- Category: Judge Somers
- Published on 28 September 2010
- Written by Judge Somers
SIGNED this 23 day of September, 2010.
Dale L. Somers
UNITED STATES BANKRUPTCY JUDGE
Opinion Designated for Electronic Use, But Not for Print Publication
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS
EDWARD WILLIAM BANGE, CASE NO. 08-40156-7C
OPINION RECONVERTING THIS CASE TO CHAPTER 12
On September 1, 2010, the Court issued its Order Setting Conditions for Granting
the Debtor’s Motion to Reconvert this Case to Chapter 12. The Court did not cite
authority supporting its power to reconvert the case, but will do so now.
Section 706(a) provides: “The debtor may convert a case under this chapter to a
case under Chapter 11, 12, or 13 of this title at any time, if the case has not been
converted under section 1112, 1208, or 1307 of this title.” The Court has found no cases
applying this provision to a request to reconvert a case to Chapter 12, but a number of
Case 08-40156 Doc# 436 Filed 09/23/10 Page 1 of 4
courts have applied it to a request to reconvert to Chapter 13. In that situation, some
courts have concluded § 706(a) means they have no discretion to convert a case back to
Chapter 13 if it was previously converted to Chapter 7, often saying the provision’s plain
language required that result.1 But § 706(a) is phrased as a restriction on the debtor’s
ability to convert a case; it says nothing explicit about the court’s authority to do so.
Section 706(c), by contrast, provides: “The court may not convert a case under this
chapter to a case under chapter 12 or 13 of this title unless the debtor requests or consents
to such conversion.” Unlike subsection (a), this provision is phrased as a limitation on
the bankruptcy court’s authority to convert a case. A leading bankruptcy treatise relies on
this distinction to support the conclusion a court may reconvert a case to a reorganization
chapter.2 The wording of another subsection of § 706 supports the conclusion the
identification of the relevant actor in subsections (a) and (c) was no accident. Section
706(d) provides: “Notwithstanding any other provision of this section, a case may not be
converted to a case under another chapter of this title unless the debtor may be a debtor
under such chapter.” Unlike subsections (a) and (c), this provision is phrased as a
limitation on any conversion, no matter who is doing it. The Court concludes subsections
(c) and (d) impose limitations on its authority to convert a case, but subsection (a) does
1See, e.g., In re Fry, 2008 WL 4682266, slip op. at *2-3 (Bankr. D. Kan.) (Nugent, C.J.) (Chapter
13 case); In re Muth, 378 B.R. 302, 302-04 (Bankr. D. Colo. 2007) (Chapter 13 case); In re Banks, 252
B.R. 399, 402 (Bankr. E.D. Mich. 2000) (Chapter 13 case).
2See 6 Collier on Bankruptcy, ¶ 706.04 at 706-8 (Resnick & Sommer, eds.-in-chief, 15th ed. rev.
2010) (saying use of “debtor” in (a) and “court” in (c) shows Congress intended (a) to give debtors onetime
absolute right to convert, not to limit court’s authority to convert).
Case 08-40156 Doc# 436 Filed 09/23/10 Page 2 of 4
not. Therefore, the Court joins those courts that have held a case previously converted to
Chapter 7 may nevertheless be reconverted to a reorganization chapter.3 This result helps
further the general bankruptcy policy of encouraging debtors to choose to pay their debts
to the extent they can.4
In April of this year, the Court decided to convert this case from Chapter 12 to
Chapter 7 on the ground the Debtor had committed fraud during the case. The Court
came to this conclusion in large part because of the Debtor’s involvement with an antigovernment
agitator, and actions the Debtor took based on that man’s illegal advice.
After the Court converted the case, the Debtor repented and helped the U.S. Marshal’s
Service take steps to end the agitator’s activities. The Court is now convinced the Debtor
wishes to act appropriately to reorganize his debts under Chapter 12, and should have that
opportunity. The Debtor is warned, however, that the Court will not be so lenient with
him in the future if he shows any inclination to return to such improper activities.
One of the conditions the Court imposed in the Order Setting Conditions for
Granting the Debtor’s Motion to Reconvert this Case to Chapter 12 was that an
experienced attorney capable of handling a Chapter 12 bankruptcy case must appear as
counsel for the Debtor. That condition was satisfied when Paul D. Post entered his
3See, e.g., In re Anderson, 354 B.R. 766, 768-69 (Bankr. D.S.C. 2006) (Chapter 13 case); In re
Hollar, 70 B.R. 337, 338 (Bankr. E.D. Tenn. 1987) (Chapter 11 to Chapter 7 to Chapter 13 case).
4Hollar, 70 B.R. at 338 (reconversion permissible because public policy favors repayment of
debt); see also 6 Collier on Bankruptcy, ¶ 706.04 at 706-8 (Congress “generally want[ed] to give debtors
every opportunity to repay their debts if they chose.”).
Case 08-40156 Doc# 436 Filed 09/23/10 Page 3 of 4
appearance on September 10. The Court believes it is now appropriate to convert this
case back to Chapter 12. Mr. Post will have until October 29, 2010, to satisfy the second
condition the Court set, namely to arrange for the presentation of testimony about
assistance the Debtor provided to the U.S. Marshal’s Service in Ohio. The final
condition, that administrative expenses must be paid in full prior to confirmation of a
Chapter 12 plan unless the holder of a particular claim agrees to a different treatment,
remains in effect.
The Debtor’s bankruptcy case is hereby reconverted to Chapter 12.
# # #
Case 08-40156 Doc# 436 Filed 09/23/10 Page 4 of 4
- << Prev