Kennith Whaley v. City of Chicago ( 2019 )

NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted June 20, 2019*
Decided June 24, 2019
Before
MICHAEL S. KANNE, Circuit Judge
AMY C. BARRETT, Circuit Judge
MICHAEL B. BRENNAN, Circuit Judge
No. 18-2986
IN RE: KENNITH L. WHALEY, Appeal from the United States District
Debtor-Appellant, Court for the Northern District of Illinois,
Eastern Division.
Nos. 17-cv-7341 & 18-cv-3397
John Robert Blakey,
Judge.
ORDER
Kennith Whaley filed a Chapter 13 bankruptcy petition, but he did not submit
proof of income, his tax returns, or a completed debt-repayment plan; nor did he timely
make payments, all of which were necessary to move his case forward. When he
continued incurring debt without demonstrating his ability to pay, the bankruptcy
court found that he had filed the petition in bad faith and dismissed it. The district court
* We have agreed to decide the case without oral argument because the briefs and
record adequately present the facts and legal arguments, and oral argument would not
significantly aid the court. FED. R. APP. P. 34(a)(2)(C).
No. 18-2986 Page 2
affirmed, and we agree with its decision: the bankruptcy court did not clearly err in
concluding that Whaley had sought the protection of the automatic stay without
showing that he has the “regular income” required by Chapter 13. 11 U.S.C. § 109(e).
Among the liabilities on his bankruptcy schedule, Whaley listed overdue parking
tickets, and the City of Chicago (his creditor) submitted a proof of claim under 11 U.S.C.
§ 501. But Whaley did not attend the mandatory meeting of creditors, see id. at §§ 341,
343, and after receiving a continuance to cure his petition’s deficiencies, he still failed to
submit the documents necessary to demonstrate his income and repayment potential.
Instead, he filed a still-incomplete, amended repayment plan and an amended schedule
that sought to include in the bankruptcy estate unpaid traffic tickets associated with a
vehicle that was not registered to him. (He asserted that he had leased it but offered no
evidence that a lease had been recorded to the title.) These tickets were assessed after
Whaley had filed for bankruptcy. Whaley also filed an “emergency motion” to compel
the City to release the vehicle, which it had immobilized because of the new tickets.
Without Whaley’s tax information, the trustee could not reschedule the creditor
meeting. See 11 U.S.C. §§ 521(e)(2)(A), (B); 1308(b). And Whaley still had not filed proof
of income or a completed plan, or made any payments, so the trustee moved to dismiss
the case for unreasonable delay. Id. at § 1307(c)(1); see also id. at § 1307(c)(3), (4), (9).
At a hearing on the trustee’s motion, the bankruptcy court made an oral finding
that Whaley had filed his petition in bad faith and dismissed the case. It concluded that
Whaley’s failure to produce documents and his attempt to include the new tickets in his
estate showed that he did not plan to satisfy his debts through the bankruptcy. Rather,
Whaley’s actions suggested that he intended to take advantage of the automatic stay to
forestall collections and compel the City to release the immobilized vehicle. Whaley
protested that he had mailed to the trustee’s office pay stubs and an affidavit attesting
that he was not required to file tax returns with his initial bankruptcy petition. He also
stated that he had brought copies of those documents and one payment to court with
him. But the trustee argued that the judge should not allow Whaley to begin complying
now when he had taken no steps to do so in the three months since he filed his petition.
The trustee had never received the documents that Whaley said he sent, Whaley had
not filed them after he was granted a continuance, and even if the court accepted one
payment, Whaley would still be two payments behind. The court agreed, noting that
dismissal was proper based on Whaley’s failure either to file any of the necessary
documents or to make timely payments under a complete plan. See 11 U.S.C.
No. 18-2986 Page 3
§§ 1307(c)(1), (3), (4), (9); 1308. It found that Whaley had filed his petition in bad faith
and granted the motion to dismiss.
Whaley then filed three separate motions to vacate the dismissal or reinstate the
automatic stay. He also moved for sanctions against the City for allegedly violating the
automatic stay by failing to notify his employer, Uber, that the outstanding parking
tickets would be resolved through the bankruptcy process (allowing him to retain his
permit to drive for Uber). The bankruptcy court denied the motions, declining to reopen
the petition and explaining that he could not decide matters related to a dismissed case.
Whaley appealed. See 28 U.S.C. §§ 158(a)(1), (d)(1). The district court affirmed the
dismissal and ruled that Whaley’s other motions were moot because his bankruptcy
petition was no longer active.
Whaley now argues that the district court erred in affirming the dismissal of his
petition and the denial of his motion for sanctions. He primarily contends that but for
the City’s violation of the automatic stay—which he says prevented him from driving
for Uber for nine days—he would have earned money to make plan payments. A
bankruptcy court may dismiss a Chapter 13 case for cause—including the debtor’s
failure to file proof of income within 15 days of petitioning for bankruptcy,
see 11 U.S.C. §§ 521(a)(1)(B)(iv); 1307(c)(9), his failure to file a completed repayment
plan, id. at § 1307(c)(3), his failure timely to make payments, id. at § 1307(c)(4), or for
bad faith, Matter of Lisse, 921 F.3d 629, 639 (7th Cir. 2019). We review the court’s
bad-faith finding for clear error based on the totality of the circumstances, id. at 639, and
its dismissal for abuse of discretion, see Wiese v. Comty. Bank of Cent. Wis., 552 F.3d 584,
588 (7th Cir. 2009).
We see no clear error in the bankruptcy court’s finding that Whaley filed his
petition in bad faith, and no abuse of discretion in the dismissal. Even after a
continuance, Whaley had not submitted his proof of income, tax returns, or a completed
Chapter 13 plan nearly three months after initiating his case. And his attempt to add to
the bankruptcy estate new traffic tickets while failing to move his case forward—and
incurring new debts—supports the bankruptcy court’s conclusion that Whaley intended
to avail himself of the automatic stay without meeting his obligations under Chapter 13.
So, we cannot say that the evidence leaves us with a “definite and firm conviction” that
the court erred in finding that Whaley acted in bad faith. See In re Outboard Marine Corp.,
386 F.3d 824, 827 (7th Cir. 2004) (quoting Anderson v. Bessemer City, 470 U.S. 564, 573
(1985)). Dismissal was appropriate based on that finding. Lisse, 921 F.3d at 639.
No. 18-2986 Page 4
Whaley also asserts that the bankruptcy judge incorrectly stated that Whaley
failed to file pay stubs and an affidavit stating that he was exempt from filing tax
returns because he had mailed them to the trustee’s office. But Whaley’s argument is
unavailing for three reasons. First, the bankruptcy code required Whaley to file these
documents with the court, not mail them to the trustee. See 11 U.S.C. §§ 521(a), 1308.
Second, though the judge explained to Whaley that the trustee never received the
documents and granted a continuance to allow him to file them, Whaley did not
attempt to do so before the dismissal hearing, nor has he ever explained the delay.
Third, the bankruptcy judge found that multiple independent grounds existed for
dismissing Whaley’s petition, including bad faith, unreasonable delay, and Whaley’s
failure to file a completed repayment plan or timely make plan payments.
Id. at §§ 1307(c)(1), (3), (4); Lisse, 921 F.3d at 639.
Whaley’s last argument—that the purported violation of the automatic stay
caused his non-payment—is meritless for the same reason. Because the judge’s finding
of bad faith justified dismissal, and that finding was based on more than his failure to
make plan payments, Whaley’s argument that the purported violation of the automatic
stay caused his non-payment is irrelevant.
Finally, “the stay is dependent on the existence of the bankruptcy,” so the district
court correctly concluded that Whaley’s post-dismissal motion for sanctions for the
City’s purported violation of the stay was moot. In re Statistical Tabulating Corp., 60 F.3d
1286, 1290 (7th Cir. 1995); see also In re Castaic Partners II, LLC, 823 F.3d 966, 968–69
(9th Cir. 2016) (disputes about automatic stay are moot after court dismisses petition).
We have considered Whaley’s remaining arguments, and none has merit.
AFFIRMED