Marrama v. Citizens Bank of Massachusetts
549 U.S. 365 (2007) — Supreme Court of the United States (2007)
Facts of the Case
Robert Marrama filed Chapter 7 bankruptcy and sought to convert to Chapter 13. However, Marrama had acted in bad faith — he made false statements about his assets and attempted to conceal property. Citizens Bank opposed the conversion, arguing a debtor who acts in bad faith cannot convert from Chapter 7 to Chapter 13. The bankruptcy court denied conversion, and the First Circuit affirmed.
Legal Issue
Does a Chapter 7 debtor have an absolute right to convert to Chapter 13 under § 706(a), or can a bankruptcy court deny conversion based on the debtor's bad faith?
Court Holding
The Supreme Court held (5-4) that a Chapter 7 debtor does NOT have an absolute right to convert to Chapter 13 if the debtor has acted in bad faith. The Court reasoned that § 706(a) says the debtor may convert 'at any time' — but § 706(d) says conversion is available only if the debtor 'may be a debtor under such chapter.' A debtor who acts in bad faith is not eligible to be a Chapter 13 debtor, so conversion can be denied. Marrama establishes that bankruptcy relief is not automatic — bad faith can forfeit the right to convert between chapters, which matters strategically in foreclosure defense.
Why This Case Matters
Marrama means a homeowner who files Chapter 7 (quick discharge) intending to convert to Chapter 13 (save the home through a payment plan) may lose that option if they acted in bad faith. If the homeowner concealed assets or made false statements, they can be trapped in Chapter 7 where lien stripping is unavailable (Caulkett) and the stay is temporary. Full transparency in bankruptcy filings preserves strategic options.
Impact on Homeowners
If you file Chapter 7 planning to convert to Chapter 13 to save your home, be transparent from the beginning — disclose ALL assets, every bank account, every property, every source of income. Misrepresenting or concealing assets is bad faith that can prevent conversion to Chapter 13, leaving you without the ability to cure arrears or strip junior liens.
Related Resources
Defense Doctrines
Court Procedures
Related Documents
Frequently Asked Questions
What counts as bad faith that can block conversion?▼
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