In re: Thomas Condon v.

ELECTRONIC CITATION: 2007 FED App. 0002P (6th Cir.)
File Name: 07b0002p.06

BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT

In re: THOMAS C. CONDON, )
)
Debtor. )
______________________________________ )
)
THOMAS C. CONDON, )
)
Appellant, ) No. 06-8021
)
v. )
)
JOHN BRADY and MARY SMITH, )
)
Appellees. )
_____________________________________ )

Appeal from the United States Bankruptcy Court
for the Southern District of Ohio, Western Division at Cincinnati.
No. 05-23836.

Argued: November 8, 2006

Decided and Filed: January 12, 2007

Before: GREGG, PARSONS, and SCOTT, Bankruptcy Appellate Panel Judges.

____________________

COUNSEL

ARGUED: Harry B. Plotnick, Cincinnati, Ohio, for Appellant. Eric W. Goering, Cincinnati, Ohio,
for Appellees. ON BRIEF: Harry B. Plotnick, Cincinnati, Ohio, for Appellant. Eric W. Goering,
Cincinnati, Ohio, for Appellees.
 ____________________

OPINION
____________________

JAMES D. GREGG, Bankruptcy Appellate Panel Judge. Thomas C. Condon (the “Debtor”)
appeals the bankruptcy court’s denial of his motion to convert his chapter 7 case to chapter 13. For
the reasons that follow, the bankruptcy court’s decision is VACATED and REMANDED.

I. ISSUE ON APPEAL

What factors should a bankruptcy court examine to determine whether a debtor’s motion to
convert from chapter 7 to chapter 13 should be denied because of lack of good faith?

II. JURISDICTION AND STANDARD OF REVIEW

The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal.
The United States District Court for the Southern District of Ohio has authorized appeals to the
Panel, and a final order of the bankruptcy court may be appealed by right under 28 U.S.C.
§ 158(a)(1). For purposes of appeal, an order is final if it “ends the litigation on the merits and
leaves nothing for the court to do but execute the judgment.” Midland Asphalt Corp. v. United
States, 489 U.S. 794, 798, 109 S. Ct. 1494, 1497 (1989) (citations omitted). An order denying a
debtor’s request to convert from chapter 7 to chapter 13 is a final order. Copper v. Copper (In re
Copper), 314 B.R. 628, 630 (B.A.P. 6th Cir. 2004), aff’d, 426 F.3d 810 (6th Cir. 2005) (citations
omitted).

The bankruptcy court’s determination of whether a debtor acted in good faith is a finding of
fact, which is reviewed on appeal for clear error. Id. (citing Alt v. United States (In re Alt), 305 F.3d
413, 419 (6th Cir. 2002); Hardin v. Caldwell (In re Caldwell), 895 F.2d 1123, 1127 (6th Cir. 1990));
see Adell v. John Richards Homes Bldg. Co. (In re John Richards Homes Bldg. Co.), 439 F.3d 248,
254 (6th Cir. 2006). Findings of fact “will only be clearly erroneous when, although there may be
some evidence to support the finding, the reviewing court on the entire evidence is left with the
definite and firm conviction that a mistake has been committed.” In re Alt, 305 F.3d at 422 (quoting
United States v. Latouf, 132 F.3d 320, 331 (6th Cir. 1997)) (additional citation and internal quotation
marks omitted).

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 The bankruptcy court’s “conclusions with regard to the legal standard applicable to good faith
determinations are questions of law reviewed under the de novo standard.” In re Love, 957 F.2d
1350, 1354 (7th Cir. 1992) (citing United States v. Singer Mfg. Co., 374 U.S. 174, 193, 83 S. Ct.
1773, 1783 (1963)); see Sorah v. Sorah (In re Sorah), 163 F.3d 397, 400 (6th Cir. 1998) (citing Long
v. Calhoun (In re Calhoun), 715 F.2d 1103, 1111 (6th Cir. 1983) (application of legal standards and
allocation of the burden of proof are conclusions of law)); Luper v. Columbia Gas of Ohio, Inc. (In
re Carled, Inc.), 91 F.3d 811, 813 (6th Cir. 1996) (“Although the factual underpinnings of the
bankruptcy court’s decision must be upheld unless clearly erroneous, the application of the legal
standard to the facts is a question of law that we review de novo.”) (citation omitted). De novo
review requires the appellate court to interpret “‘the law independently of the trial court’s
determination.’” Thickstun Bros. Equip. Co. v. Encompass Servs. Corp. (In re Thickstun Bros.
Equip. Co.), 344 B.R. 515, 517 (B.A.P. 6th Cir. 2006) (quoting Treinish v. Norwest Bank Minn.,
N.A. (In re Periandri), 266 B.R. 651, 653 (B.A.P. 6th Cir. 2001)).

III. FACTS

The Debtor is a professional photographer who was convicted of multiple counts of abuse
of a corpse in the Court of Common Pleas for Hamilton County, Ohio. The conviction resulted from
photographs of dead bodies taken by the Debtor at the Hamilton County Coroner’s Office. To date,
the Debtor has served at least twelve months in prison for these offenses. In addition to the criminal
charges, the Debtor also faces civil liability for his actions at the morgue. John Brady and Mary
Smith (the “Appellees”) represent a certified class of persons who sued the Debtor for tortious
conduct relating to the photographs in the United States District Court for the Southern District of
Ohio (the “class action lawsuit”). The certified class includes relatives of the deceased individuals
whose remains were in the morgue when the Debtor’s photographs were taken. The damages sought
by the Appellees in the class action lawsuit are in the “multi-million dollar . . . range.” (Tr. at 4.)

The Debtor filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code on
October 15, 2005. The Appellees were granted relief from stay to pursue the class action lawsuit by
order entered October 27, 2005.

Shortly thereafter, on December 1, 2005, the Debtor filed a motion to convert his case to
chapter 13. The Appellees filed an objection to the requested conversion, and the court held an

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evidentiary hearing on January 24, 2006. The Debtor appeared at the hearing and gave extensive
testimony regarding the circumstances that led to his bankruptcy filing, his current financial
situation, and the reasons for his motion to convert to chapter 13. The Debtor explained that after
his release from prison, he suffered from severe depression and had a difficult time obtaining
employment. Due to the notoriety generated by the criminal case, the Debtor was unable to work
in the commercial photography field. He accepted employment for significantly reduced wages in
a metal fabrication shop. With the class action suit looming and little possibility of increasing his
income in the future, the Debtor filed bankruptcy in a last ditch effort to move on with his financial
life. The Debtor explained that he had relatively few creditors other than the class action tort
claimants.1 He also acknowledged that his primary reason for filing bankruptcy was to discharge the
potential tort liability.

The Debtor stated that he filed his case under chapter 7 at the advice of his bankruptcy
attorney. After the Debtor’s initial meeting of creditors, the chapter 7 trustee allegedly asked the
Debtor’s attorney why he had advised the Debtor to file under chapter 7 when the potential class
action debt was likely dischargeable in chapter 13. The Debtor’s attorney apparently realized his
error at that point,2 and advised the Debtor to file a motion to convert. The motion was filed after
the class action claimants obtained relief from the automatic stay.

Shortly before the hearing on the motion to convert, the Debtor filed amended schedules I
and J. Amended schedule I disclosed the Debtor’s monthly income as $2,166.66 but did not include
any income from the Debtor’s spouse. At the hearing, the Debtor testified that his wife has an
income of approximately $1,000 per month. The Debtor’s attorney claimed responsibility for this
omission, representing to the court that the wife’s income was properly excluded from the schedules
filed with the original chapter 7 petition, and that her income was never added once conversion was
sought.

1
In actuality, the Debtor’s schedules listed $107,639.34 in unsecured debt, not including the
class action tort claim the amount of which was scheduled as “unknown.”
2
It is astounding that the Debtor’s attorney, who has practiced bankruptcy law for twenty
years, could have overlooked the potential applicability of 11 U.S.C. § 523(a)(6) when he advised
the Debtor to file under chapter 7. Yet based upon the record, that is what occurred in this case.

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 Amended schedule J disclosed expenses totaling $2,065. The Debtor gave conflicting
testimony about these expenses: at one point he stated that the scheduled amounts represented his
total household expenses, but he later clarified that the figures reflected only his portion of the
expenses. He also testified that the $200 monthly auto payment listed on schedule J went to his
mother to repay her for expenses she incurred repairing a jointly owned vehicle. The Debtor further
explained that the monthly $400 listed for “regular expenses from operation of business” related to
his rental of art studio space. According to the Debtor, his sister leased the space and permitted him
to use it to “put [his] artistic life back together.” (J.A. at 76.) Although he was not a party to the
lease, the Debtor reimbursed his sister for the rental costs. The Debtor also stated that the studio
space contained approximately ten sculptures and six or seven paintings that had not been disclosed
in his bankruptcy petition. He explained that he had done that work primarily for his emotional well-
being, was “not actively engaged in trying to sell the work,” and had not disclosed those items
because he honestly did not believe they had any value. (J.A. at 76-77.) Alternatively, he stated that
he had an “unspoken” agreement with his sister that the proceeds from any work done in that studio
would belong to her.

The Debtor also filed a proposed chapter 13 plan just prior to the hearing on the motion to
convert. The Debtor’s proposed plan extended thirty-six months and provided a three percent
distribution to unsecured creditors.

At the conclusion of the hearing, the bankruptcy court took the matter under advisement. On
April 3, 2006, the court issued its memorandum opinion finding that the Debtor’s motion to convert
was filed in bad faith. The court’s opinion focused on three main factors which suggested the Debtor
lacked good faith in seeking chapter 13 relief. First, the court noted that the Debtor’s motion to
convert was motivated by his desire to “avail himself of the super-discharge under Chapter 13 to
better discharge any potential judgment against him in the class action.” (J.A. at 30.) While this
alone did not establish bad faith, the court determined that it was a factor to be considered in
assessing the Debtor’s good faith under the totality of circumstances.

Next, the court noted that the Debtor’s chapter 13 plan lasted the statutory minimum of three
years and proposed to repay only three percent of his unsecured debt. Although the Bankruptcy

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Code does not require the Debtor to do more than this, the court found that the percentage and length
of repayment suggested a lack of good faith.

Finally, and most importantly, the court cited inaccuracies in the Debtor’s schedules and
conflicting testimony at the hearing on the motion to convert. The court noted that neither the
Debtor’s mother nor his sister were listed as creditors in the Debtor’s schedules, despite the fact that
he pays them $200 and $400 a month, respectively. The court also observed that the Debtor had
failed to disclose the art work in his studio and his wife’s income on his schedules. It found that the
Debtor’s explanations for these omissions were inconsistent and unpersuasive.

Based on these findings, the bankruptcy court entered an order on April 3, 2006, denying the
Debtor’s motion. This timely appeal followed.

IV. DISCUSSION

Conversion from chapter 7 to chapter 13 is governed by § 706(a) of the Bankruptcy Code.
Section 706(a) states:
The debtor may convert a case under this chapter 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 covert a case under this
subsection is unenforceable.
11 U.S.C. § 706(a). The circuit courts of appeals have disagreed whether a debtor has an absolute
right to convert from chapter 7 to chapter 13.3 The Court of Appeals for the Sixth Circuit has held
that a debtor’s right to convert under § 706(a) is not absolute and may be denied under certain
circumstances, including a lack of good faith. Copper v. Copper (In re Copper), 426 F.3d 810, 815
(6th Cir. 2005). In so holding, the court of appeals noted that it had previously determined that a
chapter 13 petition could be dismissed if it was not filed in good faith, and therefore found it “logical
to conclude that conversion from Chapter 7 to Chapter 13 may also be denied in the absence of good
faith . . . .” Id. at 817 (citing Alt v. United States (In re Alt), 305 F.3d 413, 418-19 (6th Cir. 2002)).
The court observed that “[c]ommon sense dictates that the bankruptcy court should have authority
to police the integrity of its proceedings.” Id. Accordingly, the court of appeals affirmed and

3
This split will likely soon be settled by the United States Supreme Court. See Marrama v.
Citizens Bank of Mass. (In re Marrama), 430 F.3d 474, 482 (1st Cir. 2005), cert. granted, 126 S. Ct.
2859, 165 L. Ed.2d 894 (2006) (argued November 6, 2006).

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adopted the bankruptcy appellate panel’s conclusion that “if, upon its review of the facts, the
bankruptcy court finds that the debtor’s request for conversion was made in bad faith, or represents
an attempt to abuse the bankruptcy process, the court may deny the requested conversion.” Id. at 815
(quoting Copper v. Copper (In re Copper), 314 B.R. 628, 636 (B.A.P. 6th Cir. 2004) (quoting In re
Brown, 293 B.R. 865, 870 (Bankr. W.D. Mich. 2003)).

Like Copper, most reported decisions regarding a debtor’s request for conversion to chapter
13 focus on the threshold question of whether a debtor’s right to convert under § 706(a) is
“absolute,” and not on the factors to be examined to determine good faith or lack thereof. For those
courts that interpret § 706(a) as providing a “one-time absolute right” to convert, evidence that a
debtor lacks good faith or is seeking to abuse the bankruptcy process is irrelevant. See, e.g., Miller
v. United States Trustee (In re Miller), 303 B.R. 471, 475 (B.A.P. 10th Cir. 2003) (permitting
conversion despite bankruptcy court’s findings that debtor had engaged in egregious behavior and
abuses of the bankruptcy court and Code to “avoid paying creditors”). In reported cases where the
courts have concluded that a debtor’s motion to convert may be denied for lack of good faith, the
debtors’ behavior is almost always shockingly egregious. See, e.g., Marrama v. Citizens Bank of
Mass. (In re Marrama), 430 F.3d 474, 482 (1st Cir. 2005), cert. granted, 126 S. Ct. 2859, 165 L.
Ed.2d 894 (2006) (debtor’s actions presented “classic profile of playing fast and loose with the
bankruptcy process”); In re Copper, 426 F.3d at 815-16 (debtor “all but admitted a lack of good
faith”). Due to the outrageous nature of the debtor’s conduct in most of these cases, the courts,
including the Sixth Circuit Court of Appeals, have not been called upon to closely examine the
standard for determining whether a debtor’s motion to convert was made in bad faith. This case, by
contrast, requires a more detailed analysis of the factors to be considered.

In denying the Debtor’s motion to convert, the bankruptcy court acknowledged that, under
Copper, “[g]ood faith is determined by using the ‘totality of the circumstances’ analysis” that applies
“when determining whether a debtor should be permitted to commence a chapter 13 case.” (J.A. at
28; emphasis supplied.) However, the court actually applied the standard that is used to determine
whether a debtor has proposed his chapter 13 plan in good faith for purposes of § 1325(a) of the
Bankruptcy Code. The court stated that “[a] debtor must meet the criteria of 11 U.S.C. § 1325(a)
before converting to Chapter 13” and “[u]nder 11 U.S.C. § 1325(a)(3), the debtor must have
proposed his plan in good faith.” (J.A. at 27.) The court further stated that “[t]he burden of proving

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good faith is on the debtor.” (J.A. at 28.) Accordingly, in reaching its conclusion that the conversion
was in bad faith, the bankruptcy court focused on the percentage and length of repayment under the
Debtor’s proposed chapter 13 plan and the inaccuracies in the Debtor’s schedules. The court also
discussed the Debtor’s motive in seeking conversion to chapter 13. Stating that the Debtor had
“openly admitted that his Motion was based solely on a desire to avoid a determination that the
potential judgment against him would not be dischargeable under Chapter 7, and not for the purposes
of repaying his creditors,” the court concluded that the Debtor’s motion was not brought in good
faith. (J.A. at 31.)

Given Copper’s relatively limited discussion of the circumstances that might lead to denial
of motions to convert, it is understandable that a bankruptcy court might focus solely on the good
faith standards that apply in the plan confirmation context. However, for the following reasons, the
Panel concludes that the bankruptcy court erred as a matter of law when it relied exclusively on the
plan confirmation standard of good faith and the corresponding burden of proof in its analysis of the
Debtor’s motion to convert.

The “totality of the circumstances” test referenced in Copper was discussed by the Sixth
Circuit in Alt. The issue in Alt was whether a debtor’s chapter 13 case could be dismissed for
“cause” under § 1307(c) upon a finding that the case was not filed in good faith. To answer that
question, the court first referred to the twelve factors it considers “in determining whether a [chapter
13] plan has been proposed in good faith under § 1325(a).” In re Alt, 305 F.3d at 419. Those factors
include:
(1) the debtor’s income;
(2) the debtor’s living expenses;
(3) the debtor’s attorney’s fees;
(4) the expected duration of the Chapter 13 plan;
(5) the sincerity with which the debtor has petitioned for relief under Chapter 13;
(6) the debtor’s potential for future earning;
(7) any special circumstances, such as unusually high medical expenses;
(8) the frequency with which the debtor has sought relief before in bankruptcy;
(9) the circumstances under which the debt was incurred;
(10) the amount of payment offered by [the] debtor as indicative of the debtor’s
sincerity to repay the debt;
(11) the burden which administration would place on the trustee;
(12) the statutorily mandated policy that bankruptcy provisions be construed liberally
in favor of the debtor.

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Id. (citing Society Nat’l Bank v. Barrett (In re Barrett), 964 F.2d 588, 592 (6th Cir. 1992)). The
court then noted that other circuits had recognized similar factors when determining whether a
debtor’s chapter 13 petition has been filed in good faith. Id. (citing In re Love, 957 F.2d 1350, 1357
(7th Cir. 1992)). Those factors are:
the nature of the debt, including the question of whether the debt would be
nondischargeable in a Chapter 7 proceeding; the timing of the petition; how the debt
arose; the debtor’s motive in filing the petition; how the debtor’s actions affected
creditors; the debtor’s treatment of creditors both before and after the petition was
filed; and whether the debtor has been forthcoming with the bankruptcy court and the
creditors.
Id. (citing In re Love, 957 F.2d at 1357) (additional citations omitted). Because the above
unenumerated factors relate to the broad question of whether the chapter 13 case was initiated in
good faith, rather than the more narrow question of whether the plan itself was proposed in good
faith, the Love and Barrett factors are not coterminous. See In re Love, 957 F.2d at 1360 (explaining
that “while a lack of good faith in the structuring of a particular plan may block confirmation of that
plan, the petition itself is still viable, absent a showing that the entire petition was filed in bad faith”).
Still, the factors overlap to some extent and both tests are designed to detect abuses of the provisions
and spirit of chapter 13. Therefore, Alt recognized that, when attempting to discern a debtor’s
motive in initiating chapter 13 proceedings under the totality of circumstances, a bankruptcy court
may properly consider a debtor’s good faith as reflected in a proposed chapter 13 plan. Id. The court
of appeals cautioned, however, that “given the more severe consequences . . . ‘the bankruptcy court
should be more reluctant to dismiss a petition under Section 1307(c) for lack of good faith than to
reject a plan for lack of good faith under Section 1325(a).’” Id. at 420 (quoting In re Love, 957 F.2d
at 1356). The court also stated that the “burden of showing the debtor’s lack of good faith” under
§ 1307(c) “is borne by the party seeking dismissal.” Id. (citing In re Love, 957 F.2d at 1350);
compare Hardin v. Caldwell (In re Caldwell), 895 F.2d 1123, 1126 (6th Cir. 1990) (“The party who
seeks a discharge under Chapter 13 bears the burden of proving good faith” under § 1325(a).).

In effect, denying a debtor’s motion to convert from chapter 7 to chapter 13 has the same
“harsh result” as dismissal of a chapter 13 case under § 1307(c): that is, the debtor is denied the
opportunity to propose and perform a chapter 13 plan that would allow him to repay his prepetition
debt over a specified period of time consistent with his available resources. See generally Federal
Land Bank of Louisville v. Glenn (In re Glenn), 760 F.2d 1428, 1433 (6th Cir. 1985) (discussing

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overall purpose of Chapter 13). Accordingly, this Panel concludes that bankruptcy courts should
apply the same good faith standard when evaluating a debtor’s motion to convert to chapter 13 as
is utilized when considering dismissal of a case under § 1307(c). See In re Copper, 426 F.3d at 814-
15 (quoting In re Copper, 314 B.R. at 636) (stating that “the same analysis should apply in
evaluating whether a debtor should be permitted to convert a case to chapter 13” as applies when
“evaluating whether a debtor should be permitted to commence a chapter 13 case”) (emphasis
added). It also follows that the bankruptcy courts should exhibit the same “reluctance” to deny a
motion to convert to chapter 13 that they employ when dismissing a petition for lack of good faith
under § 1307(c). See id. at 814 (quoting In re Copper, 314 B.R. at 635) (noting that conversion may
be denied in “extreme circumstances” suggesting bad faith or an abuse of the bankruptcy process)
(emphasis added). Finally, the Panel concludes that the burden of proving a lack of good faith in the
context of § 706(a) is on the party opposing the conversion.

This approach is consistent with the court of appeals’ holding in Copper and with the general
policy behind § 706(a), which suggests that conversion to chapter 13 should be freely granted
because a “debtor should always be given the opportunity to repay his debts.” Id. at 816-17 (quoting
In re Copper, 314 B.R. at 637). By making denial of motions to convert the exception, but not the
rule, bankruptcy courts ensure that conversion will be granted “readily – but not so readily as to
allow and condone abuse.” In re Starkey, 179 B.R. 687, 694 (Bankr. N.D. Okla. 1995); see In re
Copper, 426 F.3d at 817 (quoting In re Copper, 314 B.R. at 637).

Under this standard, whether a debtor is filing under chapter 13 in the first instance or
seeking chapter 13 relief via conversion from chapter 7, the “key inquiry” for courts attempting to
ascertain a debtor’s good faith “is whether the debtor is seeking to abuse the bankruptcy process.”
In re Alt, 305 F.3d at 419. To assist in this determination, bankruptcy courts weigh various factors
which “may circumstantially reflect the debtor’s motivation, and ultimately his ‘good faith,’” in
seeking relief under chapter 13. In re McGovern, 297 B.R. 650, 658 (S.D. Fla. 2003) (citing Cabral
v. Shamban (In re Cabral), 285 B.R. 563 (B.A.P. 1st Cir. 2002); In re Fleury, 294 B.R. 1 (Bankr.
D. Mass. 2003)). If, on balance, the various factors suggest that the debtor’s purpose in filing for
chapter 13 relief is consistent with the underlying purpose and spirit of chapter 13 – i.e., financial
“rehabilitation through repayment of debt” – the filing is likely in good faith. Id. at 658-60.

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 Because good faith is an “amorphous notion” it is impossible to identify the “infinite variety
of factors” that might weigh in the “good faith equation.” Metro Employees Credit Union v.
Okoreeh-Baah (In re Okoreeh-Baah), 836 F.2d 1030, 1033 (6th Cir. 1988). However, when
determining whether a debtor’s motion to convert has been brought in good faith, courts should
apply the factors identified in Alt for determining whether a chapter 13 petition has been filed in
good faith. The court might also consider factors that are typically used in the plan confirmation
context.

Several reported decisions address various factors that commonly trigger denial of debtors’
motions to convert to chapter 13. For example, the debtor in Copper had a nine-year history of
“evasive and vexatious” actions “to avoid paying his ex-wife . . . amounts she was awarded under
the parties’ divorce decree.” In re Copper, 426 F.3d at 811 (quoting In re Copper, 314 B.R. at 630).
Despite the fact that the debtor was a college professor with an annual income of $89,000, these
evasive actions included filing multiple bankruptcy petitions. Id. at 811; In re Copper, 314 B.R. at
632. In the debtor’s sixth bankruptcy case, the debtor’s ex-wife filed a complaint objecting to the
debtor’s discharge and asking that the debtor’s obligations under the divorce decree be held
nondischargeable. The debtor moved to convert his case to chapter 13 on the eve of trial of the
dischargeability action, approximately seventeen months after the chapter 7 case was originally filed.

The Sixth Circuit Court of Appeals concluded that the debtor’s motion to convert to chapter
13 was simply his latest attempt to manipulate the Bankruptcy Code in furtherance of his nine-year
pattern of abuse. In light of this pattern, the court of appeals agreed with the bankruptcy court’s
assessment that the motion to convert was not motivated by a sudden, honest desire to repay his ex-
wife. Rather, the motion was simply an ill-conceived ploy to evade the imminent trial, avoid the
probable determination that he was not entitled to a discharge (or that the obligations to his ex-wife
were nondischargeable), and further delay payment of a debt he never intended to pay. Coupled with
the serious false statements in the debtor’s schedules and statement of financial affairs and the
debtor’s “cavalier attitude and lack of candor” at trial, the facts did not suggest that the debtor sought
conversion with the good faith intention of repaying his creditors. Id. at 811-12. The court of
appeals, in agreement with this appellate panel, concluded that “the [d]ebtor’s actions constitute[d]
bad faith and abuse of process such as will justify the denial of a motion to convert under § 706(a).”
Id. at 816.

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 The circumstances which led to denial of the debtor’s motion to convert to chapter 13 in
Marrama were equally egregious. In re Marrama, 430 F.3d at 482-83. In Marrama, the debtor
transferred unencumbered property with a value of $85,000 to a revocable spendthrift trust,
designating himself as the sole beneficiary and his girlfriend as the sole trustee. The debtor later
admitted that his intent in making the transfer was to insulate the property from the claims of his
creditors. Seven months later, the debtor filed a voluntary chapter 7 petition in which he disclosed
that he was the beneficiary of the trust, but valued the trust res at zero and denied making any
transfers of property within the previous year. The debtor also stated that he was owed no tax
refunds, when in actuality, he was due a tax refund exceeding $11,000. After the chapter 7 trustee
questioned the debtor about the property and the tax refund, the debtor responded by filing a motion
to convert his case to chapter 13.

The Court of Appeals for the First Circuit affirmed the bankruptcy court’s denial of the
debtor’s motion to convert due to the debtor’s bad faith. The court of appeals noted that debtor’s
actions in the case “comport[ed] in all material respects with the classic profile of playing fast and
loose with the bankruptcy process.” Id. at 482. Prior to filing his bankruptcy petition, the debtor
transferred a valuable asset with the intent of protecting it from creditors. When he filed his chapter
7 case, he failed to honestly disclose the transfer and other valuable assets. The debtor’s alleged
desire to repay his creditors in a chapter 13 arose only after these attempts and concealing assets
failed. Further, permitting the debtor to convert to chapter 13 could have been highly prejudicial to
creditors, in that conversion would have “divest[ed] the chapter 7 trustee of any authority to act in
behalf of the estate to safeguard its assets” – the very assets the debtor had attempted to conceal. Id.
These facts “amply” supported the bankruptcy court’s conclusion that the motion to convert was not
filed in good faith. Id.

The debtor in Brown filed a chapter 7 petition on his own behalf. In re Brown, 293 B.R. 865,
866 n.1 (Bankr. W.D. Mich. 2003). The debtor’s primary asset was his residence. After the case
was filed, the debtor constantly attempted to prevent the sale of this property. The debtor
undervalued the property on his schedules, failed to attend and testify at § 341 meetings, failed to
pay his filing fee, and “consistently refused to grant the Trustee, his realtor, and the prospective
purchaser access to the . . . property.” Id. at 871. Based on these actions, the bankruptcy court
concluded that the debtor’s motion to convert was merely another attempt to “manipulate the

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bankruptcy process and prevent the sale” of the property. Id. As a result of the debtor’s efforts to
thwart the sale of the property, the sale price was reduced and the estate was harmed. Therefore, the
court denied the motion based upon lack of good faith.

Although each of these debtors had their own individual types of outrageous bad faith, it is
possible to discern common characteristics shared by all of the debtors. Each of them engaged in
a pattern of egregious behavior, both prior to filing and during the pendency of their chapter 7 cases,
which strongly suggested that they were manipulating and abusing the bankruptcy process in a
continued effort to avoid repaying their debts. The debtor in Copper had a nine-year history of
avoiding the debt to his ex-wife. The debtor in Marrama transferred and concealed valuable assets
to keep them from the reach of creditors. In Brown, the debtor did everything in his power to prevent
the trustee from selling his residence. Based on these patterns of abuse, the courts concluded that
the conversion motions filed by these debtors were not motivated by an honest desire to repay their
creditors. Without question, permitting debtors to convert under these circumstances would clash
with the underlying purposes of chapter 13. Also, in each instance, another consequence exists: the
general creditors and the bankruptcy estate are prejudiced by the debtor’s postpetition actions or
omissions.

When the appropriate legal standard is applied, the current findings of fact do not support the
conclusion that the Debtor’s motion to convert was filed in bad faith. There is no evidence that the
Debtor engaged in a pattern of egregious behavior or displayed any of the hallmarks of bad faith
illustrated in Copper, Marrama, or Brown. To the contrary, the evidence suggests that the Debtor
waited several years after the incident that gave rise to his criminal and potential tort liability before
filing for bankruptcy relief. It is unclear whether the bankruptcy court considered this, or other facts
relating to the Debtor’s prospects of repaying the debt that may result from the class action lawsuit,
when it reached its bad faith conclusion.

Of the three factors the bankruptcy court discussed in its opinion, it placed particular
emphasis on the inaccuracies and omissions in the Debtor’s schedules and statement of financial
affairs. This emphasis was not misplaced, since bankruptcy courts are “entitled to demand utmost
good faith and honesty from debtors in the preparation of their schedules and statements of affairs.”
In re Marrama, 430 F.3d at 482. However, as troubling as these inaccuracies are, there is no

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evidence that any of the misstatements or omissions in the Debtor’s schedules were made in “an
attempt to mislead the court.” In re Caldwell, 895 F.2d at 1126. Also, there were no findings that
the Debtor’s postpetition acts or omissions prejudiced creditors or the bankruptcy estate. Based on
statements and testimony at the hearing, it appears that much of the blame for the Debtor’s sloppy
and inaccurate schedules can be placed at the feet of his bankruptcy attorney. Of course, the Debtor
is generally bound by the errors and omissions of his attorney. Link v. Wabash R.R. Co., 370 U.S.
626, 633-34, 82 S. Ct. 1386 (1962). But the fact that the attorney caused the inaccuracies may
suggest that the Debtor was not seeking to mislead the bankruptcy court or creditors of the estate.

The bankruptcy court also relied on the minimal length and amount of repayment of the
Debtor’s proposed chapter 13 plan in its bad faith analysis. Because this issue is typically considered
in the plan confirmation process, it is not dispositive of a debtor’s good faith, or lack thereof, in
seeking chapter 13 relief.4 However, to the extent the length of a debtor’s proposed plan and the
amount of payments thereunder may assist the bankruptcy court in distinguishing a debtor with a
good faith intent to repay creditors from one who is abusing the provisions of chapter 13, this factor
may be given some consideration under the “totality of circumstances” standard. Accordingly, while
the bankruptcy court properly considered this factor in its analysis, this factor alone cannot support
a finding of bad faith.

Finally, the bankruptcy court considered the Debtor’s motive in seeking conversion to chapter
13. As noted above, this is not only an appropriate factor to consider when evaluating a debtor’s
good faith in seeking relief under chapter 13, it is essentially the heart of the good faith inquiry. We
conclude, however, that the bankruptcy court’s assessment of the Debtor’s motive is not supported
by the record. In its opinion, the bankruptcy court found that “the Debtor has openly admitted that
his Motion was based solely on a desire to avoid a determination that the potential judgment against
him would not be dischargeable under Chapter 7, and not for purposes of repaying his creditors.”
(J.A. at 31.) The court is correct that both the Debtor and his attorney admitted at the hearing that

4
Indeed, the bankruptcy rules permit a debtor to file a chapter 13 plan after the filing of the
case. See Fed. R. Bankr. P. 3015(b) (“The debtor may file a chapter 13 plan with the petition. If a
plan is not filed with the petition, it shall be filed within 15 days thereafter, and such time may not
be further extended except for cause shown and on notice as the court may direct. If a case is
converted to chapter 13, a plan shall be filed within 15 days thereafter, and such time may not be
further extended except for cause shown and on notice as the court may direct.”).

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the purpose of the requested conversion was to permit the Debtor to discharge the potential class
action debt. However, the Debtor never stated that he sought conversion solely to avoid the debt and
not for the purpose of repaying his creditors. “[A]n attempt to discharge a debt under Chapter 13
which is not dischargeable under Chapter 7 is not conclusive evidence” of bad faith, even if the debt
was “incurred through [a debtor’s] own criminal or tortious conduct.” In re Caldwell, 895 F.2d at
1127. Although the bankruptcy court may consider how a debt arose, it is the debtor’s actions to
repay or avoid the debt after incurring it that are most relevant to the good faith analysis. Id. at
1127-28 (denying confirmation for lack of good faith in light of debtor’s “unrelenting efforts to
reduce the assets available to his creditors,” court determined that debtor’s proposed plan represented
continuation of “unbroken pattern of deceit and delay” instead of “a good faith effort to repay”
creditors) (emphasis added). Chapter 13 permits debtors to discharge debts that would not be
dischargeable in chapter 7, provided the debtor devotes his disposable income to repayment of
creditors over the statutorily-prescribed period.

Although we conclude that the bankruptcy court’s findings are insufficient to support its bad
faith conclusion in this case, this Panel believes that the bankruptcy court should be given an
opportunity to re-evaluate the case based upon appropriate good faith factors. In re Okoreeh-Baah,
836 F.2d at 1033 (determinations of good faith “should be left simply to the bankruptcy court’s
common sense and judgment”).

V. CONCLUSION

For the foregoing reasons, the bankruptcy court’s decision is vacated and remanded for
further consideration in accordance with this opinion.

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