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In re Negosh

August 22, 2007

IN RE BARBARA NEGOSH, DEBTOR.


The opinion of the court was delivered by: Seybert, District Judge

MEMORANDUM & ORDER

Pending before the Court is pro se Appellant Barbara Negosh's ("Debtor" or "Appellant") appeal from an August 25, 2006 Order ("August Order") of United States Bankruptcy Judge Stan Bernstein approving the sale of 520 Washington Avenue, Lindenhurst, New York ("Property") and an order denying the Debtor's motion to convert her bankruptcy proceeding from one under Chapter 7 to one under Chapter 13.*fn1 Chapter 7 Trustee Neil H. Ackerman ("Trustee" or "Appellee"), opposed Appellant's appeal and filed a motion seeking sanctions against Appellant pursuant to several sections of the Bankruptcy Code, this Court's inherent powers, and two exceptions to the "American Rule" on attorneys' fees. For the reasons explained below, the Appeal is DENIED, the Trustee's motion for sanctions is GRANTED in part and DENIED in part, and the Bankruptcy Court's decisions are AFFIRMED.

BACKGROUND

Appellant voluntarily filed a Chapter 7 bankruptcy petition on February 24, 2004. (Appellee's Br., Ex. A at 2.) In the Chapter 7 petition, Appellant reported the following:

Assets: 520

Washington Ave., Lindenhurst, NY: $300,000.00

Personal Property: 84,116.00

Liabilities:

Secured: 149,160.20

Unsecured: 17,982.46

Cash Flow:

Monthly Income: 1,290.00

Monthly Expenses: 1,815.00

(Id. at 4-7, 9, 12, 14-15.)

Motion To Convert

On November 29, 2004, the Bankruptcy Court discharged Appellant from her debts. (Bankr. Docket No. 26.) Over one year later, on April 5, 2006, Appellant filed a motion to convert her Chapter 7 proceeding to one under Chapter 13. (Appellee's Br., Ex. R.) In the intervening time, although not exactly clear, it appears that the Debtor and the Trustee had made at least two separate agreements, which were never consummated, pursuant to which the Debtor was going to purchase the Property. The details are disputed by the parties; however, based on a reading of transcripts from hearings held before Bankruptcy Judge Bernstein in June and July of 2006, the Bankruptcy Court and the Trustee made great efforts to give the Debtor ample opportunity to purchase the Property rather than sell it to a third party. (Mot. to Convert Hr'g Tr. 10-18, June 27, 2006; Mot. to Convert Hr'g Tr. 29, July 6, 2006.) The Debtor, however, was unable to secure the funds to purchase the Property in a timely manner. (Mot. to Convert Hr'g Tr. 7, July 27, 2006.)

In the Chapter 13 petition, Appellant reported the following:

Assets: 520

Washington Ave., Lindenhurst, NY: $375,000.00

Personal Property: 177,000.00

Liabilities:

Secured: 141,469.96

Unsecured: 10,000.00

Cash Flow:

Monthly Income: 0.00

Monthly Expenses: 0.00

(Appellee's Br., Ex. R at 7-10, 12, 15-16, 19-20.)

Appellant's Chapter 13 reorganization plan provided for one lump-sum payment in the amount of $25,000.00, 34 monthly payments in the amount of $400.00, and a final lump-sum payment of $27,492.32. (Id. at 4.)

Appellant's conversion motion did not indicate, however, from where the funds necessary to maintain the Chapter 13 reorganization plan would be taken. (See generally id.) At a hearing on May 16, 2006, Bankruptcy Judge Bernstein orally ruled that, based on a review of the papers, the Debtor's motion to convert was denied. (Mot. to Convert Hr'g, May 16, 2006.). Subsequently, however, the Debtor was permitted to file a reply brief and the Trustee was permitted to file a sur-reply. It appears from the record that, although there was never a second formal decision rendered, ...


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