Summary
The United States Bankruptcy Court for the Northern District of Georgia denies Debtor Irving Russell’s motion to convert his Chapter 7 case to Chapter 13. Applying Marrama v. Citizens Bank of Massachusetts, the court concludes that Russell’s repeated failures to attend creditors’ meetings, nondisclosure of a bank account, noncompliance with examination and document requests, and other conduct demonstrate atypical, extraordinary, and egregious bad faith. The court reserves ruling on the trustee’s objection to Russell’s claimed exemptions for a separate opinion.
Topics
Practice areas
Questions Presented
- Whether a chapter 7 debtor has an absolute right to convert the case to chapter 13 under 11 U.S.C. § 706(a).
- Whether the debtor's conduct constituted bad faith sufficient under Marrama and 11 U.S.C. § 1307(c) to deny conversion from chapter 7 to chapter 13.
- Whether the totality of the circumstances, including concealment or nondisclosure of assets, repeated failures to appear, frivolous filings, failure to comply with a Rule 2004 examination, and lack of cooperation with the trustee, established an extraordinary and egregious case warranting denial of conversion.
Holdings
- A chapter 7 debtor does not have an absolute right to convert to chapter 13 when cause exists under 11 U.S.C. § 1307(c) to dismiss a chapter 13 case or reconvert it to chapter 7. Bad faith constitutes such cause under Marrama.
- Russell's conduct was atypical, extraordinary, and egregious and demonstrated bad faith sufficient to deny his motion to convert from chapter 7 to chapter 13.
Key quotations
“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.” (549 U.S. at 375 n.11)
“The Court finds this failure particularly troubling given that the Court ordered him to appear at the 2004 exam and specifically instructed him at the December 18 hearing that it expected him to appear at the 2004 exam.”
Factual background
Russell had filed five bankruptcy cases, including four within less than two years, and his three most recent cases had been dismissed for failure to fund a plan, failure to comply with a court directive, or failure to file required documents. In this case, he initially failed to disclose a Navy Federal Credit Union account containing approximately $30,000, missed five meetings of creditors, failed to appear at hearings on his own motions, and filed documents asserting that bankruptcy law and the court's jurisdiction did not apply to him. He also failed to appear for a court-ordered Rule 2004 examination and refused to provide sufficient bank records for the trustee to evaluate his claimed exemptions. Russell sought conversion principally to preserve his residence, which had substantial equity but was subject to a large mortgage arrearage.
Procedural history
Russell filed this fifth bankruptcy case under chapter 7 on June 12, 2025, after three recent cases had been dismissed. During the case, he failed to attend multiple meetings of creditors and hearings, failed initially to disclose a bank account containing approximately $30,000, filed numerous frivolous or duplicative documents, failed to appear for a court-ordered examination under Federal Rule of Bankruptcy Procedure 2004, and did not adequately cooperate with the trustee's investigation of his claimed exemptions. He moved to convert to chapter 13 to save his home from foreclosure, but the trustee and United States Trustee opposed conversion on bad-faith grounds.