## Facts

- A state court adjudicated a dispute between Betty Lynn Hatem and her mother, Elizabeth L. Kennedy, over a 2.7-acre parcel and home in Montrose, Alabama.
- The state court set aside a deed transferring Kennedy’s one-half interest to Hatem, finding the deed void due to fraud, deception, and undue influence, and declared Hatem and Kennedy each owned one-half of the property.
- The state court ordered the property appraised and sold, with proceeds to be equitably divided, and later amended the order to permit only Hatem and Kennedy to bid during a 30-day exclusive bid period.
- The appraisal valued the property at approximately $410,000 (making Hatem’s half interest about $205,000).
- About one week before the exclusive bid period expired, Hatem filed a Chapter 13 petition.
- In her bankruptcy schedules, Hatem valued her interest at $205,000, did not disclose Kennedy as a co-owner, and instead listed Kennedy as holding a $210,000 secured lien; Hatem also listed a mortgage held by Regions Bank.
- Hatem reported total assets of about $215,403 and unsecured claims of about $51,243, but proposed a Chapter 13 plan providing no payments to unsecured creditors.
- Kennedy moved for relief from the automatic stay and to dismiss the case, arguing lack of good faith.
- The bankruptcy court found the petition and plan were not filed in good faith, denied confirmation, dismissed the case, and imposed a 180-day bar on refiling.
- On appeal, Hatem conceded her filing was intended in part to prevent a forced sale of the property.

## Issues

1. Whether the Chapter 13 petition and plan were filed in good faith as required for confirmation under 11 U.S.C. § 1325(a)(3).
2. Whether dismissal of the Chapter 13 case based on lack of good faith was within the bankruptcy court’s discretion.
3. Whether the bankruptcy court had authority to impose, and properly supported, a 180-day bar to refiling.

## Decision

- The district court affirmed the bankruptcy court’s order in full.
- The court held the record supported findings that Hatem filed the petition and proposed the plan in bad faith under the totality of the circumstances.
- The court upheld denial of confirmation and dismissal as proper responses to a bad-faith filing and plan.
- The court upheld the 180-day refiling bar as within the bankruptcy court’s authority and supported by the evidence of abusive use of the bankruptcy process.

## Legal Principles

- Chapter 13 confirmation requires that the plan be proposed in good faith under 11 U.S.C. § 1325(a)(3), evaluated under a totality-of-the-circumstances test.
- Bad faith may be shown by filing primarily to hinder or delay enforcement of an adverse judgment rather than to reorganize debts, especially in a two-party property dispute.
- Material omissions or misstatements in schedules—such as failing to disclose a co-owner’s adjudicated property interest and mischaracterizing it as a secured debt—support a bad-faith determination.
- A plan proposing no distribution to unsecured creditors, despite significant apparent equity and ability to pay, may support an inference that bankruptcy relief is being used for improper purposes.
- Bankruptcy courts may deny confirmation, dismiss a case for bad faith, and impose a temporary bar to refiling (including 180 days) to deter abusive filings and protect the integrity of the bankruptcy process.

## Conclusion

The district court affirmed denial of Chapter 13 confirmation, dismissal, and a 180-day refiling bar because the debtor’s filing and plan, viewed as a whole, were designed primarily to block a state-ordered sale and were supported by material nondisclosures and creditor treatment inconsistent with a bona fide Chapter 13 reorganization.


In re Hatem, 273 B.R. 900 (S.D. Ala. 2001)