Phyllis Anne Pricer

1 	Although the trustee has been given notice of the filing
through the court’s Electronic Case Filing system, that is not
the same as the debtor’s serving the motion on the trustee, and
in order to flag that the motion is a matter that the trustee may
wish to address, the court will require that the debtor serve the
motion by mail.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
PHYLLIS ANNE PRICER,
Debtor.
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)
)
)
)
)
Case No. 09-00452
(Chapter 7)
For publication in West’s
Bankruptcy Reporter
MEMORANDUM DECISION AND ORDER RE PROCEDURES TO BE FOLLOWED
BY THE DEBTOR IN PURSUING HER MOTION TO CONVERT TO CHAPTER 13
The debtor has moved to convert her case to chapter 13, but
neglected to serve the motion on the chapter 7 trustee as
required by Fed. R. Bankr. P. 9013. 1 	Although I will require
service on the chapter 7 trustee and the United States Trustee, I
will not require notice of an opportunity to oppose the motion or
notice of the motion to be sent to creditors.
Under 11 U.S.C. § 706(a), a debtor “may convert a case” to a
case under chapter 13 if, as here, the case was not converted to
a case under chapter 7 from another chapter. 	But under 11 U.S.C.
The document below is hereby signed.
Signed: June 27, 2009.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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§ 706(d), a case may not be converted to chapter 13 unless the
debtor may be a debtor in chapter 13. 	The debtor may not be a
debtor in chapter 13, and conversion to chapter 13 may be denied,
if the debtor does not meet the eligibility requirements of 11
U.S.C. § 109(e), or if the case is one of the “atypical” and
“extraordinary” cases in which the debtor, through bad faith, has
forfeited the right to proceed in chapter 13. 	Marrama v.
Citizens Bank of Mass., 549 U.S. 365, 371, 375 n.11 (2007).
Conversion pursuant to a motion of the debtor under § 706(a)
does not require “notice and a hearing” as is required when a
party seeks conversion under 11 U.S.C. § 706(b). 	Accordingly,
the requirement in Fed. R. Bankr. P. 2002(a)(4) of sending notice
to the creditor body of the hearing on the conversion of a
chapter 7 case to another chapter does not apply (unless the
court directs that a hearing be held). 	See In re Croston, 313
B.R. 447, 454 (B.A.P. 9th Cir. 2004) (quoting the advisory
committee notes to Fed. R. Bankr. P. 1017, which state that a
motion to convert pursuant to § 706(a) is not automatically a
contested matter and no hearing is required on the unopposed
motion unless the court directs). 	But see In re Adler, 329 B.R.
406, 409 (Bankr. S.D.N.Y. 2005) (treating Rule 2002(a)(4) as
applicable to a debtor’s motion under 11 U.S.C. § 1112(a), which
like a motion under § 706(a) contains no requirement of a “notice
and a hearing,” without discussing the absence of a “notice and a
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hearing” requirement in § 1112(a)); In re Ponzini, 277 B.R. 399,
405 (Bankr. E.D. Ark. 2002) (presuming that Rule 2002(a)(4)
notice of hearing is required on a § 706(a) motion without
addressing the fact that § 706(a) does not contain a “notice and
a hearing” requirement); In re Young, 269 B.R. 816, 822 (Bankr.
W.D. Mo. 2001) (same); In re Starkey, 179 B.R. 687, 698 (Bankr.
N.D. Okla. 1995) (same); In re Spencer, 137 B.R. 506, 513 (Bankr.
N.D. Okla. 1992) (same). 	Because the case can be re-converted to
chapter 7 from chapter 13, the decision by Congress to dispense
with a requirement of a “notice and a hearing” in § 706(a) and a
court’s decision not to impose such a requirement does not amount
to a denial of due process. 	Although a court, in an exercise of
discretion, may elect to apply Rule 2002(a)(4) to any motion to
convert under § 706(a), see In re Carrow, 315 B.R. 8, 20 (Bankr.
N.D.N.Y. 2004), adopting such an approach to every § 706(a)
motion would be overkill.
Consonant with the lack of “notice and a hearing”
requirement in the statute, Fed. R. Bankr. P. 1017(f)(1) provides
that a motion under § 706(a) does not commence a contested matter
under Fed. R. Bankr. P. 9014(a) . 	Thus, the motion does not
require “notice and opportunity for hearing” under Fed. R. Bankr.
P. 9014(a) and corresponding notice of an opportunity to object
under Local Bankruptcy Rule 9013-1(b)(3). 	“The consequence of
not being automatically subjected to Rule 9014 is that there is a
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presumption that a hearing will not be held unless the court so
orders; this was the specific purpose of the 1987 amendment to
Rule 1017 that created categories of conversion and dismissal
motions. 	Fed. R. Bankr. P. 1017, advisory committee's note to
1987 amendments.” 	In re Croston, 313 B.R. at 454 (footnote
omitted). 	As noted in John Rao, Impact of Marrama on Case
Conversions: Addressing the Unanswered Questions, 15 Am. Bankr.
Inst. L. Rev. 585, 592 (2007), “if the Marrama decision is
intended to help courts avoid unnecessary procedural burdens, no
rule change making all section 706(a) motions a contested matter
is justified.” 	In the extraordinary case in which a trustee or
creditor who is monitoring the case would have an incentive to
object to conversion, such an entity can be expected promptly to
alert the court of the desire to object to the motion.
Experience teaches, however, that it is extremely rare for a
party to pursue either such an objection or, if the case is
converted before such an objection could be filed, a motion to
vacate or a motion for re-conversion to chapter 7 on grounds that
would have supported an objection to conversion in the first
instance.
There is good reason for Congress having opted not to impose
a “notice and a hearing” requirement for a debtor’s motion to
convert a case under chapter 7 to a case under chapter 13
pursuant to § 706(a). 	If the debtor is eligible to be a debtor
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in a chapter 13 case, and did not convert her case to chapter 7
from another chapter, it makes sense promptly to grant a motion
to convert to chapter 13 as that will advance the interest of
creditors in having plan payments in the chapter 13 case commence
sooner rather than later, and in securing a dismissal of the case
or re-conversion of the case to chapter 7 if the debtor does not
obtain a confirmed plan in chapter 13 (or defaults on such a
plan). 	Moreover, the two possible bases for denying conversion
of such a case do not warrant instituting a requirement of
“notice and a hearing” for every § 706(a) motion.
As to the first basis for denying conversion under § 706(a)
(when there has been no prior conversion of the case),
ineligibility under § 109(e) to be a debtor in a chapter 13 case,
the court can set a hearing to address that issue if the debtor’s
schedules suggest that the debtor’s debts exceed debt limitations
on eligibility. 	Whether the debtor is not “an individual with
regular income” as defined in 11 U.S.C. § 101(30) depends on the
debtor’s current income as of the requested conversion, and the
chapter 13 trustee routinely explores the § 101(30) issue in
every chapter 13 case. 	Once the court converts the case under
§ 706(a) to chapter 13 without “notice and a hearing,” all issues
of eligibility remain live issues that the chapter 13 trustee and
creditors may address in the chapter 13 case.
Section 706(d) does not require that, before a case will be
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converted under § 706(a) to chapter 13, the court must require
the debtor to put on proof of eligibility and that the court will
make an adjudication regarding eligibility that is binding on
creditors. 	Instead, § 706(d), in combination with the court’s
discretion not to require “notice and a hearing” under § 706(a),
permits a court to deny the motion to convert if the court
decides to hold a hearing to delve into the issue of eligibility
and determines that the debtor is ineligible, but otherwise does
not provide for an adjudication of the eligibility issue (because
there was no hearing) in a manner that is binding on creditors.
If the debtor is ineligible to be a debtor in chapter 13, an
order converting the case to chapter 13 (without the court having
required notice to creditors regarding the motion) has no binding
effect on creditors (or on the chapter 13 trustee as the
representative of their interests) with respect to the § 109(e)
eligibility issue.
Moreover, a motion to convert to chapter 13 may arise at an
early stage of the case when the trustee and creditors have had
little opportunity to explore whether the debtor meets § 109(e)
eligibility requirements for a chapter 13 case, in contrast to
chapter 13 where the debtor will be asked about eligibility when
the debtor is examined at the meeting of creditors under 11
U.S.C. § 341 as a preliminary step before any chapter 13 plan can
be confirmed. 	Under 11 U.S.C. § 1302(b)(2)(B) the chapter 13
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trustee is obligated to address § 109(e) eligibility because it
affects whether a plan can be confirmed.
In addition, a chapter 7 trustee may have little incentive
to litigate the issue of § 109(e) eligibility. 	If there are no
assets to administer for the benefit of creditors in a chapter 7
liquidation case, the chapter 7 trustee, who would receive no
additional compensation for litigating the issue of eligibility,
will likely have no incentive to litigate the issue. 	Creditors
will be better off having the issue litigated by the chapter 13
trustee who has a statutory obligation to address the issue.
Even if there are assets that the chapter 7 trustee could
administer for the benefit of creditors, the chapter 7 trustee
may be content to let the chapter 13 trustee address § 109(e)
eligibility (as she will have an obligation to do so under
§ 1302(b)(2)(B)). 	If the debtor is ineligible for chapter 13
relief, and the case is re-converted to chapter 7, the same
chapter 7 trustee is likely to be appointed (at least in this
district, in which the same chapter 7 trustee is traditionally
re-appointed to serve as trustee). 	It is better to let the issue
of ineligibility be addressed by the standing chapter 13 trustee,
who reliably takes responsibility for raising any issue of
ineligibility and diligently litigates such issues.
As to the second basis for denying conversion, the
forfeiture of the right to convert due to bad faith, Marrama
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2 	Without deciding the issue, I assume that bad faith
exists not only when, as in Marrama, the debtor has engaged in
such misconduct as not disclosing all assets, but also if it is
plain that cause currently exists that would require re-
converting the case to chapter 7 if it were converted to chapter
13. 	An example is a debtor who is plainly unable to comply with
the requirements to confirm a chapter 13 plan (such as, an
inability to pay through a plan, as required by 11 U.S.C.
§ 1322(a)(2), the entire amount of a whopping allowed priority
claim owed a creditor who has made plain it will not accept less
than full payment).
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recognizes that such a forfeiture is the atypical and
extraordinary case. 2 	In cases such as this one, in which the
debtor has not yet appeared at a meeting of creditors, and no
creditor has filed a request to receive all notices in the case,
it is unlikely that the trustee or a creditor has discovered
misconduct that amounts to bad faith warranting denial of a
motion to convert. 	Even when the trustee or a creditor suspects
or has discovered that there is such bad faith, and has an
incentive to object to conversion of the case to chapter 13, the
trustee or creditor can promptly file a request for additional
time to investigate the issue and to explore the possibility of
filing an opposition to the motion, or they can file a motion to
vacate if the court acts on the motion before the trustee or
creditor can make such a request.
It makes little sense to engage in an expensive and time-
consuming 20-day notice procedure as provided for under
Rule 2002(a)(4) for every § 706(a) motion to convert to chapter
13. 	Instead, unless the docket suggests that there is a clear
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3 	Because a meeting of creditors is set for July 1, 2009,
the trustee is authorized to give notice continuing that meeting
to a later date pending his addressing the motion to convert, and
the court’s acting on the motion.
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issue of ineligibility or bad faith, or some other reason to
suggest that creditors might take an active interest in the issue
of conversion, the court will grant the debtor’s § 706(a) motion
unless the trustee signals to the court within five days after
the filing of a certificate reflecting service of the motion on
the trustee that the trustee wishes to oppose (or to consider
opposing) the motion to convert. 3 	The chapter 7 trustee has
extensive experience in administering chapter 7 cases and will be
readily able to alert the court if this is the extraordinary case
in which the trustee wishes to explore pursuing an opposition to
the motion, or if he is aware of a creditor who might wish to
explore opposing the motion. 	If the court enters an order
granting the motion to convert, erroneously assuming that neither
the trustee nor any creditor wishes to oppose the motion, the
trustee or creditor may file a motion to vacate under Fed. R.
Bankr. P. 9023, and the court will permit time for a response to
the motion to convert. 	See In re Porreco, 333 B.R. 310 (Bankr.
W.D. Pa. 2005) (court addressed issue of an allegedly bad faith
conversion motion pursuant to a Rule 9023 motion to reconsider).
To delay granting the motion to convert until after a 20-day
notice procedure has been followed, however, would defeat the
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command of Fed. R. Bankr. P. 1001 that the rules "shall be
construed to secure the just, speedy, and inexpensive
determination of every case and proceeding." 	As the Court
observed in Marrama, 549 U.S. at 374, “[t]he class of honest but
unfortunate debtors who do possess an absolute right to convert
their cases from Chapter 7 to Chapter 13 includes the vast
majority of the hundreds of thousands of individuals who file
Chapter 7 petitions each year.” [Footnote omitted.] 	It makes no
sense to impose on that “vast majority” of debtors who invoke
§ 706(a) an expensive and time-consuming procedure. 	It is thus
ORDERED that the debtor shall promptly file a certificate of
service reflecting that she has mailed her motion to the chapter
7 trustee and the United States Trustee by first class mail, and
once such a certificate is filed, the court will proceed after
five business days to address the motion. 	It is further
ORDERED that the debtor is not required to give notice under
Rule 2002(a)(4) or notice under LBR 9013-1 as those provisions
are inapplicable, and the court sees no special circumstances
warranting imposing such requirements.
[Signed and dated above.]
Copies to: Debtor (via BNC and by hand-mailing by the clerk);
Chapter 7 Trustee; Office of United States Trustee; Cynthia A.
Niklas, Chapter 13 Trustee.
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