WILLIAM L. EDMONDS, U.S. Bankruptcy Judge.
Debtors Richard and Marcia Turpen ask the court to dismiss their chapter 7 case. Objections to the motion were filed by the trustee, the United States trustee, and the Iowa Department of Revenue and Finance (IDRF). The United States of America on behalf of the Internal Revenue Service (IRS) filed what may be called a conditional objection, asking that its claim against debtors for pre-petition taxes be paid in full before a dismissal of the case (docket no. 277). Hearing on the motion was held August 24, 1999 in Mason City. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A).
Procedural Background
Richard and Marcia Turpen filed their joint chapter 13 petition on August 8, 1997. They filed a proposed plan on August 26, 1997 (docket no. 8). Confirmation of the plan was denied (docket nos. 64, 65). The United States filed a proof of claim for $142,038.00 (claim no. 22). Comprehensive Systems, Inc. filed a claim for $515,169.92 (claim no. 17). Each of these creditors alleged its claim was nondischargeable. If that were so, there were insufficient assets in the estate to provide for payment of all claims in full.
Debtors did not file another plan. They filed an objection to the claim of Comprehensive Systems, Inc. (docket no. 38) and to the claim of the United States (docket no. 71).
The United States trustee moved to convert the debtors' case to a case under chapter 7. Creditors joined in the motion. On February 2, 1999, the court granted the motion (docket no. 134). The basis of the order was the court's finding that there had been an unreasonable delay in the case that was prejudicial to creditors. Debtors made no attempt to dismiss their case prior to the court's ruling on the motion to convert.
Larry S. Eide was appointed as chapter 7 trustee. He began liquidating the estate. Debtors refused Eide's informal requests that debtors turn over to him property of the estate. Eide filed a turnover motion against the debtors (docket no. 146). I granted the turnover motion on March 11, 1999 (docket no. 154). Because he was not satisfied with debtors' response to the turnover motion, Eide sought an order holding debtors in civil contempt (docket no. 158). His motion was granted (docket nos. 184, 185). The debtors later purged themselves of contempt by satisfying Eide's demands.
Findings of Fact
The claims deadline in this case was July 28, 1999. As of the date of the hearing, 46 timely claims had been filed. Debtors' exhibit 2 shows only 34 such claims, but I base my finding of a higher number upon my judicial notice of the court's claims register as it existed on August 18, 1999. The unduplicated claims appear to total $1,017,955.76. This total is affected by settlements and payments. The debtors and Comprehensive Systems, Inc. settled their dispute, and Comprehensive's claim for $515,169.92 will be withdrawn. The United States withdrew its claim for $142,038.00; however, it tardily refiled the claim in the amount of $124,941.00 (claim no. 47). Marcia Turpen testified that Turpens have paid at least $93,492.82 of these claims (claim nos. 1, 2, 3, 5, 6, 8, 9, 11, 16, 18, 19, 28). Four of the claimants which have been paid have also filed consents to the dismissal (exhibit no. 4). Creditor Whitfield Eddy, holding unpaid claim no. 29 for $20,507.10, has also consented to the dismissal. One of debtors' attorneys, David Morse, has filed a claim for $22,945.38 (claim no. 45). He consents to the dismissal. Marcia Turpen testified that attorney May, representing the holder of claim no. 20, also consents.
It appears that the filed, unpaid claims in the case total $392,196.03. The United States, on behalf of the Internal Revenue Service, says it is owed $6,676.54 in interest on taxes which have been paid by the debtors, and it is owed $2,250.21 in post-petition 1998 income taxes.
From the liquidation of assets, the trustee is holding $108,788.00 (Exhibit A). He projects that after further liquidation, there will be $136,164.00 available for distribution in the case after the payment of costs and expenses of sales.
Debtors amended their schedule of assets and exemptions in February 1999 to list three pension plans valued at $137,000.00. The trustee filed an objection to the claim of the plans as exempt and served notice of the objection on the Turpens. Notwithstanding the pendency of the objection, the Turpens have cashed in the three plans and spent all of the proceeds. A substantial amount was used to pay pre-petition claims. However, the debtors cannot account for all of the funds.
Discussion
Turpens move to dismiss their case. They contend the estate is solvent, save for the tardily filed fraud claim of the United States, which they dispute, and that it will be more efficient for creditors if Turpens are able to dismiss and pay them voluntarily. Turpens say that payment through the case would be slower because of litigation attendant to the case, particularly with the United States. Turpens say no creditors would be prejudiced by the dismissal, as Turpens intend to pay all unpaid creditors as soon as possible after dismissal, and even the United States would have its nonbankruptcy remedies.
Turpens also say a dismissal is in their best interests as it would enable them to control the liquidation of their assets, not only to pay creditors in full, but to retain income-producing assets as a source of support.
The trustee, the United States trustee, the United States (for its fraud claim and 1998 tax claim) and the Iowa Department of Revenue and Finance, all oppose dismissal, saying that the prejudice to them of dismissal would be the risk of Turpens' failure voluntarily to pay the claims.
It appears the debtors are asking to dismiss their case under 11 U.S.C. § 707(a). It provides that the court may dismiss a case for cause. A debtor may move to dismiss under 11 U.S.C. § 707(a), although this proposition is not free from doubt. Matter of Jennings, 31 B.R. 378, 380 (Bankr.S.D.Ohio 1983) (a debtor's voluntary dismissal controlled by equitable principles, not under § 707(a)). If a dismissal would prejudice creditors, the motion should be denied. Matter of Williams, 15 B.R. 655, 658 (E.D.Mo. 1981), aff'd, 696 F.2d 999 (8th Cir. 1982). A trustee may object to dismissal on any ground on behalf of unsecured creditors who do not affirmatively consent to a dismissal of the case. Penick v. Tice (In re Penick), 732 F.2d 1211, 1213 (4th Cir. 1984). The debtors do not specifically cite the provision of the Bankruptcy Code through which they seek dismissal. It may be that they seek dismissal under 11 U.S.C. § 305(a). If that is so, the debtors must show that "the interests of creditors and the debtor would be better served by such dismissal. . . ." 11 U.S.C. § 305(a)(1);Eastman v. Eastman (In re Eastman), 188 B.R. 621, 624 B.A.P. 9th Cir. 1995). Under either Code section, there cannot be prejudice to creditors.
When all filed but unpaid claims are considered, it is doubtful that the estate is solvent. But I do not need to reach a resolution of this factual issue. Solvency may be a factor in considering the debtors' motion, but it is not an overriding one. The Bankruptcy Code contemplates the existence of fully administered, solvent estates. 11 U.S.C. § 726(a)(6). I consider the overriding factor to be the consideration of prejudice to creditors.
There would be prejudice to creditors if I dismissed debtors' case. Debtors promise that if the case is dismissed, they would voluntarily pay all creditors who have filed claims except for the United States, and they say that these creditors would be paid more quickly and efficiently than in this pending case. Even the United States, they argue, would have all its non-bankruptcy remedies. Creditors have only the debtors' word that they will voluntarily pay claims in full. Debtors, on the other hand, have interests opposed to the creditors. The continuation of the chapter 7 case would assure creditors of payment of their claims to the extent possible. A trustee is a fiduciary of the estate. The Turpens are merely debtors to their creditors. It would be prejudicial to these creditors, after more than two years of bankruptcy administration, to return the parties to the potential of the state law collection process.
Supportive of my decision is Turpens' use of the pension monies. While the trustee's objection to their exemption claims was pending, they withdrew the money and spent it all. Although they may have spent a substantial part of it paying pre-petition claims, they cannot account for the use of all the proceeds. Turpens appear to have the attitude that they can take any action in this case that they deem desirable, notwithstanding the rights of others. I doubt not that this attitude would continue if Turpens were enabled by dismissal to control the liquidation of their assets and the payment of creditors.
The debtors have failed to prove that dismissal is in the best interest of creditors or that it would not prejudice them. Therefore,
IT IS ORDERED that the debtors' motion to dismiss their case is denied.
SO ORDERED THIS 1st DAY OF SEPTEMBER 1999.