Opinion ID: 48828
Heading Depth: 3
Heading Rank: 2

Heading: The Bankruptcy Petition and Decision

Text: On April 15, 2003, the same day that the judgment against Mrs. Stanley became final and before Suggs could file her judgment in the public records and thus become a secured creditor, the Stanleys filed a petition for relief under Chapter 13 of the Bankruptcy Code. The next month, Suggs filed an objection to the proposed wage earners’ plan on the grounds that it was a “continuation of the malice of Dorothy Stanley against Kathleen Suggs.” Suggs asserted that the plan had not been proposed in good faith, so that confirmation should be denied pursuant to 11 U.S.C. § 1325(a)(3). Suggs also filed a motion to have the Stanleys’ Chapter 13 case converted to one under Chapter 7. Suggs asserted that the Stanleys’ lack of good faith was evident from: (1) an earlier filing of a Chapter 7 petition; (2) the timing of the filing of the petition; (3) their attempt to discharge a debt that, according to Suggs, would not be dischargeable in a Chapter 7 bankruptcy, because it arose from a willful or malicious injury; (4) the Stanleys’ alleged determination not to pay the debt; (5) Mrs. Stanley’s voluntarily quitting her job the month following the entry of the judgment in the district court in Arkansas; (6) the original plan’s provision for repayment into a retirement account; (7) the Stanleys’ failure 2 Id. at 676-77, 682. to comply with Suggs’s requests for documents; (8) false or undisclosed information on a loan application filed by the Stanleys two months before the bankruptcy filing; (9) the denuding of the Stanleys’ home equity by obtaining a mortgage loan; and (10) the plan’s preferential treatment of some of the Stanleys’ unsecured creditors over Suggs. After conducting a hearing, the bankruptcy court confirmed the plan and denied Suggs’s motion to convert, finding that the plan had been proposed in good faith. In reaching its conclusion of good faith, the bankruptcy court addressed each of Suggs’s proffered indicia of a lack of good faith, rejecting each in turn with reasons. In sum, the bankruptcy court held that the Stanleys filed their petition because “they had no place else they could go and continue to live, pay their bills, and . . . support their dependents.” The bankruptcy court entered an order overruling Suggs’s objection and denying the motion to convert, which Suggs timely appealed to the district court. Following entry of this order, the bankruptcy court allowed modification of the Stanleys’ plan, and Suggs objected to the modified plan for substantially the same reasons that she had objected to the original plan. The modified plan was confirmed on December 2, 2003. Suggs again timely appealed to the district court. The district court consolidated the appeals, eventually reversing the bankruptcy court. The district court concluded that the bankruptcy court had failed to consider the totality of circumstances and remanded the matter to the bankruptcy court for further proceedings. The Stanleys appeal the district court’s ruling. Suggs cross-appeals, asserting that the Stanleys’ bankruptcy petition should be dismissed rather than converted to a Chapter 7 proceeding.