In re Stockwell

579 B.R. 367

IN RE: Brian Lee STOCKWELL, Debtor

In re: Brian Lee Stockwell, Debtor

CASE NO. 17–04342–5–JNC

CASE NO. 17–05760–5–JNC

United States Bankruptcy Court, E.D. North Carolina, Greenville Division.

Signed December 21, 2017

Brian Lee Stockwell, pro se.

CONSOLIDATED ORDER DISMISSING CASES AND ENJOINING DEBTOR FROM REFILING FOR ONE YEAR

Joseph N. Callaway, United States Bankruptcy Judge

Pending before the court is the Motion to Dismiss Chapter 7 Proceeding with Prejudice filed pursuant to 11 U.S.C. §§ 105(a), 707(a), and 707(b)(3) (the "Motion") by the Bankruptcy Administrator (the "BA") in Case No. 17–04342–5–JNC (the "Third Case") on October 30, 2017 (Third Case D.E. 28), and a substantively similar motion with an identical caption filed by the BA in Case No. 17–05760–5–JNC (the "Fourth Case") on December 14, 2017 (Fourth Case D.E. 20) (collectively, the "Motions"). Also pending before the court is the Order to Show Cause for failure to file a certificate of credit counseling issued in the Fourth Case on November 29, 2017 (Fourth Case D.E. 12; the "Show Cause Order"). A hearing was held on the Motions and the Show Cause Order in Raleigh, North Carolina on December 19, 2017. Counsel for the BA attended the hearing. Mr. Brian Lee Stockwell ("Mr. Stockwell" or the "Debtor") did not appear.

Based on the uncontroverted evidence presented by the BA at the hearing on the Motions, the court makes the following findings of fact and conclusions of law.

BACKGROUND

Mr. Stockwell filed his first relevant voluntary petition for relief under chapter 13 of the Bankruptcy Code in this district on March 7, 2017, which was assigned Case No. 17–01108–5–JNC (the "First Case"). He failed to file the required schedules and statements, a chapter 13 plan, or a certificate of credit counseling with the petition as required by 11 U.S.C. §§ 109(h), 521(a)(1)(B), 521(b), and 1321. Further, the only creditor Mr. Stockwell listed on the First Case petition was Ocwen Loan Servicing, LLC ("Ocwen"), reportedly the servicer for the first lien mortgage encumbering his primary residence located at 3608 Coventry Court, Greenville, North Carolina 27858 (the "Residence") (First Case D.E. 1 at 9–10). Mr. Stockwell was notified to correct the filing deficiencies, and a show cause order was entered (First Case D.E. 13) directing that he appear before the court on April 5, 2017 to show cause for the failure to file a certificate of credit counseling. When Mr. Stockwell did not appear at the hearing, the First Case was dismissed (First Case D.E. 17).

On May 30, 2017, Mr. Stockwell filed a second voluntary petition for relief, this time under chapter 7 of the Bankruptcy Code, which was assigned Case No. 17–02608–5–JNC (the "Second Case"). Again, he failed to file multiple documents required under the Bankruptcy Code, including schedules of his assets and liabilities, a statement of financial affairs, details of his current income and liabilities, and the certificate of credit counseling. The court entered an order instructing Mr. Stockwell to appear and show cause for failure to file a certificate of credit counseling (Second Case D.E. 18). The matter was set for July 11, 2017. Once again, only Ocwen was listed as a creditor by Mr. Stockwell (Second Case D.E. 1 at 9–10). Mr. Stockwell failed to appear at the July 11 hearing, and the Second Case was dismissed that same day (Second Case D.E. 22). Meanwhile, Ocwen had filed a Motion for Relief from the Automatic Stay of Section 362 or in the Alternative Adequate Protection on June 23, 2017 (Second Case D.E. 20) seeking permission to proceed with a foreclosure action on its deed of trust against the Residence. Because the Second Case was dismissed before the Ocwen motion could be heard, that matter became moot.

Undeterred by the two prior dismissals, Mr. Stockwell filed the Third Case on September 5, 2017, again under chapter 7 of the Bankruptcy Code. As with the first two cases, he failed to file completed schedules, statements and certificates including the credit counseling completion certificate mandated by the Bankruptcy Code. Again, the only creditor listed on the petition was Ocwen (Third Case D.E. 1 at 9–10). Ocwen promptly sought relief from the stay in the Third Case by motion filed on September 15, 2017 (Third Case D.E. 13), alleging that as of the date of filing Mr. Stockwell was delinquent twenty-one (21) monthly payments on his mortgage, resulting in an arrearage exceeding thirty-five thousand dollars ($35,000.00). Mr. Stockwell did not oppose the motion and it was allowed in due course and Ocwen was granted relief from the stay by an order entered October 4, 2017 (Third Case D.E. 14).

The meeting of creditors required by § 341 of the Bankruptcy Code was scheduled in the Third Case for October 5, 2017 at 9:30 am in Greenville, North Carolina (Third Case D.E. 9). Mr. Stockwell failed to attend this meeting even though his attendance was required by 11 U.S.C. § 341(a). A show cause order was entered (Third Case D.E. 17) directing Mr. Stockwell to appear on November 1, 2017, and explain his failure to attend the meeting of creditors. In addition, the BA advised the court that the Third Case was presumed to be an abuse and the Clerk issued a Statement of Presumed Abuse pursuant to 11 U.S.C. § 707(b) on October 17, 2017 (Third Case D.E. 18). However, prior to consideration of Ocwen's motion or the issue of abuse on October 23, 2017, the Third Case was automatically dismissed by operation of 11 U.S.C. § 521(i) due to the failure of Mr. Stockwell to file required documents in the case within forty-five days of the petition date (Third Case D.E. 21).¹ The BA quickly filed a Motion for Reconsideration of Order Dismissing Case (Third Case D.E. 23) seeking to set aside the Third Case dismissal so that the court could address the presumption of abuse and dismissal with prejudice based on Mr. Stockwell's successive filings and routine failure to prosecute his cases in at least the most basic manner. The dismissal was set aside by order dated October 27, 2017 (Third Case D.E. 26), and the Motion was filed in the Third Case shortly thereafter (Third Case D.E. 28).

Meanwhile, and notwithstanding that the Third Case remained open by virtue of the order setting aside the dismissal, Mr. Stockwell filed yet another case (the Fourth Case) under chapter 7 of the Bankruptcy Code on November 28, 2017. Again, Mr. Stockwell listed no creditors other than Ocwen in his petition (Fourth Case D.E. 1 at 9–10). Like the three prior cases, Mr. Stockwell neglected to file schedules, statements and certificates required for a bankruptcy case to proceed, including a certificate of credit counseling. The Show Cause Order instructing Mr. Stockwell to appear with respect to his failure to pay the filing fee required by 28 U.S.C. § 1930² and to file a certificate of credit counseling was entered on November 29, 2017 (Fourth Case D.E. 12). The BA filed the Motion in the Fourth Case on December 14, 2017 (Fourth Case D.E. 20).

None of the four cases filed by Mr. Stockwell have been filed with the assistance of counsel, and none of the cases contain even the faintest resemblance of a full petition and schedules. The BA seeks to dismiss both the Third and Fourth Cases with prejudice and to bar Mr. Stockwell from seeking relief under the Bankruptcy Code for a period of twelve months pursuant to 11 U.S.C. §§ 105(a), 707(a), and 707(b)(3).

DISCUSSION

As further discussed below, the court finds that both the Third and Fourth Cases were filed in bad faith, subjecting them to dismissal under § 707(a). Further, based on Mr. Stockwell's conduct in filing these four cases, a one-year bar to refiling is reasonable and warranted under these circumstances.

I. BOTH CASES ARE SUBJECT TO DISMISSAL UNDER § 707(a) FOR BAD FAITH

After notice and a hearing, the court may dismiss a case under chapter 7 for "cause." 11 U.S.C. § 707(a). While the statute provides a non-exclusive list of factors that constitute "cause" for dismissal of a case under chapter 7, courts have consistently held that bad faith filing of a petition constitutes "cause" justifying dismissal under § 707(a). See, e.g. , Krueger v. Torres (In re Krueger) , 812 F.3d 365, 370 (5th Cir. 2016) ("This circuit joins those courts that have held a debtor's bad faith in the bankruptcy process can serve as the basis of a dismissal ‘for cause,’ even if the bad faith conduct is arguably encompassed by other provisions of the Code."); Perlin v. Hitachi Capital Am. Corp. (In re Perlin) , 497 F.3d 364, 372–75 (3d Cir. 2007) ; Indus. Ins. Servs., Inc. v. Zick, (In re Zick) , 931 F.2d 1124, 1126–27 (6th Cir. 1991) ; McDow v. Smith , 295 B.R. 69, 76 (E.D. Va. 2003) (" ‘[C]ause’ in § 707(a) includes bad faith as a basis for discretionary dismissal."). But see Neary v. Padilla (In re Padilla) , 222 F.3d 1184, 1193 (9th Cir. 2000) ("[B]ad faith per se can properly constitute ‘cause’ for dismissal of a Chapter 11 or Chapter 13 petition but not of a Chapter 7 petition under § 707(a).").

A finding of bad faith on the part of a debtor is based upon the "totality of the circumstances," McDow v. Smith , 295 B.R. at 79, and courts have promulgated "a number of factors to consider in determining whether bad faith exists." In re Romero , 557 B.R. 875, 881 (Bankr. D. Md. 2016). This court has previously relied upon fourteen categories of relevant factors in considering whether a bankruptcy case lacks good faith, as follows:

1. The debtor reduces creditors to a single creditor in the months prior to the filing of the petition;

2. The debtor failed to make lifestyle adjustments or continued living an expansive or lavish lifestyle;

3. Debtor filed the case in response to a Judgment pending litigation ... ;

4. The debtor made no efforts to repay his debts;

5. The unfairness of the use of Chapter 7;

6. The debtor has sufficient resources to pay his debts;

7. The debtor is paying debts to insiders;

8. The schedules inflate expenses to

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