Opinion ID: 773215
Heading Depth: 2
Heading Rank: 1

Heading: Timing of Eligibility

Text: 20 11 U.S.C. §§ 109(e) states that [o]nly an individual with regular income that owes, on the date of the filing of the petition, non-contingent, liquidated, unsecured debts of less than $250,000 . . . may be a debtor under chapter 13 of this title. The BAP's decision purports to endorse In the Matter of Pearson, 773 F.2d 751, 757 (6th Cir. 1985), in which the Sixth Circuit held that Chapter 13 eligibility should normally be determined by the debtor's schedules checking only to see if the schedules were made in good faith. However, the BAP quickly qualifies its endorsement by stating that a `bankruptcy court should look past the schedules to other evidence submitted when a good faith objection to the debtor's eligibility has been brought by a party in interest.'  Scovis, 231 B.R. at 341 (quoting In re Quintana, 107 B.R. 234, 239 n.6 (BAP 9th Cir. 1989), aff'd, 915 F.2d 513 (9th Cir. 1990)). Although we affirmed the BAP in Quintana, we assumed without argument that Chapter 12 eligibility should be decided using the date of debtor's petition. See Quintana, 915 F.2d at 515 n.2 (The parties do not dispute the use of the date of Debtors' petition for the purpose of determining Debtors' eligibility under Chapter 12.). 21 In tallying up the various unsecured debt in the Scovis's petition, however, it becomes entirely unclear what law the BAP is applying. See Scovis, 231 B.R. at 342-43. For the Henrichsen debt, the BAP used the debt at the time the petition was filed, yet went beyond the schedules to consider accrued interest; for the general unsecured debt, the BAP used a figure that was nearly half that of the debt listed on the originally filed schedules; for the Mary Scovis debt, the BAP remanded but gave no instruction as to whether Mary 22 Scovis's declaration, submitted a year after the initial petition, and which purported to waive any claim to unsecured debt, should be included in the bankruptcy court's fact finding consideration on remand. See id. at 343. 23 In In re Slack, 187 F.3d 1070, 1073 (9th Cir. 1999), we recently considered the timing aspect of §§ 109(e) for eligibility determination purposes. There, we held that a final judgment entered in state court in an insurer's civil action against debtor, after the debtor's Chapter 13 petition was filed, could not be considered in deciding the amount of debt owed to the insurer for purposes of determining eligibility for relief. See id. at 1073. 24 Prior to filing for bankruptcy relief, Slack was a defendant in a tort action in which a California state judge had entered a tentative decision that Slack was jointly and severally liable to plaintiff Wilshire in the amount of $659,971. Soon after, Slack filed for bankruptcy under Chapter 13. Creditor Wilshire argued that Slack was ineligible for Chapter 13 relief because the state court's tentative ruling established that Slack had a non-contingent, liquidated, unsecured debt which exceeded the $250,000 statutory limit. Slack, on the other hand, argued that this debt was unliquidated. The parties had stipulated to the amount of damages Wilshire actually suffered before the state and the bankruptcy courts, which totaled $255,954. Based on the stipulation of damages, the bankruptcy court dismissed Slack's petition, finding that his non-contingent, liquidated, unsecured debt exceeded the statutory limit. See id. at 1072. 25 By the time Slack reached this Court on appeal, the state court had entered final judgment in favor of Wilshire, definitively holding Slack jointly and severally liable for $455,480 plus interest. Wilshire, thereafter, filed a motion for this Court to take judicial notice of the state court's judgment for purposes of determining Chapter 13 eligibility. See id. We refused to do so because the judgment was entered after the bankruptcy petition was filed. In so deciding, we cited to and implicitly adopted the Sixth Circuit's holding in Pearson that the bankruptcy court should normally look to the petition to determine the amount of debt owed, checking only to see that the schedules were made in good faith. See Slack , 187 F.3d at 1073. As articulated in Pearson, this rule finds its grounding in both the text of §§ 109(e) and Congressional intent, and is similar in nature to the subject matter jurisdiction context for purposes of determining diversity jurisdiction. See Pearson, 773 F.2d at 756-57. 26 We now simply and explicitly state the rule for determining Chapter 13 eligibility under §§ 109(e) to be that eligibility should normally be determined by the debtor's originally filed schedules, checking only to see if the schedules were made in good faith. Because the BAP's decision is premised upon an incorrect application of Pearson, as well as an incorrect interpretation of the eligibility requirements for Chapter 13 relief, we must reverse its decision and assess eligibility de novo.