In re Bouchard, BK No: 15–10543

560 B.R. 385

In re: Andrew P. Bouchard, Debtor

BK No: 15–10543

United States Bankruptcy Court, D. Rhode Island.

Signed December 5, 2016

Kevin D. Heitke, Heitke Law Office, LLC, Providence, RI, for Debtor.

DECISION AND ORDER ON CREDITOR's MOTION TO CONVERT OR DISMISS CASE

Diane Finkle, U.S. Bankruptcy Judge

In bankruptcy administration, the system will collapse if debtors are not forthcoming .¹

Before this Court is the motion of creditor Amanda Rotella, former spouse of debtor Andrew Bouchard, to convert or dismiss this chapter 13 case for bad faith. One need only review the record here to understand the tortured path of this case and to fully appreciate Mr. Bouchard's abuse of the bankruptcy process and his repeated efforts to manipulate his income and expenses to fit his needs. It is the Court's foremost responsibility to protect the integrity of the bankruptcy process for the benefit of honest debtors and their creditors. This decision constitutes the Court's findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052,² to the extent made applicable by Rule 9014(c). Considering the totality of the circumstances presented, the Court finds that Mr. Bouchard lacked good faith in the filing of his bankruptcy petition, and that it is in the best interest of the Debtor's creditors that this case be dismissed.

I. Jurisdiction

The Court has jurisdiction over this matter under to 28 U.S.C. §§ 157(a) and 1334, and Rule 109(a) of the local rules of the District Court for the District of Rhode Island This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (L), and (O).

II. Convoluted Procedural History

On March 26, 2015, Mr. Bouchard filed a voluntary chapter 13 bankruptcy petition (Doc. # 1), together with applicable schedules (Doc. # 1), a Form 22C chapter 13 statement of current monthly income and calculation of commitment period (the so-called "means test" form) (Doc. # 3), and a chapter 13 plan ("Plan," Doc. # 4). The Plan proposed monthly payments to the Chapter 13 Trustee in the amount of $233 for 60 months; to pay directly secured creditors Attitash Mountain Village (monthly timeshare fee of $115) and Santander Consumer USA (monthly vehicle installment payment of $384); and after deduction of administrative expenses, to pay $10,582 to unsecured creditors, approximately 7% of their claims. In early May 2015, only a few days after the meeting of creditors was held as mandated by 11 U.S.C. § 341³ ("Creditors' Meeting"), Ms. Rotella filed an initial objection to Plan confirmation (Doc. # 15), which she amended soon after (Doc. # 18). The Chapter 13 Trustee also objected to the Plan (Doc. # 19).

On July 2, 2015, Mr. Bouchard filed an amended Schedule B (list of personal property) (Doc. # 27) to add a joint bank account containing $650 he held (and still holds) with his then-girlfriend, now fiancée, Jessica Doyle, as well as clothing and a watch both valued at $200. The Court held a preliminary hearing on Plan confirmation on July 8, 2015, and then scheduled a full evidentiary hearing for September 10, 2015. Mr. Bouchard and Ms. Rotella filed a joint pretrial statement on August 24, 2015 (Doc. # 39), and supporting memoranda of law (Doc. ## 42, 46). Prior to the evidentiary hearing, Ms. Rotella also filed a motion seeking to convert the case from chapter 13 to chapter 7 or, in the alternative, to dismiss the case ("Motion," Doc. # 47), to which Mr. Bouchard filed an objection (Doc. # 54).⁴ In light of the Motion, the evidentiary hearing was rescheduled to October 22, 2015, for Plan confirmation and consideration of the Motion. As directed by the Court, the parties filed amended joint pretrial statements on October 7, 2015 (Doc. # 59), and again on October 20, 2015 (Doc. # 66).

At the commencement of the October 22 evidentiary hearing, Mr. Bouchard's counsel represented that his client intended to file an amended plan, amended schedules, and an amended means test form. Consequently, the evidentiary hearing was once again rescheduled, this time to November 19, 2015. Mr. Bouchard filed amended Schedules I and J (statement of income and expenses) (Doc. # 72), an amended means test (Doc. # 73), and an amended plan (Doc. # 74) on October 26, 2015. Line 4 of the amended means test reflected $150 in additional monthly income of Mr. Bouchard for pre-petition monthly contributions from Ms. Doyle, allegedly for utility expenses. In actuality, as the later testimony indicated, this monthly contribution was in fact $300, but because Mr. Bouchard claimed to have received it for only three of the six months prior to the petition date, he only listed it as a $150 monthly contribution.

The following day, both the Chapter 13 Trustee (Doc. # 76) and Ms. Rotella (Doc. # 77) filed objections to confirmation of the amended plan, and Ms. Rotella also objected to Mr. Bouchard's amended means test form (Doc. # 78) and the amended Schedules I and J (Doc. # 79). Adding to the confusion, the next day Mr. Bouchard filed a new set of Schedules I and J (Doc. # 80), this time supplemental schedules to reflect changes to his income that would become effective in January 2016, and yet another amended plan ("First Amended Plan," Doc. # 81) upon the Clerk's office termination of the amended plan filed the previous day as filed incorrectly.

In his revised supplemental Schedule I (Doc. # 80), Mr. Bouchard disclosed that his residential lease would expire at the end of 2015, that Ms. Doyle had purchased her own home, and that he would be entering into a one-year lease with her and moving to her home the first of the year. Consequently, he would no longer receive her $300 per month contribution. In turn, his revised supplemental Schedule J indicated that his monthly rental contribution for his current apartment was reduced from $1,300 to $650 (presumably reflecting Ms. Doyle's new rent contribution in the same amount for one-half of the total rent). It also noted that once he moved into her house in January 2016, his rent payments would increase to $950 per month (this sum being one-half of Ms. Doyle's mortgage payment). This schedule also reflected the elimination of the $115 monthly timeshare payment. The First Amended Plan proposed monthly payments of $233 for seven months, $1,046 for two months, and $446 for 51 months to correspond with the changes noted in the newly revised supplemental Schedules I and J. The payment increase was intended to cure the plan payment shortfall that the Chapter 13 Trustee and Ms. Rotella asserted arose due to Mr. Bouchard's unreasonable payment of the entire rent for the apartment he shared with Ms. Doyle, rather than one-half of the total monthly rent. The Chapter 13 Trustee and Ms. Rotella objected to the First Amended Plan (Doc. ## 84, 77).⁵

On November 18, 2015, the parties filed a revised joint pretrial statement (Doc. # 91), and the following day, the Court held an evidentiary hearing on confirmation of the First Amended Plan, the Motion, and the various objections. Mr. Bouchard and Ms. Rotella introduced testimony and documentary evidence, and the Court continued the hearing to November 23, 2015, for closing arguments. See transcript of November 19, 2015 hearing at Doc. # 129 ("Tr. # 129"). As has been the most unusual and candidly frustrating pattern in this case, instead of presenting closing arguments, Mr. Bouchard's counsel informed the Court that his client once again intended to amend his proposed chapter 13 plan. After a general discussion of the anticipated amendments and potential issues of law they might raise, the Court set deadlines for the filing of this proposed amended plan and for post-trial memoranda of law.

On November 30, 2015, Mr. Bouchard filed another set of supplemental Schedules I (Doc. # 98) and J (Doc. # 99) and his now third proposed plan ("Second Amended Plan," Doc. # 100). These revised supplemental schedules eliminated Ms. Doyle's $300 monthly contribution, increased Mr. Bouchard's rent expense to $950, and modified some utility and food expenses. The Second Amended Plan proposed monthly payments of $233 for seven months, $1,046 for two months, and $546 for 51 months, thus providing a dividend for general unsecured creditors of approximately 31% of their claims over the term of the plan, a greater percentage than previously proposed in his earlier plans. Mr. Bouchard also filed a post-hearing memorandum of law (Doc. # 104), as did Ms. Rotella (Doc. # 110). Once again the Chapter 13 Trustee (Doc. # 112) and Ms. Rotella (Doc. # 121) filed objections to confirmation of the Second Amended Plan. After a conference with the parties, the Court found it necessary to reopen the evidentiary hearing.

The reopened evidentiary hearing was held on April 28, 2016. See transcript at Doc. # 128 ("Tr. # 128"). Mr. Bouchard and Ms. Rotella submitted additional evidence, counsel presented closing arguments, and the Court directed the parties to submit post-hearing proposed findings of fact and conclusions of law.⁶ After some delay, Mr. Bouchard filed his memorandum on August 16, 2016 (Doc. # 133), and Ms. Rotella filed hers on September 22, 2016 (Doc. # 138). The Court took the Motion and confirmation of the Second Amended Plan under advisement on October 11, 2016.

III. Findings of Fact

The following findings of fact are based on the parties' stipulated facts in their joint pretrial statements and the evidence adduced at the hearings. Mr. Bouchard and Ms. Rotella married in 2004 and divorced in 2009. At the time of their divorce, the couple owned a residential condominium that was subject to a mortgage on which they were jointly liable to Pawtucket Credit Union ("PCU"). As provided in their divorce judgment, Mr. Bouchard agreed to indemnify and hold harmless Ms. Rotella from any liability resulting from that joint mortgage. Despite good intentions, sometime after the divorce Mr. Bouchard became unemployed and unable to make the mortgage payments. PCU foreclosed on the condominium and...