In Re: Janice Carrington

Background

Janice Carrington, the debtor, was representing herself in an appeal from an order of the United States Bankruptcy Court for the Southern District of New York. That order converted her bankruptcy case from Chapter 11 to Chapter 7. Carrington asked the District Court to stay, or pause, all bankruptcy proceedings while her appeal of the conversion order was pending.

The District Court issued this order on the stay motion. At the same time, it issued a Report and Recommendation recommending that the conversion order be affirmed. This order did not itself decide the appeal of the conversion order.

Why the Court Denied the Stay

The court first held that Carrington had not followed the required procedure. Bankruptcy Rule 8007 generally requires a party to ask the Bankruptcy Court for a stay before asking the District Court. A party may go directly to the District Court only if seeking relief first in the Bankruptcy Court would be impracticable. Carrington had not first asked the Bankruptcy Court to stay the conversion order or the bankruptcy proceedings as a whole, and she had not shown that doing so would have been impracticable. The court stated that this failure alone justified denying the motion.

The court also considered the merits of the stay request. Courts generally consider four factors: whether the applicant is likely to succeed on appeal, whether the applicant will suffer imminent and serious harm without a stay, whether a stay would substantially harm other interested parties, and where the public interest lies.

On the likelihood of success, the court concluded that Carrington had not shown that the Bankruptcy Court likely abused its discretion by converting the case. The court stated that it had reviewed the record and that its accompanying Report and Recommendation found ample grounds to affirm the conversion order.

On irreparable harm, the court found Carrington’s claimed injuries too speculative. The case had been in bankruptcy for more than three years without confirmation of a reorganization plan, and the Bankruptcy Court had found no evidence that Carrington could successfully reorganize. The court also found that the possible liquidation of additional assets, including Carrington’s concern that her home was in danger, did not establish imminent harm because any request to liquidate additional estate assets would require an independent decision by the Bankruptcy Court. The court further stated that Carrington had provided no facts showing imminent physical or mental harm from continued proceedings.

The court found that a stay could substantially injure the trustees and creditors by preventing the Chapter 7 trustee from collecting and converting estate property into money for creditors. It also found that creditors, who had remained unpaid for more than three years, would continue to be harmed by delaying the case. Finally, the court said the public interest favored the prompt administration of bankruptcy cases and opposed obstructing the trustee’s efforts to collect, liquidate, and distribute estate assets.

Disposition

Judge Robert W. Lehrburger denied the debtor’s motion to stay the bankruptcy proceedings, whether in part or in whole. The order did not state that the motion was denied with or without prejudice.