Chapter 7 Debtor filed a motion to convert his case to one under Chapter 11 so that he could amend his petition to elect Subchapter V status.  The Trustee and two creditors objected to the conversion.   Citing Marrama, the Court noted that a debtor should not be able to convert his case when conversion would result in immediate dismissal or reconversion.  After analyzing the recent cases of In re Trepetin and In re Seven Stars on the Hudson Corp., along with the deadlines imposed by Sections 1188(a) and 1189(b), the Court noted that it sees no reason why a delayed conversion to Subchapter V cannot occur when the Section 1189(b) plan filing deadline can be extended by the Court, when no party objects to such conversion.  However, in this case, the Debtor has been evasive and misleading about the true nature of his involvement with an LLC owned as tenants by the entirety with his spouse and gave conflicting information as to ownership and transfer dates to the Trustee, the United States Trustee and two different lenders. If converted to Chapter 11 and Subchapter V elected, this Court would decline to extend the time for the Debtor to file a plan under Section 1189(b) given the Debtor’s conduct.  Because the Debtor would immediately run afoul of Section 1112(b)(4)(J) if the motion to convert were granted and the election made, the Court denied the motion to convert.  

A creditor filed a motion to dismiss the debtor’s case, claiming that the debtor was not eligible to be a debtor under chapter 12.  Specifically, the creditor argued that the debtor did not qualify as a “family farmer” under section 101(18) because the debtor was not “engaged in a farming operation” and her gross income did not meet the 50 percent gross income test of section 101(18)(A).  Based on the evidence presented, the Court found that the debtor was engaged in a farming operation at the time she filed her petition.  Additionally, the Court ruled as a matter of law that the Tax Code’s definition of “gross income” informs the Bankruptcy Code’s definition of “gross income” under section 101(18) for purposes of determining whether to include social security income in the calculation of “gross income.”  Based on an interpretation of the Tax Code’s definition of “gross income,” the Court found that more than 50 percent of the debtor’s gross income was received from the farming operation for the taxable year preceding the filing of her petition.  Accordingly, the Court held that the debtor was a “family farmer” eligible to proceed as a debtor under chapter 12 and denied the motion to dismiss.

Debtor’s complaint in this adversary proceeding alleged that certain notes made by the Debtor to a creditor were time barred under the applicable statute of limitations.  The creditor asserted that the proper statute of limitations to apply was the six year statute of limitations under Va. Code Ann. § 8.3A-118 and not the five year period under Va. Code Ann. § 8.01-246 as argued by the Debtor.  The Court agreed that the proper statute of limitations to apply was § 8.3A-118, which provides - “an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date.”  The Court held that the Complaint failed to allege facts to establish the claims at issue were time barred.  

The female Debtor filed a motion for contempt against a creditor for violation of the automatic stay. The Court found that creditor willfully violated the automatic stay of 11 U.S.C. § 362(a) as the creditor had notice of the bankruptcy when he sent the female Debtor an email threatening to take criminal action if she did not pay him the money she owed, as well as repeated calls after notice of the bankruptcy. The Court awarded the Debtor $170.00 in actual financial loss damages.  The Court also found sufficient evidence of egregious or vindictive conduct to award the female Debtor $500.00 in punitive damages.