Menu    1 ABR 11 

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA



In re:)
)
EVAN E. SWENSEN, ) Case No. A89-01304
) Involuntary Chapter 7
Debtor.         )
______________________________________ )


ORDER FOR RELIEF UNDER CHAPTER 7



            At Anchorage in said district this 6th day of July, 1990.

            The involuntary bankruptcy petition of Federal Express, the Municipality of Anchorage and the Case-Hoyt Corporation against Evan E. Swensen duly came before the Court for trial. Evidence was presented in the form of testimony of Mr. Swensen, Millie Jennings, as well as the telephonic testimony of Roger Henderson.

            From the evidence presented the following facts were established. On December 29th, 1989, the date of the filing of the involuntary petition, Mr. Swensen owed the following debts:
    Debt Amount

      Matanuska Telephone Association 73.35
      Kemper National 16.00
      Chugach Electric 106.69
      Phoenix Health & Medical 2,666.56
      Enstar Natural Gas Company 85.15
      American Assoc. of Travel Writers 45.00
      Outdoor Writers of America 60.00
      Matanuska Electric Association 137.43
        TOP      1 ABR 12 
      Chris Batin 3,000.00
      Wadsworth & Associates 10,783.77
      The Case-Hoyt Corp d/b/a Ron's Printing 110,086.34
      Municipality of Anchorage 1,496.06
      Skaggs Telecommunications, Inc. 5,072.50
      Consolidated Freight Ways 1,200.00
      Bell Plumbing & Heating, Inc. 637.84
      Federal Express 1,948.85
      Alaska Financial Services, Inc. 660.71
      Total Debts $138,076.25


            Mr. Swensen testified that debts owed to Matanuska Telephone Association, Kemper National, American Assoc. of Travel Writers, Outdoor Writers of America and Matanuska Electric Association were incurred and paid in the ordinary course of business. The obligations owed Chugach Electric and Enstar Natural Gas were not paid, however. Mr. Swensen disputes his debt to Phoenix Health & Medical as it was an obligation originally incurred by his wife. He also disputes the claim of Chris Batin.


            The remainder of Mr. Swensen's obligations, including a claim for $110,086.34 due the Case-Hoyt Corp and $5,072.50 due Skaggs Telecommunications, Inc. remain unpaid. The Skaggs debt was due and payable several years ago. The debt due Case-Hoyt has been reduced to Judgment and no payments have been made. Mr. Swensen admits he is past due on all of the obligations but states he is making some payments. The amounts and timing of the
      TOP      1 ABR 13  payments were not given. The City of Anchorage did receive, however, $456.38 through execution against Mr. Swensen's permanent fund entitlement. Mr. Swensen does business with Federal Express on a cash basis but has not paid the balance of approximately $2,000.00 due from past transactions. Mr. Swensen admits that he is past due on all of the unpaid undisputed obligations as they were originally due and payable within 30 days.

            11 U.S.C. § 303(h) provides in part:
    (h) If the petition is not timely controverted, the court shall order relief against the debtor in an involuntary case under the chapter under which the petition was filed. Otherwise, after trial, the court shall order relief against the debtor in an involuntary case under the chapter under which the petition was filed, only if--
            (1) the debtor is generally not paying such debtor's debts as such debts become due unless such debts are the subject of a bona fide dispute;.

            Here the parties have stipulated in chambers to the amendment of the petition to provide for relief against the debtor under Chapter 7. There are more than twelve creditors and three creditors have joined in the petition. These creditors are undisputed and unsecured to the extent of at least $5,000.00 in accordance with 11 U.S.C. § 303(b)(l). The only issue is whether or not Mr. Swensen is generally not paying his debts as such debts become due, unless such debts are the subject of a bona fide dispute.

              TOP      1 ABR 14  The Ninth Circuit has noted in Matter of Bishop. Baldwin, Rewald. Dillinaham, 779 F.2d 471, 475 (9th Cir. 1985)
    [1] The "generally not paying" test is to be applied as of the date of filing of the involuntary petition, in this case, August 4, 1983. In re JV Knitting Services, Inc., 4 B.R. 597, 598 (Bankr.S.D.Fla. 1980). In applying the test, the Debtor claimed that emphasis should be placed not only on the number and amount of the claims, but on the regularity of payment as well. The Debtor contended that there were genuine issues of material fact regarding whether the Debtor's inability to pay claims over a six-day period commencing July 29, 1983, the date of the first investor demand, constituted "generally not paying its debts."

    [2] In In re All Media Properties, 5 B.R. 126, 142-143 (Bankr.S.D.Tex.), aff'd. 646 F.2d 193 (5th Cir. 1981), the court noted that the term "generally not paying" was adopted in preference to terms used in earlier bankruptcy acts to allow more flexibility in the commencement of involuntary cases. The authority of the court is triggered and guided by the totality of the circumstances existing when the petition is filed. Congress intended to provide a flexibility which is not reducible to a simplistic formula. The availability of relief is not circumscribed by time but by knowledge.

            Whether or not disputed debts should be included in the 303(h) (1) involves a balancing test. In Re Dill, 731 F.2d 629 (9th Cir. 1984). Here the amounts of the disputed claims, $2,666.56 and $3,000.00, will be excluded from the 303(h)(1) test as disputed claims.

            In looking at the totality of the circumstances, and after excluding disputed claims, the debtor paid only five of the remaining undisputed creditors listed as payable on 12/29/89 as   TOP      1 ABR 15  they become due. The payments made total only $331.78. Adding funds from the City's execution, $456.38, Mr. Swensen has made payment of $788.16 against roughly $132,000.00 in undisputed debt, less than 1% of the debts outstanding. Although Mr. Swensen states he may have made some payments to Skaggs Telecommunications, Inc. he admits that Skaggs remains unpaid in accordance with its terms and is still owed a substantial sum. Even if Skaggs were paid in full, the overwhelming weight of the evidence demonstrates that Mr. Swensen is not paying and has not paid his debts as they become due. The totality of the circumstances is such that the three petitioning creditors have amply met their burden of proof.

            Counsel for Mr. Swensen has raised the issue of whether or not creditors would be better served if the petition were denied. This is not a material consideration. The issue before the Court is whether or not the criteria enunciated in 11 U.S.C. § 303 for involuntary petitions have been met by the petitioning creditors. They have.

            Therefore, on consideration of the petition filed on December 29, 1989 against the above-named debtor, an order for relief under Chapter 7 of the Bankruptcy Code (Title 11 of the United States Code) is granted.


                  DONALD MacDONALD IV
                  United States Bankruptcy Judge