debts. The de btor in Copper had a nine -y ear

history of

a vo idi ngthe de bt t o h is e x-w if e . The de bto r i nMarrama tr ans fe rr e d a nd c on c e a le d v a lua

ble a sse ts to keep them f

rom the re ach of

cre ditors. I n Br own , the debtor did e very thing in his power

to preve nt the t rustee from s elling his residenc e. Ba sed on these patterns of a buse, the c ourts conclude d that the c on ve rs ion mot ion s fi le d by the se de bto rs we re no t mo tiv a te d b y an h on e st d e sir e to r e pa

y the ir

c re dit or s. With ou t qu e sti on , pe rm itt ing de bto rs to c on ve rt un de r t he se c ir c ums tanc e s w ou ld c la sh with the underlying pur

poses of c hapter

13. Also, in eac h instance, a nother c onsequenc e exists: the g ener al cr editors and the ba nkruptcy est ate are pr ejudiced by

the debtor’ s postpetition actions or omissions

. When the appropr iate leg al standar d is applied, the cur rent finding s of fa ct do not support the conclusion that the Debtor’s mot ion to conver t was filed in bad faith. There is no evidenc e that the De bto r e ng a g e d in

a patte rn of e g re g iou s b e havio r or di sp lay ed any of the ha llm ark s o f b a d f

a ith illust rate d in Copper , Marrama , or Br own . To the contra ry , the evidenc e sug g ests that the Debtor waited se vera l y ear s after the incident that g ave rise to his criminal and potential tort liability befor e fi lin g fo r b ank

ru ptc y re lie f. I t is un c le ar wh e the r the ba nk ru ptc y c ourt c on sid e re d th is, or oth e r f a c ts

re la tin g to t

he De bto r’ s pro sp e c ts of

re pa y ingthe de bt t

hat ma y re su lt f ro m th e c la ss a c tio n la

ws uit , when it re ache d its bad faith conc lusion.
Of t h e t h re e fa ctors the ba nkruptcy court discussed in its opinion, it pl ace d particula r
em p h as i s on the inacc urac ies and omissions in the Debtor’s sche dules and stateme nt of financ ial

a ff a ir s. Th is e mph a sis wa s no t mis pla c e d, sin c e ba nk ru ptc y c ourt s are “ e nti tle d to de mand utm os t g ood faith and hone sty

from debtor s in the prepa ration of their sche dules and stateme nts of aff airs.” In re Ma r r a ma , 430 F.3d at 482. Howeve r, as troubling as these ina ccur acie s are , there is noI ndeed, the bankruptc y rules permit a debtor to f ile a cha pter 13 plan a fter the filing of the 4 case
. See Fe d. R. Bankr . P. 3015(b) (“ The de btor may file a chapte r 13 plan with the petition. I f a plan i s not filed wit h the petit ion, it shall be filed within 15 day s there afte r, and such time may not be fu rt he r e xten de d e xce pt f

or c a us e sh ow n a

nd on no tic e a s th e c ourt

may dir ect . I f a

c a se is c o n v e rte d to c h a

p te r 1 3 , a p la

n s h a ll b e f

il e d w it h in 1 5 d ay s th e r e a f

te r , an d s u c h ti me ma

y not be further extended except for c ause shown a nd on notice as the court may direc t.”).

- 14- evidenc e that any

of the misstatements or omissions in the Debtor’s sche d u les wer e made in “an attempt to misl ead the court.” In re Cal dwe ll , 895 F.2d at 1126. Also, there w ere no finding s that the Debtor ’s postpetition acts or om issions prejudice d cre ditors or t he bankruptcy estate. B ased on statements and testimony at the hear ing, it a ppear s that much of the blame for the Debtor’ s sloppy and inac curate sche dules ca n be plac ed at the f

eet of his bankruptcy

attorney . Of c ourse, the D ebtor is g ener ally

bound by the er rors a nd omissions of his attorney

. Link v

. W abash R.R. Co. , 3 70 U. S. 626, 633-34, 82 S. Ct. 1386 (1962). But the fac t that the attorney cause d th e i n ac cu ra ci es may sug g est that the De btor was not seeking to misl ead the bankruptc y court or c reditors of the estate.
The ba nkruptcy court a lso relied on the minimal leng th and amount of re pay ment o f t he Debtor’ s proposed c hapter 13 plan in its bad faith ana ly sis. Bec ause this issue is ty pically considere d in t he pla n c on fi rm a tio n pro cess , it is n ot d isp os iti ve of a de bto r’ s g oo d f

a ith , o r l a c k th e re of

, in seeking chapte r

1 3 r e li e f

. H o w e v e r , to th e e xte n t t h e le n g th o f a d e b to r ’ s p r o p o s e d

p la nan d the 4

am o u n t o f p ay

me n ts th e r e u n d e r ma

y a s s is t th e b an kr

u p tc y c o u rt in d is ti n g u is h in g a d e b tor with a g ood faith intent to repa

y cre ditors from one who is a busing the provisions of chapte r 13, this fac tor

may be g ive n s ome c on sid e ratio n und e r t he “ tot a lity

of c ir c ums tanc e s” sta

nd ard . Ac c or din g ly , w hil e the bankr uptcy court prope rly

considere d this fa ctor in its analy sis, this fac tor alone c annot support a finding of bad f

aith. Finally , the bank

r u p tc y c o u r t c o n s id e r e d

th e D e b to r’s motive in seekingconver sion to chapter 13. As noted above , this is not only an appr opriate fa ct o r to consider when e valuating a debtor ’s g o o d f a it h in s e e k in g r e li e f

u n d e r c h a p te r 1 3 , it is e s s e n ti a ll y

th e h e art o f

th e g o o d f a it h in qu ir y
. We conclude , howeve r, that the ba nkruptcy court’s assessment of the De btor’s motive is not supported by the record. I n its opini on, the bankr uptcy court found that “the De btor has openly admitted that his Mo tio n wa s bas e d sole ly on a de sir e to a

vo id a de te rm inatio n th a t th e po te nti a l ju dg me nt a g a ins t him would not be discharg eable under Chapte r 7, and not for purposes of re p ay i n g his creditors.” (J.A. at 31.) The court is c orre ct that both the Debtor and his attorney

admitted at the hea

ring that- 15-

the purp os e of

the re qu e ste d c on versi on was to pe rm it the De bto r t o d isc ha rg e the po te nti a l c la ss action debt. How ever , the Debtor never stated t hat he sought conve rsion solely to avoid the debt and not for the pur

pose of r epay

ing his c reditors. “ [A] n attempt to discharg e a de bt u n d er Chapte r 13 which is not discharg eable under Chapte r 7 is not conclusive e vidence ” of ba d faith, eve n if the debt was “incurre d throug h [a debtor’s] own criminal or tortious conduc t.” In re Cal dwe ll , 895 F.2d at 11 27 . A lth ou g h th e ba

nk ru ptc y c ourt may c on side r h owa

de bt a ro se , it is the de bto r’ s a c tio ns to

re pa y or a vo id t he de bt a ft e r in c urring it t h at are most releva nt to the good f

aith analy sis. Id . at 11 27 -2 8 ( de ny in g co nfi rma tio n f or la c k o f g oo d f

a ithin l ig ht o f d e bto r’ s “ un re le nti nge ff or ts t o reduc e the a ssets available to his c r e d it o r s , ” c o u rt deter mined that debtor’s pr oposed plan re prese nted

c o n t i n u a t i o n o f

“ u nb r o k e np a t t e r

no f d e c e i tan d

d e l ay” i n s t e a d

o f “ a g o o d f a i t h e f f o rtt o r e p a y”

cre ditor s ) ( e mp h a s is a d d e d )

. Ch a p te r 1 3 p e r

mi ts d e b to r s to d is c h ar g e d e b ts th a t w o u ld n ot be discharg eable in chapter

7, provided the de btor devotes his disposable income to repay ment of

cre ditors over the statutorily -pre scribed pe riod. Although w e conc lude that the bankruptc y court’s f indings a re insuff icient to support its bad faith conc lusion in t his case, this Panel be lieves that the ba nkruptcy court should be g iven an opportunity to re- evaluate t he case based upon appr opriate g ood faith fa ctors. In re Ok oreeh-Baah , 836 F.2d at 1033 (deter

minations of go o d fa i th “should be left simply to the bankruptc y

court’s

common sense a

nd judgme nt”).

V. CO NC LU SION
For the fore g oing r eas o n s , t he bankr uptcy court’s de cision is vacate d and re manded f or further considera

tion in accor dance with this opi nion.