4:25-bk-10219•Scott Michael Leonard
Testo completo
IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA IN RE: SCOTT MICHAEL LEONARD Debtor. Case No. 25-10219-T Chapter 11 ORDER CONVERTING CASE TO A CASE UNDER CHAPTER 7 This matter comes before the Court pursuant to the Motion to Convert Case to a Case under Chapter 7 (the “Chapter 11 Conversion Motion”) 1 filed by Lakeside Bank of Salina, Oklahoma; Bank of Commerce, Chouteau, Oklahoma; and American National Bank of Oklahoma, Collinsville, Oklahoma (collectively, the “Banks”); the Supplemental Authority in Support of the Motion (the “Supplement”), filed by the Banks; 2 and a Response 3 filed by Scott Michael Leonard (“Debtor”). An evidentiary hearing was held in this matter on January 9, 2026, after which the Court took the Chapter 11 Conversion Motion and Response under advisement. The following findings of fact and conclusions of law are made pursuant to Federal Rule of Bankruptcy Procedure 7052 and Federal Rule of Civil Procedure 52. Jurisdiction The Court has jurisdiction over this bankruptcy case pursuant to 28 U.S.C. § 1334(b). 4 Reference to the Court of the bankruptcy case is proper pursuant to 28 U.S.C. § 157(a). Matters concerning the administration of the estate are core proceedings as defined by 28 U.S.C. § 157(b)(2)(A). 1 ECF No. 134. 2 ECF No. 145. 3 ECF No. 147. 4 Unless otherwise noted, all statutory references are to sections of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq. T Filed/Docketed Jan 13, 2026 Case 25-10219-T Document 165 Filed in USBC ND/OK on 01/13/26 Page 1 of 6
2 Findings of Fact The Court makes the following findings of fact: 1. Debtor filed this Chapter 13 case on February 24, 2025 (the “Petition Date”). He was represented by attorney Ron Brown (“Brown”). 2. The Banks sought conversion of Debtor’s bankruptcy case to a case under Chapter 7 of the Bankruptcy Code (the “Chapter 13 Conversion Motion”). 5 Debtor objected. 6 3. The Banks and Debtor agreed to submit stipulated facts and briefing to the Court on the issues contained in the Chapter 13 Conversion Motion, and forgo additional evidentiary hearing. 7 4. On June 30, 2025, the Court found Debtor was not eligible under § 109(e) to proceed under Chapter 13 of the Bankruptcy Code (the “Chapter 13 Conversion Opinion”). 8 The Court then set the issue of whether the case should be converted or dismissed for further hearing. Before that hearing took place, Debtor filed a Motion to Convert a Case Under Chapter 13 to a Case Under Chapter 11. 9 5. Finding no objection, on September 4, 2025, the Court entered an Order Converting Case to Chapter 11 (the “Chapter 13 Conversion Order).” 10 That Order contained the following language: a. IT IS THEREFORE, ORDERED, ADJUDGED AND DECREED by the Court that this case is hereby converted to chapter 11. Debtor shall have 7 days from the date of conversion to file an Amended Voluntary Petition in this case.11 6. On September 30, 2025, Debtor filed an Amended Petition in this case, which designated that Debtor would proceed under Chapter 11 of the Bankruptcy Code. Debtor also indicated he was a small business debtor and elected to proceed under Subchapter V of Chapter 11. 12 5 ECF No. 14. 6 ECF No. 22. 7 Agreed Scheduling Order, ECF No. 29. 8 ECF No. 51. Additional background facts regarding the relationship between Debtor and the Banks can be found in the Chapter 13 Conversion Opinion. 9 ECF No. 64. 10 ECF No. 70. 11 Id. 12 ECF No. 81, at 4 ¶13. Case 25-10219-T Document 165 Filed in USBC ND/OK on 01/13/26 Page 2 of 6
3 7. On November 6, 2025, Brown moved to withdraw as Debtor’s counsel. 13 Finding no objection, Brown was allowed to withdraw as of November 25, 2025. 14 8. On November 24, 2025, the Bank filed the Chapter 11 Conversion Motion. The Supplement was filed on December 11, 2025. Debtor, appearing pro se, filed the Response on December 18, 2025. 9. On December 22, 2025, the Court held a preliminary hearing regarding the Chapter 11 Conversion Motion. Banks appeared by counsel and Debtor appeared pro se. 10. On January 9, 2026, the Court held a final hearing regarding the Chapter 11 Conversion Motion (the “Final Hearing”). Again, Banks appeared by counsel and Debtor appeared pro se. Debtor indicated he had hired counsel the day before, but no counsel attended the hearing or entered an appearance on the case docket of the Court’s CM/ECF System. 11. At the Final Hearing, Debtor made an oral motion to continue the hearing to allow time for his newly hired counsel to enter an appearance and become familiar with the case. The Court determined that Debtor was given sufficient notice of the date and time of the scheduled hearing and denied the motion. 15 12. On January 12, 2026, Dana Gerian of Dana Law, Inc. entered an appearance on behalf of Debtor on the case docket. 16 13. As of the date of this opinion, no plan has been filed in this case. To the extent the “Conclusions of Law” contain any items that should more appropriately be considered “Findings of Fact,” they are incorporated herein by this reference. 13 ECF No. 123. 14 ECF No. 138. 15 The Court notes that upon receipt of a motion to convert or dismiss a case filed under § 1112, The court shall commence the hearing on a motion under this subsection not later than 30 days after filing of the motion, and shall decide the motion not later than 15 days after commencement of such hearing, unless the movant expressly consents to a continuance for a specific period of time or compelling circumstances prevent the court from meeting the time limits established by this paragraph. § 1112(b)(3). 16 ECF No. 160. Case 25-10219-T Document 165 Filed in USBC ND/OK on 01/13/26 Page 3 of 6
4 Conclusions of Law The issue before the Court is whether cause has been shown to convert the Debtor’s bankruptcy case from Chapter 11 to Chapter 7. The burden of proof is on the movant to demonstrate that one of the enumerated grounds for dismissal or conversion under § 1112(b) has been met by a preponderance of the evidence. 17 The Chapter 11 Conversion Motion is brought under § 1112 of the Bankruptcy Code, which provides in relevant part: on request of a party in interest, and after notice and a hearing, the court shall convert a case under this chapter to a case under chapter 7 or dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, for cause unless the court determines that the appointment under section 1104(a) of a trustee or an examiner is in the best interests of creditors and the estate. 18 The term “cause” includes the following non-exclusive list: (A) substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation; (B) gross mismanagement of the estate; (C) failure to maintain appropriate insurance that poses a risk to the estate or to the public; (D) unauthorized use of cash collateral substantially harmful to 1 or more creditors; and (J) failure to file a disclosure statement, or to file or confirm a plan, within the time fixed by this title or by order of the court[.] 19 Absent a finding of unusual circumstances, which is not applicable to this case, a finding of cause mandates this court to either convert or dismiss the case, whichever is in the best interests of the creditors and the estate. However, whether cause exists under § 1112(b), and if so, whether to dismiss or convert the case are questions left to the sound discretion of the bankruptcy court. 20 In 17 In re Creekside Senior Apartments, L.P., 489 B.R. 51, 60 (6th Cir. BAP 2013). 18 § 1112(b)(1). 19 § 1112(b)(4). 20 In re Miell, 419 B.R. 357, 366 (Bankr. N.D. Iowa 2009); In re BTS, Inc., 247 B.R. 301, 309 (Bankr. N.D. Okla. 2000). Case 25-10219-T Document 165 Filed in USBC ND/OK on 01/13/26 Page 4 of 6
5 determining whether cause exists to convert or dismiss a case under § 1112(b), a court must engage in a case-specific factual inquiry that focuses on the circumstances of each debtor. 21 Debtor has elected to proceed under Subchapter V of Chapter 11, making §§ 1181-1195 applicable to this case. Section 1189 establishes a deadline for the debtor to file a plan as being “not later than 90 days after the order for relief under this chapter, except that the court may extend the period if the need for the extension is attributable to circumstances for which the debtor should not justly be held accountable.” 22 Section 348 addresses the effect of the conversion of a case from one chapter to another: Conversion of a case from a case under one chapter of this title to a case under another chapter of this title constitutes an order for relief under the chapter to which the case is converted, but, except as provided in subsections (b) and (c) of this section, does not effect a change in the date of the filing of the petition, the commencement of the case, or the order for relief. 23 The Chapter 13 Conversion Order was entered on September 4, 2025, making that the date of the order for relief under Chapter 11 in this case. Pursuant to the deadline established in § 1189(b), Debtor had 90 days, or until December 4, 2025, to timely file a plan in this case. 24 No such plan was filed. 25 Failure to file a plan within the time fixed by § 1189(b) constitutes cause under 21 United Sav. Ass’n of Texas v. Timbers of Inwood Forest Assocs., Ltd. (In re Timbers of Inwood Forest Assocs., Ltd.), 808 F.2d 363, 371-72 (5th Cir. 1987), aff’d 484 U.S. 365 (1988); In re Creekside Senior Apartments, L.P., 489 B.R. at 60. 22 § 1189(b) (emphasis added). 23 § 348(a) (emphasis added). 24 The Banks make an argument that the time to file a plan under § 1189(b) had already expired at the time of the conversion of Debtor’s case to Chapter 11. Because the time to file a plan under § 1189(b) has expired, and cause is shown under § 1112(b)(4)(J), the Court will not address the Banks’ argument. 25 The Court notes it appears Debtor has a “plan” in the conceptual sense of a design, proposal, or idea, in which he will sell various assets and pay various debts. See e.g., Response, at ECF No. 147. But there is no plan filed in the case that conforms to the requirements of § 1123 or that could be considered for confirmation under § 1129(a). Case 25-10219-T Document 165 Filed in USBC ND/OK on 01/13/26 Page 5 of 6
6 § 1112(b)(4)(J) to convert or dismiss this case. Therefore, the Court finds the Banks have met their burden to show cause under § 1112(b) to convert or dismiss this case. The next question is whether to convert or dismiss the case. The Banks request that the case be converted to Chapter 7 so that a trustee may be appointed to administer the substantial assets of the Debtor. No party has advocated dismissal of the case. 26 In the Chapter 13 Conversion Opinion, this Court found Debtor owed at least $1,891,961.16 in noncontingent, liquidated secured debt as of the Petition Date, and another $15,229.27 in unsecured debt. 27 Representatives of the Banks testified at the January 9, 2026, hearing that creditors of the estate would be better served by the conversion of the case to Chapter 7 and the appointment of a trustee to coordinate the distribution of the substantial assets belonging to Debtor. The Court agrees. Conclusion The failure of Debtor to file a plan by the deadline established in § 1189(b) constitutes cause under § 1112(b)(4)(J) to dismiss or convert this case. Pursuant to § 1112(b)(1), the Court finds it to be in the best interests of creditors and the estate to convert this case to a case under Chapter 7. IT IS THEREFORE ORDERED that this case be, and the same hereby is, converted to a case under Chapter 7 of the United States Bankruptcy Code. The Clerk of Court is directed to give notice of the conversion as required under Federal Rule of Bankruptcy Procedure 2002(f)(1)(B). Dated this 13th day of January, 2026. 26 To the extent the Court can discern a request made by Debtor in the Response, it is that he be given “time to resolve [his] debt.” ECF No. 147. Given the time constraints imposed on the Court and the parties by §§ 1189(b) and 1112(b)(3) & (b)(4)(J) of the Bankruptcy Code, that is not a request the Court has the discretion to grant. 27 ECF No. 51, at 4. Case 25-10219-T Document 165 Filed in USBC ND/OK on 01/13/26 Page 6 of 6
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