Marrama v. Citizens Bank of Massachusetts

          United States Court of Appeals
                        For the First Circuit
No. 04-9009
                     IN RE ROBERT LOUIS MARRAMA,

                                Debtor


                        ROBERT LOUIS MARRAMA,

                              Appellant,

                                  v.

                  CITIZENS BANK OF MASSACHUSETTS AND
                MARK G. DEGIACOMO, CHAPTER 7 TRUSTEE,

                              Appellees.



              APPEAL FROM THE BANKRUPTCY APPELLATE PANEL

                         OF THE FIRST CIRCUIT


                                Before

                        Howard, Circuit Judge,

                Cyr and Stahl, Senior Circuit Judges.


     David G. Baker for appellant.
     Mark G. DeGiamomo, with whom Olga L. Bogdanov and Murtha
Cullina LLP were on brief for appellee Mark G. DeGiacomo.
     Jack J. Mikels, Michael A. Wirtz, Janell E. DeGennaro, and
Jack Mikels & Associates on brief for appellee Citizens Bank of
Massachusetts.
     Lynn F. Riley, with whom Gary Klein, Roddy, Klein & Ryan, and
John Rao, National Consumer Law Center, were on brief for Amicus
Curiae, National Association of Consumer Bankruptcy Attorneys.


                           October 31, 2005
            CYR, Senior Circuit Judge.           Robert Louis Marrama appeals

from the bankruptcy court order which rejected his petition to

convert these proceedings from chapter 7 to chapter 13, based on

its determination that Marrama had attempted to conceal assets from

creditors.    We affirm.

                                       I

                                 BACKGROUND

            In August 2002, Marrama transferred residential real

estate in York, Maine, having an unencumbered value of $85,000, to

a revocable spendthrift trust, for no consideration, and designated

himself     sole   beneficiary   and       his    girlfriend   sole   trustee.

Marrama's acknowledged intent was to protect the property from the

claims of creditors.     Seven months later, he submitted a voluntary

chapter 7 petition, together with a statement of financial affairs

wherein he (i) disclosed that he was the Trust’s beneficiary, (ii)

listed the value of its res as zero, (iii) denied making any

property transfers within one year preceding the filing of the

chapter 7 petition, and (iv) asserted that the IRS owed him no tax

refunds.1    Whereas, Marrama was due a tax refund exceeding $11,000.


     1
      Moreover, in accompanying financial statements, Marrama
claimed a homestead exemption in his Gloucester, Massachusetts
residence. In affirming the bankruptcy court finding that Marrama
had acted in bad faith, the Bankruptcy Appellate Panel (“BAP”)
noted that the homestead exemption appeared invalid on its face,
since Marrama simultaneously claimed to be residing in Maine and to
have received rental income from the Massachusetts property since
May 2003, thus contradicting his assertion that it was a
“residence” eligible for exemption. In the interim, however, the

                                    -2-
              In June 2003, the chapter 7 trustee questioned Marrama

regarding these apparent discrepancies.             Rather than responding,

Marrama    filed     notice   in   the    bankruptcy    court,    pursuant     to

Bankruptcy Code § 706(a), seeking to convert the chapter 7 case to

a   chapter     13   debt-restructuring        proceeding,    based   upon    his

contention that, more recently, he had acquired additional rental

income and gainful employment.           The chapter 7 trustee opposed the

conversion on the ground that Marrama intentionally failed to

disclose in his schedules the preferential transfer of the Maine

property into the trust some seven months prior to his chapter 7

petition, as well as his anticipated federal tax refund.                      The

debtor    contended    that   these   misstatements     and    omissions     were

inadvertent.

              Following a non-evidentiary hearing, the bankruptcy court

refused to permit the conversion to chapter 13, on the ground that

the deceptive statement of financial affairs demonstrated Marrama's

“bad faith.”      Marrama appealed to the BAP, which affirmed.             In re

Marrama, 313 B.R. 525 (BAP 1st Cir. 2004).2              The present appeal


bankruptcy court has ruled that the Marrama homestead exemption
claim is valid, see In re Marrama, 307 B.R. 332, 338-39 (Bankr. D.
Mass. 2004), hence we do not rely on this evidence in determining
whether the bankruptcy court erred in finding bad faith.
     2
      Following the Marrama appeal, the Maine property was sold,
see In re Marrama, 316 B.R. 418, 421-22 (BAP 1st Cir. 2004)
(holding that Marrama’s power to revoke the trust became property
of the chapter 7 estate, exercisable by the chapter 7 trustee), and
Marrama was denied a chapter 7 discharge, Citizens Bank of Mass. v.
Marrama (In re Marrama), No. 03-11987, 2005 WL 1106919, at *5 (D.

                                         -3-
fails as well.

                                    II

                                DISCUSSION

              On an appeal from a BAP decision, we review de novo the

legal determinations of the bankruptcy court, and its findings of

fact    for    clear   error.    See     Brandt   v.   Repco   Printers   &

Lithographics, Inc. (In re Healthco Int'l, Inc.), 132 F.3d 104,

107-08 (1st Cir. 1997).

A.     Section 706(a) and “Bad Faith” Conversion

              The initial issue on appeal is whether Bankruptcy Code §

706(a) confers any discretion upon the bankruptcy court to forfend

against “bad faith” conversions to chapter 13, or the debtor has an

“absolute” right to convert.      Interpretation of subsection 706(a)

presents a pure issue of law, engendering de novo review.         See HSBC

Bank USA v. Branch (In re Bank of New England Corp.), 364 F.3d 355,

361 (1st Cir.), cert. denied, 125 S. Ct. 318 (2004).            Subsection

706(a) provides:

              The debtor may convert a case under this
              chapter [viz., chapter 7] to a case under
              chapter 11, 12, or 13 of this title at any
              time, if the case has not been converted under
              section 1112, 1208, or 1307 of this title.
              Any waiver of the right to convert a case
              under this subsection is unenforceable.


11 U.S.C. § 706(a) (emphasis added). Thus, section 706 imposes two


Mass. May 9, 2005) (finding that Marrama had “intent to defraud”
creditors, see Bankruptcy Code § 727(a)(2)).

                                   -4-
plainly expressed limitations upon a debtor’s right to convert:

the debtor (i) must not previously have converted the case; and

(ii) must meet the eligibility requirements for the chapter to

which he intends to convert, see 11 U.S.C. § 706(d).   With respect

to a conversion to chapter 13, for example, the debtor must have a

regular income, unsecured debts less than $307,675, and secured

debts less than $922,975.   See id. § 109(e).

          As always, first we must inquire whether the plain

language of subsection 706(a) resolves the interpretive issue, and,

if so, its manifest meaning must control.       See In re BankVest

Capital Corp., 360 F.3d 291, 297 (1st Cir.), cert. denied, 124 S.

Ct. 2874 (2004).   At the outset it must be noted that subsection

706(a) is to be viewed in light of a fundamental canon of the

Bankruptcy Code: a bankruptcy court sitting in equity is duty bound

to take all reasonable steps to prevent a debtor from abusing or

manipulating the bankruptcy process to undermine the essential

purposes of the Bankruptcy Code, including the principle that all

the debtor’s assets are to be gathered and deployed in a bona fide

effort to satisfy valid claims.    See United States v. Mourad, 289

F.3d 174, 178 (1st Cir. 2002) (noting that Bankruptcy Code § 105(a)

enables the bankruptcy court to “tak[e] any action or mak[e] any

determination necessary or appropriate to . . . prevent an abuse of

[the bankruptcy] process”).   Whether or not the Bankruptcy Code §

105(a) anti-abuse provision alone would warrant the bankruptcy


                                  -5-
court’s decision to deny Marrama a subsection 706(a) conversion,

that provision indeed looms large in determining whether Congress

envisioned that subsection 706(a) be construed as withholding all

discretion where the bankruptcy court is confronted with a patently

abusive motion to convert:

          Those who seek the shelter of the bankruptcy
          code [must] not play fast and loose with their
          assets or with the reality of their affairs.
          The statutes are designed to insure that
          complete, truthful, and reliable information
          is put forward at the outset of the
          proceedings, so that decisions can be made by
          the parties in interest based on fact rather
          than fiction. As we have stated, "[t]he
          successful functioning of the bankruptcy act
          hinges both upon the bankrupt's veracity and
          his willingness to make a full disclosure."

Boroff v. Tully (In re Tully), 818 F.2d 106, 110 (1st Cir. 1987)

(citation omitted).     Absent plain language to the contrary in

subsection   706(a),   therefore,    we   would   be   loathe   indeed   to

disregard such an overarching legislative policy.

          Turning to the particular language utilized in subsection

706(a), we can discern no evidence that the Congress intended to

override the presumptive power and responsibility of the bankruptcy

court to weed out abuses of the bankruptcy process at any stage in

the bankruptcy proceedings. Subsection 706(a) simply provides that

the debtor “may” convert.       The word “may” has at least two

connotations.   It can simply denote that a debtor has the option to

convert, or not convert.    On the other hand, “may” often suggests

conditionality, signifying that the event or status described is in

                                    -6-
no sense to be considered a foregone conclusion.          Thus, the phrase

“may convert” reasonably may suggest that the right to convert is

merely presumptive, and may be exercised only if the debtor meets

the preconditions for eligibility established in Bankruptcy Code §

109(e), or even then only in the absence of other exceptional

circumstances.    See In re Finney, 992 F.2d 43, 45 (4th Cir. 1993)

(holding subsection 706(a) right not “absolute,” but subject to

bad-faith exception); Martin v. Martin (In re Martin), 880 F.2d

857, 859 (5th Cir. 1989); In re Kuntz, 233 B.R. 580, 585 (BAP 1st

Cir. 1999).      In other words, the debtor “may” succeed in an

attempted    conversion,   but   not   necessarily   in   all   conceivable

instances.

            Although Congress’s mere use of the word “may” might not

be conclusive in itself as to the existence or scope of the

bankruptcy court’s discretionary authority to deny a conversion,

the statutory interpretation proffered by the trustee is bolstered

as well by a comparison between Bankruptcy Code § 706(a) and §

1307(b), for example, which provides that “[o]n request of the

debtor at any time, if the case has not been converted under

section 706, 1112, or 1208 of this title, the court shall dismiss

a case under this chapter.” (Emphasis added.)         Subsection 1307(b)

demonstrates that Congress well understood how to draft statutory

language which left no (or at least considerably less) discretion




                                   -7-
in the bankruptcy court to deny a chapter 13 debtor’s request.2

The   fact   that   subsection   706(a)   contains   no   such   imperative

language strongly suggests that it confers a more restricted right

upon the debtor, and that the bankruptcy court presumptively

retains its discretionary prerogative to deny conversion in some

circumstances.      See Citizens Awareness Network, Inc. v. United

States,      391 F.3d 338, 346 (1st Cir. 2004) (“Congress's use of

differential language in various sections of the same statute is

presumed to be intentional and deserves interpretive weight.”).3


      2
      Our comparative analysis of subsections 706(a) and 1307(b)
should not be construed as endorsing any particular interpretation
of the latter section, such as one which would preclude the
bankruptcy court from exercising its discretion to refuse to
dismiss the chapter 13 case upon debtor's request. That issue is
not before us to decide. See, e.g., Sckolnick v. Harlow, 820 F.2d
13, 15 (1st Cir. 1987) ("[C]hapter 13 proceedings are wholly
voluntary, and are subject to dismissal at any time at the debtor's
request."). For present purposes, it suffices to note that the
phrase “shall dismiss” is unquestionably a comparatively stronger
imperative than “may convert.”
      3
      The trustee points as well to Federal Rule of Bankruptcy
Procedure 1017(f)(2), which requires that the debtor file a
“motion” to convert under subsection 706(a), and to Rule
2002(a)(4), which requires that written notice of a hearing on such
a motion be served 20 days prior to the hearing.       The trustee
argues that the fact that the debtor must file a “motion,” rather
than a mere “notice,” suggests that the debtor’s right to convert
is conditional, not absolute. Ultimately, however, we find the
applicability of Rules 1017(f)(2) and 2002(a)(4) inconclusive.
Unquestionably, subsection 706(a) provides that the debtor’s right
to   convert   is  at   least   conditioned   upon   some   factual
determinations, including the absence of any prior conversions to
chapter 13, and the debtor's ability to meet the eligibility
requirements to file a chapter 13 petition in the first instance,
see 11 U.S.C. §§ 706(d); 109(e) (e.g., unsecured debts less than
$307,675). Since parties in interest might contest such factual
matters, at the very least the mere fact that the debtor must file

                                    -8-
            Similarly, use of the phrase “at any time” in subsection

706(a) simply means that the debtor may seek to convert at any

time during the pendency of the bankruptcy case, or in other words,

that no artificial time constraints should impede an election to

convert.    Obviously, however, the temporal permissiveness of the

phrase     “at   any    time”       hardly     equates     to   the   more    broad

circumstantial permission which Congress could have conferred, for

example,    by   employing      a    phrase    such   as    “regardless      of   the

circumstances.”        See In re Copper, 314 B.R. 628, 636-37 (BAP 6th

Cir. 2004); In re Young, 269 B.R. 816, 822 (Bankr. W.D. Mo. 2001);

In re Starkey, 179 B.R. 687, 692 (Bankr. N.D. Okla. 1995).

            Marrama points to the second sentence in subsection

706(a), which provides that “[a]ny waiver of the right to convert

a case under this subsection is unenforceable,” as evidence that

Congress intended that the debtor not be able to divest himself of

the right to convert, even where he allegedly abuses the bankruptcy

process.    Once again, however, in context this sentence functions

strictly    as   a   consumer       protection   provision      against   adhesion

contracts, whereby a debtor’s creditors might be precluded from



a “motion” under § 706(a) hardly demonstrates that Congress
necessarily envisioned that the bankruptcy court might also
condition conversion upon the debtor’s “good faith.” See In re
Croston, 313 B.R. 447, 452-53 (BAP 9th Cir. 2004).        We would
observe, however, that invocation of Rules 1017(f)(2) and
2002(a)(4) is in no sense incompatible with an interpretation which
includes debtor “bad faith” among the conceivable contested matters
to be addressed at a hearing.

                                         -9-
attempting to prescribe a waiver of the debtor’s right to convert

to chapter 13 as a non-negotiable condition of its contractual

agreements.    See In re Copper, 314 B.R. at 637; cf. Bankruptcy Code

§ 522(e) (referring to a similarly-worded exemption waiver, which

was   made    “unenforceable,”   as   one   “executed   in   favor   of   a

creditor”).     Subsection 706(a) contains no intimation that the

debtor should be accorded protection against his own willful

misconduct, such as an intentional abuse of the bankruptcy process.

See In re Starkey, 179 B.R. at 692 (noting that such debtor

misconduct is more akin to an “estoppel,” than a “waiver”).

             In construing subsection 706(a), it is important to bear

in mind that the bankruptcy court has unquestioned authority to

dismiss a chapter 13 petition – as distinguished from converting

the case to chapter 13 – based upon a showing of “bad faith” on the

part of the debtor.     See In re Cabral, 285 B.R. 563, 571-72 (BAP

1st Cir. 2002); see also In re Alt, 305 F.3d 413, 418-19 (6th Cir.

2002). We can discern neither a theoretical nor a practical reason

that Congress would have chosen to treat a first-time motion to

convert a chapter 7 case to chapter 13 under subsection 706(a)

differently from the filing of a chapter 13 petition in the first

instance.

             The plain language of subsection 706(a) in no sense

undermines the presumptive authority of the bankruptcy court to

take reasonable steps to thwart debtor abuse of the bankruptcy


                                  -10-
process.   However, even assuming arguendo that subsection 706(a)

were ambiguous, we would look to the statute’s “historical context,

its legislative history, and the underlying policies that animate

its provisions."     In re Weinstein, 272 F.3d 39, 48 (1st Cir. 2001);

see In re LAN Tamers, Inc., 329 F.3d 204, 210 (1st Cir. 2003)

(noting that court may rely upon legislative history to corroborate

meaning derived from plain statutory language).

           The present controversy over the meaning of subsection

706(a) is traceable not to the plain language of subsection 706(a),

but   largely   to   its   legislative        history,    which      describes     the

debtor’s right to conversion as “absolute,” or as a “matter of

right”:

           Subsection (a) of this section gives the
           debtor   the  one-time   absolute   right  of
           conversion of a liquidation case to a
           reorganization or individual repayment plan
           case. If the case has already once been
           converted from Chapter 11 or 13 to Chapter 7,
           then the debtor does not have that right. The
           policy of the provisions is that the debtor
           should always be given the opportunity to
           repay his debts.

H.R. Rep. No. 95-595, at 380 (1977); S. Rep. No. 95-989, at 94

(1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5880.

           The term “absolute” is problematic, if taken out of

context, in that it implies that the debtor’s conversion right is

unconditional.       We    are   not   at   liberty      to   take    the   term    so

literally, however, since subsections 706(a) and 109(e) make clear

that numerous conditions exist which might defeat the debtor’s

                                       -11-
motion to convert.        See 9 Lawrence W. King, Collier on Bankruptcy

¶ 1017.05[1], at 1017-9 to 1017-10 (1998) (“Section 706(a) permits

the debtor, as a matter of right, to convert a liquidation case to

a case under chapter 11, 12, or 13 if the case has not previously

been converted from one of those chapters to chapter 7.”) (emphasis

added).      Therefore,         in    context     the    term    “absolute”     likely

constitutes a recognition either that the debtor may convert once

as a matter of right, but may not engage in successive conversions,

or that the debtor’s right to conversion cannot be waived by

contract.

            It is the pronounced policy of subsection 706(a) “that

the debtor should always be given the opportunity to repay his

debts,”     H.R. Rep. No. 95-595, at 380, thus should be given one

chance to effectuate a viable chapter 13 plan.                          It is plainly

implicit in this legislative observation, however, that such an

opportunity is to be accorded only to honest debtors.                        See In re

Spencer,    137   B.R.    506,       512   (Bankr.      N.D.   Okla.    1992)   (“Where

conversion to [chapter] 13 amounts to an attempt to escape debts

rather than to repay them, the reason for the rule ceases – and

there the rule ceases also.”); see also In re Marcakis, 254 B.R.

77, 81 (Bankr. E.D.N.Y. 2000).              Nothing in the legislative history

remotely negates nor undermines the overarching principle that the

bankruptcy courts are duty bound to take all reasonable steps to

preclude    debtors      from    abusing     or   manipulating         the   bankruptcy


                                           -12-
process      in    order      to    undermine      the   essential    purposes    of   the

Bankruptcy Code.

              Marrama advances two additional policy-related arguments.

First, he notes the supposed irony that the bankruptcy reform

legislation recently enacted by Congress aims to encourage more

debtors to file chapter 13 petitions and thus undertake voluntary

repayment         of   their       debts,   whereas      the   bankruptcy   court      here

prematurely short-circuited his nascent attempt to do so.                               See

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,

Pub. L. 109-8, § 215, 119 Stat. 23 (2005).                           This argument is

unpersuasive.          The language of subsection 706(a) remains unchanged

under the new act, and Marrama has not suggested that there is any

other specific Bankruptcy Code amendment which would affect our

interpretation of subsection 706(a).                     Rather, the purport of the

bankruptcy reform legislation is to compel some debtors presently

eligible to file chapter 7 debt-liquidation cases to opt for the

less debtor-friendly, debt-restructuring chapter 13 regime, thus

making it impossible for those debtors to obtain an absolute

discharge of their debts.                   See In re Hill, 328 B.R. 490, 500

(Bankr. S.D. Tex. 2005) (discussing reform bill).                        A legislative

policy aimed at encouraging able debtors to undertake the voluntary

repayment of their lawful credit obligations plainly is not served

where the bankruptcy court has determined, as a threshold finding

of   fact,    that      the    debtor       is    utilizing    his   subsection   706(a)


                                                 -13-
conversion rights to advance an ongoing scheme to retain his non-

exempt assets from bona fide creditors.

            Finally,   Marrama   notes    that   the      Code   accords     the

bankruptcy court discretion to reconvert a chapter 13 case to

chapter 7 at a subsequent stage in the proceedings where the debtor

has acted in “bad faith,” see In re Copper, 314 B.R. at 365, and

therefore    that   subsection   706(a)   should    not    be    construed    as

authorizing a largely duplicative remedy.          We disagree.     First, it

would ill serve general policies aimed at promoting the efficient

administration of bankruptcy cases to insist that a bankruptcy

court – already confronted with clear evidence of a debtor’s bad

faith – must indulge in the technical formality of converting the

chapter 7 case to chapter 13, knowing full well that eventually the

case must be reconverted by reason of that same evidence of bad

faith.   See Kowal v. Malkemus (In re Thompson), 965 F.2d 1136, 1145

(1st Cir. 1992) (noting “the important policy favoring efficient

bankruptcy    administration”).       Absent     some     plausible    policy

justification for such pointless spinning of judicial wheels, we

cannot construe subsection 706(a) as requiring it.

            Moreover, these two remedies are neither inherently nor

necessarily duplicative.     Thus, for example, the bankruptcy court

could invoke its power to reconvert a case, even though the debtor

did not submit the subsection 706(a) conversion motion in bad

faith, but subsequent to the conversion the debtor engaged in bad-


                                   -14-
faith conduct which justified reconversion to chapter 7.                     Congress

may    well    have    envisioned   –     altogether     reasonably     –    that   the

bankruptcy court could nip in the bud manipulative conduct on the

part of a “bad faith” debtor at the moment of conversion, pursuant

to subsection § 706(a), rather than only after the case has been

converted.

               For all these reasons, we conclude that subsection 706(a)

permits       the    bankruptcy   court    to    deny   a    chapter    13   debtor’s

subsection 706(a) motion to convert where the court determines that

the debtor engaged in bad faith conduct.                      We now turn to an

assessment of the determination of bad faith made by the bankruptcy

court.

B.     The Finding of “Bad Faith”

               Marrama maintains that the bankruptcy court erred in

finding that he acted in “bad faith” by attempting to conceal

assets from creditors by means of misrepresentations and material

omissions of fact in his chapter 7 schedules.                    Marrama contends

that    (i)    the    schedules   merely    failed      to   disclose    his   recent

transfer of the Maine property into the trust, yet did not conceal

the existence of the property itself; (ii) the former omission was

merely the result of scrivener error, with no intent to conceal;

(iii) the statement, in Schedule B – that the res property had no

value – was not false, notwithstanding its stated market value of

$85,000, in that Marrama harbored a good-faith belief that the


                                          -15-
“spendthrift” nature of the trust prevented it from becoming

property of the chapter 7 estate in the first instance; and (iv)

the bankruptcy court determination is not supported by competent

evidence, since the court did not convene an evidentiary hearing.

           As “good faith” is a fact-intensive determination to be

made on a case-by-case basis, we review the instant finding as to

“bad faith” for clear error only.           See In re Sullivan, 326 B.R.

204, 212 (BAP 1st Cir. 2005).       A finding of fact cannot constitute

clear error where competent record evidence supports it, nor is a

reversal in order unless the court is “left with the definite and

firm conviction that a mistake has been committed.” In re Hannigan,

409 F.3d 480, 482 (1st Cir. 2005) (citation omitted). In assessing

the   totality   of    the   circumstances,    the   bankruptcy   court   may

consider, inter alia, (i) the accuracy of the debtor’s financial

statements; (ii) any other attempts by the debtor to mislead the

bankruptcy court or manipulate the bankruptcy process; (iii) the

type of debt sought to be discharged; (iv) whether the debt is

dischargeable in chapter 7; and (v) the debtor's motivation in

seeking to convert to chapter 13.          See Sullivan, 326 B.R. at 212.

           As    the   bankruptcy   court     determination   that   Marrama

engaged in “bad faith” conduct is amply supported by the record,

there can have been no clear error.              The bankruptcy court is

entitled to demand utmost good faith and honesty from debtors in

the preparation of their schedules and statements of affairs.             See


                                    -16-
Hannigan, 409 F.3d at 483.          “The successful functioning of the

bankruptcy [code] hinges both upon the bankrupt's veracity and his

willingness to make a full disclosure.” In re Tully, 818 F.2d at

110.    Thus, concealment of assets is a long-recognized ground for

rejecting a motion to convert a case.            See, e.g., In re Kuntz, 233

B.R. at 583 (collecting cases); In re Porter, 276 B.R. 32, 37-38

(Bankr. D. Mass. 2002) (denying debtor's motion to convert, due to

failure to disclose transfer of assets within one year of filing

bankruptcy petition).

            The instant case comports in all material respects with

the classic profile of playing fast and loose with the bankruptcy

process.        First, Marrama engaged in prepetition transfers of

valuable property with the acknowledged intention of insulating the

transfers from creditors, submitted a chapter 7 petition, then

omitted    to    mention   these   same    assets      and    transfers    in    the

bankruptcy      schedules,    presumably    in   the    expectation       that   the

chapter 7 trustee would not discover their concealment.                     As the

effort at camouflage failed, Marrama moved to convert the case to

chapter 13, predicated upon the uncorroborated assertion that he

was    receiving    regular    income     sufficient     to    entitle     him   to

protection under chapter 13.       Conveniently, the instant conversion

(which Marrama characterizes as an “absolute” matter of right

impregnable to challenge either by the trustee or the bankruptcy

court) would divest the chapter 7 trustee of any authority to act


                                     -17-
in behalf of the estate to safeguard its assets.                See Bankruptcy

Code § 348(e), 11 U.S.C. § 348(e).           Thus, in the event the debtor

were to succeed in securing confirmation of a chapter 13 plan, he

could reacquire his interest in “property of the estate,” as well

as the concealed property.

            Confronted with the profile presented by the instant

case, the bankruptcy court readily could conclude that the Marrama

disclosures     demonstrated     abundant       indicia        of   intentional

concealment. Question 10 unambiguously required Marrama to “[l]ist

all other property, other than property transferred in the ordinary

course of business or financial affairs of the debtor, transferred

either absolutely or as security within one year immediately

preceding the commencement of this case.”                 Marrama responded:

“None.”    The contention by counsel that Marrama simply forgot to

include the transfer of the Maine residence – which occurred a mere

seven months before the chapter 7 petition filing – severely

strains    credulity.     Not   only   was    the   Maine      residence    among

Marrama’s most valuable assets ($85,000), but Marrama conceded at

the creditors’ meeting that the transfer was made with the specific

intent to avoid the claims of his creditors.                See, e.g., In re

Weeden, 306 B.R. 449, 459 (Bankr. W.D.N.Y. 2004) (discrediting

similar    excuse   by    “intelligent,        educated     and     financially

sophisticated individual” for failure to disclose in Question 10

response   a   transfer   proximate    in    time   to   the    filing     of   the


                                   -18-
bankruptcy petition); In re Carlson, 231 B.R. 640, 656 (Bankr. N.D.

Ill. 1999) (inferring fraudulent concealment where omitted transfer

involved   property   transferred     for   no   consideration   and   with

specific intent to avoid creditors’ claims against it).           Further,

by listing the value of the transferred property (or the trust res)

as zero, Marrama made it less likely that the trustee would

discover the preferential transfer, inasmuch as Marrama had made it

appear that the trust may have never been funded.

           The contention that Marrama honestly disclosed that the

trust property value was zero strains credulity as well.          Schedule

B explicitly requires that the “current market value of debtor’s

interest in the property” be listed, rather than its value to the

bankrupt estate.4

           Finally,   we   reject    the    contention   that,   absent   an

evidentiary hearing, there was insufficient record support for the

“bad faith” finding by the bankruptcy court.              Marrama neither

requested an evidentiary hearing, nor has he yet identified what

additional material evidence could or would have been adduced at



     4
      We note as well that Marrama’s asserted legal basis for
stating that the Maine property never became part of the bankrupt
estate is highly questionable. See, e.g., Aylward v. Landry (In re
Landry), 226 B.R. 507, 510 (Bankr. D. Mass. 2002) (“[A] spendthrift
trust is ineffective against creditors if the settlor creates a
trust for the settlor's own benefit and retains the power to amend,
revoke or invade the principal of the trust.”); see also In re
Marrama, 316 B.R. at 421 (noting that, under Maine law, settlor
retains power to revoke trust at any time, and this revocation
power vests in the chapter 7 trustee).

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such a hearing.   See Cabral, 285 B.R. at 577 (affirming, despite

lack of evidentiary hearing on ground that “[n]either counsel to

the Debtor nor the Trustee indicated that there were facts in

dispute or requested an opportunity to present evidence at the

hearing”).

          Affirmed.




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