ORDER AND OPINION DENYING MOTION TO CONVERT OR DISMISS

Ben Barry, United States Bankruptcy Judge.

On August 16, 2018, the debtor filed the above-captioned chapter 7 bankruptcy case. On November 23, 2018, creditor Bankers Healthcare Group [BHG] filed its Motion to Convert Case to Chapter 11 or in the Alternative Dismiss, with Notice of Opportunity to Object. On December 12, 2018, the debtor filed an objection to BHG's motion. On December 17, 2018, chapter 7 trustee Bianca Rucker filed a response to BHG's motion. The Court held a hearing that began on January 9, 2019, and concluded on March 11, 2019.1 David Nixon appeared on behalf of the debtor; Stanley Bond and Emily Henson appeared on behalf of BHG; and Bianca Rucker appeared on her own behalf. Patti Stanley appeared on behalf of the United States Trustee but did not actively participate in the hearing. At the conclusion of the hearing, the Court took the matter under advisement. For the reasons stated below, the Court denies BHG's motion to convert or dismiss in its entirety.

Background

The debtor is a pediatric radiologist employed by Arkansas Children's Hospital and Sheridan Radiology. She is married and has two sons. Her older son is 23 years old and attending his final year of college; her younger son is 17 years old and still living at home. The debtor's husband is not currently employed but owns a business that allows him to contribute to household expenses on a sporadic basis. The debtor claims her husband and two sons as dependents. The debtor's gross income is $ 28,948 per month. Her bankruptcy schedules state that her monthly net income is $ 16,041 and her monthly expenses are $ 16,242-a figure that includes rent for $ 2750; $ 1300 for food and housekeeping supplies; $ 300 for personal care products and services; $ 200 for a housekeeper; and $ 200 for travel and vacation expenses.2

Prior to moving to Arkansas in 2018, the debtor lived in Florida, where she was worked as a radiologist for Sheridan Radiology, Pensacola Radiology Consultants, PA, and Orlando Hospital.3 In January 2014, the debtor created a professional association called Centre D'Elle, PA [the PA] for the purpose of opening a medical aesthetics spa. The debtor testified that a medical aesthetics spa (sometimes referenced as a "med spa") provides services such as medical grade chemical peels, micro-needling, and "modalities to tighten skin and reduce cellulite" such as Cool-Sculpting® and Z-wave machines. The debtor testified that she had planned to leave her radiology practice to perform vein procedures at the med spa once it was making enough money to allow her to quit her radiology position.

To fund the business, the PA obtained loans from BHG and Suntrust Bank [Suntrust], all of which the debtor personally and unconditionally guaranteed.4 The med spa-Centre D'Elle-opened in July 2015. After the spa opened, the debtor continued her employment at Orlando Hospital but testified at trial that she was "very, very involved" with the med spa and used several weeks of her allotted vacation time from the hospital to work at the spa, in addition to working there on the nights and weekends that she was not at the hospital. Despite the debtor's efforts, the spa's clientele began diminishing in October 2016 and the spa was closed by December 2016. The debtor said that she found out that running a med spa was difficult, due in part to the high rate of turnover among aestheticians.

After the med spa failed, the debtor paid approximately $ 300,000 of her "own money" toward debts incurred by the business.5 Trial Tr. vol II, 41, Mar. 11, 2019. The record does not reflect how much of this sum was paid to Suntrust and BHG but, in any event, both lenders threatened to file suit to collect the money owed by the PA and guaranteed by the debtor. In response, on March 31, 2017, the debtor filed a chapter 7 bankruptcy case in the Middle District of Florida, indicating on her petition that her debts were primarily business debts rather than consumer debts.6 Cook Ex. B. In December 2017, the debtor's Florida bankruptcy case was dismissed.7 Also in December 2017, the debtor pulled her son from Ole Miss and enrolled him in a less expensive university in Florida to cut down on her expenses. In early 2018, the debtor hired an attorney to try to negotiate settlements with Suntrust and BHG. Settlement offers were exchanged with Suntrust and BHG—to no avail—and SBA began garnishing the debtor's wages to recoup the amount that it had paid on one of the Suntrust loans. Around the same time, the debtor moved to Arkansas to begin her current position at Arkansas Children's Hospital.

On August 16, 2018, the debtor filed her current chapter 7 bankruptcy case, indicating on her Arkansas petition—as she had on her Florida petition—that her debts were primarily business debts rather than consumer debts. On November 23, 2018, BHG filed its motion to convert the debtor's case to chapter 11 pursuant to 11 U.S.C. § 706(b) or, in the alternative, dismiss her case under § 707(a) and (b). On December 12, 2018, the debtor filed an objection to BHG's motion and on December 17, 2018, the chapter 7 trustee filed her response to BHG's motion.

Arguments of the Parties

BHG's argument in favor of converting the debtor's chapter 7 case to a case under chapter 11 pursuant to § 706(b) is straightforward: as a doctor, the debtor has a high income and should not be allowed to rid herself of debts that she could afford to pay. Specifically, BHG argues that if the debtor were to reduce her voluntary retirement contributions, eliminate her travel and vacation savings, cease all gift-giving, stop paying for her older son's college tuition and expenses and stop saving for her younger son's upcoming college tuition and expenses, she would have money left over each month to pay a portion of what she owes to her creditors through a chapter 11 plan. Although BHG would prefer that the debtor's case be converted to a chapter 11, BHG moved in the alternative for dismissal of her case under § 707(a), which provides that a court may dismiss a chapter 7 case "for cause," and under § 707(b), which provides that a court may dismiss a consumer chapter 7 case if it finds that the debtor filed her petition in bad faith or that granting relief under the chapter would constitute abuse.

The chapter 7 trustee testified that she objects to the dismissal of the debtor's case because she has recovered assets that will result in a distribution to the debtor's creditors and she has not concluded her investigation into the debtor's affairs. Specifically, the trustee testified that the debtor has already turned over to her $ 44,991; she and the debtor are in the process of negotiating a buyback agreement for an additional $ 40,000; and the trustee has in her possession CoolSculpting® cartridges that she plans to sell for approximately $ 500 each and a Z-wave machine that she is already in the process of selling for $ 5000. In addition, the trustee testified that she intends to investigate and, if appropriate, pursue the recovery of pre-petition transfers made to the debtor's adult child and his university. The trustee opposes conversion of the debtor's case to a chapter 11 unless a trustee is appointed upon conversion, because, despite the debtor's cooperation with her thus far, she does not believe that the debtor, a busy doctor, would be an effective fiduciary for her creditors.

The debtor argues that the Court should not exercise its discretion to convert her chapter 7 case to chapter 11 under § 706(b) because she would not benefit from the conversion and, in any event, she believes that she would be unable to fund a plan because she has already minimized her expenses as much as she can and she believes she is obligated to pay for her sons' college tuition and expenses.8 She also argues that there is no cause to dismiss her case under § 707(a) and that her case is not subject to dismissal under § 707(b) because she has primarily business debts and § 707(b) applies only in consumer cases.9

Findings of Fact & Conclusions of Law

BHG seeks to prevent the debtor from obtaining chapter 7 relief under three code provisions: § 706(b), § 707(a), and § 707(b). Although conversion under § 706(b) and dismissal under § 707(a) are potentially applicable in all chapter 7 cases, dismissal under § 707(b) is restricted to chapter 7 cases in which the debtor has primarily consumer debts. 11 U.S.C. § 707(b)(1) ("the court . . . may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts . . . .") (emphasis added). Therefore, the Court must determine whether the debtor in this case has primarily consumer or non-consumer debts before proceeding with its analysis. Consumer debt is defined as "debt incurred by an individual primarily for a personal, family, or household purpose." 11 U.S.C. § 101(8). "Consumer debt can be both secured and unsecured debt." Cox v. Fokkena (In re Cox), 315 B.R. 850, 855 (8th Cir. BAP 2004) (citing Zolg v. Kelly (In re Kelly), 841 F.2d 908, 912 (9th Cir. 1988)). To determine whether a debt should be classified as a consumer debt, courts examine the debtor's "purpose in incurring it." Lapke v. Mutual of Omaha Bank (In re Lapke), 428 B.R. 839, 843 (8th Cir. BAP 2010). If a debt does not involve a "business transaction or potential profit motive" then it is generally categorized as a consumer debt. In re Palmer, 117 B.R. 443, 446 (Bankr. N.D. Iowa 1990).

In this case, the Court finds that the debtor has $ 431,666 in consumer debt10 and $ 1,071,312 in non-consumer debt comprised of business debt in the amount of $ 949,21211; a domestic support obligation owed to the debtor's ex-husband in the amount of $ 112,500; and county property taxes incurred in relation to the med spa in the amount of $ 9600.12 Therefore, despite BHG's unsupported-yet puzzlingly steadfast-contention that the debtor has primarily consumer debt, the Court finds that the debtor has primarily non-consumer debt.13 As a result, the Court denies BHG's motion to dismiss under § 707(b) and will address BHG's remaining two bases for conversion and dismissal below.

Conversion under § 706(b)

Section 706(b) provides that "[o]n request of a party in interest and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 11 of this title at any time." 11 U.S.C. § 706(b). The movant-in this case, BHG-bears the burden of showing grounds for conversion to chapter 11 pursuant to § 706(b). In re Mercural, No. 17-00144, 2017 WL 6001682, *2 (Bankr. N.D. Iowa Dec. 1, 2017). "[T]he decision whether to convert [under § 706(b)] is left in the sound discretion of the court, based on what will most inure to the benefit of all parties in interest." Schlehuber v. Fremont Nat'l Bank & Trust (In re Schlehuber), 489 B.R. 570, 573 (8th Cir. BAP 2013) (citations omitted). The

In re Karlinger-Smith, 544 B.R. 126, 131 (Bankr. W.D. Tex. 2016).

Because § 706(b) provides no guidance regarding the factors pertinent to deciding whether a case should be converted, courts "should consider anything relevant that would further the goals of the Bankruptcy Code." In re Schlehuber, 489 B.R. at 573 (citations omitted). However, this Court recognizes-as other courts have-that the "goals of the Bankruptcy Code" inherently conflict because "creditors seek to maximize their recovery [while] debtors understandably seek to discharge their debts as quickly as possible in furtherance of their fresh start." In re Decker, 535 B.R. 828, 837-38 (Bankr. D. Alaska 2015). BHG correctly pointed out in its motion to convert or dismiss that § 706(b) does not require, on its face, the application of a balancing test. Nonetheless, courts have historically considered the parties' "competing interests in furtherance of responsibly exercising their discretion." Id. at 838.

In analyzing whether to convert a chapter 7 case to a case under chapter 11, courts generally begin by deciding whether the debtor has sufficient disposable income to fund a chapter 11 plan. In re Baker, 503 B.R. 751, 757 (Bankr. M.D. Fla. 2013) (citing In re Schlehuber, 489 B.R. at 574 (the debtor's ability to fund a chapter 11 plan is "`an important and relevant consideration' under § 706(b)."); see also In re Parvin, 538 B.R. 96, 102 (Bankr. W.D. Wash. 2015) (the debtor's ability to pay is the logical starting point for a § 706(b) analysis because "the whole reason for asking [for] a case to be converted is the assumption that creditors would receive more in a chapter 11 than a chapter 7.")

In the instant case, the debtor's updated drafts of Schedules I and J reflect that she has a monthly budgetary deficit of $ 2056-indicating that the debtor could not fund a chapter 11 plan. However, BHG argues that the debtor's budget contains expenses that are inappropriate for a chapter 7 debtor to include, such as voluntary contributions made to her 401(k) and 403(b) accounts, gift-giving expenses, an allotment for travel and vacation, as well as what BHG deems excessive expenditures for food and personal care products and services. BHG contends that these voluntary wage deductions and unnecessarily high expenditures, including those related to her older son's college tuition and expenses and the monthly savings directed toward her younger son's similar future expenses, should be reduced or eliminated to bring her budget more closely in line with the national standards published by the IRS. According to BHG, if the debtor were compelled to adjust her budget, she would have sufficient disposable income to fund a five-year chapter 11 plan, resulting in a larger dividend to her creditors than they would receive if the debtor remained in her chapter 7 case.

The Court agrees that if the debtor were forced to reduce or eliminate expenses from her budget that exceed the IRS guidelines and she was prevented from paying for her sons' respective college educations-an action that, according to the debtor's undisputed testimony, may well be in violation of a state court order-then the debtor could fund a chapter 11 plan that would result in a larger dividend to creditors than they would receive in a chapter 7 case. However, although conversion to chapter 11 would benefit creditors in theory, the Court cannot say with certitude that conversion would benefit creditors in reality, as discussed below.

Although BHG accurately asserted in its motion to convert or dismiss that plan confirmation is not an issue to be decided in the context of a motion to convert under § 706(b), it is appropriate for the Court to consider the likelihood that the debtor will be able to propose a confirmable plan. See In re Parvin, 538 B.R. at 102. Here, the Court finds it unlikely that the debtor would be able to propose a confirmable plan in the light of the fact that the debtor tried and failed to negotiate a settlement with BHG several times—before she filed bankruptcy in Florida, during a mediation conducted during her bankruptcy case in Florida, and again before she filed her current bankruptcy case in Arkansas. Against the backdrop of the parties' historical inability to come to a mutually satisfactory resolution, the Court finds it improbable that BHG would accept any plan proposed by the debtor unless she made the significant alterations to her budget that BHG insists upon and the debtor testified that she cannot make. As a result, if the debtor's case were converted to one under chapter 11, the Court finds it more likely than not that additional litigation between BHG and the debtor would impede or completely obstruct the confirmation of a plan-leading the debtor to seek dismissal or reconversion of her case to one under chapter 7, all of which would take time, result in added expense to the parties, and ultimately delay payment not only to BHG but to all creditors. For these reasons, the Court finds that it is not necessarily in the best interest of creditors to convert the case to one under chapter 11.

In any event, the debtor's ability to pay into a chapter 11 plan is not, by itself, determinative under § 706(b). In re Decker, 535 B.R. at 840. The Court must also examine whether conversion would benefit the debtor. See In re Karlinger-Smith, 544 B.R. at 133-34 (conversion under § 706(b) must afford some benefit to the debtor "however small or intangible.") Courts generally find a benefit to the debtor-irrespective of the debtor's opposition to conversion-when the debtor has significant unresolved tax liabilities, domestic support arrearages, or other non-dischargeable debts that would survive a chapter 7 discharge but could be addressed through a chapter 11 plan. See id.; see also In re Decker, 535 B.R. at 839 and In re Baker, 503 B.R. at 758. In those types of debt scenarios, "conversion may not give Debtors immediate relief, but could ultimately result in a better fresh start." In re Decker, 535 B.R. at 843. In the instant case, however, the debtor has no tax debt-other than $ 9600 owed for county property taxes-she is current on her domestic support obligation, and presently has no other non-dischargeable debts that could be more effectively addressed within the context of a chapter 11.14 As a result, the Court finds that conversion to a chapter 11 would be of no benefit to the debtor and would instead only transfer some of her future income to her creditors. See In re Karlinger-Smith, 544 B.R. at 134. If the debtor's disposable income was diverted to creditors against her will, it is unlikely that the debtor would be motivated to maintain her current work load—and by extension, her current level of income. See id. Although § 706(b) provides a statutory mechanism for a court to convert a case to chapter 11 without the debtor's consent, "it would be a poor exercise of discretion not to take a lack of benefit to the debtor—and concomitant lack of incentive-into consideration." Id.

For all of the above stated reasons—including the unfavorable prospects for plan confirmation; the likelihood that the debtor would attempt to reconvert her case to a chapter 7 or dismiss it completely; the probability that the chapter 7 trustee's distribution to creditors would be delayed in the event of conversion due to the litigation that would almost certainly ensue in a chapter 11; the expense of that litigation to all parties; and the fact that conversion would not benefit the debtor in any discernible way-the Court declines to exercise its discretion to convert the debtor's case pursuant to § 706(b). Therefore, the Court denies BHG's motion to convert.

Dismissal under § 707(a)

Section 707(a) provides that

11 U.S.C. § 707(a). The statute does not define the term "`cause,' beyond setting forth three specific examples.'" Huckfeldt v. Huckfeldt (In re Huckfeldt), 39 F.3d 829, 831 (8th Cir. 1994). However, "the introductory word `including' means that these three types of `cause' are nonexclusive." Id. (citation omitted). The decision to dismiss under § 707(a) "lies within the discretion of the bankruptcy judge." In re Timmerman, 379 B.R. 838, 845 (Bankr. N.D. Iowa 2007).

In its motion to convert or dismiss, BHG stated that "[t]he Eleventh Circuit has unequivocally ruled that a bad faith filing constitutes `cause' for dismissal." BHG then enumerated a list of factors used by courts in the Eleventh Circuit to determine bad faith under § 707(a). During his closing argument, debtor's counsel also cited to Eleventh Circuit precedent, in apparent agreement with BHG that the Eleventh Circuit's analysis applies in this case. However, the Eighth and Eleventh Circuits do not subscribe to the same approach to bad faith under § 707(a). The Eleventh Circuit employs a "less restrictive approach to § 707(a) dismissal" than the approach adopted by the Eighth Circuit. In re Bushyhead, No. 13-12897-M, 2016 WL 11263627, *4-5 (Bankr. N.D. Okla. May 25, 2016) (discussing various circuits' respective approaches to bad faith under § 707(a)). The Eighth Circuit applies a "narrow, cautious approach to bad faith" in relation to § 707(a), limiting bad faith under this subsection to "extreme misconduct falling outside the purview of more specific Code provisions, such as using bankruptcy as a `scorched earth' tactic against a diligent creditor, or using bankruptcy as a refuge from another court's jurisdiction." In re Huckfeldt, 39 F.3d at 832 (adopting the approach to bad faith under § 707(a) as set forth in In re Khan, 172 B.R. 613 (Bankr. D. Minn. 1994)). In this case, the Court has no evidence that the debtor has engaged in the type of "extreme misconduct" that would fall under the Eighth Circuit's narrow definition of bad faith under § 707(a).15

In support of dismissal under § 707(a), BHG argues, again, that the debtor's high income affords her the ability to pay her creditors a significant portion of what she owes them and that her ability to pay is sufficient cause to dismiss her case under § 707(a). Although other jurisdictions-the Eleventh Circuit, for instance-may consider the debtor's ability to pay in the context of dismissal under § 707(a), the Eighth Circuit recognizes that a debtor's "ability to pay is not cause for dismissal under § 707(a)." In re Huckfeldt, 39 F.3d at 832 (emphasis added) (citing In re Goulding, 79 B.R. 874, 876 (Bankr. W.D. Mo. 1987)). For these reasons, the Court finds that BHG did not establish cause to dismiss the debtor's case pursuant to § 707(a). Therefore, the Court denies BHG's motion to dismiss.

Conclusion

For all of the above-stated reasons, the Court denies BHG's motion to convert or dismiss. The Court finds that the debtor may proceed in her case under chapter 7. The Court will hear the debtor's Motion for Sanctions against BHG on June 5, 2019, at 9:00 a.m., in the United States Bankruptcy Court, Fayetteville Division.

IT IS SO ORDERED.