In re Traylor, Case No. 19-21995 (JJT)

628 B.R. 1

IN RE: Sylvester TRAYLOR, Debtor.

Case No. 19-21995 (JJT)

United States Bankruptcy Court, D. Connecticut, Hartford Division.

Signed February 26, 2021

Patrick Crook, Hartford, CT, for Trustee.

Roberta Napolitano, Hartford, CT, Trustee, pro se.

ORDER DISMISSING CHAPTER 13 CASE WITH A TWO-YEAR BAR

James J. Tancredi, United States Bankruptcy Judge

I. INTRODUCTION

Roberta Napolitano, the Chapter 13 Trustee ("Trustee"), filed the instant Motion to Dismiss (ECF No. 160) pursuant to 11 U.S.C. § 1307(c) seeking dismissal of the Debtor's Chapter 13 case for failure to file a confirmable plan due to lack of feasibility and the plan's ostensible lack of a bona fide bankruptcy purpose. A hearing on the Motion to Dismiss, the Debtor's Fourth Amended Plan (ECF No. 161, the "Plan"), and the Debtor's Motion to Reinstate the Automatic Stay (ECF No. 163) proceeded on a consolidated record on February 12, 2021 (ECF No. 185), whereat the Court heard evidence and argument advanced by the Trustee, the Debtor, and creditor Town of Waterford ("the Town"). In addition to adopting the Trustee's statements regarding the Plan's lack of feasibility, the Town also argued that dismissal of the Debtor's case with prejudice was warranted based on a lack of good faith in addition to the Debtor's efforts to delay or otherwise frustrate a pending state court tax foreclosure. At the conclusion of the hearing, the Court took all matters under advisement.¹ For the reasons provided herein, the Trustee's Motion to Dismiss is GRANTED and, in accordance with 11 U.S.C. § 349(a), the dismissal is with prejudice and the Debtor is barred from filing for relief under any chapter of the Bankruptcy Code, in any bankruptcy court, for a period of not less than two (2) years from the date of entry of this Order.

II. BACKGROUND

On November 22, 2019, the Debtor filed a voluntary petition along with his first Chapter 13 Plan.² See ECF Nos. 1, 5. According to Schedules I and J, the Debtor listed a negative monthly net income of $515 (ECF No. 1, p. 28), yet proposed monthly plan payments of $740 to address outstanding real estate taxes due to the Town (ECF No. 5). In her Objection to Confirmation, in addition to highlighting material issues concerning feasibility, the Trustee also objected to confirmation on the basis of: (1) missing documentation;³ (2) failure to conform the plan to the claims filed; and (3) failure to provide for the appropriate amount of interest on the Town's secured claim. See ECF No. 40. The Debtor subsequently sought, and the Court thereafter granted, denial of confirmation with leave to amend (ECF Nos. 46, 51).

While confirmation of the Debtor's initial plan was pending, the Town moved for relief from the automatic stay regarding real and personal property located at 881 Vauxhall Street in Quaker Hill, Connecticut (the "Property"), based on outstanding taxes, interest, and fees in the amount of $74,767,84 that were duly assessed on the Property. (ECF No. 21). On March 12, 2020, the Court granted the Town's Motion for Relief from Stay (ECF No. 42).⁴

On May 14, 2020, the Debtor filed a First Amended Plan, wherein the only amendment that was made was to "[show] payments held by the Trustee" in the amount of $4,400 (ECF No. 95). Because the Debtor's Amended Plan had wholly failed to address any of the issues raised in the Trustee's initial objection, the Trustee's Objection to the First Amended Plan raised the same issues as her first, i.e., (1) the Debtor did not provide requested documentation; (2) the plan did not conform to filed claims; (3) the plan did not provide for appropriate interest for the Town's secured claim; and (4) the plan was not feasible (ECF No. 131). The Debtor's First Amended Plan was denied with leave to amend (ECF No. 134).

On September 15, 2020, the Debtor filed a Second Amended Plan (ECF No. 140), again without addressing any issues raised in the Trustee's first two objections, this time adding a non-standard provision (with exhibits) pertaining to an unrelated Connecticut Superior Court foreclosure action and updating the "amount previously paid to trustee" to $7,400. In addition to reasserting the very same objections she raised in her two prior objections, the Trustee's Objection to the Second Amended Plan also assailed the Debtor's claim that he had paid $7,400 to the Trustee during the pendency of the case, instead contending that she had only received $6,660 (ECF No. 144). A confirmation hearing on the Debtor's Second Amended Plan was held on October 22, 2020, whereat the Court denied confirmation but granted the Debtor leave to amend (ECF No. 148).

On November 25, 2020, just over a year after filing his first plan, the Debtor filed a Third Amended Plan (ECF No. 151), wherein he nearly doubled the proposed monthly plan payment to $1,384 despite ostensibly operating with a negative monthly net income, removed the non-standard provision, and adjusted the arrearage on the Town's claim to $74,767.84. In the Trustee's Objection to the Debtor's Third Amended Plan, she pointed out that, in addition to the defects that she had specifically identified in each of the three prior objections,⁵ the Debtor failed to maintain plan payments and was overdue in the amount of $1,104, and that the plan serves no apparent purpose because it only purports to address the Town's claim—despite the Court's granting of stay relief as to that claim (ECF No. 156). The instant Motion to Dismiss was filed soon thereafter (ECF No. 160).

On January 20, 2021, the Debtor filed a Fourth Amended Plan which increased the proposed monthly Plan payment to $2,386.78 and provided to pay interest at 18% on the tax portion of the Town's claim (ECF No. 161). Given the underlying questions concerning feasibility raised by the Trustee throughout this case, the Court scheduled an evidentiary hearing to address the Trustee's Motion to Dismiss, the Debtor's Fourth Amended Plan, and the Debtor's Motion to Reinstate the Stay, and ordered the Debtor to "promptly deliver to the Trustee those documents reasonably requested to support his income, resources to support the Plan and financial feasibility." ECF No. 167. The Court's Order also directed that the "Debtor shall open the hearing with the presentation/offer of proof of a summary of the sources and uses of funds to address the classes of creditor claims to be treated in his plan." Id.

At the evidentiary hearing, which was held on February 12, 2021, the Debtor proffered various exhibits, including a copy of a check in the amount of $2,290.78 sent to the Trustee on February 11, 2021, which was to ostensibly demonstrate that the Debtor had brought plan payments current; bank statements showing transactions from 12/30/20–1/12/21 and 1/29/21–2/10/21 which the Debtor claimed confirms that he has sufficient income to make plan payments; a 12-month profit and loss statement, which was created by the Debtor but not substantiated by any other proffered evidence; and a document containing a written response to the Trustee's objections, which notably indicated that a fifth amended plan would be necessary in order to "reflect Trustee's computations" as well as address the shortfall of his income, which he claimed could be dealt with through his "ability to generate additional income if needed and have family members that will contribute to help me save my home."

In keeping with her observations throughout this case, the Trustee now argues that the Motion to Dismiss and her Objection to the Fourth Amended Plan turn on feasibility, and that the Debtor has not met his burden of demonstrating an ability to make the proposed payments. Simply put, she argues that aside from the information listed in his Schedules, the Debtor has not produced any corroborating evidence that would support his claim that he has sufficient funds to make the proposed plan payments while continuing to pay his living expenses. What's more, to the extent that the Debtor claims there are promised or hopeful contributions from family members, he has provided no documentation or testimony to substantiate such a claim. The Town joins the Trustee's arguments, while also arguing for dismissal with prejudice, citing the length of time this case has been pending and the Plan's mootness in light of stay relief entering in the Town's favor.

The Court agrees that dismissal is warranted and finds that cause exists to dismiss the Debtor's case based on his failure to satisfy his burden in demonstrating that he has the means and ability to comply with the terms of the proposed plan, the unreasonable and prejudicial delay in this case, and the Debtor's ostensible lack of good faith demonstrated by the filing of multiple unfeasible plans throughout this case.

III. DISCUSSION

Section 1307 of the Bankruptcy Code, which governs conversion or dismissal of Chapter 13 cases, provides that the court, on request of a party in interest and after notice and a hearing, may dismiss a case for cause, and further provides a non-exhaustive list of circumstances that constitute "cause." 11 U.S.C. § 1307(c). The Court finds that at least two of the enumerated circumstances apply here.⁶ Under subsection (c)(1), the Court may dismiss a Chapter 13 case where there has been "unreasonable delay by the debtor that is prejudicial to creditors." 11 U.S.C. § 1307(c)(1). Additionally, subsection (c)(5) provides that the Court may dismiss a Chapter 13 case in the event of "denial of confirmation of a plan under [ 11 U.S.C. § 1325 ]." 11 U.S.C. § 1307(c)(5).

With respect to dismissal under subsection (c)(1), this case has been pending for over a year, and in that time the Debtor has made no meaningful progress toward the filing of a feasible and confirmable plan. For more than a year (and during his previous bankruptcy) the Trustee has requested, and the Debtor has failed to provide, those documents necessary for the Trustee to determine if the plan is feasible and if it complies with Section...