Lentz v. Myers (In re Myers)

Citation: 486 B.R. 365Docket: Bankruptcy No. 00-53489EE; Adversary No. 10-05014EE

Court: United States Bankruptcy Court, S.D. Mississippi; February 14, 2013; Us Bankruptcy; United States Bankruptcy Court

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The Court held a trial on November 29-30, 2011, regarding a Complaint for Declaratory Judgment filed by Chapter 7 Trustee Kimberly R. Lentz, involving several defendants, including Liberty Mutual Insurance Company, Fox-Everett Underwriters, Ltd., Steve Lee, and Rick and Tina Myers (the Debtors). The Court found that the Debtors converted their Chapter 13 bankruptcy case to Chapter 7 in bad faith, asserting that all property held by them at the time of conversion belongs to their bankruptcy estate. Additionally, it determined that assets from the estate were used to form Infinity Services of Mississippi, LLC, which is also considered part of the bankruptcy estate.

The background indicates that the Debtors initially filed under Chapter 13 on August 17, 2000, but converted to Chapter 7 on March 2, 2001. A report by the Chapter 7 Trustee on October 25, 2001, confirmed no assets were available for creditors, leading to the Debtors receiving their discharge and the case being closed shortly thereafter. The Court's analysis is part of an ongoing litigation involving multiple parties, necessitating a detailed review of prior proceedings and the transfer of assets related to the Debtors. Further findings regarding the asset transfers and the establishment of Infinity Services will be included in the Court's conclusions of law.

On October 21, 2002, Rick Myers and his company, Infinity Services of Mississippi, LLC, filed a lawsuit against Liberty Mutual Insurance Company and its affiliates in the Hinds County Circuit Court, alleging that Liberty Mutual failed to provide required workers’ compensation insurance for Infinity. Myers claimed reliance on false representations made by Liberty Mutual's agents, which ultimately led to Infinity's closure. The lawsuit includes multiple causes of action, such as breach of contract, gross negligence, and emotional distress. On May 25, 2004, Liberty Mutual removed the case to the U.S. District Court for the Southern District of Mississippi, asserting that the claims were part of Myers’ bankruptcy estate. Liberty Mutual contends that Myers engaged in asset transfers to Infinity to hinder creditor recovery before converting his bankruptcy to Chapter 7 in 2001. Following the reopening of the bankruptcy case on October 1, 2004, Judge Henry T. Wingate denied Myers’ motion to remand the case back to state court, confirming that the lawsuit claims arose during the bankruptcy proceedings. The District Court Action is ongoing, with discovery stayed pending a determination of the claims’ status in the bankruptcy estate, and Liberty Mutual has filed two proofs of claim in the bankruptcy case.

On May 2, 2005, Liberty Mutual submitted a claim for $977,753.46 based on "assigned risk premium" and a second claim on April 23, 2007, for $977,798.46 for "money loaned." After the bankruptcy case was reopened, the Trustee negotiated a settlement with Liberty Mutual, proposing that Liberty Mutual pay $60,000 to dismiss a related District Court Action, contingent on a finding of bad faith conversion by the Debtors, who objected to the settlement. On August 25, 2006, the Trustee initiated an adversary proceeding against the Debtors with two counts: Count I sought $20,000 for the sale of a franchise listed as having no value on the Debtors' Schedule B, and Count II sought a declaratory judgment that Infinity was a successor in interest to the Debtors' business. Meanwhile, Liberty Mutual filed a second adversary proceeding on March 20, 2007, claiming the Debtors owed approximately $977,798.46 in unpaid workers’ compensation premiums, asserting the debt was nondischargeable under 11 U.S.C. § 523(a)(2)(A). Following a recusal of Judge Gaines from both the Trustee’s Adversary Proceeding and the main bankruptcy case, the case was transferred to a new judge. On August 22, 2007, the Trustee and Debtors reached a settlement where the Debtors agreed to pay $20,000, and the Trustee would dismiss Counts I and II, while Liberty Mutual objected and expressed interest in purchasing the causes of action against the Debtors. A Consent Judgment on March 17, 2008, resulted in the dismissal of Count I and a non-adjudicative dismissal of Count II regarding Infinity’s status as property of the bankruptcy estate. A trial on the Liberty Mutual Settlement was set for January 15, 2009, with mediation scheduled before Judge Houston.

The mediation between the parties did not yield a comprehensive settlement, but an agreement was made between Myers and the Trustee concerning the classification of causes of action in the District Court Action as property of the Debtors’ bankruptcy estate. On May 4, 2009, a motion regarding the Trustee's compromise was filed, alongside a counter-offer from Liberty Mutual and Fox-Everett. A trial concerning the Myers’ Settlement and the Liberty Mutual Counter-Offer took place on August 12, 2009, but the Court did not approve either proposal, deeming the Myers’ Settlement unfair and not in the estate's best interests, while finding the Liberty Mutual Counter-Offer contingent and similarly disadvantageous.

Following the Court's directive for action, the Trustee initiated an adversary proceeding on April 6, 2010, seeking a declaratory judgment on two counts: whether the causes of action in the District Court Action belong to the bankruptcy estate and whether Infinity Services of Mississippi, LLC is a successor in interest to the Debtors and Express Personnel d/b/a P. L Properties. Liberty Mutual responded on May 21, 2010, asserting that the District Court Action claims are indeed part of the bankruptcy estate, referencing Judge Wingate’s prior ruling and presenting three grounds for their assertion: 1) prior findings linking Myers’ claims to bad faith conversion to Chapter 7; 2) claims accruing before Myers' conversion; and 3) Infinity claiming to be a successor to P. L, thus holding assets that should have been disclosed in the bankruptcy proceedings.

Debtors Rick and Tina Myers, operating as Express Personnel and P.L. Properties, filed motions to dismiss, an answer, and affirmative defenses on May 26, 2010, collectively referred to as the Debtors’ Answer. They raised defenses, including laches, denial of constitutional rights, estoppel, and double recovery, asserting that the causes of action were not part of the bankruptcy estate due to abandonment. On June 17, 2010, the Trustee responded with two general denials to the Debtors’ Answer.

On November 23, 2011, the Debtors filed identical responses to a cross-claim from Liberty Mutual Insurance Company and others, mirroring their prior answer. The Court heard the motions to dismiss on March 11, 2011, and denied them, followed by a Final Judgment on March 14, 2011, which included a Scheduling Order for the ongoing case.

On June 14, 2011, the Debtors filed a motion for summary judgment, claiming entitlement to judgment as a matter of law regarding Count I of the Complaint, arguing that the causes of action arose after their bankruptcy discharge, thus not part of the estate. This position was contested by Liberty Mutual and the Trustee, who cited prior adjudication by Judge Wingate establishing that the causes of action accrued before the Debtors converted to Chapter 7. On September 1, 2011, the Court issued a memorandum denying the summary judgment motion, reaffirming Judge Wingate’s determination regarding the timing of the cause of action.

Judge Wingate determined that the cause of action at issue is core, based on three factors: it accrued prior to conversion, may constitute property of the bankruptcy estate if the conversion was fraudulent, and affects the liquidation of the estate's assets. The trial for the Third Adversary Proceeding was scheduled for November 29 and 30, 2011, with the transcript filed on January 26, 2012, and a final brief submitted on August 22, 2012, after multiple extensions. The court confirmed its jurisdiction under 28 U.S.C. §§ 1334 and 157, classifying the proceeding as core under 28 U.S.C. § 157(b)(2)(A, B, O).

In a Chapter 13 bankruptcy case, property of the estate includes both property specified in § 541 and any after-acquired property. Upon conversion to Chapter 7, the estate generally consists of property possessed by the debtor at the conversion date, excluding after-acquired property. However, under § 348(f)(2), if bad faith conversion is established, all property as of the conversion date becomes part of the estate. Liberty Mutual asserts the Debtors converted their case in bad faith on March 2, 2001, claiming that the District Court Action is part of the bankruptcy estate, while the Debtors dispute this.

Before addressing the bad faith issue, the court must first determine whether certain assets, including those of P.L., were claimed as exempt and subsequently abandoned by the Trustee. Under § 541, all debtor assets become part of the bankruptcy estate upon filing, but debtors can exempt certain properties under § 522, either by specific limits or state law. If no objection is made by an interested party within the timeframe set by Federal Rule of Bankruptcy Procedure 4003(b), the claimed exemptions are upheld, as established in Taylor v. Freeland, Kronz, even if the claimed exemption lacks a good faith basis.

In Schwab v. Reilly, the Supreme Court clarified the treatment of a debtor’s claimed exemptions in bankruptcy. The debtor filed an asset on Schedule B valued at $10,718 and claimed the same amount exempt on Schedule C, with no objections from the trustee or interested parties within the thirty-day period. After this period, the trustee discovered the asset's actual value was $17,200, exceeding the statutory exemption limit. The Court addressed whether an interested party is required to object to a claimed exemption when the property description and claimed value are within statutory limits.

The Supreme Court held that an exemption removes a debtor's "interest" in the property up to a specified dollar amount but does not remove the asset itself from the bankruptcy estate. The Court distinguished this case from Taylor, where the claimed exemption exceeded statutory limits, thus necessitating an objection. In Schwab, the claimed exemption was within limits, indicating no need for the trustee to object.

Applying this reasoning, the Debtors in the current case listed property in Schedule C without naming an entity called Infinity. They argued that since P. L was claimed as exempt and no objections were raised, Infinity could not be part of the bankruptcy estate. The trustee's reliance on the property description and claimed exemption value was justified, as both were stated as 0.00, clearly within statutory limits, relieving the trustee of the obligation to object.

If the Debtors intended to exempt the entire asset, they were required to explicitly indicate this. By claiming a value of 0.00, they failed to notify the trustee adequately. The ruling establishes that when a debtor retains only an interest in an asset and not the asset itself, the exemption is limited to the claimed value at filing, with the bankruptcy estate entitled to any increase in asset value beyond that exemption.

Debtors' exemptions did not alert the Trustee to object, allowing the assets claimed as exempt to remain part of the bankruptcy estate. The Court must assess whether the Debtors converted their Chapter 13 case to Chapter 7 in bad faith. According to Section 348, if such a conversion occurs in bad faith, the estate's property will consist of assets held at the conversion date. Bad faith is not explicitly defined in the Bankruptcy Code, but the Fifth Circuit’s Moser v. Mullican case provides guidance. In Mullican, debtors converted from Chapter 13 to Chapter 7 after inheriting significant assets but failed to disclose all of them, leading the Chapter 7 trustee to assert that these assets belonged to the Chapter 7 estate due to bad faith conversion. The Mullican court utilized the totality of the circumstances test to evaluate good faith under Section 1325(a)(3) and applied the same approach to bad faith under Section 348(f)(2). Factors considered included any inability to make Chapter 13 payments, transparency regarding post-petition changes, and whether the conversion would unfairly benefit the debtors. The Mullican court concluded that the debtors converted in bad faith to evade unsecured creditors, thereby classifying the inherited assets as part of the Chapter 7 estate. Other jurisdictions have also examined the criteria for bad faith in bankruptcy conversions.

The court defined "bad faith" using Black’s Law Dictionary, highlighting it as opposite to "good faith," indicating actual or constructive fraud, deceit, or a refusal to fulfill duties due to dishonest motives. Bad faith involves intentional wrongdoing rather than mere negligence. Liberty Mutual argued that the Debtors manipulated the bankruptcy system to disadvantage creditors. To assess this claim, the court examined the Debtors' actions surrounding their bankruptcy filing and the formation of Infinity Services of Mississippi, LLC.

Key events include: 
1. On March 26, 1999, the Debtors sold Mass Marketing Distribution (MMD) to T. D Marketing for $118,000, receiving a $35,000 down payment and agreeing to monthly payments of $1,722.94 for the remaining balance.
2. The Debtors filed for Chapter 13 bankruptcy on August 17, 2000, while owed approximately $65,600 from the MMD sale.
3. In December 2000, Meylan Enterprises contacted P. L regarding employee supply for work on the U.S.S. Cole.
4. On December 8, 2000, a $3,000 check was issued from P. L’s account for workers’ compensation insurance coverage.
5. An application for workers’ compensation under Mississippi’s assigned risk pool was filed on December 15, 2000, and approved on December 16, 2000, with Liberty Mutual as the servicing carrier.
6. P. L employees began working on the Cole on December 16, 2000. 

These details are critical for the court's evaluation of potential bad faith in the Debtors’ bankruptcy actions.

Beginning December 20, 2000, P. L/Express Personnel issued invoices to Meylan and Spectrum Environmental Services for staffing services related to the Cole job. The initial invoices were sent by Express Services from their Oklahoma office, in compliance with a billing agreement, and upon payment, Express Services provided commissions to Express Personnel. On January 4, 2001, an invoice from Express Personnel with a Biloxi, Mississippi address was sent to Spectrum and subsequently paid. A February 22, 2001, invoice to Meylan was sent from the Oklahoma office. Starting March 2, 2001, a series of potentially confusing duplicate invoices were issued by P. L., Infinity Services, or Infinity Services of Mississippi, LLC, all using an Ocean Springs, Mississippi post office box for returns. All payments for these invoices were directed to P. L. until April 12, 2001.

On January 9, 2001, Rick Myers issued an $1800 check from P. L.’s account labeled as a "loan to officer," part of total checks amounting to approximately $4600 that were similarly designated. On January 17, 2001, Chapter 13 Trustee Donald Simmons expressed concerns about the case's feasibility and requested additional information about P. L.'s operations and employee count. In response, Rick Myers sent a letter on February 2, 2001, asserting the plan's feasibility, citing his wife’s employment income, detailing expenses, and confirming P. L. had five employees engaged in staffing and payroll services. However, it appears this letter was not received by the Trustee.

Subsequently, on February 2, 2001, the Chapter 13 Trustee moved to dismiss the case due to the Debtors’ expenses exceeding income, excessive spending, and being behind on plan payments. In their February 14, 2001, response, the Debtors acknowledged the expense issue but claimed it had changed due to a shift in their business's nature, resulting in increased capital for funding expenditures.

Debtors indicated their intention to amend their Chapter 13 case plan upon receiving information from their accountant. Before responding to a motion to dismiss, they purchased two vehicles (an Infinity and a Taurus) for $14,244.25 on February 10, 2001, using a check from P. L's account; these purchases were not disclosed in their schedules or at the 341 Meeting of Creditors. On February 13, 2001, Rick Myers withdrew $3,236.89 from P. L's account for startup costs related to Infinity, which included purchasing equipment for employees working on a project. Employees were subsequently paid from P. L's account for work dating back to November 2000 through various dates in March 2001.

On February 26, 2001, Rick Myers bought a Suburban for $19,641.25, also not disclosed in the schedules or at the creditors' meeting. Around the same time, he engaged in email discussions with Express Services regarding his franchise, having previously received a cease and desist letter from them. An order was issued on February 28, 2001, requiring the Debtors to submit amended schedules and a plan by April 1, 2001, to reflect their improved financial situation or face dismissal.

On that same day, Tina H. Myers obtained a $1,600 cashier's check, which was partially deposited into their personal bank account; this account was not listed in their schedules. In late February, Rick Myers agreed to sell his franchise back to Express Services for $20,000 and sent them a list of assets to remain in his office on March 2, 2001. On March 1, 2001, the Debtors filed a motion to convert their Chapter 13 case to Chapter 7 without stating a reason; however, the subsequent order cited an "extreme change in the financial situation" as the basis for conversion. Additionally, invoices related to work on the Cole project were sent by P. L and Infinity, with Rick Myers asserting that payments should have been deposited into P. L’s account.

On March 5, 2001, Rick Myers opened a checking account at SouthTrust Bank under "Infinity Services of MS, LLC," prior to the official formation of the LLC, using his Social Security number as the Tax ID. On the same day, he issued a check for $50 from P. L's account to the Mississippi Secretary of State for the formation fee, which initially bounced but later cleared. Myers signed an application for an Employer Identification Number on March 7, 2001, indicating a business start date of March 1, 2001, with a revision of the first wage payment date from March 1 to March 15, 2001.

Beginning March 12, 2001, checks totaling $6,500 were written from the P. L account, including a $1,000 transfer to the newly opened Infinity account on March 26, and a subsequent $5,000 deposit on March 30, 2001. Myers testified that funds from P. L were the sole source for starting Infinity. Additionally, on March 14, Express Services wired $20,000 for a franchise sale to P. L's account, and the purchase agreement was signed on March 16.

A payment of $20,343.98 was deposited into P. L's account on March 19 for invoices from both P. L and Infinity, with total receipts for March 2001 amounting to $39,918.46. Infinity LLC was officially formed on March 30, 2001, coinciding with the first employee payments. During the April 10, 2001, Chapter 7 creditors' meeting, Myers failed to disclose the $20,000 received for the franchise, which he later confirmed was used as startup capital for Infinity. The Chapter 7 trustee reported no assets for creditor distribution on April 24, 2001. Finally, on April 19, 2001, Infinity LLC filed its Employer's Quarterly Federal Tax Return, reporting $31,733.75 in wages despite its formation date.

On April 27, 2001, Infinity LLC submitted a Status Report to the Mississippi Employment Security Commission, indicating employment in Mississippi commenced on March 1, 2001, and reporting wages of $31,733.75 for Q1 2001. A September 5, 2001, form labeled "Confidential Request for Information" was sent to Fox Everett, noting a name change effective February 1, 2001. Steve Lee testified that Rick Myers sought guidance on changing the name on a workers’ compensation policy, and although Myers disputed the signature on the form, he confirmed the policy transfer to Infinity LLC.

The Debtors received their Discharge of Debtor, closing their case on October 25, 2001, but filed a Motion to Re-Open Bankruptcy Case on September 23, 2004, due to Liberty Mutual’s claims regarding the lawsuit being part of the bankruptcy estate. The case was reopened on October 1, 2004. The Court applied the Fifth Circuit’s totality of the circumstances test, focusing on whether the Debtors' conversion was driven by an inability to make Chapter 13 payments and their disclosure of post-petition changes.

The Debtors failed to reveal monthly income from the sale of MMD and engaged in significant withdrawals and purchases from their accounts, including buying three vehicles and equipment related to a job, none of which were disclosed to the Chapter 7 Trustee. The Court ordered the Debtors to amend their schedules on February 28, 2001, to demonstrate the feasibility of their Chapter 13 case, coinciding with a $1,600 withdrawal from an undisclosed account by Tina Myers.

Rick Myers was negotiating to sell his franchise back to Express Services when the Debtors filed for conversion to Chapter 7, citing a significant change in their financial situation. The Court acknowledged a substantial change, but clarified it was positive, stemming from revenue generated by the Cole job and anticipated funds from the franchise sale. On the day of conversion, Rick Myers provided Express Services with a list of assets to remain in the office. At the Chapter 7 Meeting of Creditors, the Debtors had received $20,000 from Express Services but failed to disclose this to the Chapter 7 Trustee. The Court determined that the conversion was not due to an inability to make Chapter 13 payments. Rick Myers testified he intended to pay all creditors, and twelve days later, the Debtors indicated they could make plan payments due to improved circumstances, including Tina Myers' new job and increased income. The Chapter 13 Trustee noted the Debtors had more available income, partly due to inflated reported expenses and duplicate listings. The Court concluded that the Debtors' circumstances had indeed changed, justifying their ability to fund Chapter 13 payments, and indicated that the conversion was not motivated by financial inability.

However, the Debtors failed to disclose critical information regarding the Keesler account, three vehicles acquired post-petition, and the monthly payments from the sale of MMD, as well as the $20,000 received from the franchise sale. Although they later provided this $20,000 after the Trustee initiated recovery proceedings, their lack of transparency raised questions. The Debtors referenced the case In re Bejarano, arguing they did not convert their case in bad faith, contrasting with that case's circumstances involving a personal injury incident during pending bankruptcy.

The debtors initially employed at the start of their Chapter 13 case became unemployed during the case, making only one payment to the trustee. They were entitled to a 2002 tax refund, and in June 2002, the trustee moved to dismiss their case. Prior to the September 2002 hearing on this motion, the debtors sought to convert their case to Chapter 7. The Chapter 7 trustee claimed the conversion was in bad faith, asserting that the tax refund and personal injury claims were property of the Chapter 7 estate. The court, referencing the Siegfried case, determined that the debtors did not convert in bad faith, clarifying that acquiring postpetition assets does not inherently imply bad faith if conversion is pursued under the protections of § 348(f)(1).

However, the court distinguished the debtors' situation from the Bejarano case, noting that the debtors failed to disclose both pre-petition and post-petition assets. Unlike the Bejarano debtors who lost employment, one debtor found work during the Chapter 13 case. The court found that the debtors did not disclose changes in their post-petition circumstances, resulting in a windfall that harmed creditors. While not constituting fraud, the debtors' actions indicated a design to mislead, driven by an interested or sinister motive, rather than mere negligence. Consequently, the court ruled that the conversion to Chapter 7 was executed in bad faith, including the property held by the debtors as of March 2, 2001, in the Chapter 7 estate.

The court then addressed whether Infinity LLC constituted property of the bankruptcy estate. The debtors argued it was a separate entity created post-conversion, while Liberty Mutual contended it was a successor in interest to P. L, thus making it part of the estate. According to § 541(a), the bankruptcy estate generally includes all legal or equitable interests held by the debtor at the case's commencement, with specific provisions detailing what constitutes property of the estate.

Proceeds, products, offspring, rents, or profits from estate property are included in the bankruptcy estate as defined by 11 U.S.C. § 541(a)(6), with the exception of earnings from services performed by an individual debtor after the case begins. The Fifth Circuit, in McLain v. Newhouse, interpreted this provision as broadly encompassing all interests held by the debtor, including future, non-possessory, contingent, speculative, and derivative interests. Congress intended for § 541 to broadly define property of the estate, including interests acquired post-petition (11 U.S.C. § 541(a)(7)). Consequently, if undisclosed pre-petition funds are used to generate property interests, those interests belong to the bankruptcy estate and are accessible to creditors. 

In the present case, the court found that the debtors acted in bad faith in converting their Chapter 13 case, resulting in the Chapter 7 estate encompassing all legal and equitable interests held by the debtors, effective as of March 2, 2001. Rick Myers, who began business as Infinity LLC prior to its formal creation on March 30, 2001, used assets from P.L. for Infinity’s startup. Specific transactions included the purchase of vehicles and equipment with funds from P.L.’s account in February 2001. Payments for work done by P.L.’s employees were also deposited into a new account for Infinity LLC. Testimony confirmed that Infinity LLC’s IRS Form 941 filed later included wages paid by P.L., indicating that the employees were the same, further linking the two entities' financial activities.

Mr. Henley asserted that a specific form validated that Infinity LLC is the same entity, justifying why it reported wages for the entire quarter. Normally, a distinct entity would require a separate tax return to close the prior entity and file a new return for the wages of the new entity. In this instance, however, the payment was cumulative. The Court noted that the Debtors utilized assets from the bankruptcy estate, including a $20,000 sum received from selling their Express Services franchise, to establish Infinity LLC. Thus, Rick Myers’ interest in Infinity Services of Mississippi, LLC, is considered part of the Debtors’ Chapter 7 estate.

The Debtors claimed that P. L was abandoned from the bankruptcy estate since no objections were raised against their exemption claim. However, given that their claimed exemption was zero, the asset and any excess amount remain part of the bankruptcy estate under the precedent set by Schwab v. Reilly. When assessing if the Debtors converted from Chapter 13 to Chapter 7 in bad faith, the Court examined specific facts indicating potential fraud or dishonesty. These included the Debtors' failure to disclose monthly payments from the sale of MMD, purchases of three vehicles, an account at Keesler Federal Credit Union, and the $20,000 from the franchise sale. Their lack of transparency with the Court and misuse of estate assets to create Infinity LLC demonstrated manipulation of the bankruptcy system detrimental to creditors.

As a result, the Court concluded that the Debtors converted their case in bad faith, thus encompassing all property held at the time of conversion within the Chapter 7 estate. The creation and operation of Infinity LLC were linked to proceeds from P. L, confirming their connection to the bankruptcy estate. Additionally, the Court acknowledged that any causes of action related to the District Court Action accrued before the conversion, and because bad faith was determined, these causes of action are also part of the Chapter 7 estate. A judgment consistent with these findings will be issued, with this opinion serving as the Court's factual and legal conclusions. The case is characterized by its fact-intensive nature.

Court findings of fact are treated as conclusions of law if so construed, and vice versa. C. Thomas Anderson was appointed Chapter 7 Trustee in 2001 when the Debtors converted their case from Chapter 13 to Chapter 7, and Kimberly R. Lentz took over as Trustee in 2004 after the case was reopened. The case is identified as Civil Action No. 3:04-cv-392-HTW-LRA. An Agreed Order withdrew the Liberty Mutual Settlement on September 11, 2009. A Corrected Consent Judgment was entered on October 23, 2008, to amend the docket number of this settlement. The Debtors agreed to pay the Trustee $20,000 for the settlement; however, this payment was not mentioned in the Consent Judgments. The Debtors filed motions to dismiss under Federal Rules of Civil Procedure, which were improperly cited as they should have referenced the Federal Rules of Bankruptcy Procedure. On March 14, 2011, the Court issued a Final Judgment denying all motions to dismiss. The term "Debtors" refers to Rick and Tina Myers, and the specific entity Infinity Services of Mississippi, LLC is acknowledged separately. The case was initially assigned to Judge Edward R. Gaines with case number 00-53489SEG.

Case number 00-53489EE was assigned to Judge Ellington, reflecting a change in the docketing system from NIBS to CM/ECF when the court transitioned to electronic filings in March 2005. The case, initially filed in 2000, retains both paper and electronic files, with potential discrepancies in docket numbering between the two systems. On March 31, 2005, the Debtors amended their schedules, omitting Mass Marketing Distributions and P. L Properties, LLC from their claimed exemptions, which did not alter the court's determination that these assets remained part of the bankruptcy estate. Under Section 1325(a)(3), a court may confirm a bankruptcy plan if proposed in good faith. Various financial documents and transactions, including checks and a Bill of Sale, were noted, indicating payments related to the bankruptcy estate. The case also involved a conversion from Chapter 13 to Chapter 7, with references to the involvement of Rick Myers and the implications of his membership in Infinity LLC on the bankruptcy proceedings. The Trustee acquired all rights associated with Infinity LLC due to the absence of other members, thus including all membership interests in the bankruptcy estate.