This matter came before the Court on May 11, 2017, for a hearing on the Debtors’ motion to convert the case to Chapter 13, and creditor bank’s objection.
The Debtors own a bed and breakfast business that Bank has provided financing for. The business ran into financial problems, and Bank filed a foreclosure action in state court in April 2016. In the course of that suit, the parties reached certain agreements, and the business’s real and personal property was to be sold in February 2017. The sale was cancelled, though, when the Debtors filed a Chapter 7 bankruptcy on January 24, 2017. The business had been run as a corporation for ten years, but the Debtors listed its assets as their own in their bankruptcy schedules.
The Debtors changed attorneys, and on March 22, 2017, they filed a motion to convert their case to Chapter 13. Bank objected that the motion should be denied because the Debtors had acted and were acting in bad faith, citing the Supreme Court’s decision in Marrama v. Citizens Bank.