IN RE: KEVIN L. SHAW and KENNETH WAYNE COKER (2026)

MEMORANDUM DECISION DENYING § 1307(b) REQUEST TO DISMISS

On this Court's 11:00 a.m. calendar on March 24, 2026, the motion of Marble Bridge Funding Group, Inc., to convert or dismiss this chapter 13 case pursuant to 11 U.S.C. § 1307(c) was heard and granted with a decision to convert to chapter 7.

I. The § 1307(c) Motion Proceeding

The premise of the Motion to Dismiss or Convert was that the Debtors, by listing an unambiguous $161,314.38 debt to Marble Bridge Funding Group, Inc., as “unknown” used bad faith manipulation to appear to squeeze under the chapter 13 debt limits prescribed by 11 U.S.C. § 109(e) and hence were not eligible to file a chapter 13 case.

Counsel for the debtors had signed up to appear at the § 1307(c) hearing but then did not respond when this Court called his name.

Having carefully examined the record and considering the argument of the movant and the views of the chapter 13 trustee, this Court concluded that the debtors were ineligible for chapter 13 relief by virtue of the § 109(e) debt limits and that they had, in bad faith, made false statements under penalty of perjury on the Petition and Schedules with the intent to maintain an improper chapter 13 case.

Finding cause to act under § 1307(c), this Court, ruling from the bench, ordered the case be converted to chapter 7. In doing so, it considered all relevant circumstances.

Among the false statements under penalty of perjury that the court observed in its study of the file were averments by debtor Kevin L. Shaw that he had been known by no other names in the past 8 years (Petition, item 2) and that he held no professional license (Schedule A/B, item 27 “none”).

Elsewhere, the Schedules and Statement of Financial Affairs revealed that Kevin L. Shaw, under the name Kevin Le Roi Shaw, is an active member of the California State Bar with State Bar No. 169184.

False statements under penalty of perjury by a licensed California lawyer are indicative of bad faith – or worse. It is inconceivable that the statements were accidental omissions.

The statutory standard for choosing between conversion and dismissal under § 1307(c) is “whichever is in the best interests of creditors and the estate.” 11 U.S.C. § 1307(c).

This Court reasoned that the best interests of creditors and the estate would be served by careful scrutiny by a chapter 7 trustee. Likewise, such scrutiny serves the public interest of preserving the integrity of the bankruptcy process.

II. The Debtors’ Tardy § 1307(b) Motion

At 11:14 a.m. on March 24, the clerk docketed a “Request for Voluntary Dismissal” filed by the debtors pursuant to § 1307(b).

By the time the § 1307(b) “Request” came to the attention of this Court, the hearing on the § 1307(c) motion hearing had been concluded with the decision granting the motion and converting the case announced.

This Court acknowledges that under the current law of the Ninth Circuit a § 1307(b) motion is regarded as a “right” that must be granted. Nichols v. Marana Stockyard & Livestock Mkt., Inc. (In re Nichols), 10 F.4th 956, 964 (9th Cir. 2021). In that case, a bankruptcy court order was reversed for denying a § 1307(b) motion that was filed and served three days before the announced effective date of a § 1307(c) conversion order.

The Nichols court did not, however, decide the threshold question of when a dismissal request is “before” a bankruptcy court. Colburn v. Reaves, 2022 WL 3754721 at *3, Bankr. L. Rep. ¶ 83,806 (D. Ariz. 2022).

A dismissal request under § 1307(b) is only before a bankruptcy court if procedural rules are followed. Colburn v. Reaves, at *3, citing Duran v. Rojas (In re Duran), 630 B.R. 797, 811 (9th Cir. BAP 2021).

The procedural rules differ as between § 1307(a) and § 1307(b). A chapter 13 debtor's § 1307(a) conversion as of right to chapter 7 is automatically effective without a court order the moment a “conversion notice” is filed. Fed. R. Bankr. P. 1017(f)(3).

In contrast, exercise of the § 1307(b) “right” to dismiss a chapter 13 case is not automatically effective, but requires, by virtue of Rule 1017(f)(2), that a debtor proceed by motion filed and served as required by Rule 9013.

Nor is the requirement of a motion an empty formality. There is more for a court to consider. As § 349(a) regarding effect of dismissal is not displaced by § 1307(b), that section remains effective.

A court ruling on a § 1307(b) motion has discretion to invoke § 349(a) to provide that such dismissal is with prejudice to the discharge in a later case of debts that were dischargeable in the case dismissed. 11 U.S.C. § 349(a); Duran, 630 B.R. at 811 (“§ 1307(b) is not a get-out-of-chapter-13-free card”).

Marble Bridge, which alleges chicanery, deserves an opportunity to be heard on the § 349(a) question.

Here, it appears that the “Request” had not yet been served as required by Rule 9013. Such service is the responsibility of the debtors. It follows that in this case service of the “Request” (assuming it could be construed as a motion under Rule 9013) was not yet complete. Until completion of service, the “Request” was not before the court. Thus, it was appropriate for the Court to enter its order for conversion under § 1307(c). See Colburn v. Reaves, at *3.

The last-minute effort by the debtors to exercise their “right” to dismiss the chapter 13 case under § 1307(b) and get the “Request” before this Court turned out to be too little, too late.

Accordingly, the debtors’ “Request” is DENIED as moot following the conversion of the case to chapter 7.