                                                                 FILED
                                                                  DEC 12 2011
 1
                                                            SUSAN M SPRAUL, CLERK
                                                                U.S. BKCY. APP. PANEL
 2                         ORDERED PUBLISHED                    O F TH E N IN TH C IR C U IT


 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5
 6   In re:                        )      BAP No.    EC-11-1258-JuKiD
                                   )
 7   BERENICE AND PIERRE THOREAU   )      Bk. No.    10-29678
     DE LA SALLE,                  )
 8                                 )
                    Debtors.       )
 9                                 )
     ______________________________)
10   BERENICE AND PIERRE THOREAU   )
     DE LA SALLE,                  )
11                                 )
                    Appellants,    )
12                                 )
     v.                            )      O P I N I O N
13                                 )
     U.S. BANK, N.A. AS TRUSTEE FOR)
14   THE CERTIFICATEHOLDERS OF     )
     STRUCTURED ADJUSTABLE RATE    )
15   MORTGAGE LOAN TRUST, MORTGAGE )
     LOAN PASS-THROUGH CERTIFICATES)
16   SERIES 2005-19XS,             )
                                   )
17                  Appellee.      )
     ______________________________)
18
19                       Submitted on November 16, 2011
                            at Sacramento, California
20
                           Filed - December 12, 2011
21
               Appeal from the United States Bankruptcy Court
22                 for the Eastern District of California
23       Honorable Ronald H. Sargis, Bankruptcy Judge, Presiding
24   Appearances:     George Gingo, Esq., argued for Appellants,
                      Berenice and Pierre Thoreau de la Salle; Robert
25                    J. Esposito, Esq., argued for appellee, U.S.
                      Bank, as Trustee for the Certificateholders of
26                    Structured Adjustable Rate Mortgage Loan Trust,
                      Mortgage Loan Pass-Through Certificates Series
27                    2005-19XS.
                          ___________________________
28
     Before:   JURY, KIRSCHER, and DUNN, Bankruptcy Judges.
 1   JURY, Bankruptcy Judge:
 2
 3           Appellants, chapter 71 debtors Berenice and Pierre Thoreau
 4   de la Salle, appeal the bankruptcy court’s orders (1) denying
 5   confirmation of their second amended chapter 13 plan and (2)
 6   granting the motion of appellee, U.S. Bank, N.A., as Trustee for
 7   the Certificateholders of Structured Adjustable Rate Mortgage
 8   Loan Trust, Mortgage Loan Pass-Through Certificates Series 2005-
 9   19XS (“U.S. Bank”) to convert their chapter 13 case to one under
10   chapter 7.     We AFFIRM.
11                                 I.    FACTS
12           The orders on appeal relate to debtors’ lengthy dispute
13   with numerous parties, including U.S. Bank, regarding the
14   identity of the entity legally authorized and entitled to
15   enforce the note and deed of trust against debtors’ real
16   property and the validity of the deed of trust itself.
17           In 2005, Berenice de la Salle signed a note in conjunction
18   with a loan for $668,000 obtained from Countrywide Homes Loans,
19   Inc., dba America’s Wholesale Lender (“Countrywide”).       The note
20   was secured by a deed of trust on debtors’ residence located in
21   Mammoth Lakes, California.     In late 2008, she defaulted on the
22   note, a notice of default was recorded and the trustee’s sale
23   was scheduled for March 25, 2010.        By then, she owed more than
24   $29,000 in arrears and approximately $840,000 on the note.
25
         1
26         Unless otherwise indicated, all chapter and section
   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.
27 “Rule” references are to the Federal Rules of Bankruptcy
   Procedure and “Civil Rule” references are to the Federal Rules of
28
   Civil Procedure.

                                        -2-
 1         After Ms. de la Salle defaulted, but before the trustee’s
 2   sale, she filed a complaint in the Eastern District of
 3   California against Countrywide and others, seeking to invalidate
 4   the   security interest on her property based on various
 5   theories.    The defendants moved to dismiss the action, which the
 6   district court granted by judgment entered on June 30, 2010.
 7   Ms. de la Salle appealed that decision to the Ninth Circuit.
 8   The appeal was dismissed due to her failure to prosecute and her
 9   request for a voluntary dismissal.
10          On April 15, 2010, two days after the district court
11   announced its decision orally, debtors filed their chapter 13
12   petition pro se.   They then mounted a multifaceted attack on
13   U.S. Bank’s “standing” to foreclose on their residence.
14         Debtors’ original Schedule D acknowledged that U.S. Bank
15   held a secured claim on their property.   However, their Schedule
16   F also listed U.S. Bank with a disputed unsecured claim in an
17   undisclosed amount.   Debtors later listed the full amount of
18   U.S. Bank’s debt as unsecured in an amended Schedule F, claiming
19   that there were three possible creditors who could enforce the
20   note and deed of trust and that by listing the debt as
21   unsecured, the true creditor would eventually come forward.
22   That amendment put their unsecured debt at $1,116,910, which was
23   over the jurisdictional limits for unsecured debt in a chapter
24   13 under § 109(e).
25         Meanwhile, debtors attempted to get their chapter 13 plan
26   confirmed.   Despite acknowledging that a secured debt existed
27   against their residence, albeit disputed, none of debtors’ plans
28   provided for the payment of arrears or maintenance payments to

                                     -3-
 1   their secured creditor.2    The first plan, filed on April 29,
 2   2010, placed U.S. Bank in Class 2,3 but provided for no monthly
 3   payment.     Debtors stated in ¶ 7.03 of an attachment to the plan
 4   that they believed the entire debt secured by the first deed of
 5   trust on their property was paid off by credit enhancements in
 6   the form of credit default swaps at the time that Ms. de la
 7   Salle defaulted.
 8           Before any confirmation hearing was held, debtors filed a
 9   “motion” to confirm an amended plan on May 27, 2010.     In the
10   amended plan, debtors still included U.S. Bank in Class 2, but
11   amended ¶ 7.03 to state that they did not know who was the owner
12   of the note U.S. Bank sought to enforce.     As a result, they took
13   the position that the entire amount of $862,462.33 owed on the
14   debt was unsecured.     The chapter 13 trustee objected to the plan
15   on the grounds, among others, that debtors’ plan attempted to
16   modify a debt secured by their residence in violation of
17   § 1322(b) and that they were not making current payments on
18   their mortgage debt.     On July 16, 2010, the court denied
19   confirmation of the amended plan, without prejudice, because of
20   inadequate service on the Internal Revenue Service.
21           Debtors filed and moved to confirm a second amended plan on
22
23       2
           Debtors also had an equity line of credit for $218,000
   secured by a second deed of trust on their property. OneWest
24
   Bank filed a proof of claim relating to this debt which debtors
25 objected to. The bankruptcy court later sustained their
   objection finding that OneWest Bank’s claim was unsecured.
26
        3
           The chapter 13 plan form for the Eastern District of
27 California (EDC3-080) designates Class 2 claims as “Secured
   claims that are modified by the plan, or that have matured or
28
   will mature before the plan is completed.”

                                      -4-
 1   August 9, 2010.      In this plan, debtors deleted U.S. Bank from
 2   Class 2 entirely and “clarified” that they would file a proof of
 3   claim on behalf of the “purported” creditor, U.S. Bank, and
 4   object to its claim.      They also stated that they were in the
 5   process of filing an adversary proceeding against U.S. Bank.
 6            U.S. Bank objected to debtors’ second amended plan on the
 7   grounds that (1) the plan did not provide for payment of the
 8   arrears or ongoing mortgage payments and (2) was not feasible
 9   given that debtors’ net monthly income of $1081 was insufficient
10   to make the monthly payments to U.S. Bank, which alone were
11   $6,423.77 per month.      The chapter 13 trustee also objected to
12   debtors’ second amended plan essentially on the same grounds.
13   As further discussed below, the court later sustained these
14   objections to the second amended plan at a March 29, 2011
15   hearing.
16   A.       Debtors’ Objection To U.S. Bank’s Proof Of Claim
17            U.S. Bank filed a timely proof of claim (claim no. 17),
18   asserting a secured claim of $828,710.32.4     On September 1,
19   2010, debtors objected to the claim, arguing that the bank had
20   not met its threshold burden of standing because the proof of
21   claim was not accompanied by evidence that it had authority to
22   bring the claim.
23            At an October 19, 2010 status conference on debtors’
24
          4
25         U.S. Bank later filed an amended proof of claim (claim
   no. 18). In that claim, U.S. Bank alleged that Mortgage
26 Electronic Registration Systems, Inc. (“MERS”) - as “nominee” for
   America’s Wholesale Lender, in whose name the deed of trust had
27 been recorded - had assigned the deed of trust to U.S. Bank. The
   MERS assignment was executed five days after the claims bar date.
28

                                       -5-
 1   objection to U.S. Bank’s claim, the bankruptcy court told Ms. de
 2   la Salle:
 3        And one of the things I tell debtors, who get very
          excited about the standing issue, is, we can go ahead
 4        and have hearings and bring people in, but first,
          last, and foremost, if there’s a deed of trust
 5        securing the loan on the property, whether you have
          the creditor, the right creditor or the wrong creditor
 6        in here, any plan, you are going to deal with the
          secured claim, and any objection -- any objection to
 7        claim now doesn’t necessarily take care of that lien.
 8   Hr’g Tr. (October 19, 2010) at 5.
 9   B.   Debtors’ Adversary Proceeding Against U.S. Bank
10        On October 12, 2010, prior to the hearing on their claim
11   objection, debtors filed an adversary proceeding (Adv. No. 10-
12   02642-E) against U.S. Bank, Lehman Brothers Holdings, Inc.
13   (“Lehman”), Countrywide and MERS.    The complaint sought a
14   declaration that the trust deed was defective and to quiet title
15   against the various defendants.   The defendants moved to dismiss
16   the adversary proceeding on res judicata grounds because
17   debtors’ complaint raised many of the same issues that were
18   raised or could have been raised in the district court action.
19   The bankruptcy court granted that motion and dismissed all
20   claims with prejudice against defendants Lehman, Countrywide and
21   MERS by order entered on March 4, 2011.
22        However, the bankruptcy court allowed debtors to proceed
23   against U.S. Bank.   The court reasoned that the issues of
24   whether the deed of trust was unperfected and whether U.S. Bank
25   had standing to enforce the note could not have been raised in
26   the district court action.
27        At a November 30, 2010 hearing, the bankruptcy court
28   indicated that it would administratively consolidate debtors’

                                    -6-
 1   objection to U.S. Bank’s proof of claim with the adversary
 2   proceeding because the issues were intertwined.5
 3        On April 15, 2011, debtors filed a motion for summary
 4   judgment on their objection to U.S. Bank’s proof of claim and
 5   motion for partial summary judgment in the adversary case.6    The
 6   hearings were scheduled for May 26, 2011.
 7   C.   U.S. Bank’s Motion To Dismiss Or Convert Debtors’ Case
 8        In late December 2010, U.S. Bank filed separate motions to
 9   dismiss or convert debtors’ bankruptcy case under § 1307(c) on
10   the grounds that (1) debtors had made no postpetition payments
11   on its secured claim and (2) they were ineligible for chapter 13
12   relief because their debts exceeded the unsecured debt limit
13   prescribed by § 109(e) due to debtors’ listing of U.S. Bank’s
14   debt as unsecured.
15        At the January 18, 2011 hearing on the motions, the
16   bankruptcy judge expressed his view on the record regarding
17   chapter 13 debtors who sought to confirm plans that did not
18   provide for payments on their residence:
19
        5
           At this hearing, the court commented in passing that
20 since debtors did not know which entity could enforce their note
21 perhaps Governor Jerry Brown would like to get the money.
   Debtors afterwards took the position that if they owed the money
22 at all, the money escheated to the State of California, and they
   could pay a lesser amount than owed on the note. They went so
23 far as to file a creditor’s claim on behalf of the State of
   California as holder of a secured claim on their property by
24
   reason of escheat, in the amount of $668,000.
25      6
           The record contains voluminous materials on the summary
26 judgment motions which have never been ruled on. Presumably
   debtors included this material in the record to show that they
27 would succeed with their litigation against U.S. Bank due to the
   overwhelming evidence they have against it. The motions for
28
   summary judgment are irrelevant to this appeal.

                                   -7-
 1        I say, go to state court, sue, get your preliminary
          injunction, because you are not telling me about a
 2        bankruptcy plan. You’re telling me we are filing
          bankruptcy to get a free injunction while we proceed
 3        with the litigation.
 4   Hr’g Tr. (January 18, 2011) at 7.     However, the bankruptcy court
 5   denied U.S. Bank’s first round of motions on procedural grounds
 6   (U.S. Bank had failed to serve creditors) by order entered on
 7   January 25, 2011.
 8        In February 2011, U.S. Bank filed its second round of
 9   motions to dismiss or convert debtors’ case, asserting the same
10   grounds as its prior motions.   Debtors filed a response on March
11   15, 2011, alleging that U.S. Bank was neither a secured nor
12   unsecured creditor in their case, that it filed a fraudulent
13   proof of claim in their case, and that it committed a fraud on
14   the court by pretending to be a bona fide creditor.    They
15   further asserted that it would violate § 1322(b)(1) to make
16   payments to U.S. Bank because such payments would discriminate
17   unfairly against bona fide creditors.    In addition, debtors
18   maintained that U.S. Bank failed to prove that it was a party in
19   interest with standing to be heard by the court as there was no
20   evidence that it was the holder of the secured claim on their
21   property.   Finally, debtors stated that if they were not
22   eligible for chapter 13, they would convert their case to one
23   under chapter 11.
24   D.   The March 29, 2011 Hearing
25        On March 29, 2011, the bankruptcy court heard (1) U.S.
26   Bank’s motions to dismiss or convert debtors’ case; (2)
27   debtors’ motion to confirm their second amended plan; and (3)
28                                   -8-
 1   the continued status conferences on debtors’ objection to U.S.
 2   Bank’s proof of claim and their adversary proceeding.
 3           The court, sustaining U.S. Bank’s and the chapter 13
 4   trustee’s objections to debtors’ second amended plan, denied
 5   confirmation of the plan finding that:     (1) the plan failed to
 6   provide for payment of the note securing debtors’ residence      in
 7   violation of § 1325(a)(5), and (2) until debtors prevailed on
 8   their theory that the secured claim escheated to the State of
 9   California, there was no reason for the court to believe that
10   U.S. Bank did not hold the first deed of trust for this claim.
11   See Civil Minutes dated March 29, 2011, Dkt. No. 210.
12           However, because debtors had newly retained counsel, the
13   court continued the bank’s motions to dismiss or convert to May
14   3, 2011, to afford debtors one final opportunity to file an
15   amended, confirmable chapter 13 plan.     In its Civil Minutes, the
16   court gave detailed instructions to debtors and their counsel:
17           On or before April 15, 2011, the debtors shall file a
             third amended plan and/or make provisions to make
18           mortgage payments to a blocked account . . . . This
             includes making provision for curing all pre and
19           postpetition arrearages as permitted by the Bankruptcy
             Code.
20
21           Finally, because debtors’ adversary proceeding and claim
22   objection raised essentially the same issues, the bankruptcy
23   court consolidated the matters for all hearings, scheduling
24   deadlines, and discovery, by order entered on April 4, 2011.7
25
26
         7
           This order confirmed the oral ruling of the court on
27 November 30, 2010.
28                                    -9-
 1   E.   The May 3, 2011 Hearing
 2        Debtors and their counsel failed to submit a third amended
 3   plan by April 15, 2011, or any time thereafter.   As a result, at
 4   the May 3, 2011 hearing, the bankruptcy court granted U.S.
 5   Bank’s motion to convert debtors’ case.
 6        In its written decision, the court first noted that it had
 7   previously warned debtors that they would have to propose a
 8   confirmable plan and that until their argument that the claim
 9   securing their residence escheated to the State of California
10   was adjudicated, they should make the payments on the disputed
11   note into a blocked account.
12        The court further found that debtors’ reorganization was a
13   sham because they had never provided for payment on the secured
14   claim against their residence while they obtained the benefits
15   of the automatic stay in lieu of a Civil Rule 65 injunction.    In
16   addition, the court determined that U.S. Bank had standing to
17   participate in the case and assert its position and rights with
18   respect to its claim despite debtors’ objection to the bank’s
19   proof of claim and adversary proceeding against it.
20        Finally, the court found cause existed to dismiss or
21   convert debtors’ case on independent grounds:   (1) unreasonable
22   delay by debtors that was prejudicial to creditors; (2) failure
23   to file a plan timely; (3) failure to commence making payments
24   under a plan proposed in good faith, and (4) failure to propose
25   a plan or prosecute a reorganization in good faith.   The court
26   decided that it was in the best interests of the creditors and
27   the estate to convert the case; i.e., if debtors’ contention was
28                                  -10-
 1   true that their property was free and clear of all liens, then
 2   those monies could be made available to the unsecured creditors
 3   in the case.
 4            The court’s decision was without prejudice to the pending
 5   adversary proceeding and debtors’ objection to U.S. Bank’s
 6   claim.8     The court entered its order converting the case on May
 7   9, 2011.
 8   F.       Denial Of Debtors’ Motion For Stay Pending Appeal And
              Request For Judicial Notice
 9
10            Debtors timely appealed the orders denying confirmation of
11   their second amended plan and converting their case.9
12   Debtors moved for a stay pending appeal which was denied by the
13   bankruptcy court and this Panel.
14            Debtors request us to take judicial notice of the
15   bankruptcy court’s memorandum decision denying their request for
16   a stay pending appeal in their reply brief.      They contend such
17   notice is appropriate because the court’s decision clarifies the
18   court’s reasons for ordering the conversion of their case.       We
19   deny debtors’ request for judicial notice because they seek to
20   use the court’s decision to establish the accuracy of the facts
21   within to support their position in this appeal; i.e., that the
22
23        8
             The court observed that the chapter 7 trustee would have
     standing as plaintiff in the adversary proceeding.
24
          9
25         Debtors’ Notice of Appeal also includes the order that
   administratively consolidated debtors’ claim objection and
26 adversary proceeding against U.S. Bank and numerous minute orders
   scheduling and rescheduling the hearings on those consolidated
27 matters.
28                                     -11-
 1   court did not act sua sponte in converting debtors’ case, but
 2   simply ruled on U.S. Bank’s motion to convert and U.S. Bank did
 3   not have standing to bring that motion.          Debtors’ request goes
 4   beyond the proper use of judicial notice for purposes of this
 5   appeal.
 6                              II.    JURISDICTION
 7        The bankruptcy court had jurisdiction over this proceeding
 8   under 28 U.S.C. §§ 1334 and 157(b)(2)(B), (K) and (L).         We have
 9   jurisdiction under 28 U.S.C. § 158.
10                                III.    ISSUES
11        A.   Whether the bankruptcy court abused its discretion in
12   denying confirmation of debtors’ second amended plan;
13        B.   Whether U.S. Bank was a party in interest with
14   standing to seek dismissal or conversion of debtors’ bankruptcy
15   case under § 1307(c); and
16        C.   Whether the bankruptcy court erred in converting
17   debtors’ bankruptcy case from chapter 13 to one under chapter 7.
18                        IV.   STANDARDS OF REVIEW
19        The proper interpretations of statutes and rules are legal
20   questions that we review de novo.          Heath v. Am. Express Travel
21   Related Servs. Co. (In re Heath), 331 B.R. 424, 428 (9th Cir.
22   BAP 2005).    Whether compliance with a given statute or rule has
23   been established is generally a question of fact, which we
24   review for clear error.     Id.
25        We review the bankruptcy court’s ultimate decision to
26   confirm or not to confirm a reorganization plan for an abuse of
27   discretion.   Computer Task Grp., Inc. v. Brotby (In re Brotby),
28                                       -12-
 1   303 B.R. 177, 184 (9th Cir. BAP 2003).
 2        We review the issue of standing de novo.    Brown v. Sobczak
 3   (In re Sobczak), 369 B.R. 512, 516 (9th Cir. BAP 2007).
 4        We review a decision to dismiss or convert a chapter 13
 5   case under § 1307(c) for abuse of discretion.    Ellsworth v.
 6   Lifescape Med. Assocs., P.C. (In re Ellsworth), 455 B.R. 904,
 7   914 (9th Cir. BAP 2011).
 8        In applying our abuse of discretion test, we first
          ‘determine de novo whether the [bankruptcy] court
 9        identified the correct legal rule to apply to the
          relief requested.’ If the bankruptcy court identified
10        the correct legal rule, we then determine whether its
          ‘application of the correct legal standard [to the
11        facts] was (1) illogical, (2) implausible, or (3)
          without support in inferences that may be drawn from
12        the facts in the record.’ If the bankruptcy court did
          not identify the correct legal rule, or its
13        application of the correct legal standard to the facts
          was illogical, implausible, or without support in
14        inferences that may be drawn from the facts in the
          record, then the bankruptcy court has abused its
15        discretion.
16   USAA Fed. Sav. Bank. v. Thacker (In re Taylor), 599 F.3d 880,
17   887-88 (9th Cir. 2010) (citing United States v. Hinkson, 585
18   F.3d 1247, 1261-62 (9th Cir. 2009) (en banc)).
19        We review the bankruptcy court’s factual findings regarding
20   debtors’ lack of good faith for clear error.    In re Ellsworth,
21   455 B.R. at 914.
22        We may affirm on any ground supported by the record.
23   Shanks v. Dressel, 540 F.3d 1082, 1086 (9th Cir. 2008).
24
25                              V.   DISCUSSION
26        As we understand debtors’ arguments on appeal:
27        (1) by placing a claim at issue through an objection or
28                                    -13-
 1   adversary proceeding and by keeping current on the plan payment
 2   they proposed (in this case $1079), they need not make current
 3   payments to U.S. Bank nor provide for its claim in their plan,
 4   pending the outcome of the claim dispute;
 5         (2) the bankruptcy court denied them a hearing on the claim
 6   dispute and thus they were prejudiced by the premature
 7   conversion of their case; and
 8         (3) their claim objection, coupled with their overwhelming
 9   evidentiary showing that U.S. Bank did not have standing to
10   enforce the note against their residence, caused the bank to
11   lose its standing for all purposes to participate in their case.
12         We address each contention below.
13   A.    The Bankruptcy Court Did Not Err In Denying Confirmation
           of Debtors’ Second Amended Plan
14
15         We are not persuaded by debtors’ argument that their
16   objection to U.S. Bank’s proof of claim authorized them to
17   suspend all payments to their secured creditor and ignore its
18   claim in their chapter 13 plan.    To support their argument,
19   debtors cite to various statutes and Rules that pertain to the
20   claim objection and allowance process which are different from
21   the statutes and Rules that govern confirmation of chapter 13
22   plans.    While debtors had the right to object to U.S. Bank’s
23   proof of claim, the notice and hearing procedures for the
24   objection were statutorily mandated by § 502(b).10   These
25
          10
26         Section 502(b) provides that if an objection “to a claim
   is made, the court, after notice and a hearing, shall determine
27                                                    (continued...)
28                                   -14-
 1   procedures, which are separate and apart from the plan
 2   confirmation process, do not authorize debtors to change the
 3   amount or reclassify a debt in their chapter 13 plan which was
 4   set forth in a properly filed proof of claim.
 5         The language in the chapter 13 plan form required to be
 6   used in the Eastern District of California is consistent with
 7   the statutes and Rules governing claims and their treatment in
 8   chapter 13 plans.   Section 3.04 of the plan form (EDC3-080)
 9   states:
10         The proof of claim, not this plan or the schedules,
           shall determine the amount and classification of a
11         claim. If a claim is provided for by this plan and a
           proof of claim is filed, dividends shall be paid based
12         upon the proof of claim unless the granting of a valuation
           or lien avoidance motion, or the sustaining of a claim
13         objection, affects the amount or classification of the
           claim.
14
15   Accordingly, despite debtors’ claim objection and pending
16   adversary proceeding against U.S. Bank, as long as debtors
17   proposed a plan which provided for the bank’s proof of claim as
18   filed, confirmation of their plan could have occurred.11
19         But none of debtors’ plans provided for the payment of U.S.
20   Bank’s secured claim.   Putting U.S. Bank’s proof of claim aside,
21   § 1322(b)(2) specifically prohibits debtors from modifying
22   claims which are secured by their principal residence.
23   Moreover, § 1325(a)(5) requires debtors to provide for the
24
           10
25          (...continued)
     the amount of such claim . . . .”
26
          11
           Indeed, debtors’ position would invite strategic
27 litigation to avoid making payments under a chapter 13 plan.
28                                  -15-
 1   payment of their secured claims in an amount equal to the claim.
 2   The record shows that debtors did not have the income to provide
 3   for the payment of U.S. Bank’s claim.       Accordingly, we conclude
 4   that the bankruptcy court properly denied confirmation of their
 5   second amended plan.
 6   B.    The Bankruptcy Court Did Not Prejudice Debtors By
           Converting Their Case Prior To Resolving Their Objection To
 7         U.S. Bank’s Proof Of Claim
 8             We also find no merit to debtors’ contention that they
 9   were prejudiced by the conversion of their case prior to the
10   resolution of their objection to U.S. Bank’s proof of claim.
11   There is no deadline in a statute or Rule for hearing claim
12   objections.      Actually, imposing such a deadline creates
13   difficulties in the plan confirmation process and is
14   inconsistent with other deadlines established in the Code.       An
15   accelerated process contemplates the confirmation of a chapter
16   13 plan and commencement of payments prior to the claims bar
17   date or the final allowance of claims.12       See §§ 1324 and
18   1326(a), Rules 3002(c) and 3015.13       Indeed, bankruptcy courts are
19
        12
           We recognize that some districts — and even selected
20 judges in a district — do not confirm a chapter 13 plan until
21 after the bar date.
          13
22           Section 1324(b) states that the hearing on confirmation
     of the plan may be held no earlier than twenty days and not later
23   than forty-five days after the date of the meeting of creditors
     under § 341(a). Section 1326(a)(1) requires a debtor to commence
24   making payments not later than thirty days after the date of the
25   filing of the plan or the order for relief, and subsection (2) of
     that provision states that the trustee shall distribute those
26   payments when the plan is confirmed.
          Rule 3002(c) states that in a chapter 13 case, a proof of
27                                                      (continued...)
28                                     -16-
 1   authorized to go forward with confirmation, for the benefit of
 2   the debtor and other creditors, even when final liquidation of a
 3   claim of a particular creditor is impossible, by allowing the
 4   estimation of claims.14   § 502(c).   The key rationale for this
 5   procedure is to allow creditors to be paid sooner, as the
 6   chapter 13 trustee cannot make distributions until a plan is
 7   confirmed.   § 1326(a)(2).
 8        Further, as stated above, confirmation of a plan is not a
 9   determination of the amount of any allowed secured claim.    The
10   form plan in the Eastern District of California expressly
11   provides that the amount of the secured claim, absent separate
12   court determination, is the amount stated as secured in the
13   proof of claim.
14        In addition, even if we were convinced that prejudice could
15   arise due to delay — which we are not — the record shows that
16   any alleged delay in the resolution of debtors’ claim objection
17   was due to their decision to file an adversary proceeding
18   against U.S. Bank prior to the hearing on their claim objection.
19   After debtors filed their adversary proceeding, the bankruptcy
20
          13
21        (...continued)
   claim is timely filed if it is filed not later than ninety days
22 after the first date set for the meeting of creditors under
   § 341(a). Rule 3015 requires a debtor to file a plan within
23 fourteen days after the petition is filed and that time cannot be
   extended unless the court so directs.
24
         14
25         Debtors argue in their appeal brief that the court did
   not have to estimate U.S. Bank’s claim because it was liquidated
26 and not contingent. In that event, all debtors had to do was
   provide for payment of the secured claim in their plan, which
27 they did not do.
28                                  -17-
 1   court consolidated the matters for purposes of hearings and
 2   discovery because of the similar issues involved.    Civil Rule
 3   42(a), which is made applicable to bankruptcy proceedings by
 4   Rule 7042, allows the court to consolidate various actions
 5   pending before it which “involve[ ] a common question of law or
 6   fact . . . .”   The opportunity for consolidation is designed to
 7   promote not only judicial economy, Johnson v. Manhattan Ry. Co.,
 8   289 U.S. 479, 496–97 (1973), but also the expeditious and
 9   efficient conduct of litigation for all concerned.
10   Consolidation is within the broad discretion of the bankruptcy
11   court and trial courts may consolidate cases sua sponte.
12   Burchinal v. Cent. Wash. Bank (In re Adams Apple Inc.), 829 F.2d
13   1484, 1487 (9th Cir. 1987); See also Boone v. Derham-Burk (In re
14   Eliapo), 298 B.R. 392, 405 (9th Cir. BAP 2003) (bankruptcy
15   courts have wide discretion to manage their dockets).
16        Here, debtors’ objection to U.S. Bank’s proof of claim and
17   adversary proceeding were in the same procedural posture, there
18   were common issues of law and fact, and the parties were the
19   same.   Under these circumstances, we discern no prejudice to
20   debtors.
21        Finally, although not required, the court made a reasonable
22   accommodation to allow debtors to place the payments owed to
23   their secured creditor in a blocked account pending the outcome
24   of the dispute so that payments would not be made to the wrong
25
26
27
28                                  -18-
 1   party.    Debtors chose simply not to comply.15
 2         In sum, on this record we perceive no procedural error or
 3   infringement on debtors’ substantive rights.
 4   C.    U.S. Bank Was A Party In Interest With Standing Despite
           Debtors’ Objection To Its Proof Of Claim And Pending
 5         Adversary Proceeding
 6         Debtors’ objection to U.S. Bank’s proof of claim or pending
 7   adversary proceeding did not cause the bank to lose its party in
 8   interest standing to participate in debtors’ bankruptcy case.
 9         Debtors cite Warth v. Seldin, 422 U.S. 490, 495 (1975), in
10   their appeal brief for the proposition that standing is a
11   threshold issue in every federal case, determining the power of
12   the court to entertain the suit.    Debtors misapply this
13   precedent.    In Warth v. Seldin, the Supreme Court explained that
14   “standing imports justiciability: whether the plaintiff has made
15   out a ‘case or controversy’ between himself and the defendant
16   within the meaning of Art. III.”    422 U.S. at 498.   “A federal
17   court’s jurisdiction . . . can be invoked only when the
18   plaintiff himself has suffered ‘some threatened or actual injury
19   resulting from the putatively illegal action.’” Id. at 499.
20         The “threshold standing” inquiry in Warth v. Seldin has no
21   application in this context.    Debtors do not contend the
22   bankruptcy court lacked jurisdiction or that debtors themselves
23   lacked standing to file their petition or seek confirmation of
24
25        15
           On April 19, 2011, debtors deposited $1,000 into their
26 attorney’s trust account. This payment was allegedly made
   pursuant to the court’s directive that money be deposited into a
27 blocked account in order to pay for the interest on the note.
28                                   -19-
 1   their proposed plan.   Instead, debtors argue that U.S. Bank did
 2   not have standing to enforce its secured claim against debtors’
 3   residence.   The requirement for standing in that instance is
 4   irrelevant to this appeal.   Perhaps if the bankruptcy court had
 5   overruled debtors’ objection to the proof of claim or had
 6   confirmed a plan requiring payment of claims to the improper
 7   party without considering debtors’ arguments about U.S. Bank’s
 8   lack of standing, then debtors’ argument might have merit.    But
 9   the bankruptcy court did not rule on the claim nor did it
10   require payment to an improper party, it simply converted
11   debtors’ case.
12        Furthermore, a creditor does not need an allowed claim to
13   be a party in interest for purposes of § 1307(c).   Under that
14   section, a court may convert a chapter 13 case to a chapter 7
15   for cause on request of a party in interest and after notice and
16   a hearing.   In applying a parallel statute in the chapter 11
17   context, this Panel held that creditors are parties in interest
18   and may move for the conversion or dismissal of a case under
19   § 1112(b) whether or not their claims have been allowed.    See
20   Johnston v. JEM Dev. Co. (In re Johnston), 149 B.R. 158, 161
21   (9th Cir. BAP 1992); see also Martinez v. Arce (In re Torres
22   Martinez), 397 B.R. 158, 164 (1st Cir. BAP 2008) (same).    The
23   holding in In re Johnston reinforces the notion that the claim
24   allowance process does not control a party in interest inquiry.
25
26
27
28                                  -20-
 1   Because the statutory language of § 1112(b)16 is almost identical
 2   to that in § 1307(c) — both giving parties in interest the right
 3   to seek conversion or dismissal of a bankruptcy case for “cause”
 4   — we discern no reason why creditors should not be included
 5   within the scope of a party in interest for purposes of
 6   § 1307(c).
 7         A statutory analysis supports this view.   Under
 8   § 101(10)(A), a creditor is defined as an “entity that has a
 9   claim against the debtor that arose at the time of or before the
10   order for relief concerning the debtor.”   Section 101(5)(A)
11   defines a “claim” as a “right to payment, whether or not such
12   right is . . . disputed . . . .”   Under these statutory
13   definitions, U.S. Bank was a creditor under § 101(10)(A) because
14   it was the holder of a right to payment.   “This right, although
15   in dispute, is nevertheless a claim.”   In re Johnston, 149 B.R.
16   at 161.   Therefore, as a “creditor,” U.S. Bank had party in
17   interest standing to request the conversion or dismissal of
18   debtors’ case.
19   D.    The Bankruptcy Court Did Not Err In Converting Debtors’
           Bankruptcy Case
20
           Section 1307(c) sets forth a non-exclusive list of factors
21
     which constitute “cause” for conversion or dismissal, including
22
     unreasonable delay by the debtor that is prejudicial to
23
24
          16
25         This section provides in relevant part that “on request
   of a party in interest, and after notice and a hearing, the court
26 shall convert . . . or dismiss a case under this chapter, which
   ever is in the best interests of creditors and the estate, for
27 cause . . . .”
28                                  -21-
 1   creditors and failure to file a plan timely.    § 1307(c)(1) and
 2   (3).    Moreover, a lack of good faith constitutes “cause” to
 3   dismiss a chapter 13 case.    Eisen v. Curry (In re Eisen), 14
 4   F.3d 469, 470 (9th Cir. 1994) (per curiam); In re Ellsworth, 455
 5   B.R. at 919.
 6          Section 1307(c) establishes a two-step analysis for dealing
 7   with questions of conversion and dismissal.    “First, it must be
 8   determined that there is ‘cause’ to act.    Second, once a
 9   determination of ‘cause' has been made, a choice must be made
10   between conversion and dismissal based on the ‘best interests of
11   the creditors and the estate.’”    Nelson v. Meyer (In re Nelson),
12   343 B.R. 671, 675 (9th Cir. BAP 2006).
13                                  Cause
14          “A debtor’s unjustified failure to expeditiously accomplish
15   any task required either to propose or confirm a chapter 13 plan
16   may constitute cause for dismissal under § 1307(c)(1).”      In re
17   Ellsworth, 455 B.R. at 915.    Here, after denying confirmation of
18   their second amended plan, the court gave debtors detailed
19   instructions and a final opportunity to propose a confirmable
20   plan by April 15, 2011.    However, debtors chose to do nothing.
21   More than a year after debtors filed their petition, they still
22   had not confirmed a chapter 13 plan.    Given the passage of time
23   and debtors’ repeated failure to provide for the claim secured
24   by their residence in their plan, the bankruptcy court correctly
25   concluded that conversion of debtors’ case was warranted on
26   account of the resultant delay and prejudice.
27          Moreover, the record shows that debtors failed to file a
28   plan timely under § 1321.    Section 1321 provides that the debtor

                                     -22-
 1   shall file a plan and Rule 3015 states that the deadline for
 2   filing the plan is fourteen days after the filing of the
 3   petition or within another deadline ordered by the court.       This
 4   provision “applies not only to the first plan filed, but also to
 5   any subsequent plan or modification required by the court.”       In
 6   re Ellsworth, 455 B.R. at 916.    Here, the court ordered debtors
 7   to file a third amended plan by April 15, 2011 with provisions
 8   that provided for payment to their secured creditor.       Debtors
 9   failed to comply with that order.       Thus, the bankruptcy court
10   did not err by converting debtors’ case for cause under
11   § 1307(c)(3).
12        Finally, “[t]o determine bad faith a bankruptcy judge must
13   review the ‘totality of the circumstances.’       A judge should ask
14   whether the debtor ‘misrepresented facts in his [petition or]
15   plan, unfairly manipulated the Bankruptcy Code, or otherwise
16   [filed] his Chapter 13 [petition or] plan in an inequitable
17   manner.”   In re Eisen, 14 F.3d at 470.      The record shows that
18   the bankruptcy court considered the totality of the
19   circumstances in deciding that debtors failed to propose their
20   plan and prosecute their case in good faith.
21        The record indicates that debtors enjoyed the protection of
22   the automatic stay for over a year while making zero payments to
23   their secured creditor; none of debtors’ plans complied with the
24   Code by providing for the payment of their secured creditor’s
25   claims; and debtors’ primary activity in their bankruptcy was
26   the continuing litigation of U.S. Bank’s claims.       Furthermore,
27   after debtors and their counsel received detailed instructions
28   from the bankruptcy court to include payments for their secured

                                      -23-
 1   creditor in their third amended plan, they ignored those
 2   instructions by choosing not to file a third amended plan.
 3   Under the totality of circumstances approach, we conclude the
 4   bankruptcy court did not err in converting debtors’ case based
 5   on their lack of good faith.
 6             Best Interests Of Creditors And The Estate
 7        At the hearing on U.S. Bank’s motions to dismiss or
 8   convert, U.S. Bank argued for the dismissal of debtors’ case.
 9   However, the U.S. Trustee suggested conversion because he had
10   discerned that there was some nonexempt cash which could be used
11   by the chapter 7 trustee to determine if there was any real
12   value in the real property or debtors’ adversary proceeding.
13   Since the U.S. Trustee made a showing that there might be a
14   recovery that would enhance the value of the estate for
15   unsecured creditors, we conclude the bankruptcy court properly
16   determined that conversion was in the best interests of the
17   creditors and the estate.
18                           VI.    CONCLUSION
19        For the reasons stated, we AFFIRM.
20
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22
23
24
25
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27
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