As a bankruptcy attorney in Mount Vernon, IL for over 20 years, I read through and analyze court rulings throughout the country.
This is a case involving a person on a fixed income and whether they may convert to a Chapter 13 consolidation.
Bankr CD California: Chapter 7 Debtors who Lacked Sufficient Income to make Payments called for under a Ch 13 Plan could Not Convert to Chapter 13.
Thus, Debtors who do not have sufficient income to make payments called for under a plan, as here, are ineligible for Chapter 13.
It also appears that Debtors cannot show that conversion to Chapter 13 is in good faith since they have not demonstrated that they have any excess income to make Chapter 13 plan payments and appear to be motivated by trying to stop the actions of their secured creditor from foreclosing a reinstated trust deed, which the creditor had shown in a state court action was fraudulently released and indicates that the motivation for the Chapter 13 conversion request was to defeat the state court litigation brought by the secured creditor. Opposition of Wilmington Trust, NA, as Trustee, etc., to Debtor’s Motion to Hold It in Contempt and for Sanctions, ECF 40, filed on November 4, 2016, and Exhibit 5 attached thereto (state court order filed on August 17, 2016, granting Wilmington Trust, NA, summary judgment, finding Debtor Edmund Castillo recorded a forged reconveyance of trust deed purportedly to “revoke” and reconvey Wilmington Trust’s trust deed and lien to secure its real property loan on Debtors’ property); see, In re Leavitt, 171 F.3d 1219, 1224 (9th Cir. 1999); see also, In re Santos, ___ B.R. ___, 2017 WL 129901, No. 6:13-bk-13557 MH Chapter 7 (Bankr. C.D. Cal. 2017) (memorandum decision and order denying debtors’ motion to convert to Chapter 13 based on finding cause to convert or dismiss Chapter 13 case under 11 U.S.C. § 1307(c) if motion granted)(copy available on the court’s website under judicial opinions), slip op. at *4-6, citing inter alia, Marrama v. Citizens Bank of Massachusetts, 549 U.S. at 365. As noted previously, the motion to convert does not include any legal memorandum of points and authorities and did not state a reason for the motion, ECF 44, but Debtor Edmund Castillo in his motion to reopen the case, ECF 21, stating that he sought to reopen the case to amend the bankruptcy schedules to add lien creditors and to file a motion to avoid lien of the secured lender, or alternatively, to file a motion to convert the case to Chapter 13. Debtors have not provided any good faith reason for converting this case to Chapter 13 because they do not intend to pay claims of their unsecured creditors as there are no meaningful debts to be paid as such debts were discharged by the Chapter 7 discharge previously entered in this case and Debtors’ only stated reason for converting to Chapter 13 is to avoid the lien of the secured creditor determined in the state court litigation to be valid after determining that Debtor Edmund Castillo had recorded a forged reconveyance of its trust deed to illegally release the lien arising from the trust deed, which is just a collateral attack on the state court judgment in that litigation, is not a good faith reason to convert to Chapter 13. In re Santos, ___ B.R. ___, 2017 WL 129901, No. 6:13-bk-13557 MH Chapter 7, slip op. at *3, citing inter alia, In re Starling, 359 B.R. 901, 911 (Bankr. N.D. Ill. 2007).
Read the full opinion here.
About the blogger:
Michael Curry of Curry Law Office in Mount Vernon, Illinois (http://michaelcurrylawoffice.com/) has helped thousands of individuals, family and small businesses in southern Illinois find protection under the Bankruptcy Code for almost twenty-five years. He is also available to help individuals and families with their estate planning (wills, power-of-attorney) and real estate and other sales transactions.
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