Mason v. Young

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
JAN 16 2001
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT

In re: F. ARTHUR YOUNG, also
known as F.A. Young, also known as
Francis Arthur Young, III, also known
as Terry Young, Debtor.

RONALD MASON,
No. 99-6355
Appellant,
v.

FRANCIS ARTHUR YOUNG, III;
ANN SPEARS, Trustee,

Appellees.

Appeal from the Bankruptcy Appellate Panel
for the Tenth Circuit
(BAP No. WO-98-29)

Joseph R. Weeks, Oklahoma City, Oklahoma for the Appellant.

Lesli Bailey Peterson, Bellingham, Collins & Loyd, P.C., Oklahoma City,
Oklahoma for the Appellee.

Before EBEL, McKAY and LUCERO, Circuit Judges.

LUCERO, Circuit Judge.
 This case is on appeal from the Tenth Circuit Bankruptcy Appellate Panel

(“BAP”). We consider first whether the BAP erred in determining that a

conversion from Chapter 7 to Chapter 13—before a Chapter 13 plan was

approved—was a final, immediately appealable order such that an appeal

subsequent to approval of the Chapter 13 plan is untimely. Determining that the

appeal is timely, we inquire into whether the bankruptcy court erred as a matter

of law in allowing a conversion to Chapter 13 after discharge was obtained under

Chapter 7, and whether the bankruptcy court erred in determining that the

Chapter 13 plan at issue was proposed in good faith pursuant to 11 U.S.C.

§ 1325(a)(3). Exercising jurisdiction pursuant to 28 U.S.C. § 158(d), we affirm,

but for different reasons than those articulated by the BAP.

I

The procedural background of this case before it reached the bankruptcy

court is lengthy. See Mason v. Oklahoma Tpk. Auth. , 182 F.3d 1212, 1213 (10th

Cir. 1999) (describing the procedural history of the underlying lawsuit in federal

district court and on appeal in this Court). Of relevance here is that the debtor in

this case, F. Arthur Young, initially owed Ronald D. Mason $300,000 in punitive

damages 1 and interest from a jury verdict in a wrongful discharge action in

1
The punitive damages awarded against Young consist of $150,000 for a
violation of 42 U.S.C. § 1983 and $150,000 for a violation of Oklahoma public
(continued...)

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United States District Court for the Western District of Oklahoma. See Mason v.

Oklahoma Tpk. Auth. , No. CIV-93-1836R (W.D. Okla. Apr. 21, 1998) (Fourth

Amended Judgment), aff’d , 182 F.3d at 1216. In July 1997, Young filed for

bankruptcy under Chapter 7 of the Bankruptcy Code in United States Bankruptcy

Court for the Western District of Oklahoma. Mason filed an adversary

complaint, claiming the debt Young owed him was nondischargeable under 11

U.S.C. § 523(a)(6). Young obtained a discharge of his debts in United States

Bankruptcy Court for the Western District of Oklahoma. See In re F. Arthur

Young , No. 97-13747 (Bankr. W.D. Okla. July 30, 1997) (Discharge of Debtor).

After a hearing before the bankruptcy court, Young converted to a Chapter 13

plan, see In re F. Arthur Young , No. 97-13747 BH (Bankr. W.D. Okla. Oct. 16,

1997) (Order), over the objection by Mason that Young’s request for conversion

to Chapter 13 was made in bad faith to avoid payment of the outstanding

1
(...continued)
policy. See Mason v. Oklahoma Tpk. Auth., No. CIV-93-1836-R, at 1 (W.D.
Okla. Mar. 18, 1998) (Order). Although neither party has expressly raised the
issue on appeal, for jurisdictional purposes we note that at the time of filing, it
appeared that Young owed Mason only $150,000 in punitive damages, thus
meeting the requirements for filing under Chapter 13. See 11 U.S.C. § 109(e);
Comprehensive Accounting Corp. v. Pearson (In re Pearson), 773 F.2d 751, 756
(6th Cir. 1985) (“[S]ection 109(e) considers debts as they exist at the time of
filing, not after a hearing.” (citing In re King, 9 B.R. 376 (Bankr. D. Or. 1981)).
But see, e.g., Lucoski v. IRS (In re Lucoski), 126 B.R. 332, 337 (S.D. Ind. 1991)
(rejecting Pearson’s reasoning).

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judgment in favor of Mason because—according to Mason—that debt would not

likely have been discharged under Chapter 7 but would be under Chapter 13 .2

Pursuant to 11 U.S.C. §§ 1321 and 1322, Young filed a Chapter 13 plan

with the bankruptcy court, providing for monthly payments of $818.60 for a term

of thirty-six months, to be divided into monthly payments of $321.26 to a

Cadillac dealer for finance payments on Young’s used Cadillac, with further

amounts to be divided between Young’s attorney and other creditors among

whom Mason was not included. Any remainder was then to be divided among

unsecured general creditors like Mason. Mason again objected, on the ground

that the plan was proposed in bad faith. The bankruptcy court agreed. As

evidence of Young’s bad faith, the court pointed to his proposal of a minimum

thirty-six-month plan rather than a sixty-month plan, suggesting that Young’s

plan made “no effort whatsoever to reduce [Young’s] only non-priority unsecured

debt [to Mason], even though conceding that the debt would not be dischargeable

in a Chapter 7 case.” In re Francis Arthur Young III , No. BK-97-13747-LN, at

12 (Bankr. W.D. Okla. Feb. 18, 1998) (Order).

2
Young did not dispute that the debt to Mason would not likely be
dischargeable in a Chapter 7 case. We agree with the parties that a debt falling
under 11 U.S.C. § 523(a)(6) and therefore non-dischargeable under Chapter 7 may
nevertheless be dischargeable under Chapter 13, 11 U.S.C. § 1328(a). See Graves
v. Myrvang, No. 99-35328, 2000 WL 1724818, at *4 (9th Cir. Nov. 21, 2000);
Handeen v. LeMaire (In re LeMaire), 898 F.2d 1346, 1348 (8th Cir. 1990).

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 In February 1998, Young filed an amended Chapter 13 plan, providing for

a sixty-month duration and otherwise resembling his earlier plan. After a

hearing, the court considered his amended plan, concluding as follows:

It appears to this court that debtor’s prospective ability to pay the amount
of [the punitive damage] awards [against Young] . . . with post-judgment
interest . . . is virtually nil. If during the five-year term of debtor’s
[current] plan, debtor’s employment or compensation fortunes significantly
brighten, modification of his plan may result in a greater percentage of the
obligation to Mason being paid than is presently proposed. Mason should
be advised, however, that a debtor who has sought the protections of
bankruptcy, and who meets the obligations of [11 U.S.C.] § 1325(a) for
confirmation of a plan over the maximum term permitted by law, need not
be turned away and forced to sell apples on the streets in every case in
order to satisfy an impossibly large unsecured obligation, however
egregious may have been the conduct which gave rise to the obligation.
Debtor proposes to obligate himself to making Chapter 13 plan
payments for the maximum period permitted by law, in an amount equal to
his total projected disposable income, based as it must be upon debtor’s
current level of income and reasonably necessary expenses. While this is
undoubtedly not enough for Mason, who apparently would not be satisfied
with less than the infliction of constant pain and suffering on debtor
forever, it is all that the legitimate policies of bankruptcy can, or should,
demand in the circumstances presented here.

In re Francis Arthur Young III , No. BK-97-13747-LN, at 6-7 (Bankr. W.D. Okla.

Apr. 28, 1998) (Order). The court confirmed the proposed plan. See id. at 7.

Mason thereupon appealed to the BAP. The BAP affirmed, holding that

“[t]he issue of whether a case is properly converted [from Chapter 7 to Chapter

13] should be appealed within ten days of the entry of a bankruptcy court’s

order,” and therefore the appeal of that issue was untimely. Mason v. Young (In

re Young) , 237 B.R. 791, 795 (B.A.P. 10th Cir. 1999). With regard to the issue

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of whether the bankruptcy court properly confirmed Young’s Chapter 13 plan,

the BAP held that the plan was proposed in good faith under 11 U.S.C. §

1325(a)(3), see id. at 799, and that Young was in compliance with 11 U.S.C. §

1325(b)(1)(B) as the bankruptcy court had found because he was devoting all of

his disposable income to repaying his debts under the plan, see id. at 800. This

appeal followed.

II

We review de novo the finality and timeliness determinations of the BAP

as well as the bankruptcy court’s decision to allow, as a matter of law, the

conversion to Chapter 13 proceedings after a Chapter 7 discharge , and review for

clear error the bankruptcy court’s factual determination that Young’s Chapter 13

plan was proposed in good faith. See Phillips v. White (In re White) , 25 F.3d

931, 933 (10th Cir. 1994).

A

Underlying the instant dispute is the fundamental difference between

bankruptcy under Chapter 7 and Chapter 13. As a general matter, under Chapter

7, the debtor’s assets are liquidated and the proceeds distributed among the

creditors. See 2 Epstein et al., Bankruptcy 278-80 (1992). Both parties agree

that under Chapter 7, Young’s full debt to Mason would not have been

discharged. Under Chapter 13, on the other hand, the debtor’s assets are not

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liquidated at all. Rather, the plan agreed to by the debtor and the court is paid

over a period of years out of the debtor’s disposable income. See id. at 601-03.

Preliminary to reaching the merits of whether the conversion in this case

was proper, we must ask whether the conversion to Chapter 13 (before a Chapter

13 plan was approved) was a final, immediately appealable order rendering

untimely Mason’s appeal subsequent to approval of the Chapter 13 plan. This

Circuit’s broad rule of finality in bankruptcy actions was enunciated in Magic

Circle Energy 1981—A Drilling Program v. Lindsey (In re Magic Circle Energy

Corp.) , 889 F.2d 950, 953 (10th Cir. 1989): “To be final and appealable, the

district court’s order must end the litigation and leave nothing to be done except

execute the judgment.” However, in Cascade Energy & Metals Corp. v. Banks

(In re Cascade Energy & Metals Corp.) , 956 F.2d 935, 939 (10th Cir. 1992), we

enunciated a more flexible test with different criteria of finality, namely: “(1) the

posture of an appellant’s claim within a particular adversary proceeding or

discrete unit, and (2) what further proceedings are envisioned by the district

court’s order.” Whether we employ the In re Magic Circle or the In re Cascade

Energy test, it is clear that an order under Chapter 13 is not final until a Chapter

13 plan has been approved. Otherwise, it would be impossible for creditors to

determine in advance whether their interests truly had been adversely affected.

The effect of the bankruptcy court’s ruling in the Chapter 13 context only

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becomes clear after the bankruptcy court has approved a Chapter 13 plan

providing for the allocation of disposable income over a fixed period of months.

On the other hand, under Chapter 7, once the debtor’s assets have been

liquidated, it is virtually impossible to reassemble them, and therefore an order

converting to Chapter 7 is necessarily more final in nature than an order

converting to Chapter 13. See Vista Foods U.S.A., Inc. v. Unsecured Creditors’

Comm. (In re Vista Foods U.S.A., Inc.) , 202 B.R. 499, 500 (B.A.P. 10th Cir.

1996). The BAP in the instant case erred in applying the reasoning of a Chapter

7 conversion to a conversion under Chapter 13 and should have allowed Mason

to appeal the bankruptcy court’s decision to permit the “Chapter 20” conversion 3

within ten days of the court’s confirmation of Young’s Chapter 13 plan. See Fed.

R. Bankr. P. 8002; In re Hayes Bankr. , 220 B.R. 57, 62 (N.D. Iowa 1998). 4
Due

to our disposition below of the merits of Mason’s claims, however, we need not

reverse the BAP. Rather, we affirm the judgment of the bankruptcy court on

grounds different than those on which the BAP relied. See United States v.

Sandoval , 29 F.3d 537, 542 n.6 (10th Cir. 1994) (“We are free to affirm a district

3
“Successive filing of a Chapter 7 bankruptcy and a Chapter 13 plan is
often referred to as a ‘Chapter 20’ situation.” Pioneer Bank of Longmont v.
Rasmussen (In re Rasmussen), 888 F.2d 703, 703 n.1 (10th Cir. 1989).
4
Because we so hold, we need not address Mason’s other arguments
regarding the BAP’s decision not to entertain his appeal of the Chapter 20
conversion.

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court decision on any grounds for which there is a record sufficient to permit

conclusions of law, even grounds not relied upon by the district court.”).

B

This brings us to the issue of whether the bankruptcy court erred in

allowing Young to convert to Chapter 13 after he obtained discharge of his debt

under Chapter 7. While courts may disallow specific “Chapter 20” conversions

under the peculiar circumstances of a given case, as a general matter the

Bankruptcy Code and most courts are clear regarding the permissibility of such

conversions: “The debtor may convert a case under [chapter 7] to a case under

chapter . . . 13 of this title at any time.” 11 U.S.C. § 706(a); see also In re

Mosby , 244 B.R. 79 (Bankr. E.D. Va. 2000) (collecting cases and concluding that

permitting conversion to Chapter 13 even after a discharge under Chapter 7 is

proper). There is no evidence of congressional intent to the contrary. As the

Supreme Court stated in Johnson v. Home State Bank , 501 U.S. 78, 87 (1991),

Congress has expressly prohibited various forms of serial filings. See,
e.g. , 11 U.S.C. § 109(g) (no filings within 180 days of dismissal); §
727(a)(8) (no Chapter 7 filing within six years of a Chapter 7 or Chapter
11 filing); § 727(a)(9) (limitation on Chapter 7 filing within six years of
Chapter 12 or Chapter 13 filing). The absence of a like prohibition on
serial filings of Chapter 7 and Chapter 13 petitions, combined with the
evident care with which Congress fashioned these express prohibitions,
convinces us that Congress did not intend categorically to foreclose the
benefit of Chapter 13 reorganization to a debtor who previously has filed
for Chapter 7 relief. Cf. United States v. Smith , 499 U.S. 160, 167 (1991)
(expressly enumerated exceptions presumed to be exclusive).

-9-
 Although there is always the potential for abuse of the bankruptcy process

in such a conversion,

the court is not without the means to deal with such attempts on a case by
case basis. First, in every chapter 13 case there is a requirement of good
faith and fair dealing for confirmation of a plan. . . . Additionally, a
chapter 13 plan must provide creditors with at least as much as they would
receive in a chapter 7 liquidation.

In re Mosby , 244 B.R. at 86-87 (citations omitted). The provisions of 11 U.S.C.

§ 1325 ensure that a Chapter 13 plan arising out of a conversion from Chapter 7

will be properly scrutinized by the bankruptcy court before the plan is confirmed,

mitigating the danger of abuse. Once again, as the Supreme Court stated in

Johnson , 501 U.S. at 87-88,

The Bank’s contention [that a Chapter 20 conversion should not be
allowed to proceed] also fails to apprehend the significance of the full
range of Code provisions designed to protect Chapter 13 creditors. A
bankruptcy court is authorized to confirm a plan only if the court finds,
inter alia, that “the plan has been proposed in good faith,” § 1325(a)(3);
that the plan assures unsecured creditors a recovery as adequate as “if the
estate of the debtor were liquidated under chapter 7,” § 1325(a)(4); that
secured creditors either have “accepted the plan,” obtained the property
securing their claims, or “retain[ed] the[ir] lien[s]” where “the value . . . of
property to be distributed under the plan . . . is not less than the allowed
amount of such claim[s],” § 1325(a)(5); and that “the debtor will be able to
make all payments under the plan and to comply with the plan,”
§ 1325(a)(6). In addition, the bankruptcy court retains its broad equitable
power to “issue any order, process, or judgment that is necessary or
appropriate to carry out the provisions of [the Code.]” § 105(a). Any or
all of these provisions may be implicated when a debtor files serially under
Chapter 7 and Chapter 13.

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In short, it is our considered judgment that a so-called “Chapter 20” conversion is

both permissible under the Code and—given the requisite scrutiny by the

bankruptcy courts—entirely proper. 5

C

Be that as it may, Mason’s third claim—that the bankruptcy court erred in

determining Young’s Chapter 13 plan was proposed in good faith as required by

11 U.S.C. § 1325(a)(3)—presents a closer question. As a general matter, a

determination of good faith must be made on a case by case basis, looking at the

totality of the circumstances. See Pioneer Bank v. Rasmussen (In re Rasmussen) ,

888 F.2d 703, 704 (10th Cir. 1989). “In evaluating whether a debtor has filed in

good faith, courts should be guided by the eleven factors set forth in Flygare v.

Boulden , 709 F.2d 1344, 1347-48 (10th Cir. 1983), as well as any other relevant

circumstances.” Robinson v. Tenantry (In re Robinson) , 987 F.2d 665, 668 (10th

Cir. 1993) (footnote omitted). The eleven Flygare factors are:

(1) the amount of proposed payments and the amount of the debtor’s
surplus; (2) the debtor’s employment history, ability to earn and likelihood
of future increases in income; (3) the probable or expected duration of the
plan; (4) the accuracy of the plan’s statements of the debts, expenses and
percentage repayment of unsecured debt and whether any inaccuracies are
an attempt to mislead the court; (5) the extent of preferential treatment
between classes of creditors; (6) the extent to which secured claims are
modified; (7) the type of debt sought to be discharged and whether any

5
To the extent In re Jones, 111 B.R. 674, 680 (Bankr. E.D. Tenn. 1990),
can be read as contrary authority, we reject its holding.

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 such debt is non-dischargeable in Chapter 7; (8) the existence of special
circumstances such as inordinate medical expenses; (9) the frequency with
which the debtor has sought relief under the Bankruptcy Reform Act; (10)
the motivation and sincerity of the debtor in seeking Chapter 13 relief; and
(11) the burden which the plan’s administration would place upon the
trustee.

Flygare , 709 F.2d at 1347-48 (quoting In re Estus , 695 F.2d 311, 317 (8th Cir.

1982)). But “the weight given each factor will necessarily vary with the facts

and circumstances of each case.” Id. at 1348.

In the bankruptcy court and BAP below and before us on appeal, Mason

argues, in support of his good faith claim and in loose reliance on Flygare , that

Young manipulated his income and expenses in such fashion as to avoid fully

funding the Chapter 13 plan with “all of the debtor’s projected disposable

income” in violation of 11 U.S.C. § 1325(b). Mason raises a number of facts

that, he asserts, demonstrate Young’s effort to hide his true disposable income.

If proven, that would be an obvious Flygare violation of the “accuracy of the

plan’s statements of the debts, expenses and percentage repayment of unsecured

debt and whether any inaccuracies are an attempt to mislead the court.” Flygare ,

709 F.2d at 1347 (internal quotation omitted). Mason further argues that in

various ways Young’s conduct in the bankruptcy proceedings in this case

likewise militates a conclusion that Young’s Chapter 13 plan was not submitted

in good faith under Flygare . We examine each of those arguments in turn.

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 1. The Cadillac

Young purchased a 1992 Cadillac from his brother-in-law, and his Chapter

13 plan calls for monthly payments of $321.26 to pay for that car. Mason argues

that “Young’s post-petition decision to purchase a Cadillac, rather than leasing

an automobile or purchasing a less expensive one, and his consequent inflation of

his expenses to reduce the disposable income available for funding his plan, is

indicative of a lack of good faith.” (Appellant’s Br. at 18.) The bankruptcy

court rejected Mason’s argument in this regard, stating that

Mason makes much of debtor’s purchase of a Cadillac automobile from his
brother-in-law. . . . Mason offers no evidence that debtor paid more than
the vehicle was worth, that the payments are excessive for the amount
financed, or that the transaction was anything other than arm’s-length.
This court can not find that the purchase of a five-year-old automobile,
albeit a Cadillac, with monthly payments of $321.26, represents an attempt
by debtor to “manipulate” his expenses.

In re Francis Arthur Young III , No. BK-97-13747-LN, at 9 (Bankr. W.D. Okla.

Feb. 18, 1998) (Order). The BAP affirmed that determination. See In re Young ,

237 B.R. at 798-99. It is certainly true, as Mason points out, that monthly

payments toward the purchase of the Cadillac decrease the amount of Young’s

disposable income available to service his debt to Mason. But that fact does not

compel us to conclude that the foregoing determination of good faith by the

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bankruptcy court is clearly erroneous. 6
Despite Mason’s understandable

eagerness to collect what is owed him, Mason’s argument in this regard is

tantamount to an assertion that the repayment of Young’s debt to Mason is the

only legitimate use of Young’s disposable income under the Chapter 13 plan at

issue in the instant case. We decline Mason’s invitation to so hold.

2. Rental properties

Claiming that Young misrepresented to the bankruptcy court that he had

surrendered his interests in various rental properties to other creditors when in

fact he had transferred those interests to his erstwhile wife in 1995, Mason argues

that that constitutes a bad faith misrepresentation to the court and that the

transfer itself was intended to avoid satisfying the judgment against him. In this

regard, the bankruptcy court, in its order confirming Young’s Chapter 13 plan,

held as follows:

Mason asks the court to reconsider its determination that debtor did not
state his debts inaccurately in an attempt to mislead the court. He refers to
certain parcels of real property which debtor transferred to his then wife,
from whom he has since been divorced, in 1995. Mason asserts that debtor
misrepresented the facts with regard to those properties, and appears to
believe that debtor should still have income from those properties with
which to service his debts. Debtor responds that he has never denied

6
The bankruptcy court might conceivably have held that the purchase of
even a used Cadillac constituted an unnecessarily lavish expense for an
automobile, as the court held in the context of the purchase of a new Corvette in
In re Rogers, 65 B.R. 1018, 1021-22 (Bankr. E.D. Mich. 1986). However, it was
not clear error for the court to decline to so hold.

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 transferring ownership of those properties, that he is still liable on the
indebtedness against them, and that it is necessary for him to “surrender”
his interest in them in order to discharge his personal liability upon that
indebtedness at the successful conclusion of his plan. . . . [T]he court does
not believe that reconsideration is necessary or that, if reconsidered, the
result would change.

In re Francis Arthur Young III , No. BK-97-13747-LN, at 3-4 (Bankr. W.D. Okla.

Apr. 28, 1998) (Order). Mason challenges the court’s finding, arguing that the

transfer itself occurred soon after the jury rendered its verdict against Young,

indicating Young’s intention to escape his debt to Mason. However, that is a

credibility determination that is properly the province of the trier of fact—in this

case the bankruptcy court—, and we may not disturb that trier of fact’s credibility

determinations on appeal. See Anderson v. City of Bessemer City , 470 U.S. 564,

575 (1985) (“[W]hen a trial judge’s finding is based on his decision to credit

testimony of one of two . . . witnesses, each of whom has told a coherent and

facially plausible story that is not contradicted by extrinsic evidence, that finding,

if not internally inconsistent, can virtually never be clear error.” (citations

omitted)).

Mason also states that Young’s representations were false, as evidenced by

the fact that “[a]n investigator working for Mason’s counsel determined from a

search of the land records that, in fact, Young had not transferred, and could not

transfer, any interest in the properties to the mortgage holders because he had

previously transferred his interest in the properties to his wife, who continues to

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own the properties.” (Appellant’s Br. at 23.) Young responds that he “still

remains liable as a a joint mortgager on these properties.” (Appellee’s Br. at 16.)

However, we need not resolve that dispute today. Mason’s portentous reference

to a hired investigator is wholly unsupported by citation to the record; the precise

nature of the investigator’s findings therefore remain, for our purposes, shrouded

in an appellate fog. It is likewise unclear from appellant’s brief whether he

presented the mysterious investigator’s findings to the bankruptcy court below.

Thus, Mason has waived this argument. See Valley Improvement Ass’n v.

United States Fid. & Guar. Corp. , 129 F.3d 1108, 1119 (10th Cir. 1997). We

simply discern no clear error in the lower court’s good faith determination with

regard to the rental properties.

3. Probable or expected duration of the plan

Citing Young’s initial proposed thirty-six-month plan—rejected by the

court—, Mason argues that the proposal and subsequent amendment to sixty

months comprises “yet further evidence of Young’s lack of good faith.”

(Appellant’s Br. at 26.) We disagree.

As noted, Young’s initial Chapter 13 plan was rejected by the court on the

ground that it did not represent his best efforts to satisfy his creditors, especially

Mason. Young thereupon extended the plan period to sixty months, and the court

confirmed that amended plan as having been proposed in good faith. Thus, the

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court properly scrutinized and rejected the first plan, which may well have been

made in bad faith as the court found. See In re Pickering , 195 B.R. 759, 767

(Bankr. D. Mont. 1996). But that is as far as Mason’s argument can take him.

Contrary to his suggestion, it was not then clear error for the court to accept the

subsequent plan for the maximum sixty-month period under 11 U.S.C. § 1322(d).

Rather, it was Young’s right under the Bankruptcy Code to “modify the plan at

any time before confirmation” within the parameters of 11 U.S.C. § 1322. 11

U.S.C. § 1323(a).

4. Type of debt sought to be discharged and whether any such debt is
non-dischargeable in Chapter 7

Relying on our precedent in Pioneer Bank , 888 F.2d at 704-05, Mason

argues that the totality of the circumstances of Young’s Chapter 20 conversion in

the present case is indicative of bad faith. Once again, we disagree. In Pioneer

Bank , the only remaining debt to be discharged after the Chapter 7 liquidation

was the debt to a single creditor. See id. at 703. Thus, there was a strong

inference that the debtor in Pioneer Bank promulgated his Chapter 13 plan, which

involved only $50 monthly payments over a period of thirty-six months, solely

for the purpose of evading his remaining debt. Here, by contrast, there was

ample evidence before the bankruptcy court that the Chapter 13 plan was not

filed for the purpose of evading Young’s debt to Mason. First, Young’s monthly

payments under the plan were far higher than the de minimis $50 paid by the

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debtor in Pioneer Bank . Second, there were a number of other creditors to be

satisfied under Young’s plan, raising less concern that this Chapter 13 plan was

promulgated with the purpose of bilking Mason. Third, the Chapter 13 plan in

Pioneer Bank was for the minimum thirty-six-month term, whereas the instant

plan stretches over the maximum term allowed by the Bankruptcy Code.

By the same token, the instant case is distinguishable from Gier v. Farmers

State Bank of Lucas (In re Gier) , 986 F.2d 1326 (10th Cir. 1993). In Gier , there

was strong evidence that the debtor had not been forthright about his true

disposable income (which he declared amounted to only $75), see id. at 1328,

1330, and, as in Pioneer Bank , Farmers State Bank was the only real remaining

creditor after the Chapter 7 proceedings , see id. at 1329. 7 Here, by contrast, there

is no strong evidence that Young was not above board about his disposable

income, and as discussed, there are other unsecured creditors implicated in his

Chapter 13 plan.

We are of course mindful of the Pioneer Bank court’s admonition that

[A]lthough the discharge of an obligation which would be
nondischargeable in Chapter 7 is not, standing alone, a sufficient basis on
which to find bad faith or deny confirmation, it is a relevant factor to be
considered in the § 1325(a)(3) good faith inquiry. Resort to the more
liberal discharge provisions of Chapter 13, though lawful in itself, may
well signal an “abuse of the provisions, purpose, or spirit” of the Act,

7
This is true as well of In re Jacobs, 102 B.R. 239, 242 (Bankr. E.D. Okla.
1988), also cited by Mason.

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 especially where a major portion of the claims sought to be discharged
arises out of pre-petition fraud or other wrongful conduct and the debtor
proposes only minimal repayment of these claims under the plan.

888 F.2d at 705 (quoting Neufeld v. Freeman , 794 F.2d 149, 152-53 (4th Cir.

1986)) (further quotations omitted). But we are also mindful that “a Chapter 13

plan may be confirmed despite even the most egregious pre-filing conduct where

other factors suggest that the plan nevertheless represents a good faith effort by

the debtor to satisfy his creditors’ claims.” Id. (quoting Neufeld , 794 F.2d at

153). Such is the case here. Our examination of the bankruptcy court and BAP’s

determinations as well as our meticulous review of the record on appeal reveal no

clear error in this regard.

5. Frequency with which the debtor has sought relief under the Bankruptcy
Reform Act

In another variant of his argument that a Chapter 20 conversion constitutes

bad faith, Mason argues that the fact Young sought such a conversion is evidence

of his intent to frequently abuse the Bankruptcy Reform Act for the sole purpose

of weaseling out of his debt to Mason. Although, as Mason and Pioneer Bank

point out, Chapter 20 conversions may raise questions about the motives of the

debtors seeking such conversions, see 888 F.2d at 705, in the present case, we are

satisfied—for the reasons discussed above—that no improper motive was present

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and that the bankruptcy court properly allowed the conversion to proceed and

approved Young’s Chapter 13 plan. 8

We emphasize the proper balance in this case between competing

principles comprising the guiding spirit of federal bankruptcy law. The Supreme

Court

has . . . acknowledged that a central purpose of the [Bankruptcy] Code is to
provide a procedure by which certain insolvent debtors can reorder their
affairs, make peace with their creditors, and enjoy “a new opportunity in
life with a clear field for future effort, unhampered by the pressure and
discouragement of preexisting debt.” Local Loan Co. v. Hunt , 292 U.S.
234, 244 (1934). But in the same breath that we have invoked this “fresh
start” policy, we have been careful to explain that the Act limits the
opportunity for a completely unencumbered new beginning to the “honest
but unfortunate debtor.” Id.

Grogan v. Garner , 498 U.S. 279, 286-87 (1991). The policy of allowing a fresh

start does not license debtors to lightly rid themselves of the burden of their

indebtedness without an honest attempt at repayment. Yet neither does that

policy compel debtors, in Dickensian fashion, to labor for the rest of their lives

under the crushing weight of gigantic debt; under our law, the world is not to be

made a debtor’s prison by a lifelong sentence of penury. While we appreciate

Mason’s frustration at Young’s inability to repay the whole of his debt, the fact

remains that Young filed a Chapter 13 plan with the bankruptcy court, arranging

8
Based on the foregoing analysis and our review of the record, we
likewise reject Mason’s contention that Young failed to meet his burden of proof
that he filed the plan in good faith.

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therein to devote all of his disposable income to the repayment of his various

debts, including his debt to Mason, for the maximum five-year period allowed by

law. As discussed above, the bankruptcy court found Young’s plan to have been

filed in good faith, and we discern no clear error in that determination. 9

III

The judgment of the BAP is AFFIRMED .

9
Mason argues that “Young has judicially admitted not simply that
Mason’s claim would not be dischargeable under Chapter 7, but that the
bankruptcy was converted by Young to Chapter 13 for the specific purpose of
permitting him to obtain the discharge of the debt.” (Appellant’s Br. at 39 (citing
Appellant’s App. at 175-76).) While we agree with Mason that one purpose of
the Chapter 20 conversion was to deal with Young’s non-dischargeable debt to
Mason, we also agree with the Sixth Circuit that “[i]t is not conclusively bad faith
for a debtor to seek to discharge a debt incurred through his own criminal or
tortious conduct, but that factor may be considered.” Hardin v. Caldwell (In re
Caldwell), 895 F.2d 1123, 1127 (6th Cir. 1990) (citing Matter of Chaffin, 836
F.2d 215, 216 (5th Cir. 1988); 11 U.S.C. § 1328(a)).

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