                                                                          FILED
                                                                           JUL 30 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                           NOT FOR PUBLICATION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-19-1041-KuTaS

RYAN S. O'HARA,                                      Bk. No. 2:17-bk-20050-SK

                Debtor.

RYAN S. O'HARA,

                 Appellant,
v.                                                    MEMORANDUM*

UNITED STATES TRUSTEE,

                 Appellee.

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

                                 Filed – July 30, 2019

                Appeal from the United States Bankruptcy Court
                     for the Central District of California

             Honorable Sandra R. Klein, Bankruptcy Judge, Presiding


         *
        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.
Appearances:           Mark T. Young of Donahoe & Young LLP argued for
                       appellant Ryan S. O'Hara.**



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

      Chapter 111 debtor, Ryan S. O'Hara, appeals from the bankruptcy

court's order denying his motion for approval of his disclosure statement

and dismissing his case. We AFFIRM.

                                           FACTS

A.    Prepetition Events

      1.        The Restitution Judgment

      In 2014, Mr. O'Hara was convicted in the Superior Court of Los

Angeles County of seven counts of grand theft under California Penal

Code § 487(a)2 and ordered to pay $4,594,315.96 in restitution to the victim,

Chapman Leonard Studio Equipment (Chapman). The amount of the

restitution included the value of property stolen or damaged. The Los


      **
           The United States Trustee (UST) has not participated in this appeal.
      1
      Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532.
      2
           Cal. Penal Code § 487 states in relevant part:
                 Grand theft is theft committed in any of the following cases:
                 (a) When the money, labor, or real or personal property
                 taken is of a value exceeding nine hundred fifty dollars
                 ($950) . . . .

                                               2
Angeles County District Attorney, on behalf of Chapman, obtained an

abstract of judgment (Abstract). In early 2015, Chapman recorded the

Abstract thereby creating a judgment lien (Lien) against Mr. and

Ms. O'Hara's real property located in Stevenson Ranch, California

(Property).

     Between October 2014 and February 2017, Mr. O'Hara was

incarcerated at Owens Valley Fire Camp in Bishop, California.

     2.       Ms. O'Hara's Bankruptcy: Avoidance of Chapman's Lien

     In December 2016, Ms. O'Hara filed a chapter 7 petition. At that time,

Mr. and Ms. O'Hara held title to the Property as trustees of the O'Hara

Family Trust dated March 19, 2003. The Property was encumbered by a

deed of trust held by PennyMac Loan Services and by the Lien.

     In July 2017, Ms. O'Hara filed a motion seeking to avoid the Lien

under § 522(f) on the grounds that it impaired her $100,000 homestead

exemption. The bankruptcy court granted her motion and avoided the Lien

in the amount of $4,042,446.38, with the balance of $551,869.58 remaining

on the Property (Avoidance Order).

B.   Mr. O'Hara's Bankruptcy

     On August 16, 2017, Mr. O'Hara filed his chapter 11 case.

     In June 2018, Mr. O'Hara filed a disclosure statement and plan and

motion to approve the disclosure statement. No timely objections were

filed, but the UST appeared at the hearing and argued that the disclosure


                                     3
statement was inadequate as Mr. O'Hara had under reported his living

expenses. The bankruptcy court agreed but also noted that Mr. O'Hara's

average post-petition monthly net income was negative and that the debt

owed to Chapman appeared to be nondischargeable. The court requested

Mr. O'Hara's counsel to provide a chart showing what the monthly

operating reports (MORs) reflected from the beginning of the case to the

present. And, if the numbers had not changed by the time of the next

hearing, the bankruptcy court stated that the case would most likely be

dismissed. The matter was continued to November 29, 2018.

      On October 2018, Mr. O'Hara filed an amended disclosure statement

and plan and sought approval of the disclosure statement. Under this

version of the plan, relying on the Avoidance Order, Mr. O'Hara proposed

to pay the secured portion of the Lien through his plan. He maintained,

however, that the unsecured portion of the Lien was dischargeable.

Therefore, he proposed to pay a small percentage of the unsecured portion

over twenty-five to thirty years without interest.

      The UST objected to the disclosure statement on the grounds that

there were errors and ambiguities that needed to be addressed before a

determination could be made regarding the feasibility of Mr. O'Hara's plan.

      At the November 29, 2018 hearing, the bankruptcy court found minor

issues, and what it called "deal breaker issues," with respect to the

disclosure statement and the plan. The minor issues included, among other


                                       4
things, inconsistencies between the disclosure statement and the plan

concerning the payment of tax claims, and discrepancies between the

MORs and Mr. O'Hara's average monthly income set forth in the disclosure

statement. The court viewed as a "deal breaker," Mr. O'Hara's declaration

of post-petition income which did not indicate whether he was paying

property taxes or insurance on the Property or explain what kind of

consulting work he was doing or whether it was full or part time. In

addition, although Mr. O'Hara claimed he received $12,540 in monthly

income from his job as an accountant and consultant, he did not deduct any

payroll taxes or social security from his calculations of monthly net income.

     The court also observed that Chapman's claim was $5.88 million and

that it appeared the plan was relying on the Avoidance Order in

Ms. O'Hara's case to provide for only the secured portion of the claim. The

bankruptcy court found that Mr. O'Hara could not rely on the Avoidance

Order because it had made no determination on whether Chapman's claim

was secured or unsecured. The bankruptcy court also noted that the

restitution debt, whether secured or unsecured, was a nondischargeable

debt under § 523(a)(7). After hearing further argument, the bankruptcy

court authorized additional briefing on the issues of whether (1) the

Avoidance Order was binding in Mr. O'Hara's case and (2) the full

restitution debt was dischargeable.

     The bankruptcy court found that the disclosure statement and plan


                                      5
were inadequate for the second time and stated that it would not go

through it a third time when the MORs said something different than the

plan. The court stated that it would dismiss Mr. O'Hara's case if it was not

bound by the Avoidance Order and if the full restitution debt was

nondischargeable.

      Pursuant to a scheduling order, Mr. O'Hara submitted his

supplemental brief. First, he argued that issue preclusion3 applied to the

bankruptcy court's findings in connection with the Avoidance Order in

Ms. O'Hara's case. According to Mr. O'Hara, his plan of reorganization

proposed to pay off the secured portion of the Lien in full through the

length of the chapter 11 plan. The remaining voided portion of the Lien

would be treated as an unsecured claim. If the bankruptcy court decided

that issue preclusion was inapplicable, Mr. O'Hara requested an

opportunity to file a motion to avoid the Lien which impaired his

homestead exemption.

      Second, Mr. O'Hara maintained that the unsecured portion of the

restitution debt was dischargeable. He argued that it was not a debt "for a

fine, penalty, or forfeiture" nor was it "payable to a governmental unit" or

"for the benefit of a governmental unit" since it was payable to Chapman.

Mr. O'Hara also asserted that the restitution was compensation for actual


      3
        Modern terminology, following the approach of the Restatement (Second),
replaces the term "collateral estoppel" with "issue preclusion."

                                         6
pecuniary loss. According to Mr. O'Hara, even if the unsecured portion of

the restitution debt was nondischargeable, Chapman would not be able to

enforce its unsecured claim until all plan payments were completed.

Therefore, the possible nondischargeability of the unsecured portion of the

Lien was "not an issue" as to confirmation of the plan.

      At the February 6, 2019 status conference, the bankruptcy court

found that issue preclusion did not apply to the Avoidance Order because

the issues in Ms. O'Hara's lien avoidance motion were not identical to those

in Mr. O'Hara's case. The court reasoned that the value of the Property and

Lien were determined on the petition date in Ms. O'Hara's case and would

have to be redetermined as of the petition date in Mr. O'Hara's case. The

bankruptcy court also found that the full amount of the restitution debt

was nondischargeable under § 523(a)(7). As a result, the court found that

Mr. O'Hara's plan of reorganization was not feasible. The bankruptcy court

dismissed Mr. O'Hara's case on feasibility grounds and under

§ 1112(b)(4)(A) on the basis that there was substantial or continuing loss to

or diminution of the bankruptcy estate and the absence of a reasonable

likelihood of rehabilitation.

      The bankruptcy court entered an order denying Mr. O'Hara's motion

for approval of the disclosure statement and dismissed his case. This timely

appeal followed.




                                      7
                               JURISDICTION

      The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334

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

                                    ISSUES

      Whether the bankruptcy court erred in determining that the doctrine

of issue preclusion did not apply to the Avoidance Order;

      Whether the bankruptcy court erred in determining that the full

restitution debt was nondischargeable under § 523(a)(7); and

      Whether the bankruptcy court abused its discretion by dismissing

Mr. O'Hara's bankruptcy case.

                         STANDARDS OF REVIEW

      We review de novo the bankruptcy court's determination that issue

preclusion was available. Tomkow v. Barton (In re Tomkow), 563 B.R. 716, 722

(9th Cir. BAP 2017) (citing Black v. Bonnie Springs Family Ltd. P'Ship (In re

Black), 487 B.R. 202, 210 (9th Cir. BAP 2013). If issue preclusion was

available, we then review the bankruptcy court's application of issue

preclusion for an abuse of discretion. Id.

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

standard or misapplies the correct legal standard, or if its factual findings

are illogical, implausible, or without support in inferences that may be

drawn from the facts in the record. Id. (citing TrafficSchool.com, Inc. v.

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


                                        8
      We review de novo a bankruptcy court's conclusions of law,

including statutory interpretations. Parks v. Drummond (In re Parks), 475

B.R. 703, 706 (9th Cir. BAP 2012) (citation omitted).

      Whether a claim is nondischargeable presents mixed issues of law

and fact and is reviewed de novo. Carrillo v. Su (In re Su), 290 F.3d 1140,

1142 (9th Cir. 2002).

      We review a bankruptcy court's decision to dismiss a chapter 11 case

under the abuse of discretion standard. Tennant v. Rojas (In re Tennant), 318

B.R. 860, 868-69 (9th Cir. BAP 2004).

                                DISCUSSION

A.    Issue Preclusion: Avoidance Order

      Mr. O'Hara contends that the bankruptcy court erred by finding issue

preclusion inapplicable to the Avoidance Order. However, in his opening

brief, Mr. O'Hara essentially concedes that issue preclusion is not

applicable to the value of the Property. He states that the value of the

Property "may have changed" during the eight month gap between his and

Mrs. O'Hara's bankruptcy filings and contends that the change in value

could easily be addressed by allowing him to submit an updated appraisal.

See Culver, LLC v. Chiu (In re Chiu), 266 B.R. 743, 751 (9th Cir. BAP 2001)

(value of property and lien determined as of the petition date).

Accordingly, while some of the issues for lien avoidance in Mr. O'Hara's

case were similar to those in Ms. O'Hara's case, they were not identical. See


                                        9
McQuillion v. Schwarzenegger, 369 F.3d 1091, 1096 (9th Cir. 2004) (to apply

issue preclusion, the issue at stake must be identical to the one alleged in

the prior litigation); Fund for Animals, Inc. v. Lujan, 962 F.2d 1391, 1399 (9th

Cir. 1992) (issue preclusion applies only when the issues presented in each

matter are identical—the doctrine is inapplicable if the issues are merely

similar) (citation omitted).

B.    Section 523(a)(7): Dischargeability of the Restitution Debt

      Section 523(a)(7) states that a debtor may not discharge any debt (1)

to the extent such debt is for a fine, penalty, or forfeiture (2) payable to and

for the benefit of a governmental unit, and (3) is not compensation for

actual pecuniary loss.

      On appeal, Mr. O'Hara argues that none of the three statutory

requirements for nondischargeability have been met. First, he contends that

the restitution order was not a debt "for a fine, penalty, or forfeiture,"

asserting that it is instead for "restitution." According to Mr. O'Hara,

restitution is statutorily defined in California Penal Code § 1202.4(f) as

"based on the amount of loss claimed by the victim." By contrast, he points

out, "forfeiture" is defined in California Penal Code § 186, et seq. as "a

means of punishing and deterring criminal activities of organized crime

and requires that a separate petition for forfeiture be filed by the

prosecuting agency (Penal Code § 186.4)." Since the definitions for

"forfeiture" and "restitution" are different, Mr. O'Hara concludes that the


                                       10
first requirement for nondischargeability has not been met. Next, he

contends that the restitution is payable to Chapman, who is not a

government entity. Last, Mr. O'Hara points out that the compensation is for

actual pecuniary loss. In essence, Mr. O'Hara advocates a literal

interpretation of the plain language in the statute.

      These arguments are squarely precluded by Kelly v. Robinson, 479 U.S.

36 (1986) and Ninth Circuit case law. In Kelly, the Supreme Court

interpreted the statutory language in § 523(a)(7) broadly, not literally, to

include criminal restitution debts. The Supreme Court construed § 523(a)(7)

as applying to all penal sanctions, including restitution debts, regardless of

whether they were denominated fines, penalties, or forfeitures, and despite

the fact that restitution is forwarded to the victim and may be calculated by

reference to the amount of harm the offender caused. The Court's broad

interpretation was due to concerns about federal interference with state

court criminal prosecutions, the history of bankruptcy court's deference to

criminal judgments, and the interests of the States in unfettered

administration of their criminal justice systems. Id. at 43–44. Because

Congress had not explicitly overruled the well-established judicial

exception exempting criminal restitution payments from dischargeability

statutes, the Court declined to read the statute as doing so. Id. at 47. In the

end, the Court held that "§ 523(a)(7) preserves from discharge any condition

a state criminal court imposes as part of a criminal sentence." Id. at 50.


                                       11
      The Ninth Circuit has commented on the Kelly Court's deviation from

the statutory language in § 523(a)(7), noting that it has led to "considerable

confusion among federal courts and practitioners about [§] 523(a)(7)'s

scope." Scheer v. The State Bar of Cal. (In re Scheer), 817 F.3d 1206, 1210 (9th

Cir. 2016). Nonetheless, in construing the scope of § 523(a)(7) in connection

with a debt owed by an attorney to her former client, the Ninth Circuit

reiterated Kelly's analysis that § 523(a)(7) must be interpreted in light of

historical deference to the states’ interests in administering their criminal

justice systems:

      While restitution resembled a judgment 'for the benefit of' the
      victim, the Court concluded that the overall role of restitution
      in 'the State's interests in rehabilitation and punishment, rather
      than the victim's desire for compensation,' meant that the
      criminal restitution actually operated 'for the benefit of' the
      state as far as section 523(a)(7) was concerned. The sentence
      following a criminal conviction necessarily considers the penal
      and rehabilitative interests of the State. Those interests are
      sufficient to place restitution orders within the meaning of
      § 523(a)(7).

Id. at 1210 (citing Kelly, 479 U.S. at 52–53). Kelly's deviation from the

statutory language was justified by "unique concerns of state criminal

proceedings" and "pre-Code practices" that "reflected policy considerations

of great longevity and importance." Id. at 1211 (citing United States v. Ron

Pair Enters., Inc., 489 U.S. 235, 244–45 (1989)).

      Scheer did not pay her former client the outstanding balance on an

                                        12
arbitration award and was suspended from the practice of law by the

California State Bar Court until she paid back all the funds and the court

granted a motion to terminate her inactive status. Scheer then filed

bankruptcy and sought to discharge the debt. In applying Kelly, State Bar of

Cal. v. Findley (In re Findley), 593 F.3d 1048, 1054 (9th Cir. 2010), and the

plain language of the statute, the Ninth Circuit reversed the district court

and found the debt dischargeable. While not condoning the attorney's

conduct, the court reasoned that the amount Scheer owed to the former

client was not a fine or penalty, but compensation for actual loss, and also

was not disciplinary. Id. at 1211. Therefore, it did not fall within the scope

of § 523(a)(7).

      In contrast to Scheer, there is nothing in the record that shows the

state court's order requiring Mr. O'Hara to pay restitution to Chapman was

anything other than a fine or penalty and disciplinary. Under California

law, "[a]lthough based in part on the harm caused to the victim ([Cal.] Pen.

Code, § 1202.4 (g)), restitution is imposed primarily for the benefit of the

state to promote the state's interests in rehabilitation and punishment."

People v. Moser, 50 Cal.App. 4th 130, 135 (1996) (citation omitted). The Moser

court further explained:

      Restitution 'is an effective rehabilitative penalty because it
      forces the defendant to confront, in concrete terms, the harm his
      actions have caused. Such a penalty will affect the defendant
      differently than a traditional fine, paid to the State as an


                                        13
      abstract and impersonal entity, and often calculated without
      regard to the harm the defendant has caused. Similarly, the
      direct relation between the harm and the punishment gives
      restitution a more precise deterrent effect than a traditional
      fine.' Id. at 135-36.

California law on restitution is thus consistent with Kelly.

      The Ninth Circuit has addressed an argument similar to Mr. O'Hara's

in Armstrong v. Kaplon (In re Armstrong), 677 F. App'x 434 (9th Cir. 2017).

There, Armstrong contended that his criminal restitution was

dischargeable because, unlike the state statute at issue in Kelly, the

California Penal Code provides for both "restitution" and a "restitution

fine." Compare Cal. Penal Code § 1202.4(f) (“[I]n every case in which a

victim has suffered economic loss as a result of the defendant's conduct, the

court shall require that the defendant make restitution to the victim or

victims in an amount established by court order, based on the amount of

loss claimed by the victim or victims or any other showing to the court.”)

with Cal. Penal Code § 1202.4(b) (“In every case where a person is

convicted of a crime, the court shall impose a separate and additional

restitution fine, unless it finds compelling and extraordinary reasons for

not doing so and states those reasons on the record.”). Armstrong argued

that the holding of Kelly extended only to the "restitution fine," and not to a

restitution order issued under California Penal Code § 1202.4(f). Id. at 435.

      The Ninth Circuit found that this argument was squarely precluded


                                       14
by Kelly, which categorically held that criminal restitution orders are

nondischargeable. In re Armstrong, 677 F. App'x at 436 (citing Kelly, 479 U.S.

at 49–50).

      [T]he Kelly Court's holding did not hinge upon the specific
      language or structure of the state law at issue. Rather, it was
      based upon the desire not to interfere with state courts'
      'unfettered administration of their criminal justice systems.'
      Here, Armstrong's restitution order served California's
      penological interests and was imposed as a function of the
      administration of that state's criminal justice system. It
      therefore falls within the scope of Kelly, even though the
      California penal statute also provides for the imposition of a
      separate 'restitution fine.' To hold otherwise 'would hamper the
      flexibility of state criminal judges in choosing the combination
      of imprisonment, fines, and restitution most likely to further
      the rehabilitative and deterrent goals of state criminal justice
      systems.' Id. (citations omitted).

      The Armstrong court observed that it had followed Kelly numerous

times and had no occasion to revisit or challenge its holding. Id. (citing State

Comp. Ins. Fund v. Zamora (In re Silverman), 616 F.3d 1001, 1008 (9th Cir.

2010) ("As Kelly made clear, criminal restitution payments are

nondischargeable."); State Bar of Cal. v. Taggart (In re Taggart), 249 F.3d 987,

994 n.9 (9th Cir. 2001) ("The Supreme Court has held that '§ 523(a)(7)

preserves from discharge any condition a state criminal court imposes as

part of a criminal sentence.'") (quoting Kelly, 479 U.S. at 50); Palmer v. Levy

(In re Levy), 951 F.2d 196, 198–99 (9th Cir. 1991) (Kelly "held that restitution


                                       15
obligations imposed in state criminal proceedings are not dischargeable.")).

      Contrary to Mr. O'Hara's assertions, the dischargeability of a

restitution debt does not depend upon who receives the actual benefits nor

does it matter that the restitution amount is equivalent to the victim's loss.

Kelly, 479 U.S. at 51-52; In re Armstrong, 677 F. A'ppx at 436 ("T]he fact that

restitution was based on the amount of loss 'claimed by the victim or

victims' is irrelevant, for 'such [is] the nature of restitution.'") (citing Steiger

v. Clark Cty., Wash. (In re Steiger), 159 B.R. 907, 912 (9th Cir. BAP 1993).

      Mr. O'Hara relies on In re Towers, 162 F.3d 952 (7th Cir. 1998), in

support of his argument that § 523(a)(7) is inapplicable where the

restitution award is paid to a victim rather than the governmental unit.

Towers is distinguishable because it involved a civil restitution award, not a

criminal one, and is not binding authority.

      Mr. O'Hara also contends, without citation to any authority, that only

the unavoided portion of the Lien would be nondischargeable and the

avoided unsecured portion would be dischargeable. Section 523(a)(7) does

not make any distinction between secured or unsecured debts. Further, a

chapter 11 plan may not operate to discharge an otherwise

nondischargeable debt. Computer Task Grp., Inc. v. Brotby (In re Brotby), 303

B.R. 177, 189 (9th Cir. BAP 2003); State of Cal., State Bd. of Equalization v.

Ward (In re Artisan Woodworkers), 225 B.R. 185, 190 (9th Cir. BAP 1998).

      Accordingly, for all these reasons, the bankruptcy court did not err in


                                         16
finding that the full amount of the restitution debt was nondischargeable

under § 523(a)(7).

C.    Dismissal of Mr. O'Hara's Case

      Mr. O'Hara assigns several errors to the bankruptcy court's decision

dismissing his case: (1) the dismissal of his case did not meet basic due

process requirements; (2) the court erred in its findings regarding "cause";

and (3) the court erred by failing to consider alternatives to dismissal and

which alternative was in the best interest of creditors.

      1.     Due Process

      We find no violation of due process. Mr. O'Hara did not complain

about the lack of due process in the bankruptcy court and thus failed to

properly preserve the issue fo r appeal. See Rains v. Flinn (In re Rains), 428

F.3d 893, 902 (9th Cir. 2005); Campbell v. Verizon Wireless S–CA (In re

Campbell), 336 B.R. 430, 434 n. 6 (9th Cir. BAP 2005) (citing O'Rourke v.

Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957 (9th Cir. 1989)

("The rule in this circuit is that appellate courts will not consider arguments

that are not 'properly raise[d] in the trial courts.'")).

      Even if we consider de novo whether Mr. O'Hara was given due

process before the bankruptcy court dismissed his case, we conclude that

he was. Section 1112(b)(1) provides that only "on request of a party in

interest, and after notice and a hearing" may a case be dismissed for cause.

Similarly, a sua sponte conversion or dismissal can only be ordered after


                                         17
notice and an opportunity to be heard. Tennant v. Rojas (In re Tennant), 318

B.R. 860, 869–70 (9th Cir. BAP 2004) (holding that "notice and a hearing" are

required even where the bankruptcy court acts pursuant to "its general

powers under Section 105(a)"). Adequate notice and adequate opportunity

for hearing is a flexible concept that depends on the circumstances of the

particular case. Id. at 870–71. We thus consider whether the notice given to

Mr. O'Hara about the dismissal of his case was "reasonably calculated" to

give him a meaningful opportunity to oppose dismissal if he so desired.

      The record shows that the bankruptcy court had made clear at least

two times during different hearings on the adequacy of Mr. O'Hara's

disclosure statement that his case may be dismissed. At the November 29,

2018 hearing, the bankruptcy court stated the history of the case on the

record noting that it had previously considered Mr. O'Hara's disclosure

statement and plan, but it did not go through all the issues with them since

both the disclosure statement and plan "needed to be totally redone." The

court noted: "So, I told O'Hara's counsel that I needed to see a chart of what

the MOR's reflected from the beginning of the case to the present. And if

the numbers had not changed by the time of the next hearing, which is

today, the case would most likely be dismissed."

      Later during the November 29 hearing, the bankruptcy court warned

Mr. O'Hara's counsel that it would not be going through the numbers in

the disclosure statement and plan for a third time. "So, the next time we're


                                      18
here, and I'm saying these numbers don't match up, that will just be

numbers don't match up[,]the case is dismissed." However, the court

observed that it would "not even get there because there are two hurdles";

i.e., the binding nature of the Avoidance Order and the nondischargeability

of the restitution debt. And then if restitution has to be provided for in full,

then the case will be dismissed because it just doesn't make sense to keep

this going any longer and to keep the creditors hanging and to keep the

debtor incurring additional expenses in proposing disclosure statements

and plan that just aren't going to be feasible." The matter was then set for

another hearing.

      Under these circumstances, we conclude that Mr. O'Hara had more

than adequate notice that his case may be dismissed and more than

adequate time to make further arguments to avoid dismissal.

      2.    The bankruptcy court did not err in finding "cause" for
            dismissal.

      Section 1112(b)(4) sets forth a nonexhaustive list of what constitutes

"cause" to convert or dismiss a case under § 1112(b)(1). See Pioneer

Liquidating Corp. v. United States Tr. (In re Consolidated Pioneer Mortg.

Entities), 248 B.R. 368, 375 (9th Cir. BAP 2000). Included in the list of items

constituting "cause" to convert or dismiss is the "substantial or continuing

loss to or diminution of the estate and the absence of a reasonable

likelihood of rehabilitation." § 1112(b)(4)(A).


                                        19
      Mr. O'Hara contends that the bankruptcy court erred because it

never identified any "substantial" or "continuing" loss to the bankruptcy

estate. He also maintains that the court found "the absence of a reasonable

likelihood of rehabilitation" but made no findings on this point other than

saying that he must make "meaningful payments" on the Lien. These

contentions have no merit.

      The bankruptcy court found that Mr. O'Hara had lost $15,000, and

averaged a $900 monthly loss, since the petition date. "A negative cash flow

situation alone is sufficient to establish continuing loss to or diminution of

the estate.” Loop Corp. v. U.S. Tr., 379 F.3d 511, 515–16 (8th Cir.2004)

(internal quotation marks omitted). According to Mr. O'Hara, his MORs

showed that once he had fulfilled his probation, his gross income nearly

doubled, and his net income also increased. However, "[t]o determine if

there is a continuing loss to or diminution of the estate, the court must look

beyond financial statements and fully evaluate the present condition of the

debtor's estate." In re 412 Boardwalk, Inc., 520 B.R. 126, 135 (Bankr. M.D. Fla.

2014). The record shows that the bankruptcy court properly evaluated the

present condition of Mr. O'Hara's estate, noting his negative monthly

income and the under reporting of his living expenses.

      The court also found that there was no likelihood of rehabilitation

because Mr. O'Hara owed more than $5.88 million to Chapman and thus

his plan, as written, was infeasible. Mr. O'Hara's plan provided payment to


                                       20
Chapman over thirty years. The bankruptcy court found that it was

impossible to make a finding that Mr. O'Hara could and would pay the

restitution judgment, or make any of his plan payments, because there was

no way of knowing what his financial situation would be in thirty years.

The court determined that Chapman would most likely be in a worse

position due to Mr. O'Hara's negative monthly net income, and the interest

accruing on the restitution judgment. According to the court, Mr. O'Hara

had not committed enough funds to paying the restitution judgment and

thus the plan imperiled payment of that judgment.

     The bankruptcy court also observed that the case had been pending

for a year and a half, and Mr. O'Hara had filed two disclosure statements

and plans that were wholly inadequate because, among other things, they

undervalued his living expenses. They reflected figures for his monthly

income and expenses that were significantly different from those reflected

in the MORs and they did not (1) address adequately how Mr. O'Hara

intended to pay the Chapman claim, (2) provide adequate financial

projections, and (3) demonstrate that his plan or amended plan could be

feasible. Mr. O'Hara's contention that the bankruptcy court erred in finding

the plan infeasible due to his improper treatment of Chapman's claim is

simply not supported by the record.

     In sum, we conclude that the bankruptcy court did not abuse its

discretion in dismissing Mr. O'Hara's case based on "substantial or


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continuing loss to or diminution of the estate and the absence of a

reasonable likelihood of rehabilitation" under § 1112(b)(4)(A).

      3.    Conversion as an Alternative to Dismissal.

      Finally, Mr. O'Hara argues on appeal that the bankruptcy court

should have considered conversion as an alternative to dismissal.

According to Mr. O'Hara, the record is devoid of any indication that the

bankruptcy court considered which option — dismissal, conversion,

appointment of a trustee or examiner, or simply denial of approval of the

disclosure statement — was in the best interests of the creditors and estate.

      After determining whether cause exists, the bankruptcy court

ordinarily must consider whether dismissal or conversion would best serve

the interests of creditors. Woods & Erickson, LLP v. Leonard (In re AVI, Inc.),

389 B.R. 721, 729 (9th Cir. BAP 2008) (citing Nelson v. Meyer (In re Nelson),

343 B.R. 671, 675 (9th Cir. BAP 2006) ). The bankruptcy court here did not

explicitly consider conversion before it dismissed Mr. O'Hara's chapter 11

case. However, this does not amount to reversible error.

      Neither the UST or Mr. O'Hara argued for conversion in lieu of

dismissal in the bankruptcy court. Indeed, there is nothing in the record

that shows Mr. O'Hara preferred conversion over dismissal. This argument

is waived on appeal. In re E.R. Fegert, Inc., 887 F.2d at 957. Nor is there any

evidence that demonstrates that conversion, rather than dismissal, would

benefit creditors.


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      Under these circumstances, we decline to remand for further

considerations of conversion over dismissal. See Stinchfield v. Specialized

Loan Serv. (In re Stinchfield), CC-17-1209-STaF, 2018 WL 1354339, at *4 (9th

Cir. BAP March 13, 2018) (citing Dudley v. Simmons (In re Dudley), 2014 WL

764360, at *5 n.4 (Mem. Dec.) (9th Cir. BAP Feb. 26, 2014) (same result in

appeal from chapter 13 case dismissal).

                               CONCLUSION

      For the reasons explained above, we AFFIRM.




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