Laura K. Grandy, UNITED STATES BANKRUPTCY JUDGE.
On March 1, 2019, this Court entered an order in this case requiring Debtor Chad Robert Bullock ("Debtor") to file an amended plan to provide for one hundred percent repayment to his unsecured creditors. The amendment was precipitated by the Debtor's post-petition receipt of a $92,430.84 worker's compensation award.
On March 14, 2019, the Debtor filed a Notice of Appeal and Statement of Election as to both March 1, 2019 orders. He now seeks a stay of the orders—without bond— pending appeal.
The Debtor filed his Chapter 13 petition on August 5, 2014. Neither the Debtor's Schedule B nor his Statement of Financial Affairs referenced a potential worker's compensation claim. The plan, which was confirmed on October 17, 2014, provided that the Debtor was to make plan payments of $148.00 per month for a period of sixty (60) months. A minimum of $100.00 was to be paid to the Debtor's general unsecured creditors.
On June 28, 2109, the Trustee filed a motion to compel the Debtor to file an amended plan and an amended Schedule B to address the previously undisclosed worker's compensation settlement. In response to the Trustee's motion, the Debtor filed an amended Schedule B on July 6, 2019 to list the settlement. He also filed an amended Schedule C to claim an exemption in the settlement proceeds pursuant to 820 ILCS 305/21 and 735 ILCS 5/12-1001(b) respectively. According to the amended Schedule B, the Debtor was injured at work and initiated a worker's compensation action against his employer in 2014. The gross settlement was $125,000.00, of which the Debtor received $92,430.84. However, by the time the settlement was disclosed to the Trustee and to this Court, the Debtor had spent virtually all the proceeds and, as of July 6, 2018, only $2,750.00 remained.
On July 20, 2018, the Trustee filed a Motion to Compel and for Turnover requesting that the Debtor be ordered to immediately turnover $92,430.84 to the bankruptcy estate. He also requested that the Debtor be required to file an amended plan to provide for turnover of the funds. In support of his motion, the Trustee argued that pursuant to 11 U.S.C. §§ 541(a) and 1306(a), the proceeds of the worker's compensation settlement constituted property of the bankruptcy estate which were subject to turnover pursuant to 11 U.S.C. § 542. He further asserted that pursuant to Watters v. McRoberts (In re Watters), 167 B.R. 146 (S.D. Ill. 1994), the funds were disposable income that must be turned over to the estate for the benefit of the Debtor's unsecured creditors.
The Debtor did not file an objection to the Trustee's motion. Instead, he filed a Complaint for Declaratory Judgment seeking a declaration, inter alia, that the
On February 27, 2019 the Court conducted a hearing on both the Motion to Compel and for Turnover and on the Debtors' complaint. After hearing the arguments of counsel, the Court granted the Trustee's motion and denied the relief requested in the Debtor's Complaint. The Court's ruling was memorialized in written orders which were entered March 1, 2019. The Debtor now seeks to stay enforcement of these orders.
Federal Rule of Bankruptcy Procedure 8007 permits a party to petition the bankruptcy court for a stay of an order or judgment pending appeal in a bankruptcy case. A similar rule, Federal Rule of Bankruptcy Procedure 7062, applies in adversary proceedings.
The imposition of a stay pending appeal is an "extraordinary remedy" Kuri v. Edelman, 491 F.2d 684 (7th Cir. 1974), and the movant must satisfy stringent requirements to demonstrate that a stay is warranted. Van Hollen v. FEC, 2012 WL 1758569 (D.C. Cir. May 14, 2012). A stay pending appeal is "an intrusion into the ordinary process of administration and judicial review ... and accordingly is not a matter of right, even if irreparable injury might otherwise result to the appellant." Nken v. Holder, 556 U.S. 418, 427, 129 S.Ct. 1749, 173 L.Ed.2d 550 (2009) (internal citations and quotations omitted). The decision as to whether to issue a stay is left to the Court's discretion and the party seeking the stay bears a "heav[y] burden of justify[ing] the court's exercise of such an extraordinary remedy." In re Special Proceedings, 840 F.Supp.2d 370, 374 (D.D.C. 2012); accord. Landis v. N. Am. Co., 299 U.S. 248, 255-56, 57 S.Ct. 163, 81 S.Ct. 153 (1936).
In order to determine whether a stay should be granted, courts consider the following four factors: (1) whether the appellant is likely to succeed on the merits of the appeal; (2) whether the appellant will suffer irreparable injury absent a stay; (3) whether a stay would substantially harm other parties to the litigation; and (4) whether a stay is in the public interest. In the Matter of Forty-Eight Insulations, Inc., 115 F.3d 1294, 1300 (7th Cir. 1997). "The standard for granting a stay pending appeal mirrors that for granting a preliminary injunction." In re A & F Enterprises, 742 F.3d 763, 766 (7th Cir. 2014). As the Seventh Circuit has explained:
Forty-Eight Insulations at 1300-01 (internal citations omitted). See also A & F Enterprises, Inc. II, 742 F.3d 763, 766 (7th Cir. 2014) ("As with a motion for preliminary injunction, a `sliding scale' approach applies; the greater the moving party's
To obtain a stay pending appeal, the movant must make a "strong" and "substantial" showing of likelihood of success on appeal. Adams v. Walker, 488 F.2d 1064, 1065 (7th Cir. 1973). It is well established that "mere repetition" of the movant's prior arguments is insufficient to satisfy this requirement. Nat'l Assn. of Mfrs. v. Taylor, 549 F.Supp.2d 68, 75 (D.D.C. 2008). Instead, at a minimum, the movant must provide some "reason for revisiting the Court's conclusions on the merits of the [movant's claims]." Id. at 75. In other words, the movant must provide "new information, authority or analysis to persuade the Court to reconsider its [prior] decision." In re Special Proceedings, 840 F. Supp. 2d. at 372.
In the instant case, the Debtor has made absolutely no showing that he is likely to succeed on the merits of his appeal. Debtor's counsel ignored this requirement entirely at the April 15, 2019 hearing and, in fact, did not address it in any way. Further, the Debtor provided no meaningful discussion as to this issue in his pleadings. His argument was confined to the following conclusory statement:
Debtor's Response to Trustee's Motion for Approval of Supersedeas Bond, Doc. 87, ¶10. Nothing further was offered— not even an explanation as to why counsel believes that Debtor has a "reasonable" likelihood of success on the merits of his appeal.
This Court carefully evaluated the Debtor's claims and explained in extensive detail at both the February 27, 2019 and April 15, 2019 hearings why it ultimately rejected the Debtor's position. The underlying litigation focused on the issue of whether the Debtor's worker's compensation award— an exempt asset— could be considered in calculating the Debtor's disposable income. The Court will briefly address this issue below.
Seventh Circuit authority expressly permits plan modification where the debtor experiences a post-confirmation increase in income. As the Court stated in Germeraad v. Powers, 826 F.3d 962 (7th Cir. 2016):
Id. at 974 (internal citations omitted).
Not only may the plan be amended to increase the debtor's payments based on after-acquired income, this income may also be used in calculating the debtor's disposable income—even if the income is otherwise exempt. Prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), the majority of courts—including this one—held that exempt property was not excluded from a debtor's disposable income. See Stuart v. Koch (In re Koch), 109 F.3d 1285, 1289 (8th Cir. 1997) ("Chapter 13 contains no language suggesting that exempt post-petition revenues are not Chapter 13 `income'....); Watters v. McRoberts, 167 B.R. 146, 147 (S.D. Ill. 1994) ("since there is no such limitation on income in § 1325(b) [of the Bankruptcy Code], one should not be imposed."); In re Schnabel, 153 B.R. 809, 815 (Bankr. N.D. Ill. 1993) ("without an express or even implicit limitation in § 1325(b) on `income' relating to its exempt status, this Court will not impose one."). Contrary to the assertions of the Debtor, this conclusion did not change under BAPCPA.
Section 1325(b) of the Bankruptcy Code now defines disposable income as the "current monthly income received by the debtor ... less amounts reasonably necessary to be expended" for the debtor's and any dependent's support.
Id. (emphasis added). See also In re Royal, 397 B.R. 88, 101-02 (Bankr. N.D. Ill. 2008) ("Although both the disposable income definition and the current monthly income definition exclude certain items, exempt income is not excluded."); In re Waters, 384 B.R. 432, 436 (Bankr. N.D. W. Va. 2008) ("With the enactment of BAPCPA in 2005, the split of authority over whether or not exempt assets are to be included in the calculation of disposable income has been
In addition to demonstrating a strong likelihood of success on appeal, a party seeking to stay a court order under Rule 8007 must also show that they will be irreparably harmed if a stay of the bankruptcy court's order is not granted. Forty-Eight Insulations, Inc., 115 F.3d at 1300.
The Debtor asserts in his motion that if he complies with the Court's orders, "his appeal would be mooted by the payment in full of the unsecured creditors, which would almost certainly be completed prior to the appeal being decided. This, Debtor argues, "would effectively negate [his] right to seek appellate review." Debtor's Motion to Stay Order of the Court, Doc. 80, ¶ 3. While this may be a legitimate concern, "[i]t is well settled that an appeal being rendered moot does not itself constitute irreparable harm." In the Matter of 203 North LaSalle Street Partnership, 190 B.R. 595, 598 (N.D. Ill. 1995).
At the April 15, 2019 hearing, the Debtor alternatively argued that if he failed to file an amended plan— due his inability to afford a plan that provided for 100% repayment to unsecured creditors— the Trustee would most certainly request dismissal of the case with a bar to discharge of all scheduled debts. See Debtor's Response to Trustee's Motion for Approval of Supersedeas Bond, Doc. 87, ¶ 6. Dismissal of the case, the Debtor asserted, would effectively foreclose his right to a meaningful appeal. The Court, however, also finds this argument to be without merit.
Under the facts of this case, any harm that may result from the Debtor's present inability to pay his creditors is entirely self-inflicted. The Debtor provided the Trustee with an affidavit dated September 24, 2018 which indicates that the Debtor received a $92,430.94 worker's compensation award on or about August 17, 2017— two years before his Chapter 13 plan was scheduled to complete. However, it is undisputed that the Debtor failed to disclose this settlement to either the Trustee or to this Court until July 6, 2018. Further, the Debtor's affidavit detailed how the proceeds of his settlement were spent. These expenditures were as follows:
Trustee's Brief in Support of Motion to Compel, Doc. 65, Ex.1.Absolutely none of the settlement proceeds were used to pay the Debtor's own creditors. Obviously, at one time the Debtor had sufficient funds to pay his unsecured creditors in full. However, due to the Debtor's own actions, those funds have now been dissipated. In light of
In order to establish the third criterion for a stay under Rule 8007, it is incumbent upon the Debtor, as the movant, to show that no other parties will be substantially harmed if a stay is imposed.
At hearing on April 15, 2019, the Debtor noted that unless a stay was granted, this case would very likely be dismissed. He then posited that dismissal of the case would harm creditors because they would be prevented from receiving their remaining payments under the plan.
Finally, in order to determine whether a stay pending appeal should be granted, the Court must consider whether a stay is in the public interest. As the court explained in In re Doctors Hospital of Hyde Park, Inc., 376 B.R. 242 (Bankr. N.D. Ill. 2007), "[t]he public policy behind bankruptcy is the equality of distribution to creditor within the priorities established by the Code within a reasonable time." Id. at 249. In view of the foregoing discussion regarding the harm to creditors in the event of what will likely be unreasonable delay, the Court finds that the imposition of a stay pending appeal would be contrary to the public interest.
In his motion, the Debtor requested that enforcement of the Court's March 1, 2019 orders be stayed without bond. In objection to that request, the Trustee filed a Motion for Approval of Supersedeas Bond (See. Doc. #85) in which he requested that the Debtor be required to post a $15,000.00 bond in order to obtain a stay. As this Court has found that the Debtor has not established grounds for a stay, the Trustee's motion is technically moot. However, at the April 15, 2019 hearing, counsel for the Trustee indicated that he would be amenable to a stay if the Debtor posted a
Based on the foregoing, the Debtor's Motion for Stay Pending Appeal absent the payment of a bond is DENIED. A separate order shall enter.