MEMORANDUM Opinion and Order written by the Honorable Gary Feinerman on 4/12/2018.Mailed notice.(jlj, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
In re TINA RICE-HARRIS,
FIRST FEDERAL SAVINGS BANK,
17 C 6489
Judge Gary Feinerman
Appeal from: No. 17 B 22158
MEMORANDUM OPINION AND ORDER
Tina Rice-Harris appeals the bankruptcy court’s denial of her motion to extend the thirtyday automatic stay authorized by 11 U.S.C. § 362(c)(3)(A). Doc. 1. The bankruptcy court’s
ruling is affirmed.
The following facts are not in dispute. Rice-Harris married Matthew Harris in March
2013. Doc. 12-1 at 120. Approximately a year earlier, Harris had purchased in fee simple a
property located at 1100 West Chestnut Street in Chicago (the “Property”). Id. at 94. Harris
financed the purchase with a $680,100 promissory note from First Federal Savings Bank secured
by the Property. Ibid.
In September 2014, Harris executed a quitclaim deed, transferring the Property to himself
and Rice-Harris as tenants by the entirety. Id. at 95, 122-24. When Harris died, Rice-Harris
became the sole owner of the Property through the right of survivorship. Id. at 111. Rice-Harris
continues to live on the Property, but because she was not a signatory to the promissory note, she
has no personal financial obligation to First Federal. Id. at 95; Doc. 12-2 at 35. On April 3,
2015, after the note went into default, First Federal filed a foreclosure suit in the Circuit Court of
Cook County, Illinois. Doc. 12-1 at 95. Judgment against the Property, but not Rice-Harris
personally, entered in that case on October 27, 2016. Ibid.; Case No. 17 B 2304 (Bankr. N.D.
Ill.), Dkt. 17-1.
Rice-Harris filed her first Chapter 13 petition on January 26, 2017—the day the
redemption period associated with the state court foreclosure proceeding expired. Doc. 12-1 at
90, 113; Doc. 12-2 at 29; Case No. 17 B 2304 (Bankr. N.D. Ill.), Dkt. 1, Dkt. 17 at 5. On May
23, 2017, the bankruptcy court granted the Chapter 13 trustee’s motion to dismiss the case under
11 U.S.C. § 1307(c)(1) for Rice-Harris’s “unreasonable delay” in providing her creditors with
the required “business packet and statement of financial affairs.” Case No. 17 B 2304 (Bankr.
N.D. Ill.), Dkts. 24, 30. On July 25, 2017, Rice-Harris filed her second Chapter 13 petition,
which is the subject of this appeal. Doc. 12-1 at 8.
With certain exceptions, filing a bankruptcy petition “operates as a stay, applicable to all
entities, of … any act to … enforce against property of the debtor any lien … [that] secures a
claim that arose before the commencement of the case.” 11 U.S.C. § 362(a)(5). Ordinarily, the
stay remains in place for the duration of the bankruptcy proceeding—that is, until the time the
case is closed or dismissed or a discharge is granted, whichever comes first. See id. § 362(c)(2).
The Bankruptcy Code, however, limits the automatic stay’s length for certain categories of
repeat filers. As relevant here, when a debtor files a subsequent petition after having a “case …
pending within the preceding 1-year period … dismissed,” the automatic stay lasts for only thirty
days. Id. § 362(c)(3)(A); see In re Paulino, 2014 WL 5358409, at *1 (Bankr. S.D.N.Y. Oct. 20,
2014) (“§ 362(c)(3) of the Bankruptcy Code provides that a debtor loses the protection of the
automatic stay after 30 days in a case filed within 12 months of the dismissal of an earlier
proceeding.”). The Code nevertheless permits a “party in interest,” including the debtor, to move
for an extension “before the expiration of the 30-day period,” but “only if the party in interest
demonstrates that the filing of the later case is in good faith as to the creditors to be stayed.” 11
U.S.C. § 362(c)(3)(B); see In re Roberts, 2015 WL 7257918, at *2 (D. Haw. Nov. 16, 2015)
(“The bankruptcy court may extend the thirty-day stay if a party files a timely motion showing
that the second bankruptcy case was filed in good faith.”).
In certain circumstances, the Code imposes a presumption, rebuttable by “clear and
convincing evidence to the contrary,” that the subsequent filing was not made in good faith. 11
U.S.C. § 362(c)(3)(C). As relevant here, the presumption applies in the case of a debtor whose
“previous case … was dismissed within … [the preceding] 1-year period, after the debtor failed
to … file or amend the petition or other documents as required by this title or the court without
substantial excuse.” Id. § 362(c)(3)(C)(II)(aa); see Marshall v. Blake, __ F.3d __, 2018 WL
1417550, at *13 (7th Cir. Mar. 22, 2018) (“Blake filed a previous bankruptcy case that was
dismissed within one year of the filing of this matter due to Blake’s failure to make plan
payments. As a result, this case was presumed to have been filed in bad faith. To rebut this
presumption and extend the automatic bankruptcy stay at the outset of this case, Blake had to
provide clear and convincing evidence that this case was filed in good faith.”) (citation and
internal quotation marks omitted). The presumption also applies if “there has not been a
substantial change in the financial or personal affairs of the debtor since the dismissal of the next
most previous case.” 11 U.S.C. § 362(c)(3)(C)(III); see In re Gibas, 543 B.R. 570, 596-97
(Bankr. E.D. Wis. 2016) (discussing the statutory scheme).
On July 27, 2017, two days after filing her second Chapter 13 petition, Rice-Harris
moved under § 362(c)(3)(B) to extend the thirty-day automatic stay. Doc. 12-1 at 9, 87-92. In
her affidavit accompanying the motion, Rice-Harris averred that she “intend[ed] to put the
Property on the Market in April 2018 and expect[ed] to close on a sale prior to the end of June
2018. … [T]he net proceeds from the sale of the Property will be in excess of the claim held by
First Federal Savings Bank.” Id. at 92. Rice-Harris added that this second Chapter 13
proceeding “was filed in good faith. I have retained different bankruptcy counsel from [the
earlier case], and have put forth a plan which I believe will repay my creditors in an appropriate
and responsible manner.” Ibid. After First Federal objected to Rice-Harris’s motion, id. at 94102, the bankruptcy court held hearings on August 3 and August 10, Doc. 12-2 at 1, 13.
At the August 10 hearing, the bankruptcy court orally denied Rice-Harris’s motion for
two independent reasons. Id. at 22. First, the court held that because Rice-Harris’s right of
redemption under state law had expired, she no longer had an ownership interest in the Property,
which was therefore no longer property of the bankruptcy estate. Id. at 20-21. Second, after
noting that the § 362(c)(3)(C) presumption (that her second petition was not filed in good faith)
applied “as a result of the dismissal of [her] prior Chapter 13 case” for failure to provide
creditors with required documents, the court held that Rice-Harris had not “rebutted that
presumption by clear and convincing evidence.” Id. at 23. The court also held that there had
been no “change … in the financial or personal affairs of the debtor since the dismissal of the
prior case … sufficient to rebut the presumption.” Ibid. The court, however, permitted RiceHarris to file additional briefing on the question whether she still had a cognizable interest in the
Property despite the expiration of the redemption period. Id. at 25-26.
At a third and final hearing on August 24, the bankruptcy court first held, in light of
Colon v. Option One Mortgage Corp., 319 F.3d 912 (7th Cir. 2003), that it had incorrectly
concluded at the August 10 hearing that Rice-Harris did not have an ownership interest in the
Property. Doc. 12-2 at 28-30. The court nevertheless reaffirmed its earlier holding that RiceHarris had failed to rebut the § 362(c)(3)(C) presumption by clear and convincing evidence. Id.
at 32-34. Relying on In re Love, 957 F.2d 1350 (7th Cir. 1992), the court looked to the “totality
of the circumstances” surrounding her second bankruptcy petition. Id. at 31. The court
considered these factors from Love: “the timing of the petition, how the debt arose, the debtor’s
motive in filing the petition, and how the debtor’s actions affect its creditors.” Ibid. The court
also considered the following additional factors: “why the debtor’s prior case was dismissed,
including the debtor’s conduct in that case, the likelihood that the debtor will have a steady
income throughout the bankruptcy case, and whether she can properly fund the plan, whether the
debtor’s circumstances have changed since the prior dismissal, and whether the trustee or
creditors have objected to the debtor’s motion.” Id. at 31-32 (citing Gibas, 543 B.R. at 598).
Applying these factors, the bankruptcy court found, first, that Rice-Harris’s “essential
purpose [in] filing this new case was to impose the stay in order to delay the foreclosure action
by First Federal significantly, not in order to save her home to provide a roof over her head or to
give her a fresh start, but, rather, to sell it in hopes of obtaining a profit.” Id. at 33. Second, the
court found that Rice-Harris had provided no “guarantee” as to when the Property would be sold,
“or that it will sell for the amount she currently claims its worth.” Ibid. Third, the court found
that Rice-Harris “ha[d] not shown there was a substantial change in her financial affairs since the
dismissal of the prior case.” Id. at 34. Based on these findings, the court held that the “totality
of the circumstances does not show by clear and convincing evidence that this case was filed in
good faith as to this particular creditor,” id. at 34, and thus denied Rice-Harris’s motion to extend
Rice-Harris then filed this timely appeal. Doc. 1.
The sole question on appeal is whether the bankruptcy court erred in denying RiceHarris’s § 362(c)(3)(B) motion to extend the thirty-day automatic stay on the ground that she had
not rebutted by clear and convincing evidence the § 362(c)(3)(C) presumption that she had not
filed her second Chapter 13 petition in good faith.
The parties agree that this court reviews for clear error the bankruptcy court’s finding that
Rice-Harris did not act in good faith, and they further agree that Love’s totality of the
circumstances test governs that determination. Doc. 12 at 9, 17-18; Doc. 14 at 10, 17; see Love,
957 F.2d at 1353-54 (upholding a bankruptcy court ruling under 11 U.S.C. § 1307(c) “[b]ecause
the bankruptcy court appropriately applied the totality of circumstances test in making its good
faith determination, and because it was not clearly erroneous for the bankruptcy judge to find
that Love lacked good faith in filing the Chapter 13 petition”). * Moreover, this court reviews for
abuse of discretion the bankruptcy court’s decision not to extend the automatic stay. See Colon,
The parties’ agreement regarding Love is sound. It is true that Love did not construe
the term “good faith” within the meaning of § 362(c), but rather arose under § 1307(c), which
gives a bankruptcy court discretion to “convert a case under [Chapter 13] to a case under chapter
7” or to dismiss it, “whichever is in the best interests of creditors and the estate, for cause.” 11
U.S.C. § 1307(c); see Love, 957 F.2d at 1354. As Love explained, however, although “Chapter
13 does not explicitly contain a good faith requirement for the filing of a petition,” because the
Seventh Circuit has held “that lack of good faith is sufficient cause for dismissal” under
§ 1307(c), an initial Chapter 13 petition may nevertheless be subject to an implicit “good faith
determination.” Id. at 1354-55. Given that § 362(c)(3)(B) explicitly subjects repeat Chapter 13
filers seeking an extension of the automatic stay to a good faith determination, the Love totality
of the circumstances test applies here.
319 F.3d at 916 (“The bankruptcy court’s grant of relief from the automatic stay is reviewed for
an abuse of discretion.”); In re Williams, 144 F.3d 544, 546 (7th Cir. 1998) (“[T]he bankruptcy
court has discretion whether and to what extent it will grant relief from the stay, so our review is
limited to whether the court abused that discretion.”).
It was not clearly erroneous for the bankruptcy court to find, applying Love’s totality of
the circumstances test, that Rice-Harris did not act in good faith in filing her second bankruptcy
petition. On appeal, Rice-Harris does not dispute that § 362(c)(3)(C)’s rebuttable presumption
applies to her, Doc. 12 at 19, nor does she explain why she did not provide the requisite materials
to her creditors in the first bankruptcy proceeding, resulting in the dismissal of that case. Rather,
Rice-Harris contends that, in the second proceeding, she “provided the Bankruptcy Court with a
great deal of uncontroverted and uncontested information supporting [her] requested relief.” Id.
at 16. That evidence, according to Rice-Harris, included:
(i) an affidavit … as to the change in her personal affairs since the filing of the
Prior Case, (ii) proof that the property was transferred from Matthew Harris to
[Rice-Harris] while they were legally married, (iii) [First Federal’s] admission
that the value of its claim secured by the Property was approximately
$800,000.00, (iv) an appraisal dated August 22, 2016, evidencing the value of
the property was $1,000.000.00 [sic], (v) a chapter 13 plan which proposed to
market and sell the Property, and pay 100% of the claims held by [First
Federal] and the Bankruptcy Estate, and (vi) the presence of [Rice-Harris]
during each hearing before the Bankruptcy Court with an offer to elicit
testimony in support of the Motion to Extend Stay.
Id. at 16-17.
None of that evidence is sufficient to overturn the bankruptcy court’s finding that RiceHarris did not rebut by clear and convincing evidence the presumption that she did not file her
second bankruptcy petition in good faith. “Under [the clear error] standard, if the trial court’s
account of the evidence is plausible in light of the record viewed in its entirety, a reviewing court
may not reverse even if convinced that it would have weighed the evidence differently as trier of
fact.” Love, 957 F.2d at 1354. The evidence Rice-Harris points to on appeal does not address
the bankruptcy court’s principal findings of fact—that (1) her motivation in filing the second
petition was to extract a profit from the sale of her property, and (2) that she had provided no
guarantee as to when the property would be sold. Doc. 12-2 at 33. Nothing about her husband’s
motivations in transferring the property, the value of First Federal’s claim, the value of the
Property, the fact that her proposed plan would (at least on her account) make First Federal
whole, or her attendance during court proceedings are relevant to those findings.
Moreover, the reasons the bankruptcy court gave for its factual findings are “plausible in
light of the record viewed in its entirety.” Love, 957 F.2d at 1354. Rice-Harris’s undisputed
failure to provide required documentation to her creditors in the first bankruptcy proceeding
strongly suggests that her motivations in again filing for bankruptcy were to “frustrate [her]
mortgage lender[’s] attempts to exercise [its] foreclosure rights, rather than to pay off creditors
via the relief afforded by chapter 13.” Gibas, 543 B.R. at 598. Likewise, Rice-Harris’s proposal
in July 2017 to sell the Property in April 2018 and “to close on a sale prior to the end of June
2018,” Doc. 12-1 at 92, contained no commitment mechanism to assure First Federal that, in
light of her prior conduct, she would follow through this time, nor that, as the bankruptcy court
emphasized, the Property “[would] sell for the amount she currently claims it’s worth,” Doc. 122 at 33.
Rice-Harris contends that, contrary to the bankruptcy court’s finding, she successfully
demonstrated a “change in her personal affairs since the filing of the Prior Case.” Doc. 12 at 16.
But the only record evidence on this point is Rice-Harris’s affidavit accompanying her motion to
extend the automatic stay. As noted, Rice-Harris averred in that affidavit that she had hired a
new lawyer after the dismissal of her first petition and was now willing to sell the Property. Doc.
12-2 at 92. But although Rice-Harris’s conduct perhaps reflects a new seriousness of purpose, it
does not undermine the bankruptcy court’s conclusion that there had been no “substantial change
in her financial affairs since the dismissal of the prior case.” Doc. 12-2 at 34; compare In re
Kalpakis, 2017 WL 3600645, at *4 (Bankr. E.D.N.Y. Aug. 18, 2017) (denying a motion to
extend a stay where “[t]he only change in circumstances following dismissal of the First Case is
Debtor’s desire to continue to use or have access to the Property”), with In re Forletta, 397 B.R.
242, 243, 245 (Bankr. E.D.N.Y. 2008) (finding that the debtor had rebutted the § 362(c)(3)(C)
presumption where she had shown that her boyfriend, with whom she had “reconciled,” would
“provid[e] her with approximately $4,000 per month which she [would] use toward funding the
Plan” and that she would “rent out a portion of her home for $2,000 per month”); In re
Castaneda, 342 B.R. 90, 95 (Bankr. S.D. Cal. 2006) (“Here, Debtor’s personal and financial
affairs have substantially improved since the dismissal of her Prior Case. At that time, Debtor
was unable to make the plan payments because she had lost her daughter’s income. Debtor’s son
has now agreed to give his mother $500 monthly for the duration of her plan so she can make her
plan payments. The additional income substantially improves Debtor’s personal and financial
affairs since the dismissal of her Prior Case.”) (internal quotation marks omitted).
Given that the bankruptcy court did not clearly err in finding that Rice-Harris had not
rebutted the § 362(c)(3)(C) presumption, it was not an abuse of discretion for the court to deny
her motion to extend the automatic stay. Rather, because § 362(c)(3)(B) makes filing in good
faith a requirement for obtaining a stay extension, the bankruptcy court rightly concluded that
Rice-Harris was entitled to no more than the thirty-day stay for which the statute provides. See
11 U.S.C. § 362(c)(3)(B) (“[O]n the motion of a party in interest for continuation of the
automatic stay and upon notice and a hearing, the court may extend the stay in particular cases as
to any or all creditors … only if the party in interest demonstrates that the filing of the later case
is in good faith as to the creditors to be stayed.”) (emphasis added).
The bankruptcy court’s denial of Rice-Harris motion to extend the automatic stay is
April 12, 2018
United States District Judge
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