Christopher Wells Harper and Janice Danielle Harper

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
WILMINGTON DIVISION
IN RE:
CHRISTOPHER WELLS HARPER and
JANICE DANIELLE HARPER,
DEBTORS.
CASE NO. 10-07510-8-JRL
Chapter 7
ORDER
This matter came before the court on the debtors’ motion to convert their case to chapter
13 and the chapter 7 trustee’s objection. A hearing was held on January 19, 2011 in Wilmington,
North Carolina.
The debtors filed a voluntary chapter 7 petition on September 15, 2010 and attended their
§ 341 meeting of creditors on October 26, 2010. There, the debtors tendered their 2009 tax
return which indicated extensive participation in real estate partnerships not disclosed on the
debtors’ schedules. For example, the tax return listed previously undisclosed holding
companies, Cape Fear Ventures and Hare Properties. The debtors told the chapter 7 trustee the
entities had no assets and had been closed down. Upon further investigation, the trustee found
that the entities are owners of record of various properties. Furthermore, the debtors did not
disclose that Cape Fear Ventures was sold to third parties. The tax return also listed a
SO ORDERED.
SIGNED this 27 day of January, 2011.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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distribution of over $46,000.00 from BizHarp, LLC, another undisclosed entity. The debtors, in
their response to the chapter 7 trustee’s objection to conversion, assert they never received a cash
distribution in that amount and do not know why their accountant listed them as receiving such a
distribution. The debtors, “as a result of innocent oversight,” also neglected to disclose a sale of
stock. 	Additionally troubling, the debtors failed to disclose five separate foreclosures in
the year prior to filing on properties owned individually. One of the properties foreclosed on
contained an irregularity and resulted in the return of a quit claim deed to the male debtor. When
asked about this foreclosure at the §341 meeting, the male debtor said he was not aware of the
foreclosure’s outcome.
Debtors generally have a right to convert their chapter 7 cases to those under chapter 13.
11 U.S.C. §706(a). However, a debtor’s prepetition bad-faith conduct can cause forfeiture of
this right to convert. Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365, 367 (2007).
The Court in Marrama held that bad-faith conduct committed during an earlier chapter 7
proceeding constitutes a waiver of that debtor’s right to convert his or her case to chapter 13. Id.
at 374. Here, the debtors’ failure to disclose their interests in various entities and multiple
foreclosure proceedings makes their initial schedules so misleading as to give rise to an inference
of bad faith, which in turn prevents conversion. The debtors argue that providing the 2009 tax
return, which disclosed some of the missing items, demonstrates they were not purposefully
concealing matters from the trustee. Debtors cannot pick and choose items for disclosure on
their schedules and rely on the trustee to uncover the rest through investigation of public records.
The trustee requires complete schedules so as to best protect the interests of the estate and
maximize distribution to creditors. In particular, disclosing foreclosure actions is imperative to
the trustee’s ability to examine the proceedings for procedural regularity and possibly bring
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avoidance actions.
The motion for conversion to chapter 13 is DENIED. The debtors’ case shall remain in
chapter 7.
END OF DOCUMENT
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