Shady L Daniels, III and Melinda K Hughes

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
WILMINGTON DIVISION
IN RE:
SHADY L. DANIELS, III & 	CASE NO. 09-08798-8-JRL
MELINDA K. HUGHES, 	Chapter 13
Debtors.
______________________________________________________________________________
ORDER
This case is before the court on Equipment Finance, Inc.’s (“EFI”) motion for relief from
stay and motion to dismiss. A hearing on these matters was conducted on March 31, 2010 in
Wilmington, North Carolina.
The debtors, Shady L. Daniels III and Melinda K. Hughes, filed a joint petition for relief
under chapter 13 of the Bankruptcy Code on October 8, 2009. With the filing of their petition,
the debtors scheduled unsecured claims totaling $212,075.01 on Schedules E and F. In addition,
the debtors scheduled EFI as a creditor in this case. EFI’s involvement in the debtors’ affairs
stems from a promissory note in the principal amount of $340,642.54 and a security agreement
pledging certain equipment executed by K&S Timber, LLC on July 8, 2008; on that same day,
the debtors executed a guaranty agreement under which they jointly guarantied all obligations of
K&S Timber, LLC to EFI under the promissory note and security agreement. The debtors
SO ORDERED.
SIGNED this 01 day of April, 2010.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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scheduled the equipment K&S Timber, LLC pledged as collateral on their Schedule B and
valued the equipment at $17,950.00 on Schedule D. By virtue of filing a proof of claim in the
amount of $201,789.60, EFI is the holder of an allowed secured claim in this case. The debtors’
plan, not yet confirmed, proposes to make payments to EFI on its secured claim.
On March 5, 2010, EFI filed the instant motion to dismiss, contending that Mr. Daniels
and Ms. Hughes are not eligible to be debtors under chapter 13 because the total unsecured
claims against them exceeds the debt limits established in 11 U.S.C. § 109(e). Section 109(e)
provides, in relevant part, that “[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 $336,900 . . .
may be a debtor under chapter 13 of this title.” 11 U.S.C. § 109(e).
At the hearing, EFI represented to the court that it examined each claim in the instant
case. Using the amount of each proof of claim filed or, if no proof of claim was filed, the
amount scheduled by the debtors, EFI bifurcated each claim as required by 11 U.S.C. § 506 and
arrived at the amount of secured and unsecured claims against each of the debtors individually.
With respect to EFI’s claim arising from the promissory note and security agreement, for
example, EFI represented that it has a secured claim of $17,950.00, the value of the equipment
scheduled by the debtors on Schedule D, as well as an unsecured claim of $183,839.60 against
each debtor. The debtors did not object to EFI’s approach or any of the claims that were
considered. EFI concluded, and the court agrees, that the unsecured debt of Mr. Daniel and Ms.
Hughes is $367,408.01 and $415,910.40, respectively. As such, each individual’s unsecured
debt is clearly above the amount allowable for a chapter 13 debtor.
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Based on the foregoing, Mr. Daniels and Ms. Hughes are not eligible to be chapter 13
debtors under 11 U.S.C. § 109(e), and the motion to dismiss filed by EFI is GRANTED. The
motion for relief from the automatic stay is, therefore, moot.
“END OF DOCUMENT”
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