Marrama v. Citizens Bank of Massachusetts (2006)
- Docket
- 05-996
- Decided
- 2006-01-01
Summary
Question: Can the right in Section 706(a) of the Bankruptcy Code to convert a Chapter 7 bankruptcy to another chapter be denied because of bad faith? Conclusion: Yes. In a 5-4 decision, the Court ruled that there is a "bad faith" exception to the right of conversion in Section 706(a). The opinion by Justice John Paul Stevens held that although the vast majority of Chapter 7 debtors can convert to Chapter 13, a Chapter 7 debtor who engages in bad faith conduct does not qualify as a "debtor" under Chapter 13 and thus cannot convert his petition. The majority also wrote that courts have the inherent power to deny the motions of litigants who act in bad faith. The Court concluded that "Nothing in the text of [...] 706 [...] limits the authority of the court to take appropriate action in response to fraudulent conduct by the atypical litigant who has demonstrated that he is not entitled to the relief available to the typical debtor."