Law Office of Jeff Whitehead» ND Illinois Bankruptcy Case Summaries

Do you have a right to receive your college transcript if tuition debts are discharged in bankruptcy?

admin — Sat, 25 Apr 2009 18:58:06 +0000

In the 7th Circuit, YES.

In the case below, the debtor, Stefanie Kuehn filed a chapter 7 bankruptcy after completing her studies at Cardinal Stritch University. Included in her bankruptcy were debts owed for tuition. After she received her discharge, Ms. Kuehn contacted the University for a copy of her transcript. The university refused to release them. Ms. Kuehn then reopened her bankruptcy case and filed a motion alleging that the university was violating the automatic stay and the discharge injunction.

United States Court of Appeals

For the Seventh Circuit

N THE MATTER OF STEFANIE KIM KUEHN,

Debtor-Appellee

Appeal from the United States District Court for the Western District of Wisconsin.

This case presents a single question: Does a university violate the Bankruptcy Code’s

automatic stay or discharge injunction by refusing to provide a transcript because pre-petition debt remains

unpaid?

Stefanie Kim Kuehn, an art teacher, enrolled in a two-year master’s degree program at Cardinal Stritch University. She took advantage of the University’s pay-asyou-go plan but stopped paying midway through the first year. The University nonetheless allowed her to take exams, receive grades, and sign up for new classes.

She completed all of the work required for a master’s

degree, which the University awarded. But when Kuehn

asked for a transcript

increase in salary from her school district

Unwilling to pay her debt to the University

though the increase in her salary would cover the whole

tuition in less than two years, and she could have borrowed

against that increase

transcript without payment, Kuehn filed a bankruptcy

petition listing the University as a creditor. (Kuehn’s

lawyer had advised her that the University would have

to provide her a transcript if she filed for bankruptcy.)

While the case was pending Kuehn again requested a

transcript, and the University again refused to provide

one. After the bankruptcy court issued an order discharging

her debt to the University, 11 U.S.C. §727, Kuehn yet

again asked for a transcript and as before agreed to pay

the transcript fee, but not the tuition. Again the University

refused. Kuehn contends that the pre-discharge refusal

violated the Bankruptcy Code’s automatic stay, 11 U.S.C.

§362(a), and the later one the discharge injunction,

11 U.S.C. §524(a), because the refusals were acts to

collect her unpaid debt. Bankruptcy Judge Martin

ordered the University to provide a transcript and pay

damages and attorneys’ fees. The district court affirmed.

2007 U.S. Dist. L

EXIS 88191 (W.D. Wis. Nov. 30, 2007). It

followed

In re Merchant , 958 F.2d 738, 741 (6th Cir. 1992),

the only appellate decision on the subject

taking “any act to collect, assess, or recover a claim against the debtor that arose before [the filing of a bankruptcy

petition]” until the bankruptcy proceeding is closed or dismissed. Section 524(a)(2) “operates as an

injunction against . . . an act, to collect . . . [discharged debt] as a personal liability of the debtor”. Other subsections

prohibit using legal process to collect, enforcing a prepetition judgment, or exercising control over the property

of the debtor. See §§ 362(a)(1)–(3), 524(a)(1)–(3). Kuehn argues that the University violated these sections when

it refused to produce her transcript. According to her, because a transcript has no intrinsic value to the

University, a refusal to provide one must be an act to collect. The University concedes that its policy is

designed to induce students to pay their tuition, but it maintains that an “act to collect” for the purpose of the

Bankruptcy Code is limited to a positive step, such as repossessing a car. A passive failure to do what the

debtor desires is not an “act,” the University submits. The University treats the transcript as a product that it is

not obliged to sell to someone with whom it no longer wants to do business.

If Kuehn had attempted to purchase a transcript on credit, and the University, having been burned once,

proved unwilling to make another loan, this would be an easy case. Sections 362(a) and 524(a)(2) apply only

when a creditor acts to

credit score, the use of a credit score is forward-looking.

Potential creditors consider creditworthiness to evaluate

the wisdom of future transactions, not to collect unpaid

debts. Any other entity deciding whether to extend

credit would consider Kuehn’s failure to pay, and the

University may do the same.

Other sections of the Bankruptcy Code set out some

circumstances in which creditors may not consider a

debtor’s prior bankruptcy filing. See 11 U.S.C. §366 (utilities

may not refuse services if the debtor provides

adequate assurance of payment within 20 days); 11 U.S.C.

§525 (anti-discrimination provision applicable to employers

and government entities). Otherwise, however,

yesterday’s failure to pay is a proper basis for tomorrow’s

refusal to extend credit. The Fair Credit Reporting Act

permits bankruptcy filings to appear on consumer

reports for 10 years from the date of discharge. See 15

U.S.C. §1681c. It follows that within 10 years from the

date of discharge a prospective creditor may consider

discharged debts in determining creditworthiness.

But Kuehn is willing to pay in advance for a transcript

of her grades, and the University’s only reason for

balking is to induce her to pay for the education

but, alas, an unreasoned one. Section 362(a)(6) prohibits pre-petition creditors fromcollect a pre-petition or discharged

debt. Although the failure to repay a debt factors into a

it does not have a contractual obligation to provide a

transcript and that, without an obligation, a passive

refusal to deal cannot be an act to collect. It relies on

which it says establishes that refusal to deal cannot be

an “act to collect”.

held that a bank did not

violate the automatic stay by placing a hold on a

checking account while asking the bankruptcy court to

lift the stay, so that the bank could set off the

account’s balance against an obligation the debtor owed

to the bank. The Court concluded that a hold designed

to maintain the status quo while the bankruptcy

court considers the request does not violate §362. See

516 U.S. at 21. This does not imply that the bank could

keep the account blocked no matter what happened in

the bankruptcy, or even after a discharge. The Court

concluded that the bank’s delay was not an act to collect

because it had a right under state law, a right preserved

by the Bankruptcy Code, to set off the checking-account

balance against the debt to the bank. That right would

be undercut if the automatic stay permitted the debtor to

drain the checking account while the bank’s hands were

tied. But money owed to a university cannot be set off

against a transcript of grades

Boston & Maine Corp. v. Chicago Pacific Corp

., 785 F.2d 562 (7th Cir. 1986)

and the University’s refusal is not designed to afford time

for judicial decision.

The district court applied what several courts have

dubbed a “coercive effects” test: a creditor acts to collect

a debt if it acts or fails to act, in a coercive manner, with

the sole purpose of collecting that debt. This “test” can’t

be found in the Code, and situations to which it

applies will be rare, because most acts or failures to act

have multiple purposes, such as minimizing risk based on

6 No. 07-3954 creditworthiness. A rational creditor does itself no

favors by refusing to engage in future transactions

when the debtor will pay cash. See

, 359 F.3d 866, 873 (7th Cir. 2004). If the creditor has competitors,

the debtor will deal with them and the creditor

loses profit. If the creditor has market power in the

goods or services being sold, it will maximize its profit

by setting a monopoly price for future transactions, not

by trying to collect a debt. Pursuing bygones is a sure

way to reduce future profits. If the University is not

obligated to provide Kuehn a transcript, its best course

of action is to sell the transcript for as much money as

possible. That amount is unrelated to Kuehn’s unpaid debt.

At oral argument we asked the University if it could

charge Kuehn a large sum (say, 25% of the salary

increase she stands to receive from her employer) for a

transcript. It replied that it could not. That answer undermines

its position that it has no obligation to provide a

transcript to Kuehn. A provider of goods and services

usually is free to charge whatever the market will bear.

We could not find any laws or regulations limiting the

price of college transcripts. So why does the University

think that the fee for a transcript must be nominal, limited

to the costs of printing and certifying the grades? Perhaps

the answer is that providing a transcript is an implicit

part of the educational contract, covered by the fee for

the course hours, and that Kuehn therefore has a contract

or property right for which she has already paid.

(Well, she hasn’t paid, but her obligation to do so has

been discharged, so it comes to the same thing.) The

University cannot charge Kuehn extra if the fee for instruction covers transcripts too. Then the University’s refusal

to certify a transcript of Kuehn’s grades would be an act

to collect the discharged debt and would violate both

the automatic stay and the discharge injunction. See

In re UAL Corp.

B

Bankruptcy Code creates or alters property rights in

grades or the right to receive a transcript. Other federal

law addresses privacy concerns but not property

interests. See 20 U.S.C. §1232g (Family Educational

Rights and Privacy Act). What remain are state statutes

and common law. See

, 408 U.S. 564, 577 (1972).

property does not give students property rights in transcripts.

Montana defines property ownership as “the

right of one or more persons to possess and use [a thing]

to the exclusion of others”. Mont. Code §70-1-101. The

court concluded that because a university creates, maintains,

and possesses the grade record to the exclusion of

others it is the owner of the official transcript. The ninth circuit’s conclusion is questionable. Universities in

Montana are limited by both state and federal law

in what they can do with a student’s grades. Mont. Code

§20-25-515 says that a university “shall release a

student’s academic record . . . when requested by the

student”. This sounds like a rule that the student has a

property interest in the information, even though the

school also may use the data. (Shared property rights

are common. Both landlord and tenant have property

interests in the premises. Or think of land subject to

an easement for transit.) But, right or wrong,

Wisconsin, whose law does not define property rights

in the same way as Montana.

Wisconsin courts have not considered whether a

student has a contract or property right to receive

a transcript. No Wisconsin statute is on point. Under

Wisconsin common law, property rights may arise from

custom and usage. See

, 42 Wis. 214 (Wis. 1877) (riparian water rights);

have consistently provided transcripts at or

around cost. A transcript currently sets students back $4

at Cardinal Stritch University, $3 at Harvard University,

and nothing at the University of Chicago if delivered

electronically (otherwise $12). Fees at other universities

are similar. We could not find any case in any court

where a university had asserted that it could charge a

student more than cost for a transcript, and, as far as we

can tell, no university has ever tried to profit by charging

a fee based on the transcript’s effect on a student’s

future income. This custom is similar to those in

Delaplaine

the students and colleges to be joint owners of the data

reflecting grades, because that is how the educational

contract is routinely understood.

A longstanding custom or practice does not prevent

change. For example, airlines used to carry checked

baggage without a fee. But nobody, including the

Supreme Court of Wisconsin, would conclude that

United Airlines is depriving passengers of their property

when it now charges for checked bags. The cost

of checking baggage is determined by contractual

rights that can be altered by the parties. Cardinal Stritch

University could announce to future students that transcript

fees would reflect the value of the education. But

the University did not say any such thing to Kuehn

when she enrolled, or even when she graduated, and it

can’t change the terms of a contract after the fact e

when those terms are implied rather than express.

Kuehn’s property right might be limited to her grades, an

intangible right similar to the right in a name or

likeness, see

, 90 Wis. 2d 379, 280 N.W.2d 129 (Wis. 1979), and not include a rightHirsch the Wisconsin Supreme Court relied on the

to receive a transcript from the University certifying

those grades. But the custom of universities has been to

provide certified transcripts, and for good reason. Intangible

grades are worthless without proof. Kuehn’s school

district increases compensation only after it receives a

certified transcript. Other employers have similar policies.

In

property right in a football player’s nickname to conclude

that the tort of misappropriation was available at common

law. It reasoned that the tort was necessary to give value to

the property right.

Mass. 599, 97 N.E. 109 (Mass. 1912) (a letter writer has a

right to receive copies of a letter owned by another in

order to give value to the writer’s common-law property

interest in the contents of the letter). That reasoning

applies equally here. A right to receive a certified copy

of a transcript is essential to a meaningful property right

in grades.

That a student has a right to a copy of the transcript does

not leave educational institutions without the means to

collect tuition. The University is unable to collect

Kuehn’s tuition only because it was careless. When Kuehn

failed to pay her mounting bills the University could have

refused to let her enroll in new classes. It could have

refused to let her take exams. It could have refused to

award a degree. Or the University could have required

Kuehn to borrow from a third party to pay for her education.

Student loans are not dischargeable unless a debtor

can show undue hardship, see 11 U.S.C. §523(a)(8), and

it is unlikely that Kuehn could have shown undue hardship.

She was gainfully employed, and her debt to the University was substantially less than the extra income

the master’s degree afforded. Presumably the University

will protect itself in one or more of these ways in the

future.

Giving weight to custom that amounts to an implicit

term of the educational contract, and following the reasoning

in

right to receive a certified copy of her transcript. The

University’s refusal to honor that right until Kuehn paid

her back tuition was an act to collect a debt and thereby

violated the automatic stay and discharge injunction.

a certified transcript is part of the package of goods and

services that a college offers in exchange for tuition?

Property interests are created and defined by state law

unless a federal law requires a different result.

Well, then, does Kuehn have a property interest becauseHirsch, we conclude that Kuehn has a state-lawId. at 383. See also Baker v. Libbie, 210Hirsch v. S.C. Johnson & Son, Inc.

ven

it is impossible to say more that the state judiciary would deemKeogh v.Daniell, 12 Wis. 163 (Wis. 1860) (movable fixtures). Universities

Delaplaine v. Chicago & N.W. Ry.Juras is unhelpful Cardinal Stritch University is located in

Juras v. Aman Collection Service, Inc., 829 F.2d 739 (9th Cir. 1987), concluded that Montana’s statutory definition of

Only one federal court of appeals (and no state supreme

court) has considered whether a current or former

student has a property right to receive a transcript.

Board of Regents v. Roth utner v. United States, 440 U.S. 48, 55 (1979). Nothing in the

In re Kmart Corp.the two items are not of similar character, see Strumpf

Citizens Bank of Maryland v. Strumpf, 516 U.S. 16 (1995), No. 07-3954 5

yet that debt has been discharged. The University contends that

and unable to obtain a

even

the University refused because she owed more than $6,000 in tuition.

the proof necessary to receive an

Can a chapter 7 debtor voluntarily dismiss her own case?

admin — Thu, 23 Apr 2009 21:45:42 +0000

Case Synopsis:

This opinion was issued by Judge Squires on April 22, 2009. In this case, the debtor filed a chapter 7 bankruptcy with the mistaken belief that her home was “exempt” and protected even though there was approximately $140,000 in equity. Once the trustee started the process to sell the house for the benefit of creditors, the debtor filed a motion to dismiss the case. Judge Squires adopted the rule that the court should balance the interests of the debtors and creditors when considering whether to grant a debtor’s motion to dismiss a chapter 7 case. The factors to be considered are:

whether dismissal is in the best interest of the debtor;
whether dismissal is in the best interest of the creditors;
whether dismissal would result in an abuse or manipulation of the system;
whether dismissal is justified by compelling equitable principles.

The motion to dismiss was denied even though the debtor promised to pay her creditors in by borrowing money from family. Judge Squires was not satisfied that the debtor’s plan to repay her creditors using family contributions would be successful.

Interestingly, chapter 7 trustee withdrew his objection because the debtor waived her discharge and agreed to pay the trustee’s administrative expenses. The debtor could have converted her case to chapter 13 under Section 706(a).

Below is the opinion

United States Bankruptcy Court

Judge: John H. Squires

SUSAN GLENN HOPPER,

Debtor.

Judge John H. Squires

MEMORANDUM OPINION

This matter comes before the Court on the motion of Susan Glenn Hopper (the

“Debtor) to voluntarily dismiss her Chapter 7 case pursuant to 11 U.S.C. § 707(a) and on the

objection of David R. Brown, the Chapter 7 case trustee (the “Trustee”). After the Court

took this matter under advisement and a few days before issuance of this Opinion, the Debtor

executed a waiver of her discharge subject to the dismissal of the case and payment of

administrative expenses. On April 17, 2009, the Debtor and the Trustee consented to the

dismissal of the case, and the Court entered an order of dismissal, but reserved issuance of

this Opinion on the instant motion in order to explain its findings and conclusions. The

Court finds that the Debtor does not have a right under § 707(a) to voluntarily dismiss her

Chapter 7 case by merely alleging a lack of prejudice to her creditors over the Trustee’s

objection. The Debtor’s voluntary waiver of discharge effectively reduces the prejudice to

her creditors to only the attendant delay in the collection of their claims as a result of the

automatic stay of 11 U.S.C. § 362.

I. JURISDICTION AND PROCEDURE

The Court has jurisdiction to entertain this matter pursuant to 28 U.S.C. § 1334(a)

and Internal Operating Procedure 15(a) of the United States District Court for the Northern

District of Illinois. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) & (O).

II. FACTS AND BACKGROUND

The Debtor owned and operated a home and garden store, as a sub-chapter S Illinois

corporation, under the name of Susan Hopper Creations, Inc., d/b/a Flora & Fauna (“Flora

& Fauna”) in Geneva, Illinois. Over a period of six years, the Debtor alleges that she

withdrew approximately $130,000 from her IRA accounts to pay the ordinary and necessary

business expenses of Flora & Fauna and to pay personal expenses. The IRA withdrawals

resulted in tax penalties for early withdrawal. The Debtor elected to close Flora & Fauna

on September 30, 2008.

The Debtor filed a Chapter 7 bankruptcy petition, schedules, and a statement of

financial affairs on December 10, 2008. The Trustee was thereafter appointed. The Debtor

had not previously filed for relief under the Bankruptcy Code. According to the Debtor,

prior to the filing, no judgments had been entered against her, no suits were pending, and

none of her creditors had taken any action to collect their debts against her other than in the

ordinary course of business. At the time of the bankruptcy filing, the Debtor was represented

by counsel. The Debtor listed her personal residence at 1430 Saddleridge Place in Bartlett,

Illinois as an asset on Schedule A and as property claimed as exempt on Schedule C. The

Debtor’s Schedules indicate the current market value of the property is $400,000 with a

secured claim in the amount of $260,929.45. On Schedule C an exemption on the property

is claimed in the amount of $15,000. The Debtor alleges that of her $151,000 in scheduled

unsecured debt, only $26,700 represents her personal obligation, in addition to the IRA

penalty of $10,600 and liability to the Illinois Department of Revenue for sales tax of

$4,100. The Debtor alleges that the scheduled debt of $24,400 on three credit cards held in

her name and the remainder of the scheduled debt, approximately $84,400, is the

responsibility of Flora & Fauna. The Debtor contemplates a separate Chapter 7 petition

being filed on behalf of Flora & Fauna in order to liquidate its obligations. A creditors’

meeting was held on January 20, 2009, at which time the Debtor appeared and testified.

There are no pending objections to discharge, objections to the Debtor’s claimed

exemptions, or other contested matters in this case.

On March 6, 2009, the Debtor moved for voluntary dismissal of her Chapter 7 case

and requested that the Trustee not execute a listing agreement for her residence until

adjudication of her motion. The Debtor alleges that she filed for bankruptcy on the basis of

a mistaken belief that her residence would be completely exempt. The Debtor argues that

if she had been fully aware of the loss of her residence through the filing of the petition, she

would not have filed the case. According to the Debtor, since the filing of the case, she has

continued to pay the first mortgage and home equity line of credit on her residence. The

Debtor alleges that since the filing of the petition, she has sought employment and contacted

family members to provide loans in order to resume payment of her personal debt as

contained in the Schedules. The Debtor seeks to satisfy her creditors outside of the

The Debtor also has the option to convert the case to Chapter 13 and pay the

amount of equity in the house to unsecured creditors over three to five years. The

Bankruptcy Code allows a debtor to convert a case from Chapter 7 to Chapter 11, 12, or 13

at any time as long as the case was not previously converted from another chapter. 11

U.S.C. § 706(a). A debtor’s right to convert is absolute in the absence of extreme

circumstances “amounting to bad faith, imposition on the Court’s jurisdiction, abuse of

process, or other gross inequity. . . .”

In re Spencer

, 137 B.R. 506, 514-15 (Bankr. N.D.

Okla. 1992). Significantly, no such conversion was sought here by the Debtor.

bankruptcy process.

The Trustee objects to the dismissal on the basis that a Chapter 7

debtor does not have an absolute right to dismiss the bankruptcy case. The Trustee argues that creditors will be prejudiced by the dismissal, and the sale of the Debtor’s residence is the only way that creditors will be satisfied. The Debtor argues that her creditors will not be prejudiced by the dismissal because they will be returned to the status quo that they held before the bankruptcy filing.

III. DISCUSSION

A Chapter 7 case can only be dismissed for “cause” under 11 U.S.C. § 707(a).

In re  Watkins

, 229 B.R. 907, 908 (Bankr. N.D. Ill. 1999). A Chapter 7 debtor does not have an

absolute statutory right to voluntarily dismiss a Chapter 7 bankruptcy petition like a Chapter

13 debtor has under 11 U.S.C. § 1307(b). Section 707(a) provides as follows:

(a) The court may dismiss a case under this chapter only after notice and a hearing and only for cause, including–

(1) unreasonable delay by the debtor that is prejudicial to creditors;

(2) nonpayment of any fees and charges required under chapter 123 of title 28 [28 U.S.C. §§ 1911 et seq.]; and

(3) failure of the debtor in a voluntary case to file, within fifteen days or such additional

time as the court may allow after the filing of the petition commencing such case, the

information required by paragraph (1) of section 521, but only on a motion by the

United States trustee.

11 U.S.C. § 707(a). Thus, a debtor does not have an absolute right to dismiss a Chapter 7

case even if begun on a voluntary petition.

Turpen v. Eide (In re Turpen) , 244 B.R. 431, 434 (B.A.P. 8th Cir. 2000);Leach v. United States (In re Leach) , 130 B.R. 855, 857 n.5 (B.A.P. 9th Cir. 1991); Watkins, 229 B.R. at 908; In re Haney , 241 B.R. 430, 432 (Bankr. E.D. Ark. 1999). Schwartz v. Geltzer (In re Smith) , 507 F.3d 64, 72 (2d Cir. 2007);  Turpen, 244 B.R. at 434; Watkins , 229 B.R. at 909. Federal Rule of Bankruptcy Procedure 1017(a) mandates that a motion for dismissal by a debtor must be predicated on cause and may only be granted after notice and a hearing. FED. R. BANKR . P. 1017(a).Indus. Ins. Servs., Inc. v. Zick (In re Zick) , 931 F.2d 1124, 1126 (6th Cir.

1991);

Watkins, 229 B.R. at 908; Kirby v. Spatz (In re Spatz) , 221 B.R. 992, 994 (Bankr. M.D. Fla. 1998). The decision whether to grant a motion to dismiss a Chapter 7 case lies within the discretion of the bankruptcy court.   Peterson v. Atlas Supply Corp. (In re Atlas Supply Corp.) , 857 F.2d 1061, 1063 (5th Cir. 1988); Eastman v. Eastman (In re Eastman), 188 B.R. 621, 624 (B.A.P. 9th Cir. 1995); Turpen, 244 B.R. at 433. A Chapter 7 trustee has standing to oppose a debtor’s request for dismissal.   In re Stephenson , 262 B.R. 871, 873 n.1 -7-

The Debtor urges the Court to adopt the test for voluntary dismissal set forth in

In re Geller , which sets a lower threshold and provides that a request for voluntary dismissal

should generally be granted “in all but extraordinary situations” unless a creditor shows that

“plain legal prejudice” to creditors would result. 74 B.R. 685, 690 (Bankr. E.D. Pa. 1987).

The

Geller case, which reviewed dismissal motions under both §§ 707 and 1112(b), has been

criticized by courts in several subsequent decisions.

See Jabarin , 395 B.R. at 340 n.18 (continued…)Watkins , 229 B.R. at 908.

In construing § 707(a), courts have refused to dismiss a Chapter 7 case where the

dismissal would cause some plain legal prejudice to the creditors.

In re Higbee,

58 B.R. 71, 72 (Bankr. C.D. Ill. 1986). “If dismissal would prejudice the creditors, then it willAtlas Supply, 857 F.2d at 1063; see also In re Harker

ordinarily be denied.”

, 181 B.R. 326, 328 (Bankr. E.D. Tenn. 1995) (“[I]f creditors are prejudiced in any respect by the dismissal or if the trustee has acquired funds for distribution, a request by the debtor for dismissal will be denied.”). Legal prejudice is found to exist where assets which would otherwise be available to creditors are lost because of the dismissal. In re McCullough , 229 B.R. 374, 376 (Bankr. E.D. Va. 1999); Higbee, 58 B.R. at 72. Delay in satisfying creditors’ claims can be sufficient to preclude dismissal. Turpen, 244 B.R. at 435; Watkins, 229 B.R. at 909.

The debtor has the burden of proving cause for voluntary dismissal of the Chapter 7 petition.

In re Jabarin , 395 B.R. 330, 337 (Bankr. E.D. Pa. 2008). Even if the debtor can show cause,

the court may deny the motion if there is a showing of prejudice to creditors.   Turpen , 244  B.R. at 435. Thus, in order for a debtor’s motion to dismiss to be granted, the debtor must Geller plain legal prejudice test is “not consistent with the substantial body of case law that has developed under § 707(a) for assessing voluntary motions to dismiss chapter 7 bankruptcy cases. . . .”);  In re Mech. Maint., Inc., 128 B.R. 382, 388 (Bankr. E.D. Pa. 1991) (finding that the Geller court’s interpretation requiring the creditor to demonstrate “plain legal prejudice” was in error). This Court declines to follow Geller’s authority for the proposition that a debtor’s request for a voluntary dismissal of the Chapter 7 case should be granted “in all but extraordinary situations.” 74 B.R. at 690. constitute such cause, nor does debtor’s right to convert to Chapter 13 of the Bankruptcy Code.”  requires a balancing of the interests of the debtor and the creditors. Id.; see also Hickmanv. Hana (In re Hickman), 384 B.R. 832, 841 (B.A.P. 9th Cir. 2008) (stating that “the totality of the circumstances” should be considered in evaluating cause for dismissal and plain legal prejudice). Courts have considered the following general factors when determining whether there is sufficient cause to justify dismissal: (1) whether dismissal is in the best interest of the debtor; (2) whether dismissal is in the best interest of the creditors; (3) whether dismissal would result in an abuse or manipulation of the system; and (4) whether dismissal is justified by compelling equitable principles.  , 58 B.R. 923, 925-26 (Bankr. S.D.N.Y. 1986).Turpen , 244 B.R. at 434. “While these questions may inform the § 707(a) inquiry into whether ‘cause’ exists for voluntary dismissal, they are questions that are not best answered in the abstract. Rather, they should be resolved on a case-by-case basis in the context of the specific facts presented.”  Jabarin, 395 B.R. at 341. “In its simplest terms, the test turns on whether or not the dismissal is in the best interests of the debtor and the creditors of the estate, . . . with particular emphasis on whether the dismissal would be prejudicial to creditors.” In re Aupperle , 352 B.R. 43, 46 (Bankr. D.N.J. 2005). “In deciding whether to

exercise its discretion and grant a Chapter 7 debtor’s motion to dismiss the debtor’s case, the

court’s primary consideration is whether dismissal is in the best interest of the creditors and

also if those interests will be protected outside bankruptcy.”

Courts are not impressed with complaints of attorney negligence, lack of representation, or errors in judgment by debtors when considering motions for voluntarily dismissal.

In re Haque , 256 B.R. 352, 354 (Bankr. D. Mass. 2000).See In re Klein, 39 B.R. 530 (Bankr. E.D.N.Y. 1984) (denying motion to dismiss

In re Martin, 30 B.R. 24 (Bankr. E.D.N.C. 1983) (denying motion to

, 19 B.R. 300 (Bankr. D.Me. 1982) (denying motion to dismiss where debtors failed to read the petition which contained false information because they believed their attorney “would do nothing which wasn’t right for them”); In re St. Laurent , 17 B.R. 768 (Bankr. D.Me. 1982) (denying motion to dismiss because mistaken belief by debtor and her counsel that she could retain all assets as exempt and receive discharge of all her dischargeable debts was not cause under § 707(a)).Cohara, 324 B.R. at 27; Turpen , 244B.R. at 434;

221 B.R. at 994.

That position is based upon the House and Senate Reports on this provision which state:

The section does not contemplate, however, that the ability of the debtor to repay his debts in whole or in part constitutes adequate cause for dismissal. To permit dismissal on that ground would be to enact a non-uniform mandatory chapter 13 in lieu of the remedy of bankruptcy.

H.R.R EP.NO. 95-595, at 380 (1977), as reprinted in 1978 U.S.C.C.A.N. 5963, 6336; S.REP. NO. 95-989, at 94 (1978), as reprinted in 1978 U.S.C.C.A.N. 5787, 5880. Thus, “[i]t is well

Spatz, 221 B.R. at 994.

established and supported by the [l]egislative [h]istory that the fact that a debtor is willing and able to pay his debts outside of bankruptcy does not constitute adequate cause for dismissal under section 707(a)[.]”

Some courts have held that the legislative history of § 707(a) does not apply when

it is the debtor, as opposed to the creditor or another party who seeks dismissal on the

grounds of ability of the debtor to repay debts outside the bankruptcy process.

Smith , 507 F.3d at 73; Aupperle , 352 B.R. at 47 (“[T]he entire excerpt [of legislative history] refers to circumstances justifying cause for involuntary dismissal sought by a party other than theSmith, this does not mean that a debtor’s

ability to repay debts is per se grounds for dismissal; rather, the significance of the debtor’s

ability to pay is merely a part of the required inquiry into whether dismissal would be in the

best interest of all parties in interest. 507 F.3d at 74.

To succeed on her motion, the Debtor must show cause and demonstrate whydismissal is justified.

See Turpen, 244 B.R. at 434. The Debtor seeks to dismiss because of

a mistaken belief that her residence would be completely exempt. The Debtor additionally

claims to have the ability and intent to pay her creditors outside the context of the

bankruptcy case. The Court does not find these arguments persuasive. First, the Debtor’s

mistaken belief that she could retain her residence and a receive a discharge of all her

dischargeable debts does not constitute “cause” within the meaning of § 707(a). See St.

Laurent, 17 B.R. at 770. “Having voluntarily submitted herself and her assets to the

jurisdiction of the Bankruptcy Court, the [Debtor’s] regret over that decision . . . does not

constitute ‘cause’ justifying dismissal of her case.”

Second, the ability of the Debtor to pay her debts does not constitute cause for dismissal.

In re Taylor, No. 01-84995, 2002 WL 32001700, at *2 (Bankr. C.D. Ill. Mar. 27, 2002).

, 324 B.R. at 27. The Debtor filed for bankruptcy relief because she

was unable to pay her debts. The Debtor’s Schedules do not show that she has the ability

to pay her debts outside of bankruptcy. Significantly, this is not a case where the Debtor has

established an additional source of income to assist with her debts.

at 46, 48 (finding sufficient cause to warrant dismissal where it was the debtor’s first

bankruptcy filing, there were no pre-petition collection efforts, the debtor was unaware that

she might lose her residence through the Chapter 7 bankruptcy filing, the debtor had

established an additional source of income to assist with her debts, and there was an

insufficient basis in the record to conclude that creditors would be prejudiced by the

dismissal). It is not at all clear that any sources of funding alleged by the Debtor (i.e., family

gifts) will allow her to pay her debts outside of bankruptcy. The Debtor’s allegations that

she has “sought employment” and “contacted family members” are not reliable evidence of

any additional income or a change in her circumstances. The Debtor has not presented a

concrete or viable plan for paying her creditors outside of bankruptcy.

324 B.R. at 29 (reversing the bankruptcy court’s decision granting the motion to dismiss where debtor In re Hull, 339 B.R. 304 (Bankr.

failed to present a detailed plan concerning how she would use her non-exempt settlement

annuity to pay creditors outside of bankruptcy).

Finally, the Debtor’s reasons for dismissal do not outweigh the prejudice that would

result to her creditors. The Debtor, citing the case

E.D.N.Y. 2006), argues that creditors are generally not prejudiced by dismissal because theyId. at 309. Hull involved a pro se debtor who had a potential personal injury claim

will no longer be stayed from resorting to the state courts to enforce and realize upon their

claims.

that she had not scheduled as an asset. Id. at 306. The potential claim was the bankruptcy

estate’s only asset and if successful may have provided a distribution to the debtor’sd. However, the value of the claim had not been determined and it was unknown

creditors. I

whether an action on the claim had been commenced.Id at 309. The debtor also had

concerns for her personal safety which required her to relocate outside the district.

Id. at 308. The court considered the “reasonable pre-petition legal expectations and entitlementsId. at 309.

of a debtor’s creditors” and found that under the circumstances, the interests of the creditors

would not be prejudiced by dismissal despite the loss of an opportunity to receive a

distribution that only existed because of the bankruptcy process.

In this case, the Debtor’s residence was not an unscheduled, speculative asset. TheSee id. It is the perceived non-exempt portion of the equity in the Debtor’s residence that the Trustee seeksSee In re Baumgarten, 154 B.R. 66, 69 (Bankr. S.D. Ohio 1993). One consummated sale by the Trustee using the bankruptcyFulton, 339 B.R. at 701; see also In re Cink, No. 06-40019, 2007 WL 601585, at *3 (Bankr. D.S.D. Feb. 21, 2007) (stating

value of the property was listed, and the Debtor was represented by counsel at the time the

petition was filed. The Trustee’s arguments and objections are based on the “ reasonable

pre-petition legal expectations and entitlements” of the Debtor’s creditors.

to realize through a sale and pay the creditors’ allowed claims.

According to the Debtor, if the case is dismissed and each creditor obtained a

judgment against her, which later would result in liens against her residence, each creditor

may be satisfied in full from a sale of the property outside of the bankruptcy process. Here,

however, the sale of the Debtor’s residence outside of the bankruptcy process is not

guaranteed to occur. There is no assurance that if a sale occurs, the proceeds will be used

for the benefit of the Debtor’s unsecured creditors. If a dismissal is granted, the Debtor will

remain subject to all creditors’ individual collection remedies that exist under nonbankruptcy

law. This may result in a reordering of priorities or delays in payments. This is not cause

to dismiss the case, but is grounds for retaining jurisdiction so the creditors may be assured

of an equitable distribution of the Debtor’s assets.

process is certainly more efficient than multiple separate creditor execution sales.

“Absent court oversight of payment [of creditors by the debtor], creditors are

prejudiced. They bear the risk of not being paid, a very unlikely risk in a chapter 7 case.

The method for insuring payment of creditors out of any non-exempt portion of the estate’s

assets is through administration under the trustee system.”

that creditors are “entitled to full payment of their allowed claims to the extent estate fundsSee Turpen, 244 B.R. at 434.Maixner v. Surratt-States (In re Maixner), 288 B.R. 815, 818 (B.A.P 8th Cir. 2003). The Trustee’s proposed sale of the Debtor’sSee In re Szekely, 936 F.2d 897 (7th Cir. 1991). The Debtor seeks to terminate the potential bankruptcySee Jabarin, 395 B.R. at 343.

are available. Anything less is prejudicial to creditors. The statutory duty to insure an

appropriate distribution lies with Trustee. . . .”). The Debtor’s creditors will be prejudiced

by dismissal of this case, and they have already been stayed in their collection remedies via

11 U.S.C. § 362(a). The Debtor has limited income and resources and there is no guarantee

that creditors will receive payment outside of the bankruptcy process. The Debtor’s vow

to pay her creditors in the future does not dispel such prejudice.

Moreover, the Debtor’s desire to save the equity in her home to the detriment of her creditors is not grounds for a voluntary dismissal.

residence appears to represent the creditors’ best opportunity for obtaining satisfaction of

their claims. The cause asserted by the Debtor for dismissing her case is the fear that she

will lose her residence if the case is not dismissed and the Trustee is permitted to pursue the

sale of the property. She is only entitled to her homestead exemption, not the residence

itself, which is part of the bankruptcy estate under 11 U.S.C. § 541. It is the equity that may

be realized from the potential sale of the residence, after satisfaction of the homestead

exemption claim and unavoidable liens encumbering the residence, with which the Trustee

seeks to pay administrative priority and other allowed unsecured claims.

administration of the estate’s assets, but she has not presented any credible source for paying

her creditors outside of bankruptcy. In these circumstances, the balance of competing

interests tips in favor of the creditors.

IV. CONCLUSIONFor the foregoing reasons, the Debtor’s motion is insufficient in light of the Trustee’s

objection. However, she has waived her discharge and the Trustee has consented to the

dismissal of the case on the condition of payment of the agreed administrative expenses.

This Opinion constitutes the Court’s findings of fact and conclusions of law in

accordance with Federal Rule of Bankruptcy Procedure 7052.

See Cohara,

See Aupperle, 352 B.R.

See Cohara

even though debtor asserted he was not fully advised of the implications of commencing a bankruptcy case);  dismiss because the debtor was represented by counsel despite her assertion that counsel failed to explain the effects of filing a bankruptcy petition);

Watkins, 229 B.R. at 909. Determining whether cause exists to dismiss a case

See Watkins, 229 B.R. at 909; In re Schwartz

show adequate “cause” per § 707(a) and that such dismissal will cause no prejudice to

creditors.   at 434-35.

Sicherman v. Cohara (In re Cohara), 324 B.R. 24, 28 (B.A.P. 6th Cir. 2005);