Court Opinion

ID: 9373969
Source: CourtListenerOpinion
Date Created: 2023-02-22 16:10:51.11791+00
Date Added: 2024-06-11T17:16:50.325255
License: Public Domain

FILED
                                                                                 MAR 24 2022
                          NOT FOR PUBLICATION                                SUSAN M. SPRAUL, CLERK
                                                                                U.S. BKCY. APP. PANEL
                                                                                OF THE NINTH CIRCUIT

          UNITED STATES BANKRUPTCY APPELLATE PANEL
                    OF THE NINTH CIRCUIT

In re:                                               BAP No. CC-21-1178-LTF
ALICIA MARIE RICHARDS,
             Debtor.                                 Bk. No. 8:21-bk-10635-ES

ALICIA MARIE RICHARDS,
               Appellant,
v.                                                   MEMORANDUM∗
RICHARD A. MARSHACK, Chapter 7
Trustee; RYAL W. RICHARDS; KEVIN E.
ROBINSON,
               Appellees.

               Appeal from the United States Bankruptcy Court
                     for the Central District of California
                Erithe A. Smith, Bankruptcy Judge, Presiding

Before: LAFFERTY, TAYLOR, and FARIS, Bankruptcy Judges.

                                 INTRODUCTION

      Alicia Richards appeals the bankruptcy court’s denial of her motion

to convert her chapter 7 1 case to one under chapter 13. Ms. Richards filed

      ∗  This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
       1 Unless specified otherwise, all chapter and section references are to the

Bankruptcy Code, 11 U.S.C. §§ 101–1532.
                                            1
the motion shortly after the chapter 7 trustee began marketing

Ms. Richards’ residence. The bankruptcy court denied the motion on

grounds of bad faith and because Ms. Richards lacked sufficient regular

income to fund a chapter 13 plan. We AFFIRM.

                                       FACTS 2

      Ms. Richards filed a chapter 7 bankruptcy petition in March 2021.

Appellee Richard A. Marshack was appointed chapter 7 trustee

(“Trustee”). This was Ms. Richards’ second bankruptcy filing. She had

previously filed a chapter 13 case in May 2019 but was unable to propose a

confirmable plan, and the bankruptcy court dismissed it in October 2019.

      On her initial schedules, Ms. Richards listed her residence located in

Newport Beach, California (the “Property”). In the space provided for the

value of the Property, she wrote, “tbd.” She included on Schedule B

amounts she was owed for family support totaling $288,000, claims against

third parties of $1 million, and contingent and unliquidated claims of

$1 million. On Schedule D, Ms. Richards listed several claims purportedly

secured by the Property, including a claim for $375,000 payable to herself,

as well as several disputed judgment liens. On Schedule E, she listed a

priority unsecured claim held by the Remsen Family Trust (the “Family

Trust”) for $300,000 that purported to be a domestic support obligation.

      2 Where necessary, we have exercised our discretion to take judicial notice of the
dockets and imaged papers filed in debtor’s current and previous bankruptcy case. See
Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP
2003).
                                            2
      Ms. Richards’ Schedules I and J showed that she had income of $1,600

per month and expenses of $5,301. But on her Statement of Financial

Affairs (“SFA”), Ms. Richards indicated she had no year-to-date income.

Ms. Richards disclosed on her SFA a transfer of $250,000 to the Family

Trust.

      After her initial § 341 meeting, 3 on May 13, 2021, Ms. Richards filed

amended schedules. On Schedule A, she changed the value of the Property

from “tbd” to $3 million. On Schedule B, she changed the value of “claims

against third parties” and “contingent and unliquidated claims” to

$28,637,734. She attached a lengthy exhibit listing numerous lawsuits and

claims against various parties, including her ex-husband, Ryal Richards,

and his counsel, Kevin Robinson. Despite her valuation of “claims against

third parties” at over $28 million, the claims listed on the attached exhibit

totaled $1.6 million.

      Amended Schedule D deleted the debt purportedly owed to

Ms. Richards as well as the disputed judgment liens, leaving only two

consensual liens of $180,000 and $15,000, respectively, secured by the

Property. She also deleted from Schedule E the debt to the Family Trust.

On her amended SFA, Ms. Richards changed her year-to-date earnings

from $0 to $8,000. She also reduced the amount of the transfer to the Family

Trust from $250,000 to $235,280.

      3
          Trustee has continued the § 341 meeting at least eight times.
                                              3
      On June 17, 2021, Ms. Richards again filed amended schedules.

Amended Schedule D added the secured claim of the Family Trust and the

disputed judgment liens. Total monthly income under Schedule I changed

to $5,000, comprised of $2,000 from employment and $3,000 from family

contributions to pay the mortgage payment on the Property. Schedule J

expenses totaled $4,878, resulting in a net monthly income of $122.

Schedule F showed unsecured nonpriority claims of $104,709.56.

      About two months into the case, Trustee filed a notice of assets and

an application to employ a real estate agent to sell the Property. While that

application was pending, Ms. Richards moved to convert the case to

chapter 13. In her supporting declaration, she stated that she sought

conversion to enable her to sell the Property herself. She stated that her

salary had increased from $1,600 to $2,000 per month and that she would

be receiving an additional $3,000 per month from her family to pay the

mortgage payments. She proposed to make “a modest, yet meaningful”

monthly plan payment while the Property was listed and stated that she

had contacted several investment companies that had expressed interest in

purchasing the Property for $2 million. She attached a proposed chapter 13

plan calling for monthly plan payments of $122 for six months, with a 100%

payout to unsecured creditors (except for certain disputed claims) from the

sale of the Property.

      Trustee opposed the motion to convert on the grounds that

Ms. Richards was not eligible to be a debtor under chapter 13 and because

                                      4
conversion was not sought in good faith. Specifically, Trustee contended

that Ms. Richards did not have “regular income” as required under § 109(e)

because her expenses exceeded her income, and her lack of good faith was

demonstrated by her inconsistent statements regarding her employment

and income. Trustee noted that one of the reasons her prior chapter 13 case

had been dismissed was her lack of sufficient income with which to fund a

plan.

        Trustee filed a supplemental opposition after questioning

Ms. Richards at her continued § 341 meeting. At that meeting, she testified

that, on February 4, 2020, she had given a deed of trust in the amount of

$235,280.88 for the benefit of the Family Trust, of which her son Jonathan

serves as trustee and of which she is a beneficiary. The deed of trust, which

was never recorded, purported to secure a promissory note given by Ms.

Richards in December 2017. Trustee argued that because the deed of trust

was avoidable, he could preserve its value for the estate in the chapter 7

case but, if the case were converted, Ms. Richards likely would not take

steps to avoid the deed of trust.

        Trustee’s counsel’s supporting declaration stated that Ms. Richards

had not timely provided certain financial records and information about

the Family Trust. He recounted Ms. Richards’ § 341 meeting testimony, in

which she testified that, in addition to having gross earnings of $2,000 per

month, her son Jonathan was contributing $3,000 per month by paying the

mortgage payments on the Property. She also testified that her son was

                                       5
planning to vacate the Property, and she was uncertain whether he would

continue to be able to pay the mortgages. She further testified that Schedule

B assets had increased from $5,215,431 scheduled in her first bankruptcy to

$31,859,308 due to claims she asserted against various individuals,

including Trustee, a superior court judge, her ex-husband and his counsel,

her mother-in-law, and her neighbors. When questioned about the basis for

her $2 million claim against her neighbors, she refused to elaborate.

      Ms. Richards filed a reply in which she stated, among other things,

that she would be foreclosing on a support judgment of $372,000, which

would bring more funds into her chapter 13 case. She also argued that she

had regular income from her employment as a legal assistant and that her

motion to convert was filed in good faith. She accused Trustee of “a bunch

of games and litigation tactics.” In a later filed reply responding to the

supplemental opposition, Ms. Richards disputed the facts regarding her

failure to disclose the deed of trust and her lack of attempts to avoid it.

      Ms. Richards’ ex-husband and his counsel also opposed the

conversion motion. They argued that, based on her income and the claims

asserted against the estate, she could not propose a viable plan.

Ms. Richards filed a reply declaration in which she blamed Mr. Richards

for forcing her into bankruptcy and accused Trustee of having a secret

meeting with and “taking the side of” Mr. Richards’ counsel, attempting to

discredit Ms. Richards with false facts, and “playing a bunch of games.”

She further alleged that Trustee had in the past sold properties to

                                       6
“flipping” companies. She also complained that Trustee had not been able

to obtain any bids for the purchase of the Property. In another reply

declaration, she attached documentation relating to the support judgment.

      Ms. Richards thereafter filed a Declaration of Contribution to Chapter

13 Plan, purportedly executed by her father, Lawrence Remsen. The

declaration stated that he would be contributing $3,000 per month toward

his daughter’s plan to pay the mortgage payments. Trustee filed an

objection and motion to strike the declaration on grounds that it was filed

too late and did not attach documentary evidence of the source of the

contribution. Trustee also noted that Mr. Remsen had been serving a life

sentence in prison since 1983 and questioned how Mr. Remsen could

plausibly contribute to the plan. Ms. Richards filed a reply in which she

promised to provide copies of bank statements.

      Ms. Richards filed two more declarations. The first was from her

employer, John H. Mitchell, who is also Ms. Richards’ stepfather. He

testified that Ms. Richards was a “1099 employee” and that he had decided

to increase her salary from $2,000 to $5,000 per month to assist in her effort

to convert. The second was Mr. Remsen’s declaration, to which was

attached a copy of a cashier’s check for $18,000 dated July 15, 2021, made

payable to Mr. Remsen, along with his testimony that he had instructed

Ms. Richards to deposit the funds into a separate account and set up

automatic payments for the first and second mortgages on the Property.

                                      7
        After a hearing, the bankruptcy court took the matter under

submission. The court entered its order denying the motion to convert on

July 30, 2021, and Ms. Richards timely appealed. She sought a stay pending

appeal, which the bankruptcy court denied. She did not ask this Panel for a

stay.

        During the pendency of this appeal, the bankruptcy court approved a

sale of the Property for $2.2 million. It also entered an order requiring

Ms. Richards to turn over possession of the Property no later than

December 4, 2021. On February 22, 2022, the bankruptcy court entered an

order finding Ms. Richards in contempt for her failure to turn over the

Property and ordering her to vacate the Property promptly. Ms. Richards

has appealed all those orders but did not obtain a stay pending appeal. The

sale of the Property closed after this appeal was submitted.

                               JURISDICTION

        The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.

                                    ISSUE

        Did the bankruptcy court abuse its discretion in denying the motion

to convert?

                         STANDARDS OF REVIEW

        We review for abuse of discretion an order denying a motion to

convert. Levesque v. Shapiro (In re Levesque), 473 B.R. 331, 335 (9th Cir. BAP

2012). A bankruptcy court abuses its discretion if it applies the wrong legal

                                       8
standard, or misapplies the correct legal standard, or if it makes factual

findings that are illogical, implausible, or without support in inferences

that may be drawn from the facts in the record. United States v. Hinkson, 585

F.3d 1247, 1262 (9th Cir. 2009) (en banc).

      A bankruptcy court’s factual finding of bad faith is reviewed for clear

error. Ellsworth v. Lifescape Medical Assocs., P.C. (In re Ellsworth), 455 B.R.

904, 914 (9th Cir. BAP 2011). Under the clearly erroneous standard of

review, if the bankruptcy court’s findings are plausible in light of the

record viewed in its entirety, we may not reverse even if we would have

weighed the evidence differently. “Where there are two permissible views

of the evidence, the factfinder’s choice between them cannot be clearly

erroneous.” Anderson v. City of Bessemer City, 470 U.S. 564, 574 (1985)

(citations omitted).

      We may affirm on any basis supported by the record. Caviata Attached

Homes, LLC v. U.S. Bank, N.A. (In re Caviata Attached Homes, LLC), 481 B.R.

34, 44 (9th Cir. BAP 2012).

                                 DISCUSSION

A.    Legal standard for conversion from chapter 7 to chapter 13

      A debtor may convert her chapter 7 case to one “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.” § 706(a). Despite the “at any time”

language of this provision, the right to convert is not absolute. Rather, it is

qualified by § 706(d), which provides, “[n]otwithstanding any other

                                         9
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.” See Marrama v. Citizens Bank of Mass., 549 U.S. 365, 372 (2007).

      In Marrama, the Supreme Court held that a debtor seeking conversion

to chapter 13 does not qualify under that chapter if he or she has engaged

in bad faith or fraudulent conduct or is otherwise ineligible for chapter 13

relief. 549 U.S. at 372-74. In that case, the debtor had misrepresented facts

about his principal asset, a home in Maine. Upon learning that the chapter

7 trustee intended to recover the home for the estate, the debtor moved to

convert the case to chapter 13, arguing that he had an absolute right to

convert. The Supreme Court disagreed, holding that the debtor did not

qualify for chapter 13 because he had engaged in bad faith conduct. See id.

The Court reasoned that, because bad faith is routinely held to constitute

“cause” for dismissal of a chapter 13 case under § 1307(c), it was an

appropriate ground for denial of a motion to convert from chapter 7 to

chapter 13. The Court found that the bankruptcy courts’ authority “to take

any action that is necessary or appropriate ‘to prevent an abuse of process’

described in § 105(a) of the Code” justified “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.” Id. at 375.

                                      10
      Although the Court’s holding was not limited to the facts before it, it

declined to decide exactly what conduct would suffice in future cases,

other than that the debtor’s conduct must be “atypical”:

      We 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.
Id. at 375 n.11 (citations omitted).

      Ms. Richards argues that Marrama was overruled by Law v. Siegel, 571

U.S. 415 (2014). She cites Nichols v. Marana Stockyard & Livestock Market, Inc.

(In re Nichols), 10 F.4th 956 (9th Cir. 2021), which was decided during the

pendency of this appeal.

      In Law, the Supreme Court held that bankruptcy courts may not use

their equitable powers under § 105(a) to contravene express provisions of

the Bankruptcy Code. 571 U.S. at 422-23. In Nichols, the Ninth Circuit held

that Law effectively overruled Rosson v. Fitzgerald (In re Rosson), 545 F.3d

764 (9th Cir. 2008). In Rosson, the issue was whether the debtor had an

absolute right to dismiss his chapter 13 case under § 1307(b), which

provides, “[o]n request of the debtor at any time, if the case has not been

converted under section 706, 1112, or 1208 of this title, the court shall

                                       11
dismiss a case under this chapter. . . .” (Emphasis added.) The Ninth

Circuit expanded the reasoning of Marrama to the chapter 13 dismissal

context, holding that “the debtor’s right of voluntary dismissal under

§ 1307(b) is not absolute, but is qualified by the authority of a bankruptcy

court to deny dismissal on grounds of bad-faith conduct or to prevent an

abuse of process.” In re Rosson, 545 F.3d at 773-74 (cleaned up).

      In Nichols, the bankruptcy court, relying on Rosson, denied a chapter

13 debtor’s motion to dismiss and granted the creditors’ motion to convert

to chapter 7 on grounds that the debtor was abusing the bankruptcy

process. The Ninth Circuit reversed, holding that Rosson had been

“effectively overruled” by Law. In re Nichols, 10 F.4th at 961.

      But Law did not overrule Marrama, and Nichols did not so hold.

Marrama involved a different statute with different language. As noted

above, the right to convert under § 706(a) is qualified by § 706(d), which

requires that a debtor seeking conversion must qualify to be a debtor in the

converted case. The Supreme Court in Marrama held that when a debtor

has engaged in bad faith conduct, he or she is disqualified from being a

debtor under chapter 13, which has an explicit statutory good faith

requirement. See § 1307(c) (authorizing dismissal of a chapter 13 case “for

cause,” including bad faith) and § 1325(a)(7) (requiring, as a condition to

confirmation of a chapter 13 plan, that “the action of the debtor in filing the

                                      12
petition was in good faith.”)4 Put another way, Marrama’s holding that the

right to convert is not absolute was not premised upon the bankruptcy

court’s equitable power but on explicit provisions of the Bankruptcy Code.

Thus, it does not run afoul of Law. This is so despite the Supreme Court’s

reference to § 105(a) as authorizing immediate denial of a motion to

convert under § 706 instead of granting conversion and then entertaining a

motion to reconvert or dismiss. Marrama, 549 U.S. at 375. The right to

convert is expressly conditioned upon § 706(d)’s requirement that the

debtor qualify to be a debtor in the converted case, and nothing in the Code

requires the bankruptcy court to grant a motion to convert if that

requirement is not met. Accordingly, denying conversion on that ground

does not contravene any express provision of the Bankruptcy Code.

B.    The bankruptcy court’s finding of bad faith was not clearly
      erroneous.
      As discussed above, Marrama’s holding is not limited to situations

where a debtor fails to disclose or misrepresents the value of assets but

stands for the proposition that “atypical” conduct may support a bad faith

finding sufficient to justify denial of conversion. Under Marrama, the

determination of whether to grant a § 706 conversion motion implicitly

incorporates the standards for dismissal or conversion set forth in § 1307(c).

549 U.S. at 372-74. In this circuit, bad faith is a ground for dismissal or

conversion under § 1307(c) and requires an inquiry into the totality of the

      4
          This is in contrast to chapter 11, which requires only that the plan be proposed
                                             13
circumstances, focusing on: (1) whether the debtor misrepresented facts in

her petition or plan, unfairly manipulated the Bankruptcy Code, or

otherwise filed her petition or plan in an inequitable manner; (2) the

debtor’s history of filings and dismissals; (3) whether the debtor only

intended to defeat state court litigation; and (4) the presence of egregious

behavior. In re Ellsworth, 455 B.R. at 917-18 (citing Leavitt v. Soto (In re

Leavitt), 171 F.3d 1219, 1224 (9th Cir. 1999)).

       The bankruptcy court considered the totality of the circumstances

and found that Ms. Richards did not seek conversion in good faith and that

granting her motion would constitute an abuse of the bankruptcy process.

The bankruptcy court listed the following relevant circumstances

supporting that finding:

       1.     Trustee had begun marketing the Property, which was

              Ms. Richards’ primary reason for seeking conversion.

              Ms. Richards did not provide persuasive evidence for her

              argument that Trustee would not fulfill his duty to obtain

              appropriate value for the estate, despite her assertion that the

              Trustee had a pattern of using “flippers” to sell real estate.

       2.     Ms. Richards’ proposed chapter 13 plan did not include any

              alternative should the Property not sell in six months, other

              than renting the Property—which would require Mr. Richards’

              consent—or reconverting the case.

in good faith. See § 1129(a)(3).
                                        14
      3.     Ms. Richards lacked sufficient income to fund a chapter 13

             plan, even if her monthly salary were increased to $5,000. The

             court noted that the familial relationship between Ms. Richards

             and her employer was not initially disclosed by her, but by

             Mr. Richards. It also noted that Mr. Mitchell’s declaration

             testimony suggested that the $5,000 monthly salary was

             unrelated to the actual value of services rendered and was in

             the nature of gratuitous payments by a family member. For

             purposes of the motion, however, the court assumed the $5,000

             was regular income.

      4.     Although doubts existed about the authenticity of the

             declarations submitted by Mr. Remsen, 5 even if those

             declarations were authentic and the funds existed, $18,000

             would be insufficient to pay creditors in full.

      5.     On February 4, 2020, Ms. Richards executed a deed of trust

             against the Property as security for a debt of $235,280.88

             purportedly owed to the Family Trust. 6 In her prior case,

      5   Trustee questioned the authenticity of Lawrence Remsen’s declarations because
Mr. Remsen was incarcerated. Ms. Richards responded that she had power of attorney
to act on Mr. Remsen’s behalf. But the signatures on the declarations purport to be those
of Mr. Remsen; there is no indication that they were signed by Ms. Richards as attorney-
in-fact for Mr. Remsen.
        6 The parties agree that the bankruptcy court erroneously found that the deed of

trust was executed without court authorization during Ms. Richards’ prior case. It was
executed after her first case was dismissed and before she filed the instant chapter 7.
Ms. Richards contends that this was “a structural error requiring immediate reversal.”
                                           15
             Ms. Richards had listed the Family Trust as having a secured

             claim of $148,238.93. In the instant case, Ms. Richards listed the

             Family Trust as having an unsecured priority debt for domestic

             support payment reimbursement of $300,000, although she

             later amended Schedule D to include the Family Trust secured

             debt of $235,280.88. The bankruptcy court concluded that “the

             dramatic inconsistencies surrounding the amount and

             characterization of the Family Trust in the Prior Case and the

             current case are concerning and militate in favor of a finding of

             bad faith.”

      The bankruptcy court’s bad faith finding was not illogical,

implausible, or without support in the record. Even making allowances for

Ms. Richards’ pro se status, her constantly shifting statements and failures

to provide competent evidence regarding her assets, liabilities, and income

support the bankruptcy court’s finding of bad faith. Although no single act

or omission cited by the court necessarily provided an independent ground

for a bad faith finding, the totality of Ms. Richards’ conduct supports the

bankruptcy court’s conclusion that she was abusing the bankruptcy

process.

      Ms. Richards argues that the bankruptcy court’s finding of bad faith

is not supported by the evidence. She points out that that she did not

As discussed herein, that was only one of the acts cited by the bankruptcy court in
support of its bad faith finding. The finding still stands without it.
                                           16
inaccurately value the Property, nor did she hide the Property from

creditors. But that is not the only basis for a bad faith finding, and she fails

to address her inconsistent representations about the Family Trust and the

purported debts owed to it. She also disputes the bankruptcy court’s

finding that her primary reason for seeking the conversion was because

Trustee had begun marketing the Property. She asserts that she sought

conversion to protect creditors by preventing Trustee from running up fees

and selling the Property for less than fair market value. But there is no

evidence in the record that this was a likely scenario.

      Finally, Ms. Richards argues that creditors would not be prejudiced

by conversion because if the case stays in chapter 7, it will be some time

before any distributions are made “because of all the disputes.” But even

accepting this assertion as true, this is not a relevant reason to permit

conversion when there is evidence of bad faith—particularly where

Ms. Richards is the instigator of the disputes.

C.    The bankruptcy court did not err in finding that Ms. Richards
      lacked sufficient regular income to fund a chapter 13 plan.
      Although the bankruptcy court cited Ms. Richards’ lack of sufficient

regular income as a factor in determining bad faith, a lack of regular

income independently disqualifies a debtor from being in a chapter 13 case.

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

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

than $419,275 . . . and noncontingent, liquidated, secured debts of less than

                                       17
$1,257,850 . . . may be a debtor under chapter 13 of this title.” § 109(e). The

term “individual with regular income” is defined as “individual whose

income is sufficiently stable and regular to enable such individual to make

payments under a plan under chapter 13 of this title . . . .” § 101(30).

      It is undisputed that Ms. Richards lacked sufficient regular income to

pay creditors absent a sale of the Property. According to her proposed

chapter 13 plan, she had only $122 in disposable monthly income, while

nonpriority unsecured claims totaled $104,709.56. Although family

contributions may be considered in determining the feasibility of a plan,

the court may require evidence of a “firm commitment by the family

member to make the contributions and a long and undisputed history of

providing for the debtor.” In re Deutsch, 529 B.R. 308, 312 (Bankr. C.D. Cal.

2015) (citation omitted); see also Pellegrino v. Boyajian (In re Pellegrino), 423

B.R. 586, 590 (1st Cir. BAP 2010) (“Typically, courts include contributions

where the contributor commits to contributing monthly for the life of the

plan, and has demonstrated a willingness and ability to do so.” (citations

omitted)).

      Here, the evidence did not show a “firm commitment.” Ms. Richards

testified at her § 341 meeting that she was not sure whether her son would

be able to continue making the mortgage payments on the Property; he did

not file a declaration committing to those payments. Mr. Remsen indicated

in his declaration that he was giving $18,000 to Ms. Richards to cover the

mortgage payments for six months pending a sale of the Property in

                                         18
chapter 13, but this one-time gift does not constitute “regular income”

either. Moreover, as suggested by the bankruptcy court, Ms. Richards’

salary increase should probably have been treated as a gratuitous family

contribution rather than employment income. Mr. Mitchell’s declaration

testimony indicated that he did not keep track of her hours, and in his

amended declaration he testified, “I have decided to increase Alicia’s salary

beginning August 1, 2021 to $5,000 per month in order to help her covert

[sic] to Chapter 13.” This testimony suggests that her stepfather

gratuitously increased her salary to help her fund her plan, but there is no

evidence of a firm commitment for the term of the plan or a history of

providing for Ms. Richards.

     Ms. Richards complains that the bankruptcy court failed to consider

the sale of the Property, the support judgment, and pending litigation

claims as sources of plan payments. But those assets do not constitute

“regular income” under the Code. Cf. McDonald v. Burgie (In re Burgie), 239

B.R. 406, 410-11 (9th Cir. BAP 1999) (only regular income and substitutes

therefor may be counted in the determination of projected disposable

income; only if an asset in question is an anticipated stream of payments is

it included in the calculation). The bankruptcy court did not err in finding

that Ms. Richards did not have sufficient regular income to fund a chapter

13 plan.

     We note that, during the pendency of this appeal, Ms. Richards filed

an opposition to Trustee’s motion to sell the Property in which she asserted

                                     19
that the Property was fully encumbered by secured debt. In that

opposition, she listed claims secured by the Property totaling

approximately $3 million. This amount includes the “Lawrence Remsen

contract” for $1.75 million, a claim that she had never listed in her

schedules. These claims render Ms. Richards ineligible to be a debtor under

chapter 13 because they exceed the secured debt limit under § 109(e)

($1,257,850). At oral argument, Trustee’s counsel pointed out that the

proofs of claim filed in this case exceeded the debt limits. Although this

information was not before the court when it ruled on the motion to

convert, this circumstance impacts both bad faith and eligibility and lends

further support to the bankruptcy court’s ruling.

      In Trustee’s brief, he raises some issues that do not appear to have

been raised in the bankruptcy court in the context of the motion to convert

and were not addressed in the bankruptcy court’s ruling.

      First, he argues that Ms. Richards’ proposed plan is essentially a

liquidating plan, which is not an appropriate use of a chapter 13, citing In

re Gavia, 24 B.R. 573, 575 (9th Cir. BAP 1982). In Gavia, the debtors proposed

to park in a chapter 13 for six months without making any payments on

either secured or unsecured debts pending the sale of real property.

Ms. Richards argues that her case is distinguishable because she will be

making payments pending the sale of her home.

      Second, Trustee notes that, pre-petition, the family court entered an

order that required sale or refinance of the Property by July 7, 2017, but

                                      20
Ms. Richards failed to comply and instead pursued litigation to have that

order set aside. He argues that this is evidence of bad faith pre-petition

conduct. Ms. Richards contends that orders entered in the family court

were void on various grounds, including denial of due process and equal

protection.

      Because these arguments were not considered by the bankruptcy

court in connection with the motion to convert, we decline to consider

them here. 7

                                   CONCLUSION

      For these reasons, the bankruptcy court did not abuse its discretion in

denying the motion to convert. We AFFIRM.

      7
       Trustee mentioned in his application to employ the real estate agent that Ms.
Richards had failed to comply with the family court’s order, but he did not raise it as a
ground for denying conversion.
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