Summary
This unpublished opinion from the U.S. Bankruptcy Appellate Panel for the Tenth Circuit affirms a bankruptcy court's denial of a Chapter 7 debtor's motion to voluntarily dismiss her case. The debtor sought dismissal to pay certain creditors directly while withholding payment from others and refusing to turnover estate property to the trustee. The panel held that a debtor's ability to repay debts does not constitute adequate cause for dismissal under 11 U.S.C. § 707(a) and found no abuse of discretion in the lower court's ruling.
Topics
Practice areas
Questions Presented
- Whether the bankruptcy court abused its discretion by finding that McGann failed to establish cause under 11 U.S.C. § 707(a) for voluntary dismissal of her Chapter 7 case.
- Whether McGann's asserted ability to repay selected debts outside bankruptcy constituted sufficient cause for dismissal.
- Whether McGann's arguments concerning trustee misconduct, property value, property condition, and offset rights demonstrated reversible error.
Holdings
- A Chapter 7 debtor does not have an absolute right to dismiss the bankruptcy case; dismissal under 11 U.S.C. § 707(a) requires a showing of cause.
- Courts in the Tenth Circuit determine whether cause exists for voluntary dismissal of a Chapter 7 case under the totality of the circumstances.
- A debtor's ability to repay debts in whole or in part, standing alone, does not constitute adequate cause to dismiss a Chapter 7 case under § 707(a).
- The bankruptcy court did not abuse its discretion in denying McGann's motion to dismiss because the totality of the circumstances demonstrated substantial prejudice to creditors and other reasons against dismissal.
- McGann waived the offset argument by failing to raise or adequately present it in her opening brief.
Key quotations
“That framework does not contemplate debtors going rogue to formulate their own repayment plan and then moving to dismiss the case without regard for the interests of all creditors.” (at 1)
“A debtor does not have an absolute right to dismiss a chapter 7 bankruptcy case.” (at 8)
“Finally, even if Appellant’s proposal were sound, Appellant’s ability to repay her debts alone does not constitute adequate cause for dismissal.” (at 13-14)
Factual background
McGann filed Chapter 7 bankruptcy while owning real property subject to multiple secured claims and claimed a homestead exemption. After a settlement caused two liens and related claims to be withdrawn, the trustee sought access to the property to evaluate and potentially liquidate it for the estate, but McGann opposed the trustee's efforts. McGann then sought dismissal so she could pay selected creditors outside bankruptcy while refusing to pay claims and administrative expenses she deemed illegitimate. The bankruptcy court found that dismissal would prejudice creditors, delay or reorder distributions, and remove the property from the bankruptcy estate.
Procedural history
McGann filed a Chapter 7 petition, and Jagow was appointed trustee. After the trustee sought access to and turnover of real property and after McGann's proposed conversion to Chapter 11 was withdrawn, McGann moved to dismiss the Chapter 7 case so that she could pay creditors she considered legitimate outside bankruptcy. The bankruptcy court denied dismissal and later denied reconsideration. The BAP affirmed.