By Ryan C. Wood

Howdy humans.  Arguably the necessary and appropriate clause of Section 105(a) of the Bankruptcy Code was and is used to illegally amend or rewrite the Bankruptcy Code.  Just like the “necessary and proper” clause of the United States Constitution is and was used to illegally amend or rewrite the United States Constitution.  What we all must understand is these clauses are supposed to be limited to substantive rights the law already provides.  What is necessary and appropriate/proper depends upon the facts of each case.  What is necessary and appropriate/proper will complement the underlying substantive law; not supplement or contravene the law entirely.  But what is happening is Bankruptcy Judges are supplementing or contravening the Bankruptcy Code by using the necessary and appropriate clause creating rights and obligations, mostly punishments, that do not exist as written by Congress.  Or to individually police debtors and punish debtors for alleged bad acts to prevent abuse.  Bankruptcy Judges are creating new law in response to what they deem are abuses by bankruptcy filers.  Rarely will you see the use of Section 105(a) to make the law less favorable to creditors.  It is almost always Bankruptcy Judges using Section 105(a) to change or entirely take away debtors’ substantive rights under the Bankruptcy Code and give creditors benefits that do not exist in the Bankruptcy Code.

The pendulum is swinging back regarding Section 105(a) of the Bankruptcy Code.  So goes life.  It is like eggs, I guess.  Are they good for us or are eggs high in cholesterol?  The pendulum of truth seems to swing back and forth about how healthy eggs are for us.  The same seems to be true of Section 105(a) of the Bankruptcy Code and the necessary and appropriate, and to prevent abuse of process clauses of Section 105(a).  The complete language is:

Section 105(a):  The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.

Section 105(a) and the express statutory language of Section 105(a), when applied to procedural issues compliments the Bankruptcy Code.  It is not abnormal for a Bankruptcy Court, upon the request of a creditor, trustee or debtor, enter an order to help procedurally administer the case specific based upon what is taking place in that particular case.  Such as delaying the entry of an order of discharge to allow time for levied funds to be returned to the debtor from a creditor.  Or an order clarifying procedure or application of the Bankruptcy Code.  Section 105(a) makes little sense when used to change actual law and contravene substantive rights debtors are supposed to enjoy when VOLUNTARILY seeking relief the Bankruptcy Code provides.  Is Section 105(a) being used to compliment the Federal Rules of Bankruptcy Procedure or change the actual Bankruptcy Code?

This Issues Is Not New and The Supreme Court of the United States Contradicted Itself In Marrama

Few things in this world are new.  They just look different, or history is forgotten entirely.  It appears that is the case with Section 105(a).  In 1988 the Supreme Court of the United States held that the equitable powers of the Bankruptcy Court must and can only be exercised within the confines if the Bankruptcy Code. 

Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 206 (1988)

In re Aquatic Dev. Grp., Inc., 352 F.3d 671, 673, 680–81 (2d Cir. 2003)

In re Combustion Eng’g, Inc., 391 F.3d 190, 236 (3d Cir. 2004)

The Ninth Circuit Court of Appeals consistently held the same regarding the use of Section 105(a) up until the Supreme Court of the United States decided Marrama.  See Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007).  In Marrama, SCOTUS allowed a debtor to be punished for his alleged bad acts and took away the debtors right to convert this case to Chapter 13 from Chapter 7.  Okay, so how could the Supreme Court of the United States get to the holding in Marrama at all if in 1988 the same Court recognized the limitations of Section 105(a)?   It is simply different human beings interpreting the same exact words and ignoring their own prior precedent.  Ignoring the truth.  How does this happen?  We elect a President every four years and that single human gets to appoint Supreme Court of the United States justices if there is a vacancy during their term.  Humans can rationalize anything and there is always a new low apparently. 

But I just showed you 1 + 1 = 2 from 1988 and somehow you in 2007 ignore 1988 and your own holding? How does that happen?  Life is not fair, consistent, equal, or reliable: period. 

The Marrama holding turned the Bankruptcy Court to a tit for tat playground full humans believing two wrongs make a right.  No, not so.  Just because a debtor allegedly did bad things does not mean a Bankruptcy Court can just make up the law, not follow the law, to punish debtors for these alleged bad acts, in their humble opinion.

Two wrongs never make a right: period.  Be better.

That is what Marrama did and it is pathetic.  Can the humans that work for the Bankruptcy Court be better than the allegedly bad debtor they seek to punish?  Nope, apparently the humans that work for the Bankruptcy Court will be equally bad and do the same exact bad thing debtors are doing.  So sad.  Some party somewhere must be better.  Can you be better?   

Marrama is an outlier and not consistent with decades of interpretation of the Bankruptcy Code.  See Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 206 (1988) (“whatever equitable powers remain in the bankruptcy courts must and can only be exercised within the confines of the Bankruptcy  Code”).

In re Valenti is a Great Example of The Limits of Section 105(a) and No End Arounds Allowed

The 9^th Circuit BAP in Valenti held:

“We hold that, although Debtor’s alleged conduct, if proven, is reprehensible, there is a strict 180-day time limit for seeking to revoke confirmation for fraud under Section 1330(a). This bars the claims raised in Creditors’ proposed amended complaint even if Debtor concealed her alleged misconduct. We reject Creditors’ attempts to get around Section 1330(a) by alleging bad faith and by invoking Section 105(a), Section 1307(c), and Fed.R.Civ.P. 60 (incorporated by Rule 9024), which have no 180-day time limit.” 

See In re Valenti, 310 B.R. 138, 52 Collier Bankr. Cas. 2d (MB) 403 (B.A.P. 9th Cir. 2004).

The debtor, Ka Ka Ka  Karen Valenti,  allegedly hid income totaling $700.00 per month, failed to disclose her interest in a house she quitclaimed to her daughter before filing her Chapter 13 bankruptcy case and straight lied about paying off the mortgage on the fraudulently transferred home.  But Section 1330(a) is clear and creditors have 180 days after confirmation of a plan of reorganization to revoke the order confirming the plan by fraud.  That is that.     

Many Bankruptcy Court opinions that rely upon Section 105(a) do not specifically cite “or to prevent an abuse of process” language, but it is there in Section 105(a); at the end.  Most Courts cite their holding is necessary or appropriate to carry out the provisions of this title or focus on the Court’s equitable authority.  The problem is many of the uses of Section 105(a) are not consistent with the Bankruptcy Code and the holdings are not necessary or appropriate, but a complete rewriting of the Bankruptcy Code and Congress’ intent when writing the Code.  If the legislative history of an express statutory language includes “absolute right” then there should be nothing a Bankruptcy Judge can hold to change that “right” as it is absolute.  That is not what has happened over the years throughout the Bankruptcy Code.  Section 105(a) has been used create a different result when filing for bankruptcy and it has worked up until case Law v. Siegel holding Section 105(a) cannot be used to contravene an express statutory provision.  More to come on Law v. Siegel after discussing what led to again expressly limiting the use of Section 105(a).   

Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365, 127 S.Ct. 1105, 166 L.Ed.2d 956 (2007)

So, as provided above limiting Section 105(a) is nothing new and is actually the prevailing enforceable interpretation of Section 105(a).  So how did this change?  This mess really came to a head in 2007 when the Supreme Court of the United States held in Marrama, that a Chapter 13 debtor did not have the absolute right to dismiss their Chapter 13 case.  Marrama held a debtor’s right to voluntarily dismiss a Chapter 13 case under § 1307(b) is not absolute, but there is qualified implied exception for bad-faith conduct or abuse of the bankruptcy process by the debtor.  Implied or a made up punishment by a human never elected to Congress to create and pass law.  Debtor, you did this this and this, so we will create a punishment for you that does not exist in the Bankruptcy Code pursuant to Section 105(a) as “necessary and appropriate.”  No, that is wrong and not how it is supposed to work.

Section 1307(b) provides: (b) On request of the debtor at any time, if the case has not been converted under section 706, 1112, or 1208 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable.

So, the express statutory authority has keywords that are not open to interpretation and are bolded above. Yet somehow SCOTUS and many lower Bankruptcy Courts created an exception to the plain language of Section 1307(b) that does not exist in the Bankruptcy Code.  A “bad faith” exception open to case-by-case interpretation by a single human Bankruptcy Judge.  Generally, this will lead to unequal results and discrimination between debtors.  Following the express statutory authority of Section 1307(b) gives all debtors the same right to convert their case without some human opinion about whether the conversion is right or wrong.  It is right because the law, the Bankruptcy Code, says a debtor gets this right.  So simple but so difficult for one human to allow another to have all their rights.  The right to dismiss a Chapter 13 case is huge for debtors that may or may not have a sound plan of reorganization.  Chapter 13 is voluntary and Chapter 13 becomes not voluntary if the debtor has no right or a limited right to dismiss or convert the case as the Bankruptcy Code allows.  This was also not Congress’ intent.  Congress intended debtors to be able to decide their fate.  Not forced into a Chapter 7 liquidation and not voluntarily lose assets.

When one area of the Bankruptcy Code is not followed as intended it negatively effects a debtors rights under other areas of the Bankruptcy Code.  It creates an imbalance that Congress did not intend.  Debtors are supposed to choose their destiny within the confines of the Bankruptcy Code.

In re Rosson, 545 F.3d 764 (9th Cir. 2008)

So, the Ninth Circuit Court of Appeals believes in precedent and relied upon the Marrama case and held in Rosson, relying upon Marrama, (holding that, under Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007), “even otherwise unqualified rights in the debtor are subject to limitation by the bankruptcy court’s power under § 105(a) to police bad faith and abuse of process”).

In Rosson the Ninth Circuit solidified Marrama and it’s holding as to Section 1307 and a debtor right to convert or dismiss a case can be limited by the opinion of the Bankruptcy Court as to the debtors alleged bad faith conduct.  This was and is still a huge problem.  There is the express statutory language of the Bankruptcy Code, as written by Congress and signed into law by the President of the United States yet entirely opposite results were and still are being supported by Bankruptcy Judges.  Legacy law?  Old law or old interpretations of the law do not seem to change overnight even though one day a case will not exist and the next day a case exists with a contrary interpretation. 

In Rosson the debtor sought to voluntarily dismiss his Chapter 13 case pursuant to Section 1307(b).  Rosson was to receive a large arbitration award and submit the funds to the control of the Chapter 13 Trustee as ordered by the Bankruptcy Court.  Rosson did not turnover the funds upon receiving the funds though.  The bankruptcy court found that Rosson was “rebelliously” “horsing around” with estate assets and, on its own motion, converted the Chapter 13 case to one under Chapter 7.  In Chapter 13 the words good faith exists.  Not bad faith though.  A Chapter 13 Plan and petition must be filed in good faith and not forbidden by law pursuant to Section 1325 in Chapter 13; only.  Chapter 11 has no such counterpart regarding the petition being filed in good faith, only the plan pursuant to Section 1129(a)(3).  But there is not good faith grounds exist to object to confirmation of the plan of reorganization only.  Lack of good faith in either Chapter 13 or 11 does not open the door creating punishments on a case-by-case basis creating drastically not equal results for debtors across the United States.

So, what then in this saga?  After Marrama Bankruptcy Courts cherry picked precedent and just cited Marrama as authority not limiting Section 105(a) even though binding precedent already existed. 

Law v. Siegel, 571 U.S. 415 (2014)

Seven years after Marrama, Law v. Siegal was heard by SCOTUS in 2014.  Now SCOTUS truly did an about face and again recognized the long-standing interpretation that Section 105(a) cannot contravene express statutory provisions.  In Law Section 105(a) was used again by the Bankruptcy Court to punish the debtor for alleged bad faith and surcharged, reduced, the debtors statutory right to his homestead exemption.  The amount of the homestead exemption for Law is set by California State law and the dollar amount cannot be changed but for the California legislature choosing to increase the homestead exemption.    Section 105(a) was used created a sanction, a punishment, of the debtor for again alleged bad faith conduct.  But why?  It all comes down to money, money and more money.  The Chapter 7 trustee is supposed to follow and enforce the law.  Not manipulate the Bankruptcy Code to get paid for the work they did for the benefit of the bankruptcy estate.  There are express statutory provisions regarding Chapter 7 trustee and their professionals’ compensation.  After Marrama and Rosson Chapter 7 trustees and their attorneys    Money, money and more money is the cause to not allow debtors to convert their Chapter 7 cases to Chapter 13 or allowing for the voluntary dismissal of Chapter 13 cases.  Not allowing dismissal or conversion forces the debtor to pay trustee’s and their professionals involuntarily and not consistent with the Bankruptcy Code.  There are remedies for debtors not fulfilling their duties under the Bankruptcy Code.  Reducing exemptions set by state law, not allowing for dismissal or conversion of a bankruptcy case are no part of the Bankruptcy Code.  Only human interpretation of the Code created these remedies.

SCOTUS arguably saw the error in its ways with the Marrama holding broadly giving bankruptcy courts authority to create law and not follow the actual Bankruptcy Code.

So Marrama swung the pendulum away from various debtor rights provide by the Bankruptcy Code and emboldened various parties to push the envelope.  But the trustee in Law went too far and now the pendulum is swinging back to the express statutory language of the Bankruptcy Code and limiting punishments that do not exist.

It should be noted that a unanimous Supreme Court of the United States supported the holding in Law v. Siegel.  That the Chapter 7 Trustee may not reduce the debtors homestead exemption, or surcharge/reduce, the amount of the exemption for the debtor due to alleged bad faith of the debtor.  SCOTUS held a bankruptcy court may not exercise its authority to carry out the provisions of the Code, 11 U.S.C. 105(a), or its inherent power to sanction abusive litigation practices by taking action prohibited elsewhere in the Code; the “surcharge” contravened section 522, which (by reference to California law) entitled Law to exempt $75,000.00 of equity in his home and which made that $75,000 “not liable for payment of any administrative expense,” including attorney’s fees or expenses incurred by the Chapter 7 trustee.

Due to the amount of litigation Law forced the Chapter 7 Trustee Siegel to participate in the Chapter 7 Trustee wanted to get paid by reducing the state law homestead exemption of the Law and put that money in his pocket instead of Law’s pocket.  Court after Court said this was okay until Law took the matter to the Supreme Court of the United States.  SCOTUS said no, enough is enough.  A Bankruptcy Court and the Bankruptcy Code does not have express statutory authority allowing for the reduction of a state law right to an exemption.  There are other remedies within the Bankruptcy Code to address bad debtors committing fraud on the Bankruptcy Courts.  As bankruptcy attorneys know an adversary proceeding can be filed objecting to the debtors right to a discharge under 727 of the Bankruptcy Code. 

Law v. Siegel is a perfect example of Chapter 7 Trustee abuse of process and hubris when administering Chapter 7 cases.  Siegel tried to change the law created and passed by the California State legislature regarding exemptions.  This is never supposed to happen according Bankruptcy Code Sections 321, 704 and 28 C.F.R § 58.3(b).

The minimum qualifications for membership on the Chapter 7 Trustee panel are set forth in 28 C.F.R § 58.3(b).  The panel member must:

1. Possess integrity and good moral character.
2. Be physically and mentally able to satisfactorily perform a trustee’s duties.
3. Be courteous and accessible to all parties with reasonable inquiries or comments about a case for which such individual is serving as private trustee.
4. Be free of prejudices against an individual, entity, or group of individuals or entities which would interfere with unbiased performance of a trustee’s duties.
5. Not be related by affinity or consanguinity within the degree of first cousin to any employee of the Executive Office for United States Trustees of the Department of Justice, or to any employee of the Office of the United States Trustee for the district in which he or she is applying.
6. Be either: a. A member in good standing of the bar of the highest court of a state or of the District of Columbia; b.  A certified public accountant; c.  A college graduate with a bachelor’s degree from a full four-year course of study (or the equivalent) of an accredited college or university; d.  A senior law student or candidate for a master’s degree in business administration recommended by the relevant law school or business school dean and working under the direct supervision of:
7. Be willing to provide reports as required by the United States Trustee.
8. Have submitted an application under oath, in the form prescribed by the Director, Executive Office for United States Trustees, to the United States Trustee for the district in which appointment is sought; provided, that this provision may be waived by the United States Trustee on approval of the Director.

So now we have Marrama in 2007 and seven years later Law v. Siegel in 2014 seemingly overruling Marrama.  At least that is how the Ninth Circuit Court of Appeals sees it another 8 years later.  For eight years after Law SCOTUS’ holding is finally being enforced, at least at the appellate level in the Ninth Circuit, and the limitations of Section 105(a).

Nichols v. Stockyard (In re Nichols), 618 B.R. 1 (B.A.P. 9th Cir. 2020)

Then we have Nichols.  The 9^th Circuit Court of Appeals held in Nichols that Rosson was effectively overruled by Law v. Siegel, 571 U.S. 415 (2014), which held that a bankruptcy court may not use its equitable powers under 11 U.S.C. § 105 to contravene express provisions of the Bankruptcy Code. The panel held that Rosson therefore is no longer binding precedent.

Rosson filed a motion to dismiss his case pursuant to Section 1307(b).  The Bankruptcy Court cited Rosson and denied the voluntary dismissal of Rosson’s Chapter 13 case.  What did Rosson allegedly do to earn this punishment that does not exist in the Bankruptcy Code? 

After the Nichols filed for voluntary relief under Chapter 13 of the Code, they were indicted on federal criminal charges for their alleged participation in a scheme to defraud Marana Stockyard and Livestock Market, Inc.  The Nichols sought to avoid disclosure of information that might compromise their position in the criminal proceedings, so the Nichols chose to not complete any of the steps required by the Bankruptcy Code to advance their case. They refused, inter alia, to hold a meeting with creditors, cf. 11 U.S.C. § 341; to file outstanding tax returns, cf. id. § 1308; or to propose an appropriate repayment plan, cf. id. § 1322. Their bankruptcy case thus languished for months without resolution.  Okay, so the Chapter 13 plan cannot be confirmed and the Chapter 13 case should be dismissed; right?

Well, creditors filed a motion pursuant to Section 1307(c) to force conversion to Chapter 7 and liquidation of the debtors not exempt/not protected assets.  Again, money, money and more money for the Chapter 7 trustee and their professionals.

So, the Nichols naturally filed their own motion to voluntarily dismiss the Chapter 13 case and here we are now with the Ninth Circuit Court of Appeals holding Rosson was overruled by SCOTUS in Law. 

What next?

In re Black Gold S.A.R.L., 635 B.R. 517,(9^th Cir. BAP 2022)

Then came the Black Gold case regarding a Chapter 15 issue.  What, Chapter 15?  Yes it exists and few  humans are aware of it.  Black Gold S.A.R.L. appealed an order denying their petition for relief for recognition of a foreign 

The lower bankruptcy court ruled that, based on the misconduct and bad faith of Black Gold, its insiders, Mr. Samba, and their attorneys, the case did not serve the purposes and objectives of § 1501, and it denied recognition of the Monegasque Proceeding on that basis.  Again, the words “bad faith” also do not exist in Chapter 15 of the Bankruptcy Code. 

The Ninth Circuit Bankruptcy Appellate Panel reversed holding the requirements for recognition under § 1517(a) were satisfied, and that recognition of the Monegasque Proceeding would not be manifestly contrary to U.S. public policy. 

The requirements for recognition of a foreign proceeding are outlined in § 1517(a), which provides that, subject to § 1506, an order shall be entered recognizing a foreign proceeding if: (1) the “foreign proceeding” is a “foreign main proceeding” or “foreign nonmain proceeding” within the meaning of § 1502;(2) the “foreign representative” applying for recognition is a person or body; and (3) the petition meets the requirements of § 1515.

There is no bad faith in Chapter 15, so where did it come from?  Cross-chapterization is the misapplying Bankruptcy Code sections in the wrong Chapters in violation of express statutory provision Section 103 of the Bankruptcy Code.  So bad faith cross-chapterization from wrong interpretations in Chapter 13 seemingly led to a belief bad faith can be used at any time upon the discretion of a Bankruptcy Judge.   No, no, this is wrong and the pendulum is slowly swinging back to the express statutory language Congress chose.

And now the Powell case just decided last month, October 2022.

In re: Jason Philip Powell, BAP No. NV-22-1014-FLB Bk. No. 3:21-bk-50147-NMC (Oct. 21, 2022)

The most recent case in this saga is Powell, a Ninth Circuit Bankruptcy Appellate Panel case discussing Section 1307(b).  Mr. Powell filed a motion to dismiss his Chapter 13 case pursuant to Section 1307(b).  A creditor opposes arguing Mr. Powell cannot voluntarily dismiss his own Chapter 13 case given Mr. Powell

Until recently, the Ninth Circuit adhered to this view. In re Rosson, 545 F.3d at 773 n.12 (holding that, under Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007), “even otherwise unqualified rights in the debtor are subject to limitation by the bankruptcy court’s power under § 105(a) to police bad faith and abuse of process”).

Until recently, the Ninth Circuit adhered to this view. In re Rosson, 545 F.3d at 773 n.12 (holding that, under Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007), “even otherwise unqualified rights in the debtor are subject to limitation by the bankruptcy court’s power under § 105(a) to police bad faith and abuse of process”).

So there are now at least four appellate cases in the 9^th Circuit clearly providing, at least in the Ninth Circuit, that Bankruptcy Judge must stop using Section 105(a) to manipulate the Bankruptcy Code in contravention of the express language of the Bankruptcy Code.  So again, this is not new, but just the pendulum swinging back to how the Bankruptcy Code was always interpreted.  The most striking issue is the inconsistency between interpretation and other sections of the Bankruptcy Code.  Debtors’ rights to convert or dismiss are just the issues that come up regularly and why there are more cases on these subjects.  But the fact is there are all kinds of interpretations of the Bankruptcy Code with the only authority in support is Section 105(a) and a Bankruptcy Court seemingly entering an order that is necessary and appropriate.

If there is still a question about Section 105(a) in the 9^th Circuit I do not know how. 

Does there have to be an appellate case for each and every Bankruptcy Code section changed by Section 105(a)?  It appears that is the case.  So far it seems Bankruptcy Courts are not capable of consistently applying appellate decisions and just following the plain, not ambiguous, express statutory language of the Bankruptcy Code.

Ninth Circuit Court of Appeals Affirms BAP In re Powell Holding re Section 1307(b)

On October 1, 2024, the Ninth Circuit Court of Appeals affirmed the Ninth Circuit Bankruptcy Appellate Panel holding in In re Powell regarding the plain and not ambiguous language of Section 1307(b).

It says:

“On request of the debtor at any time, if the case has not been converted under section 706 [Chapter 7], 1112 [Chapter 11], or 1208 [Chapter 12] of this title, the court shall dismiss a case under this chapter.”

So simple. Why did it become a problem?

Why Does It Matter?

I can write another 5000 words on how these incorrect interpretations of the Bankruptcy Code regarding the sections listed above screw up the entire process of representing debtors. 

Bankruptcy attorneys throughout the country can never rely upon the express statutory language of the Bankruptcy Code when filing cases and providing advice to clients?  Absurd.

Let us discuss the human factor here.  The big deal is many debtors filing for bankruptcy protection enter bankruptcy under extreme stress and at the last minute.  Bankruptcy is and should be considered a last resort.  With this comes some uncertainty of circumstances that may or may not equate to a successful reorganization or discharge in Chapter 7.  A temporary stay by the filing of the Chapter 13 may all that is necessary for a debtor to obtain relief and improve their circumstances.  Section 1307(b) says you can dismiss your case at any time.  So filing the Chapter 13 is strategic even though the case does not intend to confirm a Chapter 13 Plan or completing the case.  THIS IS NOT BAD FAITH BUT EXACTLY WHAT THE BANKRUPTCY CODE ALLOWS.  The debtor is supposed to be able to file the Chapter 13 case and either convert it or dismiss the Chapter 13 case at the pleasure or best interest of the debtor.  The debtor is supposed to be able to choose their destiny due to voluntarily filing for bankruptcy protection.  Debtors are not supposed to involuntarily have their assets liquidated; ever.

So now this touches on Chapter 7.  Chapter 7 is also an entirely a voluntary process.  If a debtor does not like how it is going, the Chapter 7 trustee is not being reasonable about the value of an assets, straight lying about the value of assets, or for any reason deemed justifiable, the debtor is supposed to also have the absolute right to convert to a reorganization chapter if and only if the case was not previously converted.  The debtor is supposed to have one free short at converting and improving their circumstances.  For years now bankruptcy attorneys have had to caution debtors given the uncertainty surrounding whether a case will be converted by a Bankruptcy Court or not due to made up bad faith.  This is not what Congress intended and opened the door to blatant abuses by Chapter 7 Trustees and their attorneys for the own personal financial gain.  Chapter 7 Trustee’s are independent contractors for the Department of Justice and the Office of the United States Trustee.  What happens when those tasked with enforcing the law are the ones intentionally ignoring and violating the law?  Now that is bad faith.

It is criminal how many humans lost their homes due to Bankruptcy Courts not allowing debtors to convert their cases to Chapter 13 or Chapter 11 from Chapter 7 creating a punishment that does not exist under the law.  The number one means for poor, normal humans to get ahead financially is home ownership.  The illegal prohibition of converting cases from Chapter 7 liquidation has affected the generational wealth of thousands of bankruptcy filers. 

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