Thomas Henry Bloom

UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF MICHIGAN
MEMORANDUM OF DECISION AND ORDER
PRESENT: 	HONORABLE SCOTT W. DALES
Chief United States Bankruptcy Judge
I. INTRODUCTION
Contending that chapter 13 debtor Thomas Henry Bloom (the "Debtor") is not eligible for
relief under chapter 13 given the debt limits under 11 U.S.C. § 109(e), his creditor, the Bank of
Ann Arbor (the "Bank"), filed a Motion to Dismiss Chapter 13 Case (ECF No. 26, the "Motion").1
The Debtor filed a response (ECF No. 36, the "Response"), and the court held a hearing on
October 22, 2025, in Kalamazoo, Michigan, at which counsel for the Debtor and the Bank
appeared. The chapter 13 trustee also appeared but took no position on the Motion.
The crux of the eligibility dispute is whether the Debtor's debt to the Bank is unliquidated,
either because he has affirmative defenses to the claim or because the Bank still has access to some
of its collateral.
The court heard the oral arguments of the parties and took the Motion under advisement.
For the following reasons, the court finds that the Debtor is not eligible for relief under chapter 13,
and, therefore, there is cause to dismiss the case.
1 References to "Bankruptcy Code" or to specific statutory sections in this Memorandum of Decision and Order are to
11 U.S.C. §§ 101-1532.
In re:
THOMAS HENRY BLOOM,
Debtor.
_____________________________________/
Case No. 25-02192-swd
Hon. Scott W. Dales
Chapter 13
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II. FACTUAL BACKGROUND
Mr. Bloom, prior to the filing of this bankruptcy case, owned Black Owl Properties, LLC,
and Black Owl, LLC, (collectively "Black Owl"), along with co-owners Regan Bloom and Scott
Myrick. 	Response at ¶ 2. 	Black Owl owned real property commonly known as 345 East Nine
Mile Rd., Ferndale, Michigan, 48220 (the "Property"), which the Debtor and his co-owners
operated as a restaurant. Id. at ¶ 3. To expand the business, Black Owl executed and delivered a
United States Small Business Administration Note to the Bank's predecessor on December 18,
2014 (the "Note"). 	See Proof of Claim No. 2-1, Attachs. 1-3. 	To secure the Note, Black Owl
granted a lien on all its assets, including its liquor license, as well as a mortgage on the Property
to the Bank's predecessor. 	See Response at ¶¶ 4-5. 	Additionally, the Debtor unconditionally
guaranteed payment of the Note, in the original amount of $2,650,000.00.2 Id. at ¶ 3.
Six years later, Black Owl defaulted on the Note. To avoid losing the restaurant, the Debtor
signed a series of forbearance agreements with the Bank culminating in the Third Forbearance
Agreement dated July 1, 2022.3 	By signing the Forbearance Agreements, he reaffirmed the
original loan documents, including the Unconditional Guarantee, through which he agreed not to
challenge the Bank's commercial reasonableness in liquidating its collateral or even whether it
resorted to its collateral at all. See Proof of Claim 2-1, Attach. 2 (Unconditional Guarantee at ¶
6(C)). 	He also waived any current claims, counterclaims, or defenses against the Bank, as of the
execution of the Third Forbearance Agreement. See Third Forbearance Agreement at p. 14.
2 The Debtor and his co-obligors (Scott Myrick, Regan Bloom, Scott O. Myrick Revocable Trust dated January 27,
2011, Thomas H. Bloom Revocable Trust dated November 2, 2012, and Regan K. Bloom Revocable Trust dated
November 2, 2012) all unconditionally guaranteed Black Owl's obligations under the Note. See Response at ¶ 1.
3 The Debtor signed the first forbearance agreement on January 28, 2020 (Motion at Ex. 1), the second on September
17, 2021 (id. at Ex. 2), and the third on July 1, 2022 (id. at Ex. 3, the "Third Forbearance Agreement") (collectively
the "Forbearance Agreements").
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After the Third Forbearance Agreement expired without payment in full, the Bank
foreclosed on the Property by conducting a sheriff's sale on January 30, 2024. See Motion at ¶ 9.
After applying the foreclosure sale proceeds and paying various past due city taxes, the Bank
calculated the remaining balance at $690,463.42. See Id., Ex. 4 at p. 6. To collect the remaining
balance, the Bank filed an action against the Debtor and his co-obligors in the Oakland County
Circuit Court, Case No. 2024-206252-CB (the "State Court Action"). 	The Debtor and his co-
defendants answered the Bank's complaint, asserting affirmative defenses. 	See Motion at ¶ 12.
On February 12, 2025, the Bank filed a motion for summary disposition in the State Court Action,
citing the Forbearance Agreements as well as the Debtor's Unconditional Guarantee of the Note in
support of summary disposition. Id. at ¶ 13. Before the state court could rule, however, the Debtor
filed his chapter 13 petition, triggering the automatic stay and prompting the state court to stay the
State Court Action. Id. at ¶ 15.
As a part of his voluntary petition, the Debtor scheduled the debt to the Bank at
$691,556.87 on Schedule E/F, while checking the boxes for "contingent," "unliquidated," and
"disputed." 	Additionally, the Bank has not yet foreclosed on the liquor license (also included
within Black Owl's collateral package), so the parties cannot say at this point what that asset may
be worth.
III. ANALYSIS
The parties agree that the Sixth Circuit's decision in Comprehensive Accounting Corp. v.
Pearson (In re Pearson), 773 F.2d 751 (6th Cir. 1985), informs, if not controls, a bankruptcy court's
evaluation of a chapter 13 debtor's eligibility under § 109(e). 	In that opinion, the Sixth Circuit
explained that § 109(e) is designed "to separate those small sole proprietors who should have the
benefit of Chapter 13 from those larger businesses who should not." Id. at 753-54. In other words,
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§ 109(e) requires the court to distinguish the small fry (who may swim in the chapter 13 pond)
from the big fish (who must navigate stormier seas).
Currently, as adjusted in accordance with § 104, "[o]nly an individual with regular income
that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of
less than $526,700 and noncontingent, liquidated, secured debts of less than $1,580,125 . . . may
be a debtor under chapter 13 of this title." 11 U.S.C. § 109(e).
In general, the Sixth Circuit analogizes the eligibility analysis under § 109(e) to a district
court's evaluation of the amount in controversy under 28 U.S.C. § 1332, as both statutes limit
access to the federal forum. Pearson, 773 F.2d at 757 (citing St. Paul Indemnity Co. v. Red Cab
Co., 303 U.S. 283, 288-90 (1938)). 	The Sixth Circuit summarized its commonsense approach:
"Chapter 13 eligibility should normally be determined by the debtor's schedules checking only to
see if the schedules were made in good faith." Id.
Courts following Pearson have added a necessary and helpful judicial gloss, indicating that
while eligibility initially depends on the schedules, the schedules are not conclusive if made in bad
faith or if it appears to a legal certainty that the information is not correct. In re Redburn, 193 B.R.
249, 255 (Bankr. W.D. Mich. 1996) (citing Pearson, 773 F.2d at 757). So, to continue the aquatic
metaphor, the court should initially rely on the schedules alone, but if there is something fishy
about them, it must take a deeper dive.
Here, because Mr. Bloom has not scheduled any secured debt, the court need consider only
the $526,700.00 cap for unsecured debt. 	And, because the amount that Mr. Bloom originally
scheduled for the Bank's claim on Schedule E/F ($691,556.87) exceeds the cap and approximates
the principal balance reflected in Bank's Proof of Claim, the court does not doubt Mr. Bloom's
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good faith in scheduling the amount.4 	But, because the scheduled amount itself undermines
eligibility, the court must look further to see whether the Bank's debt, added to the other substantial
unsecured (and noncontingent, liquidated debt) disqualifies Mr. Bloom as a debtor under
chapter 13.
The remaining issues, therefore, are whether Mr. Bloom scheduled the nature of the Bank's
claim as "contingent" and "unliquidated" in good faith, and even if he did, whether it appears to a
legal certainty that these characterizations are incorrect. 	Redburn, 193 B.R. at 155; cf. St. Paul
Indemnity Co., 303 U.S. at 288-89.
Because the Bankruptcy Code does not define the terms "noncontingent" and "liquidated,"
courts have struggled to decipher their meaning. As Mr. Bloom's counsel observed during last
week's hearing, however, his client's argument that the debt is unliquidated is stronger than that it
is contingent. He very nearly conceded that Black Owl’s default triggered Mr. Bloom’s liability as
guarantor, which (of course) it did. In re Winters, Case No. 12–10614, 2012 WL 1067696, at *3
(Bankr. E.D. Tenn. 2012). Decades ago, Judge James D. Gregg explained:
…it is well-settled that "a debt is non-contingent if all events giving rise to liability
occurred prior to the filing of the bankruptcy petition." ... Conversely, a contingent
debt is "one which the debtor will be called upon to pay only upon the occurrence
or happening of an extrinsic event which will trigger the liability of the debtor to
the alleged creditor."
Redburn, 193 B.R. at 259 (citations omitted).
Moreover, as Judge Jeffrey R. Hughes explained, the fact that the Bank's claim has not
been reduced to judgment is immaterial to whether it is contingent, or not. Faulhaber, 269 B.R.
at 354-55.
4 The court accepts Mr. Bloom's counsel's statement that his recent amendment to Schedule E/F erroneously reduced
the Bank's claim to $1.00. Without the clarification from counsel, the eve-of-hearing amendment would cast doubt
on Mr. Bloom's good faith in characterizing the Bank's claim. In re Faulhaber, 269 B.R. 348, 353 (Bankr. W.D. Mich.
2001).
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This leaves the thornier question of whether Mr. Bloom's debt is unliquidated, as he claims,
because either (1) he cannot say how much the Bank may collect from his co-obligors; (2) the
Bank has not yet liquidated all its collateral (including a valuable liquor license) so the court cannot
determine the "deficiency" claim against Mr. Bloom; and (3) Mr. Bloom has asserted affirmative
defenses5 to the Bank's complaint in the State Court Action, such as unclean hands and suretyship
defenses concerning mishandling of collateral.
Admittedly some cases, including Pearson, may have confused or at least conflated the
terms "disputed," "noncontingent," and "liquidated." Pearson, for example, described the impact
of pending collateral liquidation as follows:
Plainly, the Pearsons could in good faith have considered that their unsecured
liability was at least in dispute and could reasonably have amounted to less than
$100,000 should Comprehensive and the other creditors succeed in obtaining
partial or full satisfaction of their claims from the property against which they
claimed a security interest.
Pearson, 773 F.2d at 758.
The remaining discussion in Pearson, however, suggests that the dispute there involved
not the amount of the debt (which the arbitrator determined), but the unsecured portion of the debt.
Additionally, unlike Pearson where the Sixth Circuit did not consider whether the debtors
waived suretyship and other defenses, here we can say for certain that Mr. Bloom's Unconditional
Guarantee (and the Forbearance Agreements) effected broad waivers. 	See Third Forbearance
Agreement at p. 14; see also Proof of Claim 2-1, Attach. 2 (Unconditional Guarantee at ¶ 6(C),
5 The Debtor insists that the affirmative defenses he asserted within the State Court Action render the debt
unliquidated, see Response at ¶ 34, but the argument falls flat: affirmative defenses admit the prima facie claim, but
offer reasons collateral to the merits to contest liability. See Cole v. Ladbroke Racing Michigan, Inc., 614 N.W.2d
169, 174 (Mich. Ct. App. 2000) ("An affirmative defense is a defense that does not controvert the plaintiff's
establishing a prima facie case... It is a matter that accepts the plaintiff's allegation as true, but that denies that the
plaintiff is entitled to recover on the claim."); see also Roberge v. Hannah Marine Corp., 124 F.3d 199, 1997 WL
468330, *3 (6th Cir. 1997) ("An affirmative defense ... is a defense that does not negate the elements of the plaintiff's
claim, but instead precludes liability even if all of the elements of the plaintiff's claim are proven.").
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waiving rights and defenses regarding advertising collateral sales, conducting commercially
reasonable sales, seeking satisfaction from other guarantors or any collateral, or otherwise
impairing suretyship rights).
A fair reading of Pearson suggests that the court may consider some good faith disputes as
to the nature of the debt — disputes that make it difficult to determine whether a debt is secured
or unsecured, for example — in determining eligibility under § 109(e). Pearson, 773 F.2d at 758.
Nevertheless, while § 109(e) expressly borrows the terms "noncontingent" and "liquidated"
from the definition of "claim" in § 101(5), it conspicuously omits the term "disputed" in calculating
the eligibility cap. 	In construing the statute, the court must give effect to that omission. 	In
persuasive authority from within our district, Judge Gregg made sense of the statute by explaining
that under § 109(e) a debt may be both "disputed" and "liquidated." 	He did so by reference to
authority holding that courts should only consider the fact that a debtor disputes the debt if the
dispute is such that it makes it difficult to calculate the debt. See Redburn, 193 B.R. at 257 (citing
Nicholes v. Johnny Appleseed of Washington (In re Nicholes), 184 B.R. 82, 89 (9th Cir. B.A.P.
1995)). Here, but for Mr. Bloom's asserted defenses (many of which he waived), establishing the
amount of the Bank's claim is a straightforward, mathematical exercise: consult the Note and
payment history, calculate interest, and, voila, we easily establish the amount of the claim. A debt
memorialized in a promissory note epitomizes a liquidated debt unlike, say, a debt arising from a
personal injury tort claim. See In re Smith, 365 B.R. 770, 783 (Bankr. S.D. Ohio 2007) ("At one
end of the spectrum lies the classic liquidated debt — a contract claim that can be calculated from
the face of the writing...The classic unliquidated debt — a claim based on tort or quantum meruit
— lies at the other end of the spectrum."); cf. In re McPhillips Flying Serv., Inc., Case No. 25-
02011-jwb, ECF No. 126 (Bankr. W.D. Mich. Oct. 29, 2025) (holding under § 101(51D) that debt
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for penalty related to promissory note is liquidated, but tort-like debt under the False Claims Act
is unliquidated).
In this case, unlike Pearson (where the court and parties could not calculate the extent to
which the debt was secured or unsecured) the only reason the Debtor contends the debt to the Bank
is unliquidated is because he disputes it, and because the Bank may eventually reduce its claim by
applying collateral belonging to another entity. Both factors are immaterial given the facts of this
case. Indeed, the Debtor scheduled the debt in an amount within a few dollars of the amount set
forth in the Bank's Proof of Claim, suggesting no difficulty in calculating the debt. If Mr. Bloom
had scheduled the debt in an amount that, when combined with his substantial other unsecured
debts, would have fallen under the eligibility threshold, we might have a different answer, but he
did not.
Furthermore, the Debtor does not seriously contend that it is difficult to calculate the Bank's
claim, only that his defenses and the pendency of the State Court Action make it impossible to
know the amount he will eventually owe, should his defenses carry the day.
The pendency of the State Court Action is immaterial in calculating eligibility, however,
because a final judicial determination of a debt is not required for a bankruptcy court to treat a debt
as "liquidated" for purposes of § 109(e), just as the diversity jurisdiction of the United States
District Court does not depend on the entry of judgment in the case. See St. Paul Indemnity Co.,
303 U.S. at 291-92; see also Faulhaber, 269 B.R. at 355.
Additionally, the mere fact that Mr. Bloom has asserted defenses or disputes the Bank's
claim is immaterial because accepting the argument that a disputed debt is "unliquidated" or that
"affirmative defenses" might exculpate him presents the very ipse dixit risk that Judge Gregg (and
others) long ago warned about in Redburn and elsewhere:
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The Debtor cannot circumvent this limitation on eligibility by simply ignoring what
he knows and listing the amounts of the debts as "unknown" in his schedules. To
decide otherwise would eviscerate the chapter 13 eligibility requirements.
Redburn, 193 B.R. at 256 (citing In re McGovern, 122 B.R. 712, 714 (Bankr. N.D. Ind. 1989)).
Here, although Mr. Bloom did not list the debt as "unknown" — as just noted he easily
calculated the amount of the debt on Schedule E/F — he did schedule it as "unliquidated" because
of the dispute, an equivocation equivalent to scheduling it as "unknown" (or $1.00 as he
erroneously did in his amended "eve of hearing" Schedule E/F).
Similarly, the court rejects Mr. Bloom's argument that his debt is unliquidated because he
may have contribution or indemnification claims against co-obligors. These independent rights
typically associated with a suretyship relationship involving multiple obligors at most would give
Mr. Bloom a claim against co-obligors to be scheduled on Schedule A/B, not a reason to challenge
the Bank's independent claim.6 And, during oral argument, counsel conceded that Mr. Bloom and
his co-obligors share joint and several liability — each of them is "on the hook" for the full amount
of the Bank's claim. 	See Proof of Claim 2-1, Attach. 2 (Unconditional Guarantee at ¶ 9(D));
Fostvedt v. Dow (In re Fostvedt), 823 F.2d 305, 306 (9th Cir. 1997) ("[the debtor] was liable for
the full amount of the notes, regardless of the possibility that his co-obligors would eventually pay
some or all of the debt. We therefore conclude that [the debtor's] debt was liquidated.").
As noted above regarding the nature of affirmative defenses,7 such defenses typically admit
the amount of a plaintiff's claim but deny liability and therefore do not affect the liquidation of the
claim (at least not in the sense of calculating the amount). Moreover, the Unconditional Guarantee
waived suretyship defenses, rendering immaterial any argument about application of collateral
6 The court notes that although Mr. Myrick is paying the joint tax debt to the IRS, the Debtor nevertheless scheduled
that debt as "liquidated." See Schedule E/F, at ¶ 2.1.
7 See cases cited supra note 5.
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(including the Black Owl liquor license). Moreover, as of the petition date, the Bank has not yet
disposed of the liquor license, and Pearson instructs the court not to concern itself with post-
petition developments. Pearson, 773 F.2d at 756.
With respect to other defenses, the reaffirmation of the debt included within the Third
Forbearance Agreement wiped the slate clean on that score, at least as of July 1, 2022. And, with
the possible exception of the Bank's foreclosure of interests in the Property (which the court
regards as irrelevant in view of waiver of suretyship defenses), Mr. Bloom has not suggested either
in his papers or during oral argument that the defenses he asserted in the State Court Action
somehow arose after he executed the last agreement.
To be clear, the court did not conduct an evidentiary hearing regarding Mr. Bloom's
eligibility but simply assessed the record the parties presented in a summary fashion, as Pearson
contemplates. 	Based on the record and the court's on-the-spot assessment, it appears to a legal
certainty that Mr. Bloom is not eligible for relief under chapter 13 because his noncontingent,
liquidated, unsecured debts exceed the statutory eligibility cap by more than a half million dollars
(combining the Bank debt with the tax and professional debts).
IV. CONCLUSION AND ORDER
Had Congress extended the CARES Act modifications to the chapter 13 debt limit last year,
or had the Debtor filed his bankruptcy petition before the higher limits expired, he might have been
eligible for relief under chapter 13, even combining his substantial debt to the Bank with his other
liquidated and noncontingent liabilities for taxes and professional fees (totaling approximately
$362,528.00). 	But Congress and Mr. Bloom did not act in time, and the court must respect the
sunsetting of the former eligibility cap. The court must also honor Congress's decision to include
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disputed debts in the eligibility calculation, even if the dispute as a practical matter would make it
impossible to predict how much the Debtor will ultimately have to pay when all is said and done.
For the record, the court does not find that Mr. Bloom filed his petition in bad faith, only
that his liquidated, unsecured, and noncontingent debts exceed the statutory threshold to a legal
certainty on the summary record provided in connection with this eligibility dispute. While the
Debtor remains free to assert his defenses in the State Court Action, he is not free to argue in
connection with a contest under § 109(e) that the defenses render his debt to the Bank unliquidated.
Finally, the parties have not advocated for conversion rather than dismissal, but conversion
is an option. 	11 U.S.C. § 1307(c). Accordingly, because the court finds that the Debtor is not
eligible for relief under chapter 13, it will grant the Bank's Motion, but only after affording the
Debtor a brief opportunity instead to seek conversion under Bankruptcy Rule 1017(f), assuming
he is eligible for relief under another chapter.
NOW, THEREFORE, IT IS HEREBY ORDERED that the Debtor may seek to convert his
case to another chapter under which he is eligible for relief, provided he does so within 7 days
after entry of this Memorandum of Decision and Order.
IT IS FURTHER ORDERED that if the Debtor does not file a motion or notice to convert
the case within 7 days after entry of this Memorandum of Decision and Order, the court will enter
a separate order dismissing the chapter 13 case on the Bank's Motion for the reasons set forth
herein.
IT IS FURTHER ORDERED that the Clerk shall serve a copy of this Memorandum of
Decision and Order pursuant to Fed. R. Bankr. P. 9022 and LBR 5005-4 upon the Debtor, Michael
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Patrick Hanrahan, Esq., Elizabeth Clark, Esq., chapter 13 trustee, Kelly J. Shefferly, Esq., and all
entities appearing on the mailing matrix or requesting notice of these proceedings.
END OF ORDER
IT IS SO ORDERED.
Dated October 30, 2025
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