Michael E. Madera

UNITED S TATES B ANKRUPTCY COURT
FOR T HE E ASTERN DISTRICT O F PENNSYLVANIA
In re 	: 	Chapter 13
:
MICHAEL E. MADERA, 	: 	Bankruptcy No. 07-17296DWS
:
Debtor. 	:
MEMORANDUM OPINION
BY: 	DIANE WEISS SIGMUND, Chief Bankruptcy Judge
Before the Court is the Motion to Dismiss Bankruptcy With a Bar Order and Motion
for Sanctions (the “Dismissal Motion”) filed by Deutsche Bank National Trust Company,
as Trustee of Ameriquest Mortgage Securities, Inc. (“Deutsche”) and the Motion for
Continuance of the Stay Beyond 30-Day Period (the “Stay Extension Motion ”) filed by the
Debtor. For the reasons that follow, the Dismissal Motion shall be granted in part and this
case shall be dismissed. Accordingly, the Stay Extension Motion is moot.
BACKGROUND
A motion alleging that a bankruptcy petition has been filed in bad faith often involves
a factual and procedural history extending beyond the case in which the dismissal motion
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1 See Fed.R.Evid. 	201, incorporated in these proceedings by Fed.R.Bankr.P. 9017.
See Maritime Elec. 	Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1200 n.3 (3d Cir. 1991);
Levine v. Egidi, 1993 WL 69146, at *2 (N.D. Ill. 1993); In re Paolino, 1991 WL 284107, at *12 n.
19 (Bankr. E.D. Pa. 1991); see generally In re Indian Palms Associates, Ltd., 61 F.3d 197 (3d Cir.
1995).
While a court may not take judicial notice sua sponte of facts contained in the debtor’s file
that are disputed, In re Augenbaugh, 125 F.2d 887 (3d Cir. 1942), it may take judicial notice of
adjudicative facts “not subject to reasonable dispute ... [and] so long as it is not unfair to a party to
do so and does not undermine the trial court’s factfinding authority.” In re Indian Palms Assoc.,
61 F.3d 197, 205 (3d Cir. 1995) (citing Fed.R.Evid. 201(f) advisory committee note (1972 proposed
rules). Deutsche has sought and I will take judicial notice of the transcript of Deborah’s testimony
at a hearing on May 15, 2007.
Moreover, “factual assertions in pleadings, which have not been superceded by amended
pleadings, are judicial admissions against the party that made them. Larson v. Gross Bank, 204 B.R.
500, 502 (W.D. Tex. 1996) (statements in schedules). 	See also In re Musgrove, 187 B.R. 808
(Bankr. N.D. Ga. 1995) (same); In re Leonard, 151 B.R. 639 (Bankr. N.D.N.Y. 1992) (same).
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is filed. This case is no different. The debtor, Michael E. Madera (“Michael”), and his wife,
Deborah Madera (“Deborah”, and together with Michael, the “Maderas”) are not strangers
to this Court. Combined, they have filed in the past eighteen months, three bankruptcy cases
and two adversary proceedings, all in an attempt to stave off foreclosure of their home. I will
therefore incorporate by reference my prior findings of fact and take judicial notice of the
dockets and documents filed in this and in their prior cases.1 At all times the Maderas have
been represented by the same attorney, David A. Scholl, Esquire.
The Maderas are co-owners of property located at 401 Twin Streams Drive,
Warminster, Pennsylvania (the “Residence”). In June 2005, the Maderas refinanced a prior
mortgage on the Residence through Ameriquest Mortgage Company (“Ameriquest”).
Madera v. Ameriquest Mortgage Co. (In re Madera), 363 B.R. 718, 720-21 (Bankr. E.D.
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2 It is unclear exactly when the mortgage was assigned to Deutsche, though it appears it must
have occurred after Deborah’s bankruptcy case. 	For the sake of consistency, I will refer to
Ameriquest and Deutsche interchangeably as “Deutsche”.
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Pa. 2007). The Mortgage was subsequently assigned to Deutsche Bank. Dismissal Motion
and Debtor’s Answer ¶ 4. 2
After making one mortgage payment, the Maderas went into default and Ameriquest
initiated 	foreclosure 	proceedings 	in 	the 	Court 	of 	Common 	Pleas, 	Bucks 	County,
Pennsylvania. A default foreclosure judgment was entered against Plaintiffs on May 9, 2006.
363 B.R. at 722. A sheriff’s sale of the premises was stayed when Deborah filed a petition
under Chapter 13 on July 19, 2006, In re Madera, No. 06-13000 (“Deborah’s Bankruptcy”).
In the context of Deborah’s Bankruptcy, the Maderas filed two adversary proceedings
alleging violation of federal and state consumer protection statutes, and seeking to rescind
the Ameriquest mortgage transaction. 	Summary judgement was entered against them
on both. 	See Madera v. Ameriquest, 363 B.R. 718 (Bankr. E.D. Pa. Feb. 8, 2007)
(“First Adversary”) (appeal pending); Madera v. Ameriquest, Adv. No. 07-001, Order dated
April 10, 2007. 	The Chapter 13 Trustee filed two motions to dismiss Deborah’s case
for failure to make plan payments, which were subsequently resolved through entry of a
wage order.
Deutsche obtained relief from stay on June 19, 2007. At a hearing held the month
prior (the “Stay Relief Hearing”), certain facts came to light that are relevant to the instant
Dismissal Motion. Deborah conceded that no post-petition mortgage payments had been
made to Ameriquest, although it appears several of the Maderas’ checks were returned or not
cashed. 	Transcript of May 15, 2007 Hearing (“Tr.”) at 9. 	However, rather than holding
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3 Deborah testified that she was current on the taxes on the Trevose Property but that she
and Michael had not paid the $3,500 annual taxes on the Residence since 2005, in contravention to
her Schedule J, which indicates monthly payment of real estate taxes on the Residence. Tr. at 41-42.
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those mortgage funds, Deborah used them to pay for expenses related to her mother, who
Deborah testified was ailing in late 2006 and passed away on March 29, 2007. Tr. at 10-11,
13-15.
The purported death of Deborah’s mother did result in a fortuity which Deborah
asserted as the basis of a plan to cure the Madera’s mortgage arrears. Deborah testified that
her mother devised her residence to Deborah and a brother. 	Deborah testified that the
property, located at 1303 Redcone St., Trevose, Pennsylvania (the “Trevose Property”),
was unencumbered and all real estate taxes were paid. Tr. at 16.3 Deborah also testified that
in April 2007 she had entered into a listing agreement with a real estate agent, of which her
fifty percent of the proceeds would be used to fund her plan. Tr. at 15-16. Being somewhat
skeptical of Deborah’s ambitious hope of a sale within thirty days, particularly given that the
proffered Fourth Amended Plan allowed her until March 2008 to do so, I conducted further
inquiry from the bench. Her responses indicated that: (1) her brother had agreed to the sale
of the Trevose Property; (2) she was not really sure whether her mother’s estate been
probated, and therefore whether she had a vested interest in the Trevose Property; and
(3) a cousin was the executor of her mother’s estate. Tr. at 31-32. She also testified that her
brother was developmentally disabled, Tr. at 38, but no further testimony was elicited as to
whether this impaired his ability to consent to the sale of the Trevose Property.
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At the end of the Stay Relief Hearing, neither the Chapter 13 Trustee nor Ameriquest
– or the Court for that matter – was satisfied with the proffered Fourth Amended Plan that
proposed to give the Maderas until March 2008 to sell the Trevose Property with no
payments being made on the residential mortgage. 	However, in the interest of giving
Deborah the opportunity to make use of the Trevose Property to fund her plan, I adjourned
the hearing to June 19 to allow her to formulate a new plan. However, I made it clear that
Deborah must resume current mortgage payments on the Residence, beginning with the
June 1, 2007 payment. Tr. 67-68.
On June 19, 2007, the Stay Relief hearing resumed. Deborah failed to attend and had
not made the required June 1 mortgage payment. As such, I granted the stay relief motion.
Deborah voluntarily dismissed her case on August 14, 2007, and pursuant to 11 U.S.C.
§ 109(g)(2), was barred from filing a new case for 180 days. The reason for this dismissal,
Mr. Scholl now advises the Court, was that Deborah wanted the use of the approximately
$3,000 in plan payments being held by the Chapter 13 Trustee and which are returned to the
debtor where no plan has been confirmed.
Michael filed his first bankruptcy case, No. 07-15922, on October 10, 2007.
He admits that he did so to stay a pending sheriff’s sale on the Residence. On November 9,
2007, Deutsche filed a Motion to Dismiss the case as having been filed in bad faith
(the “Prior Dismissal Motion”). 	The Prior Dismissal Motion was scheduled for hearing
on December 12. A sheriff’s sale of the Residence was scheduled for December 14, 2007.
The Chapter 13 plan filed in Michael’s first case proposed $100 monthly payments, which
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4 Michael could not explain why his plan proposed so much less than that proposed in
Deborah’s case, nor could he state whether his wife would contribute to his plan through a wage
order as she had done before.
5 His interest in this property was not listed on Schedule A or B. After the hearing on the
Dismissal Motion, Debtor filed an Amended Schedule B disclosing his interest in his mother’s
property as well as the stock dividends discussed below.
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is $400 less than the payments made in Deborah’s case. 	Those payments would only be
made until the “sale of the home owned by his late mother’s estate,” which would allegedly
pay all claims filed. 	No interest in real estate aside from the Residence was listed in
Michael’s Schedule A or B.
On December 10, 2007, two days before the Prior Dismissal Motion hearing,
Michael’s first case was dismissed. 	On December 13, 2007, the day before the pending
sheriff’s sale, Michael filed this bankruptcy case. The present Dismissal Motion was filed
on December 14. The same day, Michael filed the Stay Extension Motion. A hearing was
held on both motions on January 24, 2008 and a consolidated record was made.
Only Michael testified at the hearing. Deborah was not present. As in his prior case,
Michael’s proposed Chapter 13 plan provides for $100 payments4 pending the sale of
his deceased mother’s house, located at 1303 Redcone Street, Trevose, Pennsylvania.
Michael’s mother passed away in 1995.5 Only after the Court noted a sense of deja vu was
it revealed that his mother’s house is in fact the same Trevose Property which Deborah
testified belonged to her mother and had been devised to her and her brother. 	There are
numerous contradictions between Michael and Deborah’s stories regarding the Trevose
Property. Deborah testified that her mother’s estate had not yet been probated and that a
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cousin was the executor of the will. 	While Michael did not testify as to the status of his
mother’s estate, he stated that his uncle, who passed away in 2004, was the executor,
thus implying that his mother’s estate has been probated.
Michael’s interest in the Trevose Property is shared equally with a developmentally
disabled brother, much as Deborah had claimed in her case but this time identified as
Richard R. Madera, who resided at the Trevose Property until sometime in 2000 or 2001.
While Deborah testified as to having the consent of her brother to sell the Trevose Property,
Michael testified that he has not seen Richard in four years. When questioned by counsel for
the Chapter 13 Trustee as to why he has not attempted to move forward with selling the
Trevose Property since 2001, Michael asserted that Richard “sort of went missing.” In the
next sentence he contradicted himself by stating that Richard and his wife moved to
New Jersey.
Michael’s brother, unlike the brother Deborah testified to, does not have authority to
consent to the sale of the Trevose Property. 	Michael offered into evidence a letter dated
November 21, 2007, from Francine W. Kaplan, Esquire, to Mr. Scholl, stating that Richard’s
interest in the Trevose Property is subject to a trust. 	Exhibit. D-2 (the “Trust Letter”).
The former trustee, Richard Anthony Madera, passed away in 2004 and no replacement
trustee has been appointed. Kaplan’s firm has filed a petition to appoint Kim N. Raffaele as
the new trustee to Richard’s trust so that the Trevose Property can be sold. 	None of this
information was supplied by Deborah when she raised the issue of the Trevose Property in
her sworn testimony on May 15, 2007.
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6 Michael proffered a letter from Lerch & Associates Real Estate stating it would charge
$2,500 to handle the sale of the Trevose Property. Exh. D-4.
7 At the hearing, Michael valued the Trevose Property at $150,000, but provided no factual
basis for this value, which is contradictory to his Amended Schedule B. That document discloses
a one-half interest valued at $60,000, implying the Trevose Property is worth $120,000. He did not
state whether any taxes or other liens would have to first be satisfied from the sale of the Trevose
Property. 	However, a search on Westlaw indicates two judgment liens by Lower Southampton
Township.
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Notwithstanding the lack of a trustee to represent his brother’s interests, Michael
testified that he has a “cash buyer” who is willing to pay $143,000 for the Trevose Property
and a realtor ready to handle the transaction.6 No documentary evidence was presented
supporting this offer, and Michael conceded that there was no signed agreement of sale. 7
Michael did not acknowledge or offer any explanation as to the discrepancies between
his testimony and that of Deborah with respect to the Trevose Property. 	Indeed, when
questioned about his wife’s bankruptcy case, Michael displayed an incredible lack of
knowledge, despite the fact that Deborah’s case clearly affected the Residence that he lives
in and that he was a named plaintiff in the adversary proceedings in that case. He could not
even remember when Deborah’s mother passed, which according to Deborah occurred less
than a year ago. With respect to the Trevose Property, the only finding I can make on this
record is that Michael, and not Deborah, has an interest in the Trevose Property. However,
I do not believe, without substantiation, the extent of Michael’s interest, the value of the
Trevose Property, or the existence of a willing buyer.
Moreover, Michael is unwilling to take the steps needed to effectuate a sale of the
Trevose Property. The letter from attorney Kaplan asks Michael sign an attached affidavit
supporting the appointment of the new trustee. 	Michael is unwilling to approve of
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Ms. Raffaele because he fears that she will seek a higher purchase price than the offer
Michael currently has on the Trevose Property. In addition, he states that Ms. Raffaele was
friends with Richard’s late wife, who Michael asserts exerted undue influence upon Richard
and alienated him from his family. Without addressing the credibility of this testimony, it is
at least indicative of an adversarial relationship between Michael and his brother which
presents a serious obstacle to liquidation of the Trevose Property.
In addition to the Trevose Property, Michael proffered another potential asset which
could fund a plan. He has a claim for $49,000 in stock dividends (the “Stock Dividends”)
that were held jointly with his mother and have been deposited with the Pennsylvania
Treasury Department - Bureau of Unclaimed Property (the “BUP”). 	He admits that he
became aware of the dividends sometime prior to his first bankruptcy case. The BUP sent
a letter to Judge Raslavich dated October 26, 2007, referencing Michael’s first bankruptcy
case number and stating that there were unclaimed funds owed to him. 	Exhibit D-1.
The BUP letter states:
Dear Sir:
I am writing to inform you that unclaimed property was reported to the [BUP]
in the name of Pearl and Michael E. Madera JTN. 	Pearl Madera is now
deceased; therefore the funds now belong solely to Michael E. Madera.
The property, which was reported to BUP by Northeast Utilities Services Co.,
are proceeds from Dividends and Dividend Reinvestment. The Dividends and
Dividend Reinvestment in the amount of $49,379.00 were never received by
the claimant and were reported to the Treasury Department as unclaimed
property.
The claimant, Michael E. Madera, has come forward to claim this money.
However, in our research we were able to obtain records showing that
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Michael E. Madera filed for Chapter 13 Bankruptcy on 10/10/07 . . . By this
letter, the Treasury Department is seeking guidance from the Bankruptcy Court
on payment of these funds.
Please be advised that if notification of your interest in the unclaimed property
is not made to BUP within thirty days of this letter, the claim will be processed
for payment
. . .
Exhibit D-1. Michael testified that he was told by the BUP that he cannot access the Stock
Dividends because of this bankruptcy case. I simply do not find this explanation credible.
As the letter states, he did try to claim them but BUP discovered his bankruptcy and stated
its intention to process Michael’s claim absent notice from the Bankruptcy Court. In any
event, that case and Trustee were dismissed, and Michael took no action. While he states that
he was waiting for his new Trustee (William C. Miller, Esq.) to do something, there is no
evidence that Mr. Miller was informed nor that if he was, that he would have done anything.
Michael does not explain why he has not notified the BUP to process his claim. Indeed there
is no evidence to indicate that the BUP is aware of this bankruptcy case, and Mr. Miller’s
counsel questioned Michael as to why he had taken no steps to obtain these funds.
More significantly, Michael has not disclosed the Stock Dividends in his Schedules in either
case nor provided for their use to fund his Chapter 13 plans which rely solely on the Trevose
Property to fill the deficiency in his income.
Finally, Michael was unable to explain why he voluntarily dismissed his prior case.
Indeed, he had no clue. It was his counsel, Mr. Scholl, who quite candidly explained that the
voluntary dismissal was his strategic decision. He did not want to take a chance on losing
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8 Indeed, Scholl commented how fortunate it was that Deutsche’s counsel did not have the
forethought to file a motion for relief from stay as well as the Prior Dismissal Motion, which would
have prevented his strategic filings. See 11 U.S.C. § 109(g)(2).
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the Prior Dismissal Motion and being barred from filing a new case prior to the pending
sheriff’s sale. Since Deutsche had not filed a motion for relief from stay which would have
resulted in a bar order under § 109(g)(2), counsel concluded the “out” and “in” strategy was
the safest and a permissible option to avoid the imminent foreclosure.8
DISCUSSION
Section 1307(c) provides that Chapter 13 petitions may be dismissed “for cause.”
11 U.S.C. § 1307(c). In In re Lilley, 91 F.3d 491, 496 (3d Cir. 1996), the Third Circuit held
that a debtor’s lack of good faith in filing is sufficient cause for dismissal under § 1307(c).
Because the term “good faith” is “incapable of precise definition,” the good faith inquiry
is a fact intensive determination that is left to the discretion of the bankruptcy court. 	Id.
The good faith of Chapter 13 filings is “assessed on a case-by-case basis in light of the
totality of the circumstances.” Id. To assist the bankruptcy court in its review, the following
factors have been identified by the Third Circuit to be among those relevant to the inquiry:
the nature of the debt ...; the timing of the petition; how the debt arose;
the debtor's motive in filing the petition; how the debtor's actions affected
creditors; the debtor's treatment of creditors both before and after the petition
was filed; and whether the debtor has been forthcoming with the bankruptcy
court and the creditors.
Id. (quoting In re Love, 957 F.2d 1350, 1357 (7th Cir. 1992)). 	See also Eisen v. Curry
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(In re Eisen), 14 F.3d 469, 470 (9th Cir. 1994) (quoting In re Goeb), 675 F.2d 1386, 1391
(9th Cir. 1982)) (whether the debtor “misrepresented facts in his [petition or] plan, unfairly
manipulated the Bankruptcy Code or otherwise [filed] his Chapter 13 [petition or] plan in
an inequitable manner.”). 	Moreover, “where the purpose of the bankruptcy filing is to
defeat state court litigation without a reorganization purpose, bad faith exists.” In re Dami,
172 B.R. 6, 10 (Bankr. E.D. Pa. 1994). In analyzing these factors, Deborah’s conduct in her
case is equally relevant as Michael’s in his cases. E.g. In re Feldman, 309 B.R. 422, 427
(Bankr. E.D.N.Y. 2004) (imputing the non-filing spouse's prior abusive filings to the debtor
in determining that the debtor's first case was filed in bad faith); In re Kinney, 51 B.R. 840,
845 (Bankr. C.D. Cal.1985) (finding that the actions of each family member in filing multiple
bankruptcies could be imputed to the rest of the family for purposes of determining abuse of
the bankruptcy system); In re Wong, 30 B.R. 87, 89 (Bankr. C.D. Cal. 1983) (considering
husband and wife's separate filings to determine abuse of the bankruptcy system).
Timing and Debtor’s Motive. 	Together, Michael and Deborah have filed three
bankruptcy cases in eighteen months. No mortgage payments were made in the year that
Deborah’s case was pending while she and Michael litigated their adversary proceedings
against Deutsche. When Deutsche secured relief from stay so that her bankruptcy ceased to
serve its purpose of obstructing foreclosure, Deborah voluntarily dismissed her case so that
she could pocket the $3,000 held in the Trustee’s account. Rather than use those funds to
negotiate some arrangement with Deutsche, Michael filed his first case, which he freely
admits was filed solely to stop the sheriff’s sale of the Residence. His counsel admits that
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the voluntary dismissal, two days before the Prior Dismissal Motion, was a purposeful
strategic action to avoid the hearing and allow Michael to refile in order to once again avoid
the rescheduled sheriff’s sale. 	Mr. Scholl argued that as nothing in the Code expressly
prohibited this maneuver, it was a legitimate step to protect the Residence. 	To say that
I disagree is an understatement. The absence of a statutory bar to the filing of Michael’s
second petition does not render that strategy equitable or appropriate. With absolutely no
effort to disguise it, the second bankruptcy filing stands as a conspicuous attempt to unfairly
manipulate the Bankruptcy Code to frustrate Deutsche’s foreclosure sale.
“The filing of successive petitions in bankruptcy ... may be indicia of a bad faith filing
where there is no bona fide change in circumstances that justify the multiple filing or where
the subsequent filing was designed to frustrate statutory requirements and abuse the
bankruptcy process.” In re Coones Ranch, Inc., 138 B.R. 251, 258 (Bankr. D. S.D. 1991).
Michael’s second case is in no way different from the first. How could it be, given it was
filed only three days later, after a strategic dismissal? If Michael truly desired to reorganize
using the Trevose Property and/or the Stock Dividends, he would not have dismissed his
first case. Rather, he would have testified in support of his plan to demonstrate these then
existing and now belatedly claimed “changed circumstances.” That he did not do so is ample
evidence that he lacks any real motive to reorganize under Chapter 13.
The Maderas’ true intentions are also demonstrated by their utter failure to comply
with their statutory duties in bankruptcy. A cure of any default in a Chapter 13 plan must be
done “within a reasonable time and maintenance of payments while the case is pending.”
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11 U.S.C. § 1322(b)(5) (emphasis added). Through the use of successive bankruptcy cases
and bankruptcy litigation, the Maderas have kept Deutsche at bay for two years without
making a single post-petition mortgage payment. 	In May 2007 Deborah testified, upon
penalty of perjury, that it was the illness and death of her mother that made it impossible to
make the mortgage payments and then in the next breath proffered that timely demise as a
silver-lined cloud that would fund a plan to pay Deutsche. Even before the falsity of that
testimony was demonstrated through Michael’s second case, Deborah demonstrated her lack
of good faith by failing to make the June 1 mortgage payment that would have purchased
her the time to pursue sale of the Trevose Property. Like Deborah, Michael admits that no
post-petition mortgage payments have been paid, but states that he is now willing to start
paying it forthwith. How he will do so remains unanswered. His schedule B in both his
cases shows a mere $500 in the joint checking account which one would expect to be greater
given the absence of this budgeted expense. Clearly the Maderas have not been putting their
mortgage payments aside while they attempt to sell the Trevose Property.
I simply do not believe that the Trevose Property, which has been sitting empty since
2001, is likely or even able to be sold in a reasonable amount of time. Michael’s testimony
that he could not locate his brother to do so is simply not credible. Moreover, Michael is
actively frustrating the Trevose Property sale by his refusal to accept Ms. Raffaele as trustee
for Richard’s trust. Whether it is Ms. Raffaele or not, the ultimately appointed trustee will
have a fiduciary duty to Richard to obtain the best possible price for the Trevose Property.
That duty may or may not be in harmony with Michael’s interest in a “quick” sale to his
cash buyer. Michael’s attitude as evidenced by his testimony and the protracted history of
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the lack of exposure of the Trevose Property for sale present real obstacles to a timely
solution to the payment of Deutsche’s arrears under a new Chapter 13 plan. Indeed, I find
that both Michael and Deborah before him have been disingenuous in proffering the Trevose
Property as an asset which will be readily sold under a confirmable chapter 13 plan.
With respect to the Stock Dividends, I reject Michael’s attempt to blame his inaction
upon the Chapter 13 Trustee. Michael is represented by counsel who could guide Michael
through the procedural steps needed to claim the Stock Dividends and make them available
to fund the Chapter 13 plan by amending the plan to actually provide as much. 	The
Chapter 13 Trustee, unlike a Chapter 7 trustee, could not claim the Stock Dividends under
the Chapter 13 plan in its present form. There is simply no reason for Michael’s failure to
take affirmative action, leading me to conclude that he has no real interest in using these
funds to pay Deutsche. Rather, his plan states his intention that Deutsche simply wait for a
sale of the Trevose Property that is not likely to occur at any time soon and hope that it
could be sold at a price sufficient to cure the arrears.
Candor to the Court. 	Together the Maderas have made misrepresentations and
omissions of fact. 	In particular, the circumstances surrounding the Trevose Property are
shrouded in a mist of deception. Deborah unequivocally testified that the property interest
was hers and the Trevose Property became available from the March 29, 2007 death of her
mother. To the contrary, Michael’s testimony is that the property interest is his from the
1995 death of his mother. 	Deborah testified that the other interest-holder in the Trevose
Property had consented to the sale. Michael’s testimony makes it clear that has not occurred.
Michael and Deborah’s stories simply cannot be reconciled.
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9 This is how Mr. Scholl titled his response, but as noted above, no stay relief was sought
in the Prior Dismissal Motion. Supra n. 8.
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Through his counsel Michael responded to the Prior Dismissal Motion in relevant
part:
The Debtor has indicated to counsel for the Movant that he is a recipient of a
large unclaimed property claim and has signed an agreement of sale to sell the
home of his late mother, both of which will generate sufficient funds to
promptly cure any default in payments, and may even be sufficient to satisfy
the mortgage balance. These are circumstances which dramatically changed
the financial status of the Debtor and his wife subsequent to the dismissal of
his wife's bankruptcy case.
Debtor's Answer to Ameriquest Mortgage Company's Motion For Relief from the Automatic
Stay [sic9] and Sanctions, ¶ 4, In re Madera, No. 07-15922, Doc. No. 27 (emphasis added).
This assertion is a mix of half-truths and outright falsehood. Michael’s testimony clearly
established that there is no signed agreement of sale for the Trevose Property. Also contrary
to the above the above-quoted statement, which implies that the availability of a sale of
the Trevose Property is a changed circumstance, the testimony revealed it has been sitting
empty and available for sale since 2001.
I also note that Michael failed to disclose the Stock Dividends on his Schedule B in
his last case or on his initially filed Schedule B in this case. Nor did he propose use of these
funds in the proposed chapter 13 plan filed in his first case. 	It was the BUP’s own
investigation that revealed Michael’s first case, which led the BUP to contact Judge
Raslavich’s chambers. Michael’s explanation for his failure to disclose this asset, i.e., that
he wasn’t sure as to the amount, is unacceptable, and makes me question whether it would
have been disclosed had he not thought its existence would “save” his case. Nor does the
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mere fact that a debtor has the ability to amend schedules at any time under Fed. R. Bankr.
P. 1009(a) justify a reckless disregard of a duty to truthfully disclose known assets the first
time schedules are filed. 	Bankruptcy schedules require debtors to verify the disclosures
contained in the schedules under penalty of perjury. 	“By statute, that has the force and
effect of an oath.” Cepelak v. Sears (In re Sears), 246 B.R. 341, 347 (8th Cir. BAP 2000)
(citing 28 U.S.C. 1746).
The effect of the Maderas actions upon Deutsche. The Maderas have kept Deutsche
at bay for almost two years without making any post-petition payments on a loan they
defaulted on after only one payment. Deutsche has been utterly frustrated in its efforts to
liquidate a foreclosure judgment that the Maderas have made no attempt to challenge in the
state court or to realistically address in bankruptcy. It has incurred attorney’s fees and costs
associated with filing its relief motion in Deborah’s case and the dismissal motions in
Michael’s cases, cases which have been motivated solely to delay Deutsche and to litigate
claims that should have been brought in the state court. See Madera v. Ameriquest, 363 B.R.
at 725 (holding that TILA rescission claim was barred by Rooker-Feldman doctrine).
While demanding the protection of the bankruptcy law, the Maderas’ failure to be truthful
to this Court and its processes negates their good faith.
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10 In Dami, the debtor had filed four unsuccessful bankruptcy cases over 3-1/2 years each
on the eve of a mortgage foreclosure proceeding, thereby securing the benefit of the automatic stay
to obstruct the mortgagee. His Schedules were replete with not only omissions but false statements
about his assets and liabilities, income and expenditures, and his excuses for the state of his
documents were found to be “lame and incredible.” Importantly, I found that:
this is the precise type of bankruptcy recidivism that mocks the bankruptcy system.
There can be no question that Debtor's conduct is a flagrant abuse of the automatic
stay provisions of the Bankruptcy Code, interposed for the sole purpose of
harassment and delay and intended to cause Movant great cost and expense.
Id. at 11. This finding is equally applicable here.
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In the Dismissal Motion Deutsche has requested that this case be dismissed with a bar
order against Michael filing another case for a period of 180 days. 	In appropriate
circumstances where the facts evidence an abuse of the provisions, purposes and spirit of
Chapter 13, this Court has joined other bankruptcy courts that find that more than dismissal
is warranted. Dami, 172 B.R. at 11.10 In such a case, Bankruptcy Rule 9011, incorporating
Fed.R.Civ.P.11 provides the authority for the sanction Deutsche seeks. 	As the Court in
In re Jones, 117 B.R. 415, 420 (Bankr. N.D. Ind. 1990) stated:
[W]here a debtor files a petition in bankruptcy with no intention of obtaining
the benefits or the goals for which the proceeding was designed or with
no intention of pursuing those proceeding[s] to their natural conclusion, the
bankruptcy code is being abused and bankruptcy rule 9011 is being violated.
See also In re Narod, 138 B.R. 478, 482 (E.D. Pa. 1992) (sanctions imposed under Rule 9011
are not limited to expenses or fees). Other courts have relied on their discretionary power
under Section 349, see, e.g., In re McKissie, 103 B.R. 189, 193 (Bankr. N.D. Ill. 1989);
or Section 105, see, e.g., In re Earl, 140 B.R. 728, 741 (Bankr. N.D. Ind. 1992), to enjoin
future filings to prevent abuse of the bankruptcy process. The Court's ability to impose this
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sanction is necessary to maintain the integrity of the bankruptcy process and avoid
burdening the court's docket with frivolous cases, thereby depleting valuable and limited
court resources which could be channeled to meritorious cases. 	This sanction is also
necessary to assure that this court should not be a sanctuary for litigants seeking to avoid
valid orders of the state court through improper means. On these facts, I easily conclude that
the 180-day bar Deutsche seeks against Michael should be granted.
The Dismissal Motion also seeks monetary sanctions against Michael and Scholl
for filing the instant case pursuant to Federal Rule of Bankruptcy Procedure 9011.
However, Michael and his attorney correctly note, this request was not proceeded with the
requisite demand and opportunity for Michael to withdraw the petition, as required by
Rule 9011(c)(1)(A) (the “Safe Harbor Provision”).
An Order consistent with the foregoing Memorandum Opinion shall be entered.
DIANE WEISS SIGMUND
Chief U.S. Bankruptcy Judge
Dated: February 7, 2008
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UNITED S TATES B ANKRUPTCY COURT
FOR T HE E ASTERN DISTRICT O F PENNSYLVANIA
In re 	: 	Chapter 13
:
MICHAEL E. MADERA, 	: 	Bankruptcy No. 07-17296DWS
:
Debtor. 	:
ORDER
AND NOW, this 7th day of February 2008, upon consideration of the Motion to
Dismiss Bankruptcy With a Bar Order and Motion for Sanctions (the “Dismissal Motion”)
filed by Deutsche Bank National Trust Company, as Trustee of Ameriquest Mortgage
Securities, Inc. (“Deutsche”), and the Motion for Continuance of the Stay Beyond 30-Day
Period (the “Stay Extension Motion”) filed by the Debtor, after notice and hearing and
for the reasons stated in the accompanying Memorandum Opinion;
It is hereby ORDERED that:
1. 	The Dismissal Motion is GRANTED, and the Chapter 13 case is hereby
DISMISSED. The Debtor may not file another bankruptcy case for a period of 180 days
following entry of this Order. 	To the extent that the Dismissal Motion seeks monetary
sanctions, the request is DENIED.
2. The Stay Extension Motion is MOOT.
DIANE WEISS SIGMUND
Chief U.S. Bankruptcy Judge
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