In re Gibas

543 B.R. 570

In the matter: Larry E. Gibas, Kimberly D. Richter Gibas, Debtors-in-possession.

Case No. 15–31102–beh

United States Bankruptcy Court, E.D. Wisconsin.

Signed January 19, 2016

Leonard G. Leverson, Leverson Lucey & Metz S.C., Milwaukee, WI, for Debtors-in-possession.

MEMORANDUM DECISION

Beth E. Hanan, United States Bankruptcy Judge

This chapter 11 case involves two debtors, two houses, eight bankruptcies filed in two states over four years, and no plan payments.

The debtors-in-possession, Larry and Kimberly Gibas, have filed two motions for stay and the court has issued an order to show cause. Larry Gibas has moved to continue the automatic stay under 11 U.S.C. section 362(c)(3)(B) because he had one previous bankruptcy case dismissed within the past year. Kimberly Gibas has moved to impose the automatic stay under 11 U.S.C. section 362(c)(4)(B) because she had two previous bankruptcy cases dismissed within the past year. The court ordered the Gibases to show cause why they are eligible for bankruptcy relief under Title 11 because they requested and obtained the voluntary dismissal of their last case following the filing of a motion for relief from the automatic stay by one of their creditors, a sequence of events which would render them ineligible under 11 U.S.C. section 109(g)(2).

The court concludes that the text of section 109(g)(2) renders the Gibases ineligible for bankruptcy relief under Title 11 and therefore requires dismissal of this case. Even if the court had confirmed eligibility, a pattern of egregious conduct over the Gibases' multiple bankruptcy filings shows that Larry and Kimberly have not filed this case in good faith, so stay relief would be improper. Finally, and based on the same pattern of repeated filings, late information, concealed information and disregard of a court order, the petitioners¹ will be barred from refiling, singly or jointly, a case under Title 11 for one year from this Decision.

I. JURISDICTION

This court has jurisdiction under 28 U.S.C. section 1334 and the Eastern District of Wisconsin's July 16, 1984, order of reference entered under 28 U.S.C. section 157(a). This is a core proceeding under 28 U.S.C. section 157(b)(A) and (G), thus the Court may enter final judgment. 28 U.S.C. § 157(b)(1).

II. PROCEDURAL BACKGROUND

Mr. and Mrs. Gibas filed their current chapter 11 case on October 2, 2015 (the "Chapter 11 Case").² Because the couple had previously filed a chapter 13 case in the Eastern District of Wisconsin within the prior year (the "2015 Chapter 13 Case"), their attorney moved to continue the automatic stay under section 362(c)(3). (Chapter 11 Case Doc. No. 6.) Shortly thereafter, the court issued an order to show cause why the petitioners' case should not be dismissed on eligibility grounds, because the Gibases had obtained a voluntary dismissal of their prior case shortly after a creditor moved for relief from the automatic stay. See 11 U.S.C. § 109(g)(2). (Chapter 11 Case Doc. No. 15.)

Soon after the order to show cause issued, creditor CIT Bank (formerly OneWest Bank), the holder of the mortgage on the petitioners' prior residence in South Barrington, Illinois, filed an objection to their motion to continue the stay. (Chapter 11 Case Doc. No. 17.) CIT alleged that the current case was presumptively filed not in good faith because there had not been a substantial change in the Gibases' personal or financial affairs since the dismissal of the prior case. See 11 U.S.C. § 362(c)(3)(C)(i)(II). Hours before the October 29, 2015 hearing on the motion to continue stay, CIT filed a supplemental objection, alerting the court to both Larry and Kimberly Gibas's extensive bankruptcy history outside of this jurisdiction. (Chapter 11 Case Doc. No. 21.) That history includes six bankruptcies filed in Illinois since 2011. The couple disclosed none of those prior cases in their petition. CIT also pointed out that the current case marks Kimberly Gibas's third case pending during the year ending on October 2, 2015, and argued that the automatic stay did not go into effect as to her upon filing this case. See 11 U.S.C. § 362(c)(4). Minutes before the hearing, CIT and the Gibases filed a stipulation and proposed order granting CIT relief from the stay as to the petitioners' former home and related debt in South Barrington, Illinois. (Chapter 11 Case Doc. No. 22.)

The Gibases did not appear at the hearing on their motion to continue the stay. Their attorney made a brief proffer about the nature of the petitioners' income. Based on that proffer and Larry's affidavit in support of the motion, the court conditionally continued the automatic stay as to Mr. Gibas, pending the conclusion of the hearing on the petitioners' eligibility or further order of the court. (Chapter 11 Case Doc. No. 24.) The court ruled that there was no stay in effect as to Kimberly Gibas because of her prior bankruptcies. (Petitioners' counsel filed a motion to impose the stay on Mrs. Gibas's behalf the following day.) The court advised counsel that his clients should be prepared to testify at their eligibility hearing and should file detailed breakdowns of their business income "well in advance of the hearing," to aid the court in determining the petitioners' good faith.(Id.)

On December 1, 2015, the court held a hearing on three matters: (1) the petitioners' eligibility under section 109(g)(2) ; (2) Larry's motion to continue the stay; and (3) Kimberly's motion to impose the stay.³ Petitioners' counsel argued that they are eligible for bankruptcy relief under section 109(g)(2), advocating a causal-relationship reading of the statutory provision. He asserted that the petitioners did not dismiss their prior case because of the filing of the motion for relief from stay, but rather because they learned that they were financially ineligible for relief under chapter 13. He also argued that Larry and Kimberly filed the present case in good faith and with a valid purpose under the Bankruptcy Code—to pay off their mortgage and tax debts and to save their Fontana, Wisconsin homestead. To support these arguments, counsel offered only the testimony of Larry Gibas. In response, the attorney for the U.S. Trustee elicited testimony from both Larry and Kimberly Gibas. She asserted that the couple's prior filing history demonstrates a pattern of abuse of the Bankruptcy Code and reflects bad faith. She argued the Gibases are not eligible to be debtors under any reading of section 109(g)(2), and urged the court not to continue or impose the stay as to either of them. The court took the matter under advisement. Shortly thereafter, the Gibases' counsel filed a letter of supplemental authority, addressing the In re Guerrero decision raised by the court during the hearing. (Chapter 11 Case Doc. No. 44.)

III. FACTUAL BACKGROUND

A. Petitioners' Employment

To the extent factual findings are necessary to reach the conclusions set forth in this Decision, the following description of background facts, as well as the factual credibility determinations included in the Discussion portion of the Decision, constitute such findings of fact. See Fed. R. Bankr. P. 7052.

According to Schedule I, Mr. Gibas has been employed by Rigger Local 136 for 36 years, and his occupation is an "Iron Worker." (Chapter 11 Case Doc. No. 20 at 19.) Larry Gibas explained that this is a salaried union job in which he sets up equipment for trade shows and conventions. Besides his union employment, Larry also runs his own business, New Beginnings Rental, Inc. (Id. at 29.) This business rents cranes and forklifts for use at trade shows and conventions. Mr. Gibas explained that the recent recession affected his income on a delayed basis, because trade shows are often booked (and paid for) several years in advance. He asserted that his income is now improving. (See Chapter 11 Case Doc. No. 11.)

Kimberly Gibas is a chiropractor and the owner of New Beginnings Chiropractic, Ltd. (Chapter 11 Case Doc. No. 20 at 19, 29.) Kimberly has been employed at New Beginnings Chiropractic for at least five years.⁴

B. Petitioners' Prior Bankruptcies

Although this is their first chapter 11 case, Mr. and Mrs. Gibas are not new to bankruptcy. Between them, they have filed thirteen bankruptcy cases since 1998. The most recent eight cases, including the current one, have all been filed since September 2011. Six were filed in the Northern District of Illinois, and two in this district. The lengthy but relevant history from those eight cases is set forth below. Much of that information was obtained from PACER.⁵

At this point it may be useful to explain how bankruptcy cases are logged on the federal judiciary's electronic filing and indexing systems, CM–ECF and PACER.⁶ When a case is filed using the court's electronic filing system, CM–ECF, the national PACER Service Center (PSC) extracts certain data from the filing, including the debtor's social security number. The PSC collects and stores this data for several reasons, including to identify repeat bankruptcy filers. When a debtor files a new case in this district, the debtor's social security number is automatically checked against the social security numbers from prior filings in this district. If a prior filing under the same social security number is found, an automated private docket entry is made notifying the court and the clerk's office that the debtor has filed a prior bankruptcy case. But this automated function of checking for prior cases does not extend to a search of other jurisdictions. To conduct such a broader query, one must search either the national PACER Case Locator index (using the debtor's name), or each district's individual PACER website, one-by-one (using the debtor's name or social security number). Both services require users to pay a fee to access public records. They also rely on accurate social security numbers (when searching individual court websites) and the accurate spelling of a debtor's surname. ⁷

The bankruptcy...