Jean- Pierre Schafroth and Gertrud Schafroth

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: 	JEAN-PIERRE SCHAFROTH and 	No. 	7-11-13685 JR
GERTRUD SCHAFROTH,
Debtors.
ORDER DENYING MOTION TO DISMISS
THIS MATTER is before the Court on the Motion to Dismiss filed by the Debtors, Jean-
Pierre Schafroth and Gertrud Schafroth, by and through their counsel of record, Charles
Hawthorne. 	The Chapter 7 Trustee, Clarke C. Coll, opposes the Motion to Dismiss. 	The Court
held a final hearing on the merits on May 14, 2012 and took the matter under advisement. The
parties agreed that the Court could take judicial notice of the documents filed of record in this
bankruptcy case and the proofs of claim filed in the bankruptcy case.1 After reviewing the
record of this bankruptcy case and the claims on file in this case, and after considering the
testimony admitted in evidence at the final hearing, the Court concludes that the Motion to
Dismiss must be denied. 	In reaching this determination the Court finds:
1. 	The Debtors are Swiss nationals who moved to New Mexico in 1991 to purchase and
operate a business in Ruidoso, New Mexico known as Innsbrook Lodge (the
“business”).
2. 	Mr. Schafroth used funds from his retirement fund in Switzerland to purchase the
business.
3. 	The Debtors filed a voluntary petition under Chapter 7 of the Bankruptcy Code on
August 15, 2011.
1 The Court also takes judicial notice of Adversary Proceeding No. 12-1154 and the documents filed of record in
that proceeding to support finding number 10 below. See Rule 201(b)(2) and (c), Fed.R.Evid. (providing that a court
may take judicial notice of “a fact that is not subject to reasonable dispute because it . . . . can be accurately and
readily determined from sources whose accuracy cannot reasonably be questioned[,]” and providing further that the
court “may take judicial notice on its own.”)). See also In re Smith, 2012 WL 1123049, at *1 (Bankr.W.D.Tex.
April 3, 2012)(acknowledging that “[a]s a general matter, courts may take judicial notice of documents filed in
another court, though merely to establish that such documents have been filed, or to establish the existence of
litigation.”)(citation omitted).
Case 11-13685-j7 Doc 35 Filed 05/23/12 Entered 05/23/12 13:11:20 Page 1 of 6

2
4. 	On Schedule B, the Debtors listed an interest in an IRA with a current value of
$120,000.00. 	See Docket No. 1.
5. 	The Debtors claimed the entire value of the IRA as exempt under 11 U.S.C. §
522(d)(2). See Docket 1 – Schedule C.
6. 	The Chapter 7 Trustee filed an objection to the Debtors’ claim of exemption in the
$120,000.00 identified on Schedules B and C as an IRA (the “Funds”), asserting that
the Funds represented proceeds from the Debtors’ sale of the business in 2010 that the
Debtors then deposited into a Swiss bank account. See Docket No. 12.
7. 	On December 7, 2011, The Chapter 7 Trustee filed an amended objection to the
Debtors’ claim of exemption in the Funds, asserting, among other things, that the
Funds are not qualified retirement benefits and are not currently on deposit in a
qualifying retirement account. See Docket No. 23.
8. 	The Debtors did not respond to the Chapter 7 Trustee’s amended objection to the
Debtors’ claim of exemption, and an Order Granting Trustee’s Amended Objection to
Exemptions was entered on February 23, 2012. 	See Docket No. 28. 	The Debtors’
claim of exemption in the Funds identified as an IRA on the Debtors’ Schedule B and
C was disallowed.
9. 	Following the disallowance of the Debtors’ claim of exemption, the Chapter 7
Trustee filed an adversary proceeding seeking turnover of the Funds on deposit in the
Swiss bank account. See Complaint for Turnover - Adversary Proceeding No. 12-
1154, Docket No.1.
10. On April 25, 2012, the Chapter 7 Trustee obtained a judgment by default against the
Debtors in Adversary Proceeding No. 12-1154, which directed the Debtors to
turnover the Funds held in the Swiss bank account to the Chapter 7 Trustee. See
Order Granting Default Judgment – Adversary Proceeding No. 12-1154, Docket No.
8.
11. Debtors filed the Motion to Dismiss on March 13, 2012. 	See Docket No. 30.
12. The Debtors’ Schedule F reflects twenty-two creditors holding a total of $144,658.00
in unsecured claims.
13. The claims register in the Debtors’ bankruptcy case reflects total filed claims,
including general unsecured claims, in the amount of $67,556.14.
Case 11-13685-j7 Doc 35 Filed 05/23/12 Entered 05/23/12 13:11:20 Page 2 of 6

3
14. The Debtors concede that no exemption would protect the Debtors’ interest in the
Funds, and, if this case is not dismissed, their creditors who filed timely claims
would have to be paid in full. See Motion to Dismiss, ¶ 6.
15. When the Debtors commenced this bankruptcy case, they believed in good faith that
the proceeds from the sale of their business were exempt retirement funds; they used
their retirement funds in order to purchase the business in the first place, and thought
that the Funds had been deposited in a qualified retirement account.
16. The Debtors seek to dismiss their bankruptcy case so that they can negotiate and pay
creditors on their own. 	Testimony of Jean-Pierre Schafroth.
DISCUSSION
The Debtors seek to voluntarily dismiss their case under 11 U.S.C. § 707. 2 Dismissal
under 11 U.S.C. § 707(a) may only be granted after notice and a hearing, and only upon a
showing of “cause.” 	11 U.S.C. § 707(a). 	The examples of actions that constitute “cause” for
dismissal enumerated in the statute are generally aimed at improper conduct on the part of the
debtor and are typically relied upon by creditors or the United States trustee seeking dismissal. 3
However, the list is not exhaustive4 , and, while 11 U.S.C. § 707(a) does not expressly refer to
dismissal by a chapter 7 debtor, a chapter 7 debtor may seek to dismiss his or her own
bankruptcy case, provided that the debtor demonstrates cause. 5 A debtor does not have an
2Section 707(a) provides, in relevant part:
The court may dismiss a case under this chapter only after notice and a hearing and only for cause[.]
11 U.S.C. § 707(a).
3 See 11 U.S.C. § 707(a)(cause includes “(1) unreasonable delay by the debtor that is prejudicial to creditors; (2)
nonpayment of any fees or charges required under chapter 123 of title 27; 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(a), but only on a motion by the
United States trustee.”)
4See In re Turpen, 244 B.R. 431, 434 (8 th Cir. BAP 2000)(“Section 707(a) provides three illustrative examples of
cause. However these examples are not exclusive; therefore, other grounds constituting ‘cause’ may justify
dismissal.”)(citations omitted).
5 See In re Hopper, 404 B.R. 302, 306 (Bankr.N.D.Ill. 2009)(“Although § 707(a) does not expressly refer to a
voluntary dismissal by the debtor, courts routinely apply it to such a motion.”)(citing Schwartz v. Geltzer (In re
Smith), 507 F.3d 64, 72 (2nd Cir. 2007)(remaining citations omitted); In re Jabarin, 395 B.R. 330, 337
(Bankr.E.D.Pa. 2008)(acknowledging that “[a]lthough the Code does not expressly address whether §707 applies to
a debtor seeking voluntary dismissal of his own petition, ‘courts have found that chapter 7 debtors may move for
Case 11-13685-j7 Doc 35 Filed 05/23/12 Entered 05/23/12 13:11:20 Page 3 of 6

4
absolute right to dismiss a voluntary Chapter 7 bankruptcy case.6 The debtor, as the movant,
bears the burden of demonstrating sufficient cause for dismissal.7 Many courts apply a series of
factors to assess whether a debtor’s voluntary dismissal is appropriate.8 Whether dismissal
should be granted falls within the Court’s sound discretion.9 Even when applying the various
factors under a totality of circumstances approach, by far the most important consideration is
whether dismissal will prejudice creditors.10 With these guidelines in mind, the Court finds
that dismissal is not appropriate.
Debtors who voluntarily choose to file a bankruptcy case enjoy the benefits that the
Bankruptcy Code affords, but must also bear the attendant burdens.11 The Debtors mistakenly
voluntary dismissal under this section’”)(quoting In re Hopkins, 261 B.R. 822, 823 (Bankr.E.D.Pa. 2001)(remaining
citations omitted).
6See Hopper, 404 B.R. at 306 (“a debtor does not have an absolute right to dismiss a Chapter 7 case even if begun
on a voluntary petition.”)(citing Turpen, 244 B.R. at 434)(remaining citations omitted) .
7Sicherman v. Cohara (In re Cohara), 324 B.R. 24, 27 (6 th Cir. BAP 2005)(“As the movant, the Debtor has the
burden of showing cause for dismissal.”)(citation omitted); Jabarin, 395 B.R. at 337 (“To dismiss a chapter 7 case
voluntarily, ‘the debtor has the burden of demonstrating sufficient cause.’”)(quoting In re Boyce, 2006 WL 3061633,
at *3 (E.D.Pa. 2006))(remaining citations omitted).
8Those factors include:
(1) whether all of the creditors have consented;
(2) whether the debtor is acting in good faith;
(3) whether dismissal would result in an prejudicial delay in payment;
(4) whether dismissal would result in a reordering of priorities;
(5) whether there is another proceeding through which the payment of claims can be handled; and
(6) whether an objection to discharge, an objection to exemptions, or a preference claim is pending.
Turpen, 244 B.R. at 434 (citations omitted). See also Jabarin, 395 B.R. at 338 (listing the same factors,
and citing cases in addition to those cited in Turpen that have also applied these factors)
9Turpen, 244 B.R. at 433 (“A decision of whether to grant a motion to voluntarily dismiss a bankruptcy petition lies
within the discretion of the bankruptcy judge . . .”)(citations omitted); Hopper, 404 B.R. at 307 (same).
10See Jabarin, 395 B.R. at 337-339 (identifying three approaches to voluntary dismissal of a chapter 7 case: 1) “any
prejudice to creditors is an absolute bar to voluntary dismissal, no matter how compelling the reasons for the
debtors’ request for voluntary dismissal”; 2) a “balancing of interests test” where the court considers whether
dismissal is in the best interest of the debtor and the creditors, taking account the debtor’s interest in a fresh start
versus the creditor’s concern with delay in pursuing its claim; and 3) dismissal is to be “granted freely unless it will
cause ‘plain legal prejudice’ to creditors” (quoting In re Hall, 15 B.R. 913, 917 (9 th Cir. BAP 1981)), but suggesting
that the three lines of cases are not really distinct, since all approaches tend to consider the same factors to assess the
propriety of dismissal)(remaining citations to the three approaches omitted)); In re Aupperle, 352 B.R. 43, 46
(Bankr.D.N.J. 2005)(“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.”)(citations omitted).
11Cf. Jabarin, 395 B.R. at 337 (noting that “courts frequently observe that while a chapter 7 debtor may choose to
place himself or herself in bankruptcy voluntarily, the debtor does not enjoy the same freedom to withdraw the
bankruptcy case as of right once it has been commenced.”)(citations omitted).
Case 11-13685-j7 Doc 35 Filed 05/23/12 Entered 05/23/12 13:11:20 Page 4 of 6

5
believed that their retirement funds retained their nature as an exemptible asset following use of
the funds to buy the business and the subsequent deposit of the proceeds from the sale of the
business. Under the circumstances of this case, that mistaken belief is an insufficient ground to
dismiss their Chapter 7 proceeding notwithstanding the Debtors’ offer to negotiate and pay
creditor claims following the dismissal of their bankruptcy case. There is no guaranty that
creditors will be paid following dismissal. Cf. In re Stephenson, 262 B.R. 871, 874 – 875
(Bankr.W.D.Okla. 2001)(pointing out that while the debtor claimed that he intended to use the
tax refunds to repay creditors in full, the debtor was not specific in his commitment). Further,
the Debtors’ financial incentive following dismissal would be to pay creditors who filed timely
claims less than the 100% of their claims that they would receive in this bankruptcy case. And
although some factors are present that favor the Debtors’ request for dismissal, the Court finds
that they are insufficient to justify dismissal in the face of the Chapter 7 Trustee’s objection.
There is no evidence before the Court that the Debtors filed their bankruptcy case in bad,
or that they are not acting in good faith in their pursuit of dismissal. No creditors objected to the
Debtors’ Motion to Dismiss. However, the Debtors have conceded that the Funds at issue are
not exempt, and the Chapter 7 Trustee has obtained a judgment for turnover of the Funds. 	The
non-exempt Funds appear sufficient to pay the claims of unsecured creditors in full. The fact
that the Funds the Chapter 7 Trustee seeks to administer through the bankruptcy case are on
deposit in a Swiss bank account would likely make it more difficult for creditors to collect their
claims in the event the bankruptcy case is dismissed and such claims remained outstanding. This
is the type of prejudice to creditors that courts uniformly find prevent debtors from voluntarily
dismissing their Chapter 7 case over the objection by the Chapter 7 trustee or a creditor.12
12See, e.g., In re Bartee, 317 B.R. 362, 366 (9 th Cir. BAP 2004)(finding that the debtors’ voluntary dismissal would
prejudice creditors in an asset case where funds would likely be available to pay unsecured creditors; debtors plan to
Case 11-13685-j7 Doc 35 Filed 05/23/12 Entered 05/23/12 13:11:20 Page 5 of 6

6
“Absent court oversight of payment [by the debtor to creditors], 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 estate assets is through administration
under the trustee system.” Fulton, 339 B.R. at 701. The Court, therefore, concludes that the
Motion to Dismiss should be denied so that the Chapter 7 Trustee can administer the non-exempt
asset for the benefit of creditors.
WHEREFORE, IT IS HEREBY ORDERED that the Motion to Dismiss is DENIED.
_____________________________________
ROBERT H. JACOBVITZ
United States Bankruptcy Judge
Date entered on docket: 	May 23, 2012
COPY TO:
Charles E. Hawthorne 	Clarke C. Coll
Attorney for Debtors 	Attorney for Chapter 7 Trustee
900 Sudderth Drive 	PO Box 550
Ruidoso, NM 88345 	Roswell, NM 88202
liquidate assets and pay their creditors “was too speculative to establish the lack of prejudice that is a prerequisite to
dismissal”); Stephenson, 262 B.R. at 874-75 (denying debtor’s request for dismissal, finding that creditors would be
prejudiced by revesting of state and federal tax funds in the debtor, notwithstanding debtor’s intention to use the
funds to pay creditors in full); In re Fulton, 339 B.R. 698, 701 (Bankr.N.D.Iowa 2006)(denying debtor’s motion to
dismiss despite debtor’s stated intention to pay creditors from life insurance proceeds and despite debtor’s assertion
that she was unable to think through the implications of filing bankruptcy before she filed her voluntary petition);
Hopper, 404 B.R. at 308 - 309 (denying debtor’s request to dismiss notwithstanding the debtor’s mistaken belief that
her residence would be completely exempt, despite the debtor’s claim that she has the ability and intent to pay
creditors outside of bankruptcy). See also, In re Byam, 2002 WL 32123991, at *1 (Bankr.C.D.Ill. Aug. 14,
2002)(“Prejudice exists where assets which would be available for distribution are lost as a result of the
dismissal.”)(citing In re McCullough, 229 B.R. 374 (Bankr.E.D.Va. 1999))(remaining citation omitted). But cf.
Aupperle, 352 B.R. at 46 (granting debtor’s motion to voluntarily dismiss her Chapter 7 case where debtor sought
dismissal based on fear of losing her home and the only party objecting to the debtor’s was the Chapter 7 trustee,
where 1) there was no evidence that the debtor’s request constituted bad faith, and 2) creditors would not be
prejudiced, since, following dismissal each creditor could obtain a judgment, record a lien against the property and
satisfy the claim in full from a sale of the home outside of bankruptcy).
Case 11-13685-j7 Doc 35 Filed 05/23/12 Entered 05/23/12 13:11:20 Page 6 of 6