[00:00:00] Speaker 01:
Michael Zito appearing with Elizabeth Zito appellants and Kimberly Swafford appearing for appellee.

[00:00:18] Speaker 02:
Okay, do we have Mr. Zito visually or just?

[00:00:22] Speaker 02:
Your honor, I think you had me on audio.

[00:00:24] Speaker 00:
Can you hear me?

[00:00:25] Speaker 00:
We can hear you.

[00:00:26] Speaker 00:
Do you want to reserve a little time?

[00:00:28] Speaker 00:
Well, yes, I do, your honor.

[00:00:29] Speaker 00:
And I have one question.

[00:00:31] Speaker 00:
I went to an older computer, got to Zoom.

[00:00:35] Speaker 00:
It says that we're just waiting for the host to let us in.

[00:00:39] Speaker 00:
Can you see that?

[00:00:41] Speaker 02:
No, look, you're in, right?

[00:00:42] Speaker 02:
You're in because we can hear you.

[00:00:43] Speaker 02:
The question of why your video isn't working, I don't know.

[00:00:46] Speaker 00:
OK.

[00:00:48] Speaker 00:
So how long would you like to?

[00:00:50] Speaker 02:
How long do you want to reserve?

[00:00:52] Speaker 00:
10 minutes.

[00:00:55] Speaker 02:
10 minutes, okay, sure.

[00:00:58] Speaker 02:
Okay, you can commence.

[00:00:59] Speaker 00:
Yes, Your Honor, good mornings.

[00:01:04] Speaker 00:
And it's an honor to be present here to speak.

[00:01:07] Speaker 00:
I listened to your earlier comments about how to proceed.

[00:01:10] Speaker 00:
And we, oh, first I've done it by myself, Michael Zito, appellant.

[00:01:14] Speaker 00:
Elizabeth Zito, appellant.

[00:01:16] Speaker 00:
Okay, so.

[00:01:17] Speaker 00:
Okay, great.

[00:01:18] Speaker 00:
We're both present.

[00:01:19] Speaker 00:
And I listened, I'm sorry.

[00:01:22] Speaker 02:
So I just said, right.

[00:01:24] Speaker 00:
OK.

[00:01:24] Speaker 00:
And I listened to how you want to proceed.

[00:01:26] Speaker 00:
And I know that you have read all of the statutes and the arguments that we have made in our briefs.

[00:01:33] Speaker 00:
And we filed other motions for state pending appeals and things like that.

[00:01:38] Speaker 00:
So the record is pretty full with all kinds of exhibits and things like that.

[00:01:42] Speaker 00:
What I would like to do is in my own words, say how we feel the abuse of discretion happened very quickly in the court and what the solution will be.

[00:01:52] Speaker 00:
When we filed our petition back in December of 2022, it was for one purpose, and that was to halt the trustee sale that was being brought by the holder of our note, which had been sold about 14 times before they got it.

[00:02:08] Speaker 00:
It was Blue Castle, a Cayman Islands entity.

[00:02:12] Speaker 00:
So the trustee sale was stopped because we didn't have any other way to do it.

[00:02:15] Speaker 00:
And so that's how we entered the chapter 13.

[00:02:19] Speaker 00:
In the process of that, we filled out all of our schedules and everything else, everything was proper.

[00:02:25] Speaker 00:
We had no problems with anything going forward.

[00:02:28] Speaker 00:
In our bank, in our chapter 13,

[00:02:30] Speaker 00:
We have made every payment that was required, total of about $95,000.

[00:02:37] Speaker 00:
We have made every payment required to the secured lender that we agreed on when they first opened it up, and it is the full payment.

[00:02:43] Speaker 00:
There was no reduction in 20, you know, and we paid them about $75,000 in that.

[00:02:48] Speaker 00:
As we're going along, we had an incident involving our prior business, and it involved a company that we had owned that had gone, it was dissolved, a person went to a Chapter 7.

[00:03:02] Speaker 00:
It was a company involved in a real estate development, and there were some remaining rights that carried over to water rights, permits, approvals, entitlements, and things like that.

[00:03:12] Speaker 00:
We had hired a counsel to file our petition, Preston Gardner,

[00:03:16] Speaker 00:
And we brought the matter up.

[00:03:17] Speaker 00:
So look, we have these things.

[00:03:18] Speaker 00:
He said, look, I don't see anything here.

[00:03:21] Speaker 00:
And if it ever becomes viable, well, then you got another problem.

[00:03:26] Speaker 00:
You got to redo your schedules.

[00:03:28] Speaker 00:
And that's in an email that we had presented as evidence.

[00:03:31] Speaker 02:
Let me interject here for a second, OK?

[00:03:34] Speaker 02:
Sure.

[00:03:37] Speaker 02:
At the hearing on the motion to dismiss, which was brought on the basis that you failed to identify assets.

[00:03:44] Speaker 02:
and didn't include interest in several entities that you owned or perhaps had owned and that were the subject of litigation that, you know, if you had decided it wasn't a worth thing, you could have defaulted on the litigation.

[00:03:58] Speaker 02:
You didn't do that, right?

[00:04:00] Speaker 02:
Well, all right, don't interrupt me.

[00:04:03] Speaker 02:
What Judge Collins basically ruled at the hearing on the motion to dismiss was that the failure to include an asset by itself is grounds to dismiss your case, correct?

[00:04:14] Speaker 02:
Okay.

[00:04:15] Speaker 02:
You argued that, well, it doesn't really matter because we don't think they're worth anything, right?

[00:04:19] Speaker 02:
Correct.

[00:04:20] Speaker 02:
And Judge Collins said that is of no moment, correct?

[00:04:23] Speaker 02:
Correct.

[00:04:24] Speaker 02:
What's wrong with that?

[00:04:27] Speaker 00:
It's a very, okay, it's a very narrow, the way they ruled it, because without, you voluntarily then amended our schedules.

[00:04:39] Speaker 00:
11 days.

[00:04:40] Speaker 02:
Let me stop you there too, okay, because the record actually is not quite so friendly.

[00:04:45] Speaker 02:
From the trustee's motion to dismiss, which we read as part of the record, it seems like he became aware of this litigation and therefore these possible rights sometime in December,

[00:04:55] Speaker 02:
of the year before, of 2024.

[00:04:58] Speaker 02:
There was some kind of a large meeting with you and other folks in February in which the trustee presumably said, gee, what's going on with this lawsuit and these assets?

[00:05:08] Speaker 02:
You didn't do anything then, did you?

[00:05:10] Speaker 02:
Did you amend your schedules then?

[00:05:12] Speaker 00:
We had counsel at the time for this specific purpose.

[00:05:17] Speaker 02:
And we had said- Let me ask the question directly.

[00:05:21] Speaker 02:
Did you amend the schedules then when it was clear

[00:05:24] Speaker 02:
that the trustee was aware of an asset that concerned him?

[00:05:28] Speaker 02:
I think the answer is no.

[00:05:30] Speaker 02:
You amended the schedules the week after the trustee not only knew about this, but filed a motion to dismiss your case on bad faith, is that right?

[00:05:40] Speaker 02:
That is correct.

[00:05:41] Speaker 02:
Then that, I mean, explain to me how that's prompt.

[00:05:45] Speaker 02:
That's not falling within my thinking about prompt, but help me out with that.

[00:05:49] Speaker 02:
Okay.

[00:05:50] Speaker 00:
At the time, we sent the lawyers in to talk to the trustee and let them know what was going on.

[00:05:54] Speaker 00:
This was a case that they had said they owned these assets.

[00:05:59] Speaker 00:
And we said, well, you couldn't have.

[00:06:01] Speaker 00:
We lost the property in foreclosure.

[00:06:03] Speaker 00:
But the assets were carried over and remained in the company three years later.

[00:06:08] Speaker 00:
And that's proven by the docket of the by synergy chapter seven docket, which said it in three years after the foreclosure, we had 25 million in assets.

[00:06:17] Speaker 00:
He said they're only tied to the property.

[00:06:21] Speaker 00:
That was out of cost basis that we had paid for permits, entitlements, and entitlements for the property.

[00:06:31] Speaker 02:
Let me interject again, I'm sorry.

[00:06:34] Speaker 02:
This is a long way of saying you in your editorial wisdom decided it wasn't worth listing, is that fair?

[00:06:41] Speaker 02:
Yes, your honor.

[00:06:42] Speaker 02:
Well, that's not the standard.

[00:06:44] Speaker 02:
Okay, let me just tell you the same thing Judge Collins told you, that is not the standard.

[00:06:48] Speaker 02:
We do not want debtors editorializing about what they think something is worth or whether it's a viable asset.

[00:06:54] Speaker 02:
There's this whole possibility of listing, here's an asset value unknown, uncertain, maybe zero.

[00:07:01] Speaker 02:
But there are circumstances where if we don't know the whole story on your assets, it is impossible fairly to adjudicate your case.

[00:07:09] Speaker 02:
And there are circumstances where you may think an asset is dormant or doesn't have any value, but the existence of that asset weren't disclosed might well lead to something else, which is exactly why we don't want debtors being in the position of being the editors on this.

[00:07:26] Speaker 02:
That's why Judge Collins ruled the way he did.

[00:07:28] Speaker 02:
And what I need you to do is tell me why that was wrong.

[00:07:32] Speaker 00:
Because your honor, they didn't take in consideration the mitigating factors of our Chapter 13 proceeding.

[00:07:39] Speaker 00:
Now, it's true.

[00:07:40] Speaker 00:
Exactly what you said is well, let me can I can I get off you again there for a second?

[00:07:44] Speaker 02:
How did Judge Collins not do that when he when he delayed his ruling?

[00:07:48] Speaker 02:
I mean, he said at the end of the hearing one, I have the ability to dismiss this case right now because of your bad faith and not disclosing the status.

[00:07:58] Speaker 02:
I'm not going to do that.

[00:07:59] Speaker 02:
Because you've told me about these other transactions whereby you I think he literally said may pull a rabbit out of the hat.

[00:08:05] Speaker 02:
He delayed the ruling twice, didn't he?

[00:08:08] Speaker 02:
To let you try to work some magic with respect to a refi or a sale.

[00:08:12] Speaker 02:
Okay, so how so tell me how that pitch your theory that this was a mistake.

[00:08:18] Speaker 00:
It's quite a story.

[00:08:20] Speaker 00:
He had, at the June 17th hearing, is when he dismissed us.

[00:08:25] Speaker 00:
He said, that's it, you know.

[00:08:27] Speaker 02:
Oh, no, he didn't.

[00:08:27] Speaker 02:
He delayed it.

[00:08:28] Speaker 02:
He delayed it, didn't he?

[00:08:29] Speaker 00:
Well, because on July 15th, we went in and we asked the judge, he said, I'm going to dismiss it effective August 1st.

[00:08:38] Speaker 00:
We went in and said, look, we can get this done.

[00:08:41] Speaker 00:
Can we have to September 15th?

[00:08:43] Speaker 00:
And we sort of the plan, we had letters from lenders that we could do with which which would be able to pay the other was a delinquency on the mortgage.

[00:08:52] Speaker 00:
And there was our still our, you know, unsecured creditors about 118,000.

[00:08:56] Speaker 00:
Our house was worth about a million eight we owed 400,000 to Blue Castle.

[00:09:00] Speaker 00:
And I said, we can get this done.

[00:09:02] Speaker 00:
It's got to go, you know, as long as the court's approving it, we can get this done.

[00:09:06] Speaker 00:
Submitted the letters.

[00:09:06] Speaker 00:
He said, OK, fine.

[00:09:08] Speaker 00:
You have until you have until September 15th.

[00:09:10] Speaker 00:
We began working on it.

[00:09:11] Speaker 00:
We said, we're going to get out of this because now we can get it done.

[00:09:15] Speaker 02:
Well, let me let me just interrupt you for a second.

[00:09:16] Speaker 02:
I don't know.

[00:09:17] Speaker 02:
Where are we on time for this?

[00:09:20] Speaker 02:
Yeah, six forty left.

[00:09:21] Speaker 02:
OK, just just so you know, you wanted to reserve tenure at six forty now.

[00:09:25] Speaker 02:
I'm going to pose another question to you and then you can think about it and come back and answer it if you want.

[00:09:29] Speaker 02:
OK.

[00:09:30] Speaker 02:
Yes, your honor.

[00:09:32] Speaker 02:
Okay.

[00:09:32] Speaker 02:
Judge Collins, mindful of the fact that you'd made a lot of payments in this case and that you were telling him there was a way to get this solved.

[00:09:40] Speaker 02:
And maybe at the time that was more plausible than it turned out to be, that's all fine.

[00:09:45] Speaker 02:
Okay.

[00:09:46] Speaker 02:
He twice gave you extensions.

[00:09:47] Speaker 02:
He twice with the ability to dismiss your case immediately didn't do it.

[00:09:52] Speaker 02:
Okay.

[00:09:53] Speaker 02:
So you're going to have to tell me why that was a miss, why

[00:09:56] Speaker 02:
In that context, what he did was an abusive discretion.

[00:09:59] Speaker 02:
You can think about that while your worthy adversary gets their 15 minutes here, okay?

[00:10:04] Speaker 00:
Yes, your honor.

[00:10:05] Speaker 02:
Okay.

[00:10:06] Speaker 02:
All right, Councilor for the Appellee, do you want to go ahead?

[00:10:09] Speaker 01:
Yes, sir.

[00:10:10] Speaker 01:
May it please the panel.

[00:10:11] Speaker 01:
Good morning, Your Honors.

[00:10:12] Speaker 01:
My name is Kim Swafford, and I'm here on behalf of Appellee Edward Maney, Chapter 13 trustee in this case.

[00:10:19] Speaker 01:
As Your Honor has noted, this appeal asked the question of whether the bankruptcy court abused his discretion in dismissing the Chapter 13 case under 1307C.

[00:10:29] Speaker 01:
And after finding bad faith based on the debtor's failure to disclose ownership interests in multiple LLCs, some of which were actively asserting water rights claims during the pendency of the case.

[00:10:39] Speaker 01:
The short answer is no.

[00:10:41] Speaker 01:
The court applied the correct legal standard, conducted a totality of the circumstances analysis under Levitt v. Soto and made supported factual findings and exercised discretion well within Ninth Circuit law.

[00:10:55] Speaker 01:
As the court knows, this court reviews chapter 13 dismissal under 1307 for abuse of discretion and the bad faith finding for clear error.

[00:11:04] Speaker 01:
Under the Ninth Circuit Holdings in Eisen v. Curry and Levitt v. Soto, bad faith is recognized independent basis for dismissal.

[00:11:12] Speaker 01:
Bankruptcy court is not required to find fraud, malice, or egregious conduct.

[00:11:17] Speaker 01:
The court must assess the totality of the circumstances.

[00:11:20] Speaker 02:
Well, and if it does, there are other remedies possible, right?

[00:11:23] Speaker 01:
Under 349, yes, sir.

[00:11:25] Speaker 02:
with prejudices, et cetera, right?

[00:11:26] Speaker 02:
Okay, thanks.

[00:11:27] Speaker 01:
Yes, sir.

[00:11:27] Speaker 01:
And critically, as this panel held in Convy Barton, the factors are tools, not elements.

[00:11:33] Speaker 01:
So every factor doesn't have to be satisfied and need not be weighed equally.

[00:11:38] Speaker 01:
Here, the bankruptcy court cited the correct cases, articulated the correct standard, and grounded its ruling in the record.

[00:11:44] Speaker 01:
There's no legal error.

[00:11:46] Speaker 01:
The central finding is undisputed.

[00:11:49] Speaker 01:
The debtors failed to disclose ownership interest in at least five LLCs on schedules A and B.

[00:11:54] Speaker 01:
Those omissions persisted through filing, through the 341 meeting, through plan confirmation.

[00:12:01] Speaker 01:
Approximately two weeks before plan confirmation, as a matter of fact, Council for entities owned by the debtors sent a letter asserting water rights and inviting negotiations and collaboration and possibly some joint venture.

[00:12:14] Speaker 01:
The trustee learned of the entities only after being contacted by council for the entity that sued by biosynergy and also the council for biosynergy.

[00:12:27] Speaker 01:
They called our office and the trustee did not know anything of these assets.

[00:12:34] Speaker 01:
The debtors obviously believe the water rights were owned by by synergy there or themselves or had some value or, as the court noted, they wouldn't have defended the lawsuit.

[00:12:43] Speaker 01:
They just would have written off the water rights and moved on.

[00:12:48] Speaker 01:
That alone is enough to support bad faith.

[00:12:51] Speaker 01:
Ninth Circuit law is clear.

[00:12:52] Speaker 01:
Under Hamilton v. State Farm and Section 521, a debtor has an affirmative continuing duty to disclose all assets in the case, including contingent, disputed, or unliquidated interest.

[00:13:05] Speaker 01:
Additionally, under the Ninth Circuit's holding in US v. Lindholm, the omission is the equivalent of a false statement.

[00:13:13] Speaker 01:
Here,

[00:13:14] Speaker 01:
The debtor's response has continuously been the omitted entities had no value, but values irrelevant to disclosure.

[00:13:22] Speaker 01:
As the court noted, when a debtor makes a disclosure, the trustee and creditors don't necessarily object, they investigate, they look at the disclosure.

[00:13:34] Speaker 01:
So the debtor must disclose first and let the trustee and the creditors evaluate.

[00:13:39] Speaker 01:
The debtors argue that these were passive dormant entities, but the record shows much more than passive dormant entities.

[00:13:46] Speaker 01:
They were actively asserting water rights, and they sent the letter just weeks before planned confirmation.

[00:13:52] Speaker 01:
These facts fully support the court's conclusion that the debtors failed to disclose and misrepresented their financial affairs and manipulated the bankruptcy process, which is bad faith under Leavitt.

[00:14:05] Speaker 01:
A major premise of the debtor's appeal

[00:14:08] Speaker 01:
is simply wrong as a matter of law, as the court has already noted.

[00:14:11] Speaker 01:
They argue that the bankruptcy court was required to find fraudulent intent or egregious behavior before dismissing the case.

[00:14:17] Speaker 01:
That is not Ninth Circuit law.

[00:14:19] Speaker 01:
Under Eisen, Leavitt, and Duran, in Ray Duran, fraudulent intent is not required.

[00:14:25] Speaker 01:
Egregious conduct is required only for dismissal with prejudice under section 349A.

[00:14:30] Speaker 01:
This case was not dismissed with prejudice.

[00:14:33] Speaker 01:
The debtors remain free to refile subject to the code and could have conceivably refiled rather than pursuing this appeal.

[00:14:41] Speaker 01:
The bankruptcy court explicitly recognized this distinction on the record and applied the correct legal standard.

[00:14:47] Speaker 01:
That alone defeats the appeal.

[00:14:49] Speaker 01:
The debtors also argued that they eventually did amend their schedules, and the bankruptcy court was required to overlook the omission.

[00:14:56] Speaker 01:
The debtors did amend their schedules, but only after being contacted by counsel for the trustee, and that does not excuse an omission.

[00:15:04] Speaker 01:
That argument has been rejected repeatedly.

[00:15:07] Speaker 01:
Amendment after discovery by the trustee or third parties does not erase bad faith.

[00:15:11] Speaker 01:
If it did, the disclosure of duty would be meaningless.

[00:15:15] Speaker 01:
The lack of objection to the debtor's amendment of their schedules also does not negate bad faith.

[00:15:21] Speaker 01:
As I mentioned, creditors and the trustee don't object when a debtor amends.

[00:15:25] Speaker 01:
They look at the amendment to see if there's any value for the estate.

[00:15:29] Speaker 01:
As the bankruptcy court recognized, disclosure must be complete and timely.

[00:15:33] Speaker 01:
Here the amendments only occurred after the trustee learned of the entities.

[00:15:38] Speaker 01:
Finally, the debtors argue that dismissal of the case deprived them of a discharge.

[00:15:43] Speaker 01:
But 11 U.S.C.

[00:15:45] Speaker 01:
1328 requires completion of all plan payments and conditions of the plan.

[00:15:49] Speaker 01:
The debtor's plan in this case required that they sell their home and pay all creditors in full.

[00:15:55] Speaker 01:
The home was never sold.

[00:15:57] Speaker 01:
They're not entitled to a discharge until they complete the terms of the plan.

[00:16:00] Speaker 01:
They also represented to the court that they could get financing to pay off their creditors.

[00:16:05] Speaker 01:
That never happened.

[00:16:06] Speaker 01:
And as the court noted,

[00:16:08] Speaker 01:
The bankruptcy court allowed them additional time up to August 1st and then all the way until September 15th to get this done.

[00:16:16] Speaker 01:
Your honors, unless you have some questions, I would also just like to point out some papers that were filed by the debtor in opposition to my submission on the briefs.

[00:16:27] Speaker 01:
But I'll pause here to see if you have questions.

[00:16:35] Speaker 02:
I don't have any questions.

[00:16:37] Speaker 02:
OK, Judge Brand.

[00:16:38] Speaker 01:
I have no questions.

[00:16:40] Speaker 02:
OK, I don't have any at the moment either.

[00:16:42] Speaker 02:
So proceed as you like.

[00:16:43] Speaker 01:
If you'll just bear with me, the debtor filed a paper in response to my motion for submission on the briefs.

[00:16:49] Speaker 01:
And I just wanted to point out that maybe the trustee has a statutory role here.

[00:16:55] Speaker 01:
And much of what he pointed out is legally irrelevant.

[00:16:58] Speaker 01:
But as a matter of law, the Chapter 13 trustee is a neutral fiduciary of the estate, not a litigation ally of any secured creditor.

[00:17:07] Speaker 01:
The trustee's duties are defined by the bankruptcy code.

[00:17:10] Speaker 01:
They review plans, assess feasibility, ensure compliance, and protect the integrity of this process.

[00:17:17] Speaker 01:
The trustee does not control, direct, or manipulate a secured creditor's state law foreclosure remedies.

[00:17:26] Speaker 01:
This assertion that the trustee somehow aided and abetted the mortgage holder is

[00:17:31] Speaker 01:
is rather faulty, and I'll just say that the debtors improperly attempt to reframe the disclosure-based dismissal as creditor-driven conduct.

[00:17:41] Speaker 01:
The record shows the trustee moved to dismiss because the debtors failed to disclose ownership interests.

[00:17:47] Speaker 01:
This is a core bankruptcy issue, wholly independent of the foreclosure posture.

[00:17:52] Speaker 01:
The suggestion that the trustee allowed Blue Cross to incur fees, pursue a sale or leverage the case is speculative and legally misplaced.

[00:18:01] Speaker 01:
A Chapter 13 trustee does not approve creditors fees, does not authorize the foreclosure strategy, does not manage loan enforcement.

[00:18:09] Speaker 01:
These matters are governed by the loan documents and state foreclosure law and creditor initiated proceedings.

[00:18:16] Speaker 01:
Finally, even accepting the debtor's allegations at face value, they don't undermine the dismissal.

[00:18:21] Speaker 01:
The question before the panel is whether the bankruptcy court abuse is discretion under the Levitt totality of the circumstances test.

[00:18:28] Speaker 01:
The undisputed facts remain that the debtors failed to disclose.

[00:18:31] Speaker 01:
This omission goes directly to candor and good faith in this process, which are central under Levitt and stands apart from foreclosure activity.

[00:18:42] Speaker 01:
In conclusion, your honors, we feel the case is not close.

[00:18:46] Speaker 01:
The bankruptcy court applied the correct law, made supported factual findings and exercise discretion as the Ninth Circuit precedent permits.

[00:18:54] Speaker 01:
The debtors failed to disclose.

[00:18:56] Speaker 01:
That's bad faith under Levitt, Eisen and Kahn.

[00:18:59] Speaker 01:
And for those reasons, the trustee respectfully asked this panel to affirm the dismissal and the order.

[00:19:07] Speaker 02:
Okay.

[00:19:07] Speaker 02:
Any questions?

[00:19:08] Speaker 01:
No questions.

[00:19:09] Speaker 02:
Okay, thank you very much.

[00:19:10] Speaker 02:
Okay, can we remind how long they have?

[00:19:13] Speaker 02:
You have six minutes, Mr. Zito.

[00:19:17] Speaker 00:
Yes, your honor.

[00:19:19] Speaker 00:
First of all, and the idea of the abuse of discretion.

[00:19:24] Speaker 00:
According to Levitt, the test that you could have mitigating factors that would come into play on the dismissal.

[00:19:33] Speaker 00:
Our mitigating factors are that we

[00:19:37] Speaker 00:
paid every plant payment that we were supposed to pay during the proceeding.

[00:19:40] Speaker 00:
We never filed anything that would be considered to be misleading or abusive in the entire process.

[00:19:48] Speaker 02:
Well, let me stop you right there.

[00:19:49] Speaker 02:
The failure to make a disclosure is misleading.

[00:19:52] Speaker 02:
Period.

[00:19:52] Speaker 02:
End of story.

[00:19:54] Speaker 02:
Number two, we're talking about abusive discretion.

[00:19:57] Speaker 02:
Remember what that is.

[00:19:58] Speaker 02:
Abusive discretion measures whether the court chose the right rule to decide the matter and whether its application of the rule was faulty and whether it's based on facts that are

[00:20:10] Speaker 02:
inappropriate or not in the record or simply, you know, wouldn't withstand scrutiny.

[00:20:15] Speaker 02:
So, so mitigation is, is something that, you know, maybe within the 11 factors, but it's not abusive discretion.

[00:20:23] Speaker 02:
Okay.

[00:20:24] Speaker 02:
Question is, did judge, did judge Collins choose the wrong rule?

[00:20:28] Speaker 02:
He didn't.

[00:20:29] Speaker 02:
Okay, what he did, by the way, was give you three more months to try to pull a rabbit out of the hat here, even though at the hearing on the motion of dismiss, number one, you were not in compliance with the plan.

[00:20:38] Speaker 02:
And number two, we found grounds to dismiss for bad faith.

[00:20:41] Speaker 02:
So, I mean, you were talking about mitigation.

[00:20:43] Speaker 02:
I think the record would suggest he took into account the fact that you've been making payments, because he gave you three more months to cure a problem that could have ended the case right there.

[00:20:54] Speaker 02:
So tell me why that's wrong.

[00:20:57] Speaker 00:
Your honor, I cannot tell you that it is wrong.

[00:21:01] Speaker 00:
I believe that I have no argument for that.

[00:21:05] Speaker 00:
I don't know any other rule the judge could have used except for the one that he did.

[00:21:09] Speaker 00:
And so my only point was that using that rule,

[00:21:14] Speaker 00:
is to apply the mitigating factors that might change it.

[00:21:18] Speaker 00:
Because the choice would be, Your Honor, the way we see it, what would be better, to dismiss us out of the court and then nobody gets paid, or that we reverse and go back in, finish off the plan that we had, and end the whole thing and get discharged rather than dismissal.

[00:21:34] Speaker 00:
That was the whole point.

[00:21:35] Speaker 00:
of our doing this whole thing with the appeal.

[00:21:39] Speaker 00:
We did not want to be out until we finished it.

[00:21:41] Speaker 00:
Now, everything that you said was true.

[00:21:44] Speaker 00:
They gave us the extra time, but there were difficulties along the way.

[00:21:49] Speaker 00:
Very quickly, it was the idea that we had to sell the house in order to get a discharge.

[00:21:55] Speaker 00:
I had transcripts and quotes, piles of things where the judge and the trustee both had never wavered from that point.

[00:22:03] Speaker 00:
And that was because we had a $317,000 delinquency, which of course we disputed, that was hanging there.

[00:22:11] Speaker 00:
They said the only way out is to sell the house.

[00:22:13] Speaker 02:
Well, that was because your plan said you were going to do that.

[00:22:16] Speaker 00:
Yes, because that's the only way at the time.

[00:22:18] Speaker 00:
That was the only way.

[00:22:18] Speaker 00:
Okay.

[00:22:19] Speaker 02:
But I mean, it's not the judge telling you your plan said we're going to dispose of this with an X days of confirmation, right?

[00:22:25] Speaker 02:
Right.

[00:22:26] Speaker 00:
We filed the amended plan, your honor, because the judge took the automatic stay off.

[00:22:33] Speaker 00:
He said, look, you got the delinquency.

[00:22:34] Speaker 00:
I'm not going to, you know, they do, they're going to do what they're going to do.

[00:22:37] Speaker 00:
So while we were in the 13 doing everything else, they took the automatic stay and Blue Castle then started another process.

[00:22:44] Speaker 00:
Back in August of 2024, we came right to the point.

[00:22:49] Speaker 00:
We sold our house, had it under contract, deposited all the money at Stewart Title.

[00:22:55] Speaker 00:
We were getting so close to the, you know, the trustee sale that the buyer backed out.

[00:23:03] Speaker 00:
However, we had the income and my wife and I, we paid the 385,000 to cure the default.

[00:23:12] Speaker 00:
It was over.

[00:23:13] Speaker 00:
Didn't borrow any money.

[00:23:14] Speaker 00:
Didn't do anything to our Chapter 13.

[00:23:17] Speaker 00:
I said, okay, now we don't have to sell the house.

[00:23:20] Speaker 00:
We can just refinance it because we don't want to sell the house.

[00:23:22] Speaker 00:
We don't have to.

[00:23:23] Speaker 00:
That's why we paid it.

[00:23:25] Speaker 00:
And we went forward with the amended plan.

[00:23:27] Speaker 00:
We filed that amended plan in October of 2024.

[00:23:30] Speaker 00:
Even though it got distributed and there were no objections, there were no hearings on it.

[00:23:37] Speaker 00:
It just kept going and going and going.

[00:23:39] Speaker 00:
Finally, then in April, or when you saw, I think it was March or April, the trustee said, you're going to get dismissed.

[00:23:45] Speaker 00:
Now our house was worth, like I said, it was continues to be worth a million eight and we had that.

[00:23:50] Speaker 00:
Now we lowered the mortgage by 385,000 plus the plant payments of 75,000.

[00:23:55] Speaker 00:
And yesterday we just paid another reinstatement for a $91,000.

[00:24:00] Speaker 00:
The loan is practically is down so low.

[00:24:04] Speaker 00:
all we wanted to do is they said no matter what it's reinstated doesn't matter you must sell the house and it's i have the transcript quotes both the trustee and the judge you must sell the house in order for a discharge there is no way out of your deal we don't care what it is you are going to pace a blue castle that is in quotes and in transcript you'll see it i could give you a page in line you've got you've got about a minute left okay okay

[00:24:30] Speaker 00:
All we want, Your Honor, is that it's nothing about whatever it was.

[00:24:35] Speaker 00:
We want to take, go back to the court, get the plan approved, get the financing.

[00:24:42] Speaker 00:
We can do it now because the thing is so low now.

[00:24:45] Speaker 00:
We've had good payment records through the bankruptcy.

[00:24:47] Speaker 00:
and then get the unsecured creditors place and come out with a discharge.

[00:24:52] Speaker 00:
We were hoping that they would take everything into consideration, the totality of circumstances of what we had done.

[00:24:57] Speaker 00:
Certainly, if anybody reads the transcripts and I'm talking just like I'm talking now, we don't hide anything.

[00:25:03] Speaker 02:
Everything is there.

[00:25:04] Speaker 02:
Let me help you out here.

[00:25:04] Speaker 02:
I read the transcript from the motion to dismiss.

[00:25:07] Speaker 02:
All of this was part of that lengthy discussion.

[00:25:10] Speaker 02:
Everything you're talking about now was part of the discussion.

[00:25:12] Speaker 02:
That's exactly why Judge Collins gave you a month and a half and then ultimately three months.

[00:25:18] Speaker 02:
Okay, none of this is new.

[00:25:20] Speaker 02:
So with that, the matter is submitted.

[00:25:22] Speaker 02:
Thank you very much.

[00:25:22] Speaker 02:
We'll get you a written decision as soon as we can, okay?

[00:25:25] Speaker 00:
Thank you, Your Honor.

[00:25:26] Speaker 02:
Thank you very much.

[00:25:28] Speaker 02:
Thank you.

[00:25:28] Speaker 02:
Okay, and with that, I believe we're adjourned.

[00:25:31] Speaker 01:
All rise.

[00:25:31] Speaker 00:
The court is in recess.