                                                                          FILED
                                                                           AUG 7 2019
                           NOT FOR PUBLICATION
                                                                      SUSAN M. SPRAUL, CLERK
                                                                         U.S. BKCY. APP. PANEL
                                                                         OF THE NINTH CIRCUIT



             UNITED STATES BANKRUPTCY APPELLATE PANEL
                       OF THE NINTH CIRCUIT

In re:                                               BAP No. CC-18-1218-SKuTa

ARNOLD W. GROSS and LAURIE E.                        Bk. No. 9:17-bk-10857-DS
GROSS,

                    Debtors.

ARNOLD W. GROSS; LAURIE E. GROSS,

                    Appellants,

v.                                                   MEMORANDUM*

ELIZABETH F. ROJAS, Chapter 13
Trustee,

                    Appellee.

                     Argued and Submitted on July 18, 2019
                            at Pasadena, California

                               Filed – August 7, 2019

               Appeal from the United States Bankruptcy Court


         *
        This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value. See 9th Cir. BAP Rule 8024-1.
                       for the Central District of California

          Honorable Deborah J. Saltzman, Bankruptcy Judge, Presiding



Appearances:        Janet Audrey Lawson argued for Appellants; Melissa K.
                    Besecker argued for Appellee.



Before: SPRAKER, KURTZ, and TAYLOR, Bankruptcy Judges.



                                 INTRODUCTION

      Chapter 131 debtors Arnold W. Gross and Laurie E. Gross appeal

from an order dismissing their chapter 13 case. They also appeal from an

order denying them relief under Civil Rules 59 or 60.

      The Grosses’ chapter 13 case had been pending for roughly 14

months at the time the bankruptcy court dismissed their case. And they

had not confirmed a chapter 13 plan during that time, though the court

continued the confirmation hearing seven times. On the other hand, there

is nothing in the bankruptcy court’s findings or in the record indicating

that these continuances resulted from misconduct or neglect on the part of

the Grosses or their counsel. Instead, the record evidences that the


      1
        Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.

                                           2
confirmation hearings were continued from time to time to permit the

Grosses to pursue challenges to the secured claims of two major creditors.

Both of these challenges ultimately succeeded. Moreover, throughout the

delay in confirming a plan, the Grosses duly made their $2,500.00 monthly

plan payments.

      At the last confirmation hearing held, the bankruptcy court became

concerned that the Grosses were ineligible for chapter 13 and dismissed

their bankruptcy case. However, the Grosses filed a timely motion for relief

from the dismissal ruling in which they demonstrated that the chapter 13

eligibility concerns were unfounded. Appellee chapter 13 trustee Elizabeth

Rojas has conceded this point on appeal. Though the bankruptcy court also

had noted a handful of procedural misteps that prevented confirmation of

the Grosses’ plan at the last confirmation hearing, those mistakes were not

sufficient to support dismissal on this record. Accordingly, we REVERSE.

                                    FACTS

      The Grosses commenced their chapter 13 bankruptcy case in May

2017. They filed their original plan at the same time they filed their chapter

13 petition. The original plan provided for monthly payments of $2,500.00

for 60 months. The plan committed to pay all priority claims and estimated

a 32% distribution to the Grosses’ nonpriority unsecured creditors.

      The plan and the Grosses’ bankruptcy schedules identified Select

Portfolio Servicing, Inc. (“Select”) as a secured creditor with a first priority


                                        3
lien against the Grosses’ residence. The plan provided that the Grosses

would directly pay Select’s postconfirmation mortgage payments outside

their plan. But the Grosses also contemplated curing $29,000.00 in past-due

mortgage payments through their plan payment. The plan further

provided for direct payments to the secured creditors holding liens against

their vehicles.

      Finally, the plan contemplated avoidance of the junior lien held by

Specialized Loan Servicing, LLC against the Grosses’ residence.2 The

Grosses’ schedules indicated that, given the value of their residence, this

junior lien was wholly unsecured.

      In July 2017, shortly before the first confirmation hearing, the chapter

13 trustee filed an objection to the Grosses’ plan. The trustee stated that the

Grosses had failed to serve their plan on all of their creditors and to

disclose their 1997 chapter 7 case. The trustee also pointed out that the

Grosses had not provided sufficient information regarding their income.

According to the trustee, the Grosses’ 2015 and 2016 tax returns needed to

be provided. The trustee also needed six months’ worth of paystubs and

their calculation of aggregate annual income for the year immediately

preceding their chapter 13 case filing.

      The trustee further maintained that the Grosses’ plan was not


      2
       The Grosses’ subsequently-filed motion to avoid lien suggests that Specialized
Loan Servicing was the loan servicer on behalf of Ownit Mortgage Solutions, Inc.

                                          4
feasible. As the trustee noted, the plan did not provide for certain creditors’

claims. Most notably, the plan did not include any provision for the

Internal Revenue Service’s (“IRS”) tax claims, which included a $127,904.55

secured claim and totaled more than $135,000.00. The trustee also

challenged the sufficiency of the evidence relating to whether the Grosses’

plan satisfied the “best efforts” requirements of § 1325(b)(1)(B). According

to the trustee, the Grosses’ reported expenses were too high and required

additional documentation.3

      The original confirmation hearing was held on July 27, 2017. We do

not know what transpired at the hearing because the parties to this appeal

have not provided us with a hearing transcript. We only know that the

hearing was held and was continued to September 28, 2017, as reflected on

the docket.4

      Roughly a month after the July 2017 confirmation hearing, the


      3
         It is unclear whether the Grosses ever addressed the trustee’s concerns
regarding the amount of the Grosses’ expenses. However, this concern was not raised at
the last confirmation hearing. Nor is there anything in the record to indicate that this
concern factored into the bankruptcy court’s decision to dismiss.
      4
        With the exception of the last confirmation hearing held on July 26, 2018, the
same is true for all of the confirmation hearing dates referenced below. We do not know
specifically what transpired at these hearings because the parties only provided us with
one transcript: the transcript from the July 26, 2018 final confirmation hearing. We have
searched the docket, and the imaged documents appended thereto, for additional
information regarding what transpired at the other confirmation hearings to no avail.
We can take judicial notice of the contents of the bankruptcy court’s docket. Woods &
Erickson, LLP v. Leonard (In re AVI, Inc.), 389 B.R. 721, 725 n.2 (9th Cir. BAP 2008).

                                            5
Grosses filed a motion to avoid the junior liens of Ownit Mortgage

Solutions, Inc. and the IRS. The Grosses reasoned that the liens could be

avoided under § 506(d) because the liens were wholly unsecured. The

motion was set for hearing at the same time and place as the continued

confirmation hearing. On September 28, 2017, the hearings on both matters

were continued to November 30, 2017.

      Shortly before the continued confirmation hearing, on November 13,

2017, the trustee filed another objection to the Grosses’ plan.

The new objection was similar to the trustee’s first objection. It raised

almost all of the same issues, except the trustee raised an additional

concern regarding incomplete schedules. The trustee noted that the Grosses

held title to a third vehicle, a 2013 Toyota Corolla, encumbered by a lien in

favor of Toyota Motor Credit Corp. As pointed out by the trustee, the

Grosses needed to amend their schedules to list both the vehicle and the

corresponding debt.

      On November 28, 2017, the Grosses filed an amended motion to

avoid lien. The amended motion changed the name of the junior lienholder

from Ownit Mortgage Solutions, Inc. to the Bank of New York Mellon. The

amended motion also dropped the request for relief against the IRS. On

November 29, 2017, the Grosses objected to the IRS’s proof of claim. In their

claim objection, the Grosses argued that the IRS’s claim should be treated

as wholly unsecured because all of their property subject to the IRS lien


                                       6
was either fully encumbered or exempt.

      Also on November 29, 2017, the Grosses filed an amended Schedule

A/B. In it, the Grosses addressed the trustee’s concern regarding the

allegedly omitted vehicle. The Grosses maintained that they co-signed for

the vehicle so that they could purchase it for their son. According to the

Grosses, their son had possession and control of the vehicle and made all of

the payments. Based on these allegations, the Grosses asserted that they

had no interest in the vehicle.5

      At the November 30, 2017 confirmation hearing, the bankruptcy

court continued the confirmation hearing to December 21, 2017, which was

the same date the IRS claim objection was set for hearing. Meanwhile, the

bankruptcy court vacated and reset the hearing on the first amended lien

avoidance motion for the same date. The court subsequently rescheduled

all of these hearings for January 25, 2018.

      The day before the January 25, 2018 confirmation hearing, the

Grosses filed a declaration itemizing their sources of income and

identifying the amounts obtained from each source. The Grosses

presumably submitted this declaration to address the trustee’s concerns

regarding income sources raised in both of her plan objections.

      At the January 25, 2018 hearing, the bankruptcy court granted the


      5
       The Grosses later filed an amended Schedule D to the same effect. But the
Grosses did not file their amended Schedule D until March 21, 2018.

                                          7
motion to avoid the lien of the Bank of New York Mellon, and continued

the IRS claim objection hearing and the confirmation hearing to March 22,

2018. The court entered the order avoiding the Bank of New York Mellon’s

lien on February 13, 2018. The order specified that, subject to the terms set

forth therein, the Bank of New York Mellon’s lien in the amount of

$174,361.12 was avoided, but that amount would be treated as an

unsecured claim to the extent allowed.

      At the March 22, 2018 hearing, the bankruptcy court in large part

sustained the Grosses’ objection to the IRS’s secured claim, though the

docket reflects that the matter was continued to May 24, 2018. The court

also continued the confirmation hearing to May 24, 2018. On May 16, 2018,

the court entered its Order on Objections to Claims, which allowed the IRS

$2,500.00 as a secured claim and allowed the $133,156.71 balance of the

claim as unsecured. At the May 24, 2018 confirmation hearing, the court

once again continued the matter, this time to July 26, 2018.

      In June 2018, the Grosses filed and served a first amended chapter 13

plan. The amended plan now provided for three priority unsecured claims,

as follows: (1) chapter 13 trustee’s fees, estimated in the amount of 11% of

all plan payments; (2) $2,000.00 in chapter 13 attorney’s fees; and (3) an IRS

priority claim in the amount of $2,626.18. The amended plan also provided

for the surrender of the 2013 Toyota Corolla. Otherwise, the amended plan

was similar to the original plan.


                                      8
      The amended plan contained a number of errors. For instance, it still

stated the Grosses’ intention to avoid the junior lien of Specialized Loan

Servicing, LLC, when in fact that lien already had been avoided.6 The

amended plan also misstated the date of the confirmation hearing. The

caption page of the amended plan erroneously listed the original

confirmation hearing date of July 27, 2017, instead of the pending

continued hearing date of July 26, 2018. The notice of the continued

confirmation hearing and the amended plan contained the same mistake.

      At the July 26, 2018 confirmation hearing, the court pointed out the

mistake in the hearing notice regarding the date of the hearing. The court

also pointed out that the hearing notice listed the wrong courtroom

number. The trustee, through counsel, noted that the amended plan

reduced the percentage distribution to unsecured creditors (from 32% to

31%). According to the trustee, Mrs. Gross’s signature was also missing

from the amended plan. And the trustee stated that she still needed a


      6
         Additionally, the trustee’s November 2017 plan objection included an item
regarding the amount of prepetition arrears on the Grosses’ senior mortgage debt. The
trustee noted that the original plan provided for repayment of $29,000.00 in prepetition
arrears, whereas the creditor’s proof of claim stated that $30,327.25 was in arrears prior
to the bankruptcy filing. On appeal, the trustee pointed out in his responsive brief that
the Grosses’ first amended plan also failed to address this discrepancy. The trustee
contends that the Grosses’ failure to address this issue, of which the Grosses had
months of advance notice, bolsters the court’s decision to dismiss. However, this issue
was not raised at the final confirmation hearing. Nor is there anything else in the record
to indicate that the bankruptcy court was aware of this lingering issue or considered it
as part of its basis for dismissing the Grosses’ chapter 13 case.

                                            9
complete copy of the Grosses’ 2017 tax return, as they had only “uploaded

just some schedules and extraneous documents, you know, like worksheets

and things like that. . . .”

       After raising the above problems with confirmation, the trustee, for

the first time, claimed that the Grosses exceeded the debt limit for

eligibility for chapter 13. The trustee argued that when the IRS’s unsecured

claim and the stripped junior lien of the Bank of New York Mellon were

added to the preexisting amount of unsecured debt, the Grosses’ aggregate

unsecured debt totaled roughly $474,000.00, though she provided no

itemization for her calculation of unsecured debt. At the time the Grosses

filed their petition, § 109(e) limited chapter 13 eligibility to only those

debtors with unsecured debt of less than $394,725.00.

       The Grosses had no advance notice of any of the trustee’s concerns.

None of them had been raised in the trustee’s two prior written objections

to the original plan. And the trustee did not file a written objection to the

amended plan. The Grosses were represented by appearance counsel at the

hearing, who was unable to adequately address any of these new issues. 7

       7
        By “appearance counsel” we mean someone other than the counsel the debtors
retained to represent them in their case, who for a fixed fee agrees to represent the
debtors solely for the purpose of a court appearance. See, e.g., In re Olson, Case No.
15-01580-TLM, 2016 WL 3453341, at *5 (Bankr. D. Idaho June 16, 2016); In re Dean, Case
No. 12-12576-B-7, 2013 WL 3306418, at *3 (Bankr. E.D. Cal. June 28, 2013); In re Walker,
332 B.R. 820, 831 (Bankr. D. Nev. 2005). While appearance counsel often appear at
“routine” hearings in bankruptcy cases without adverse results, they typically are ill-
                                                                               (continued...)

                                             10
Appearance counsel did not specifically ask for a continuance of the

hearing or a chance for the Grosses to amend their plan. And he did not

argue that, as a factual matter, the trustee was wrong about the Grosses

exceeding the debt limit for chapter 13 eligibility. Instead, counsel

suggested that the regular counsel should be given the opportunity to brief

the debt limit issue. The bankruptcy court indicated that it disagreed with

the Grosses’s legal theory regarding the debt limit.

      The court then announced its ruling, as follows:

      All right. So at this stage we have a number of problems. We've
      had many confirmation hearings here. Given the debt limit
      issue and the fact that we still don't have a plan on file that I
      can go forward with, I'll give the Debtor's seven days to convert
      or the case will be dismissed.

Hr’g Tr. (July 26, 2018) at 3:4-9. The court made no other specific findings.

Nor did the court immediately enter a written order memorializing its oral

ruling from the hearing.

      Instead of filing a request to convert the case to chapter 7, the Grosses

timely filed a motion seeking to alter the judgment or for relief from

judgment under Civil Rules 59 and 60 (made applicable in bankruptcy



      7
        (...continued)
prepared to address any issues that arise at the hearing requiring an understanding of
the history of their clients or their bankruptcy case. See, e.g., In re Brown, Case No.
6:16-BK-18361 MJ, 2017 WL 2869794, at *1 (Bankr. C.D. Cal. June 30, 2017); In re Garner,
Case No. 10-20383-PB11, 2014 WL 5023224, at *2 (Bankr. S.D. Cal. Mar. 31, 2014).

                                           11
cases, respectively, by Rules 9023 and 9024). 8 The Grosses principally

argued that the bankruptcy court had denied them due process. They

contended that they were not given an adequate or reasonable opportunity

to address the trustee’s objections, which were raised for the first time at

the July 26, 2018 confirmation hearing.

       Among other things, the Grosses pointed out that, during the 14

months their case had been pending, they had duly paid to the trustee each

and every $2,500.00 monthly plan payment contemplated by their chapter

13 plan. They also claimed that, up to the time of the July 26, 2018

confirmation hearing, they had promptly responded to all issues and

concerns raised by the court and the trustee. They additionally noted that,

during the pendency of the case, they had avoided the Bank of New York

Mellon’s junior lien, had successfully objected to the IRS’s secured proof of

claim, and thereby had recast all but $2,500.00 of the IRS’s claims as

unsecured.

       According to the Grosses, after their appearance counsel notified

them of the court’s ruling, they reviewed the case, corresponded with the

trustee, and realized that the trustee’s debt limit issue was factually

unfounded. The trustee had erroneously calculated the total unsecured



       8
        The Grosses did not specify which grounds for relief under Civil Rules 59 and
60 they particularly were relying on. Instead, they cited all of the grounds that typically
and historically justify relief under these Rules.

                                            12
debt to be roughly $474,000.00, when in fact the total unsecured debt

actually was much less. The Grosses explained that their original Schedule

E/F listed unsecured debt totaling $161,266.00. This amount of unsecured

debt included the $130,000.00 claim owed to the IRS. Therefore, the Grosses

reasoned, the trustee had double counted the IRS debt when she added an

additional $133,156.71 on behalf of the IRS to the Grosses’ total unsecured

debt on account of their successful claim objection. After avoiding the

second deed of trust against their residence, the trustee believed that the

Grosses were required to add Bank of New York Mellon’s $174,361.00

claim to their total unsecured debt.9 But even if Bank of New York Mellon’s

claim is added to the $161,266.00 in unsecured debt previously listed in

their Schedule E/F, the Grosses still only had a total of $335,627.00 of

unsecured debt, an amount well below the $394,725.00 debt limit imposed

by § 109(e).

       The Grosses also noted that the trustee was simply wrong when she



       9
          The Grosses did not directly dispute in the bankruptcy court whether the
unsecured debts resulting from the valuations of the challenged secured claims should
be included within the calculation of their unsecured debt to establish eligibility under
§ 109(e). On appeal they note that based on their prior chapter 7 discharges, the in
personam liability discharged in that bankruptcy is not counted in the subsequent
chapter 13 case for purposes of determining eligibility under § 109(e). Free v. Malaier (In
re Free), 542 B.R. 492, 497 (9th Cir. BAP 2015); see also Washington v. Real Time Resolution,
Inc. (In re Washington), No. CC-18-1206, 2019 WL 345052 (9th Cir. BAP July 30, 2019).
Because the trustee acknowledges that the Grosses qualify for chapter 13 under § 109(e),
we need not address this issue further.

                                             13
claimed that their signatures were missing from their first amended plan.

The trustee has conceded this point on appeal.

      As for the missing 2017 tax return, the Grosses insisted they could

quickly and easily address this new issue and any other lingering plan

confirmation issues. With respect to the wrong hearing date and courtroom

number, the Grosses indicated that these errors were clerical mistakes

made by their counsel and that they should not suffer the harsh

consequences of dismissal as a result of their counsel’s inadvertent error.

Along with their motion for relief, the Grosses contemporaneously filed a

separate application asking the court to hear the motion for relief on an

expedited basis.

      On August 3, 2018, the court entered an order denying the motion for

relief and dismissing the case. The order stated that the Grosses had not

demonstrated cause for relief from the court’s July 26, 2018 oral ruling. The

order further stated that, based on the record in the entire case and the

reasons set forth at the July 26, 2018 hearing, the case was dismissed and

the Grosses’ motion for relief and application for shortened-time

consideration were both denied.

      The Grosses timely appealed.

                              JURISDICTION

      The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.


                                      14
                                      ISSUES

1.    Did the bankruptcy court abuse its discretion when it dismissed the

      Grosses’ chapter 13 case?

2.    Did the bankruptcy court abuse its discretion when it denied the

      Grosses’ motion under Civil Rules 59 and 60?

                           STANDARD OF REVIEW

      We review the bankruptcy court’s chapter 13 case dismissal for an

abuse of discretion. Schlegel v. Billingslea (In re Schlegel), 526 B.R. 333, 338

(9th Cir. BAP 2015). We also review under the abuse of discretion standard

the bankruptcy court’s denial of motions under Civil Rule 59 and 60. First

Ave. W. Bldg., LLC v. James (In re Onecast Media, Inc.), 439 F.3d 558, 561 (9th

Cir. 2006).

      A bankruptcy court abuses its discretion if it applies the wrong law

or its factual findings are illogical, implausible, or without support in the

record. In re Schlegel, 526 B.R. at 338 (citing TrafficSchool.com, Inc. v. Edriver

Inc., 653 F.3d 820, 832 (9th Cir. 2011)).

                                  DISCUSSION

      Under § 1307(c), the bankruptcy court may dismiss a chapter 13 case

for cause. The statute sets forth a non-exhaustive list of grounds that

constitute “cause” for dismissal or conversion, whichever is in the best

interests of the estate’s creditors. de la Salle v. U .S. Bank, N.A. (In re de la




                                         15
Salle), 461 B.R. 593, 605 (9th Cir. BAP 2011).10 The bankruptcy court’s ruling

did not specify which enumerated ground under § 1307(c) the court was

relying on. Still, there are two enumerated grounds that arguably fit the

facts of this case: §§ 1307(c)(1) and (c)(5). We may affirm on any ground

supported by the record. See Shanks v. Dressel, 540 F.3d 1082, 1086 (9th Cir.

2008). Therefore, we will address each of these grounds in turn.

A. Section 1307(c)(1).

      “‘A debtor's unjustified failure to expeditiously accomplish any task

required either to propose or confirm a chapter 13 plan may constitute

cause for dismissal under § 1307(c)(1).’” In re de la Salle, 461 B.R. at 605

(quoting Ellsworth v. Lifescape Med. Assocs., P.C. (In re Ellsworth), 455 B.R.

904, 915 (9th Cir. BAP 2011)). In order to properly dismiss under

§ 1307(c)(1), the debtor’s delay must be both unreasonable and prejudicial

to creditors. Id. (citing § 1307(c)(1)).

      The bankruptcy court obviously considered the Grosses’ delay in

confirming their plan to be unreasonable. As the bankruptcy court

reasoned, it already had continued the confirmation hearing a number

times, and there still was no confirmable plan on file. The court observed



      10
          The bankruptcy court did not consider whether dismissal or conversion was in
the best interests of creditors as required by the statute. See Nelson v. Meyer (In re
Nelson), 343 B.R. 671, 675 (9th Cir. BAP 2006). Nonetheless, this was harmless error
because we must reverse in any event. We must ignore harmless error. Van Zandt v.
Mbunda (In re Mbunda), 484 B.R. 344, 355 (9th Cir. BAP 2012).

                                           16
that the first amended plan suffered from several problems raised at the

hearing. Most important of these was the chapter 13 eligibility problem

after the successful challenges to the secured claims of Bank of New York

Mellon and the IRS.

      At the time of the Grosses’ chapter 13 filing, a debtor with $394,725.00

or more in total unsecured debt was ineligible to be a chapter 13 debtor. See

§ 109(e). As the Grosses later explained in their motion for relief from

judgment, the trustee erroneously concluded that the Grosses’ unsecured

debt exceeded this eligibility limit by inaccurately tallying up the Grosses’

debts. The trustee mistakenly double counted the debt owed to the IRS. The

trustee has conceded this point on appeal. The trustee also has conceded

that she was mistaken about the missing signature of Mrs. Gross.

      This left only the copy of the 2017 tax return and the noticing errors

as a basis for the court’s conclusion that the plan could not be confirmed at

the last confirmation hearing. On this record, more is required to show that

the delay associated with the noticing defects was “unreasonable” within

the meaning of § 1307(c)(1). In the context of this statute, “unreasonable

delay” is a term of art. Generally speaking, it should be viewed as a

determination of ultimate fact encompassing an equitable assessment of all

relevant circumstances, akin to the “excusable neglect” standard under

Rule 9006(b)(1) and Civil Rule 60(b)(1), as articulated in Pioneer Inv. Servs.

Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 391–96 (1993). Another


                                       17
example would be the “bad faith” standard as applied in the chapter 13

dismissal context. See In re Ellsworth, 455 B.R. at 917-18 (citing Goeb v. Heid

(In re Goeb), 675 F.2d 1386, 1390–91 (9th Cir. 1982)).

      We do not mean to suggest that the unreasonable delay inquiry

always will require an exhaustive analysis of all of the circumstances

surrounding a case. Often, it is apparent from the record that giving the

chapter 13 debtors further leeway would be futile. They may demonstrate

over time that they are unwilling or unable to propose a feasible chapter 13

plan, or they may fail to address plan defects pointed out by the court and

the trustee at prior confirmation hearings. See, e.g., In re de la Salle, 461 B.R.

at 596-99, 605 (court gave debtors detailed instructions after denial of

second amended plan but debtors did nothing); see also Villalon v. Burchard

(In re Villalon), BAP No. NC-14-1414-KiTaD, 2015 WL 3377854, at *1-3 (9th

Cir. BAP May 22, 2015) (debtor unable to cure even a small fraction of her

large delinquency in plan payments though court gave her repeated

opportunities to do so); Phillips v. Leavitt (In re Phillips), BAP No.

NV-14-1359-JuKuD, 2015 WL 2180321, at *1-2 (9th Cir. BAP May 8, 2015)

(debtor unable to propose a feasible plan over seven attempts).

      Alternately, we also have upheld findings of unreasonable delay

when associated with bad faith – such as an apparent disregard by the

debtors of the need to promptly and accurately discharge their chapter 13

duties. These cases often involve debtors who filed their chapter 13


                                        18
petitions not with the legitimate intent to pay back their creditors, but

rather with the intent of obstructing one or more of their creditors from

enforcing their debts. See, e.g., In re de la Salle, 461 B.R. at 606 (debtors

enjoyed the protection of the automatic stay, made zero payments to their

secured creditor, and refused to propose a plan providing for its claim,

instead focusing on their spurious noteholder standing litigation); In re

Ellsworth, 455 B.R. at 920 (numerous indica of bad faith, including

suspicious timing of petition filing and apparent intent of debtor to defeat

collection of a single disputed judgment debt); see also Beckner v. Rojas (In re

Beckner), BAP No. CC–16–1142–TaLN, 2017 WL 460967, at *1-4 (9th Cir.

BAP Feb. 2, 2017) (debtor focused exclusively on her dispute with her

secured creditors and ignored her duty to propose a confirmable chapter 13

plan providing for them); Burris v. Curry (In re Burris), BAP No.

CC–14–1552–TaKuD, 2015 WL 5922036, at *1-2 (9th Cir. BAP Oct. 9, 2015)

(same).

      In addition to futility or bad faith, our decisions upholding dismissals

under § 1307(c)(1) also often reflect a debtor’s defiance of the court’s orders

and directives and the dictates of chapter 13 of the Code. See, e.g., In re de la

Salle, 461 B.R. at 605 (“Given the passage of time and debtors' repeated

failure to provide for the claim secured by their residence in their plan, the

bankruptcy court correctly concluded that conversion of debtors' case was

warranted on account of the resultant delay and prejudice.”); In re


                                         19
Ellsworth, 455 B.R. at 915 (“the Ellsworths did not take seriously the court's

admonitions regarding the need for their numbers to be accurate.”).

      This is not to say that § 1307(c)(1) dismissals and conversions always

require proof of futility, bad faith, or defiance of the bankruptcy court, the

Code, or the Rules. We are saying only that when one or more of these

factors is evident in the chapter 13 debtors’ conduct, the bankruptcy court

need not conduct an exhaustive analysis of all of the relevant

circumstances.

      Notably, the bankruptcy court here made no findings that any of

these critical factors were present. Nor is there anything in the record

indicating futility, bad faith, or defiance. To the contrary, we are confronted

here with a debtor whose plan at the time of the last confirmation hearing

suffered from only two known and valid flaws: defective notice and a

missing copy of their most recent tax return.11 There is nothing in the



      11
          It would violate the Grosses’ due process rights to consider the alleged
eligibility problem and the alleged signature problem without any notice. The trustee
raised these problems for the first time at the last confirmation hearing. In the Grosses’
motion under Civil Rules 59 and 60, once they were given a reasonable opportunity to
understand the trustee’s calculations and consider the alleged problems, they were able
to establish definitively that neither of these problems actually existed. The trustee has
admitted on appeal that she was mistaken about these problems, and yet the court
relied on them, in large part, in dismissing the Grosses’ chapter 13 case. In its order
denying the Grosses’ motion for relief from judgment, the court did not explain why the
inaccuracy of the trustee’s assertions was unimportant. Under these circumstances, the
alleged eligibility and signature problems do not fairly support the bankruptcy court’s
decision to dismiss the Grosses’ bankruptcy case.

                                           20
record to suggest that the defective notice or the missing copy of the tax

return were the result of bad faith or some act of defiance. And there is no

serious dispute that the Grosses could have quickly remedied these

problems. On this record, it was error to rely on these problems to dismiss.

      Contrary to the bankruptcy court’s determination, the record

indicates that the Grosses were serious about confirming their chapter 13

plan and delivering a significant dividend to their unsecured creditors.

Above all, they had paid to the trustee $2,500.00 per month for each of the

fourteen months their plan was pending. Additionally, they promptly

identified challenges to the secured claims of both Bank of New York

Mellon and the IRS and moved to recast those debts as unsecured claims.

Such activity often delays confirmation of a chapter 13 plan but is not

"unreasonable delay"absent other circumstances not identified in this case.

      In sum, there is no finding, and no evidence, of futility, bad faith or

defiance of the bankruptcy court, the Code, or the Rules that would

support the bankruptcy court's implicit determination of unreasonable

delay. Furthermore, as a whole, the Grosses appeared dedicated to their

good faith rehabilitation efforts. While there is evidence of delay, there is

nothing in the record demonstrating that they caused the delay or that their

conduct was unreasonable within the meaning of § 1307(c)(1).

      In any event, even if we were to accept that the unreasonableness

element for § 1307(c)(1) was met, the bankruptcy court made no finding of


                                       21
delay prejudicial to the Grosses’ creditors. Nor is there anything in the facts

of this case demonstrating such prejudice. The noticing defect the

bankruptcy court relied on in dismissing the case easily and quickly could

have been rectified if the debtors had been given the opportunity to

re-notice the confirmation hearing. Furthermore, during the entirety of the

case, no creditors had expressed any interest in challenging confirmation of

the Grosses’ plan. Nor was there any legitimate reason to think creditors

would have done so if the first amended plan were re-noticed for hearing.

Indeed, for the vast majority of creditors, the first amended plan did not

treat them much differently than they were treated under the original plan.

      We understand that, at the time of the final confirmation hearing, the

court was frustrated with the pace of the Grosses’ progress towards

confirmation. At bottom, however, the interest of the Grosses’ creditors in

the reasonable prospect of partial repayment is paramount. The Code and

§ 1307(c)(1) recognize the primacy of this interest, which is embodied in the

statutory provisions governing chapter 13. And, here, the record indicates

that the creditor goal of repayment was well within reach.

      Given what devolves into minor procedural mistakes, it is hard to

fathom how dismissal was not dramatically more prejudicial to unsecured

creditors than an additional continuance. Under these circumstances, the

bankruptcy court’s decision to dismiss the Grosses’ bankruptcy case cannot

be justified under § 1307(c)(1).


                                      22
B. Section 1307(c)(5).

      Under § 1307(c)(5), a chapter 13 case may be dismissed or converted

when confirmation of the plan is denied under § 1325 and the court also

denies a request for additional time to file another plan or a plan

modification. In re Ellsworth, 455 B.R. at 917 (citing In re Nelson, 343 B.R. at

676 & n.9) (emphasis added). To apply this provision, both types of denial

typically are required (i.e., both denial of plan confirmation and denial of a

request for an opportunity to file another plan). Id.

      In re Nelson described the purpose underlying the second of these

requirements:

      The policy underlying the second element of § 1307(c)(5)
      relating to a request for time to try again is that chapter 13 plan
      confirmation is an iterative process. A debtor who wishes to
      submit to the rigors of living for a number of years in the
      straightjacket of a plan that represents one’s “best efforts” to
      pay creditors should, in principle, be permitted the latitude to
      correct perceived deficiencies in proposed plans.

In re Nelson, 343 B.R. at 676. Nelson’s observation as to the iterative process

is even more relevant where, as here, the debtors have a significant track

record of making substantial plan payments.

      Thus, the bankruptcy court could not have properly applied

§ 1307(c)(5) unless debtor was given a reasonable opportunity to correct or

explain the trustee’s perceived deficiencies. The bankruptcy court gave the

Grosses no such opportunity. The court simply noted the deficiencies,


                                        23
noted the numerous times the confirmation hearing had been continued

and concluded that dismissal of the case was appropriate, arguably sua

sponte. When the Grosses, in their reconsideration motion, attempted to

bring to the attention of the bankruptcy court why the trustee was wrong

regarding their chapter 13 eligibility and regarding the missing signature,

the court denied the motion without any explanation – other than to say

that the Grosses had not established cause for reconsideration.

      Under these circumstances, § 1307(c)(5) does not support the court’s

decision to dismiss. See id.; see also Penland v. Rakozy (In re Penland), BAP

No. ID-05-1467-HKMa, 2006 WL 6811002 at *4-5 (9th Cir. BAP Aug. 17,

2006) (citing In re Nelson and holding that chapter 13 debtors typically must

be given an additional chance to confirm a chapter 13 plan after denial of

plan confirmation before the bankruptcy court can invoke § 1307(c)(5) as a

ground for dismissal). The Grosses were not given a meaningful

opportunity to address the points raised for the first time by the trustee at

the last confirmation hearing, so we cannot uphold the bankruptcy court’s

decision to dismiss the Grosses’ bankruptcy case under § 1307(c)(5).

C. Unenumerated “Cause” For Dismissal.

      While the bankruptcy court could have, in theory, fashioned its own

cause for dismissal, it presumably would have articulated the specifics of

that cause to make clear its intent. See generally Keith M. Lundin & William

H. Brown, Chapter 13 Bankruptcy, 4th Edition, § 334.1, at ¶ [1] (2004)


                                       24
(collecting cases). It did not. We are reluctant to consider whether the court

meant to fashion its own cause for dismissal in the absence of some clear

signal from the bankruptcy court.

      Even so, there are no findings or evidence here that would support a

finding of unenumerated cause for dismissal. This is particularly true here,

where the court appears to have primarily relied on an incorrect calculation

of the Grosses’ unsecured debt and relatively minor procedural defects, of

which the Grosses were not given prior notice. The court apparently was

frustrated with the amount of time it was taking the Grosses to confirm a

chapter 13 plan. But Congress made clear that delay only constitutes cause

for dismissal when it is both unreasonable within the meaning of

§ 1307(c)(1) and prejudicial to creditors.

      Whatever powers the bankruptcy court had to fashion its own cause

for dismissal, that power doubtlessly did not give the court authority to

dismiss for a type of delay different than that contemplated by Congress in

chapter 13 of the Code. Bankruptcy judges must work within the confines

of the Code and may not exercise their general and equitable powers in a

manner inconsistent with the Code’s express provisions. Marrama v.

Citizens Bank of Massachusetts, 549 U.S. 365, 382 (2007) (citing Norwest Bank

Worthington v. Ahlers, 485 U.S. 197, 206 (1988)).

      Accordingly, we cannot uphold the bankruptcy court’s decision to

dismiss the Grosses’ bankruptcy case based on some unenumerated theory


                                       25
of “cause” for dismissal. In light of the fact that none of § 1307(c)’s

enumerated grounds applied here, and given the absence of a valid

unenumerated theory of cause to dismiss, we cannot uphold the

bankruptcy court’s dismissal of the Grosses’ chapter 13 case.12

                                  CONCLUSION

      For the reasons set forth above, we REVERSE the bankruptcy court’s

dismissal of the Grosses’ chapter 13 case.




      12
         Because we have concluded that the bankruptcy court’s dismissal order must
be reversed, we decline to consider its order denying the Grosses’ motion under Civil
Rules 59 and 60.

                                          26
