Christine Sugar v. Michael Burnett
U.S. Court of Appeals for the Fourth Circuit
Christine Sugar v. Michael Burnett
Opinion
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 24-1374
CHRISTINE M. SUGAR,
Debtor – Appellant,
v.
MICHAEL BRANDON BURNETT; BANKRUPTCY ADMINISTRATOR,
Trustees – Appellees.
No: 24-1436
In re: CHRISTINE M. SUGAR,
Debtor,
------------------------------
TRAVIS P. SASSER,
Appellant,
v.
MICHAEL BRANDON BURNETT; BANKRUPTCY ADMINISTRATOR,
Trustees - Appellees.
Appeal from the United States District Court for the Eastern District of North Carolina, at
Raleigh. Louise W. Flanagan, District Judge. (5:23-cv-00082-FL; 5:23-cv-00411-FL)
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Argued: December 13, 2024 Decided: March 5, 2025
Before DIAZ, Chief Judge, NIEMEYER, and AGEE, Circuit Judges.
Affirmed in part, vacated in part, and remanded by published opinion. Judge Agee wrote
the opinion in which Chief Judge Diaz and Judge Niemeyer join.
ARGUED: Travis P. Sasser, SASSER LAW FIRM, Cary, North Carolina, for Appellant.
Michael Brandon Burnett, OFFICE OF THE CHAPTER 13 TRUSTEE, Raleigh, North
Carolina, for Appellees. ON BRIEF: Brian C. Behr, Kirstin E. Gardner, OFFICE OF
THE BANKRUPTCY ADMINISTRATOR, Raleigh, North Carolina, for Appellees.
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AGEE, Circuit Judge:
Christine Sugar appeals from the district court’s orders affirming the bankruptcy
court’s finding that Sugar’s sale of her residence, without prior court authorization, violated
her confirmed Chapter 13 bankruptcy plan (the “Plan”). Along with challenging the
bankruptcy court’s underlying finding of a violation, Sugar asserts it erred in finding that
the violation warranted dismissing her Chapter 13 case and prohibiting her from filing
another bankruptcy application for five years. In addition, Travis P. Sasser, Sugar’s
attorney, separately appeals the district court’s affirmance of the bankruptcy court’s
decision to impose monetary sanctions against him personally.
For the reasons set out below, we conclude that the court did not err in holding that
the sale violated the Plan and affirm its decision to impose monetary sanctions against
Sasser. But we vacate and remand the judgment against Sugar so that the bankruptcy court
can consider the effect of record evidence that she acted on advice of counsel as part of its
decision about the appropriate remedy for Sugar’s conduct and to explain why it
determined that a remedy short of dismissal would fail to adequately redress what
happened. Given the particular harshness of dismissal that was then augmented by the
sanction of a five-year filing bar, an explanation accounting for the totality of the
circumstances is required before any consequence can be imposed as to Sugar.
I.
In September 2019, Sugar filed for Chapter 13 bankruptcy in the Eastern District of
North Carolina (“EDNC”). Under Chapter 13, debtors “with regular income” may obtain
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a “fresh start” and “retain[] possession of” some assets by “discharg[ing] certain unpaid
debts” “after the successful completion of a payment plan approved by the bankruptcy
court.” Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367 (2007).
Sugar’s residence at the time she filed for bankruptcy is a focal point of the appeal.
In her bankruptcy petition, Sugar listed as an asset her condominium residence with a value
of $150,000 and subject to several liens. She represented her equity interest in the residence
to be $32,348.81 and claimed that same amount as a homestead exemption under North
Carolina law. That homestead exemption permits a debtor such as Sugar (i.e., under age
sixty-five) to claim as exempt property their “aggregate interest, not to exceed thirty-five
thousand dollars ($35,000) in value, in real property or other personal property that the
debtor . . . uses as a residence.” N.C. Gen. Stat. § 1C-1601(a)(1).1
During the pendency of Sugar’s bankruptcy proceedings (where she was
represented by Sasser), she was subject to the EDNC bankruptcy court’s local rules, orders
entered in her case, and—after its confirmation—the Plan. As a consequence, both directly
(the relevant local rule itself) or indirectly (via orders and the Plan referring to Sugar being
subject to its terms), Sugar was instructed that she “must not dispose of any non-exempt
property having a fair market value of more than $10,000.00 by sale or otherwise without
1
The Bankruptcy Code lists certain federal exemptions that debtors may claim, but
it also permits states to opt out of those exemptions in favor of that state’s own exemptions.
North Carolina has chosen to opt out, meaning that a North Carolina debtor can exclude
from her bankruptcy estate “any property that is exempt under . . . State or local law.” 11
U.S.C. § 522(b)(3)(A).
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prior approval of the trustee and an order of [the bankruptcy] court.” E.D.N.C. LBR 4002-
1(g)(4) (“the Local Rule”).2
In November 2019, the bankruptcy court approved the Plan, which set Sugar’s
“applicable commitment period” at 36 months and further obliged her to make 60 monthly
payments of $203 to the Trustee, for a total projected payment of $12,180.3 Among its
other terms, the Plan stated that property vested upon confirmation of the Plan and that
such vested property was to “remain in the possession and control of the Debtor[]” but
“subject to the requirements of . . . § 363[] [and] all other provisions of the Bankruptcy
Code, Bankruptcy Rules, and Local Rules.” J.A. 149. The Plan also “permitted [Sugar] to
receive all net proceeds from the sale of vested property and/or exempt property that is sold
during the pendency of the case,” but that this “provision [did] not prejudice and/or impact
the rights of the parties pursuant to 11 U.S.C. [§] 1329.” J.A. 150.
Sugar made her required monthly payments, but on June 9, 2022, the Bankruptcy
Administrator requested a status conference based on his belief that Sugar had contracted
2
We follow the lower court’s and parties’ practice of referring to the Local Rule as
requiring a prior court order even though the text of the rule requires the approval of the
Chapter 13 Trustee (“Trustee”) and a court order.
We also note that the Local Rule has since been amended. This case involves only
the version that was in effect during the pendency of Sugar’s bankruptcy proceeding.
3
As detailed below, we have recognized that a Plan’s “‘applicable commitment
period’ is a duration to which the debtor is obligated to serve.” Pliler v. Stearns, 747 F.3d
260, 264 (4th Cir. 2014). The applicable commitment period derives from the 2005
bankruptcy code’s revisions aimed at “ensuring that debtors devote their full disposable
income to repaying creditors” and is typically three to five years depending on
considerations not at issue in this case. Id. at 264–65.
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to sell her residence even though she had not complied with the Local Rule. The next day,
the court docketed the status conference for June 29th.
That same day (June 10), Sugar moved for court approval to sell her residence.
Attached to the motion was an executed contract for the sale of the condominium dated
April 12, 2022, which listed the sale price as $222,000.
Before the status conference took place, however, Sugar closed on the sale without
having obtained a court order. Sasser then withdrew the pending motion for court approval
of the sale.
At the status conference, Sasser acknowledged that Sugar had already sold her
residence and expressed his position that she had not needed prior court permission to do
so. Sasser represented that he had only filed the motion for court approval out of an
abundance of caution and had withdrawn it once the sale closed.
As a result, the bankruptcy court issued an order to appear and show cause “why
this case should not be dismissed for failure to comply with” the Local Rule. J.A. 300. In
tandem with the court’s directive and relying on Sugar’s failure to comply with the Local
Rule and the Plan as well as Sugar’s changed financial condition resulting from the sale of
her residence, the Chapter 13 Trustee moved, in the alternative, to modify Sugar’s Plan,
convert the case to a Chapter 7 proceeding, or dismiss her bankruptcy proceeding.
In the interim, i.e., between the status conference and issuance of the show cause
order and filing of the Trustee’s motion, Sugar used some of the proceeds from the sale of
her residence to pay the remaining balance due under the Plan. Specifically, she tendered
$5,481 to the Trustee to pay in full the remaining 27 months’ worth of Plan payments.
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The bankruptcy court considered the show cause order and the Trustee’s motion
during the same hearing because each responded to the same underlying conduct: Sugar’s
sale of her residence without having obtained a prior court order and the proceeds that she
received as a result of the sale.4 When questioned about why she closed on the sale of her
residence without first obtaining the court’s permission, Sugar repeatedly and consistently
testified that Sasser had informed her that her residence was exempt in full and that she did
not need court approval before selling it. E.g., J.A. 482 (“I asked my bankruptcy attorneys.
And . . . I was under the understanding that my house was exempt from the bankruptcy.
So, I didn’t believe that I needed permission to do anything with it because it was not part
of the bankruptcy.”); J.A. 503–04 (testifying that her “bankruptcy attorney” “confirmed
that the house was exempt”); J.A. 507 (“I have understood myself that the house was
exempt based on documents that I saw and what I was told by my attorney.”); J.A. 509 (“I
asked [Sasser] if there would be any issues or if there were any issues and I was told that
the house was exempt so I had the right to sell my house and I could move forward.”). She
also stated that she was not familiar with the bankruptcy court’s local rules and that she did
not intend to violate any rules. In addition, she explained that she agreed to Sasser filing
the later-withdrawn motion for a court order regarding the sale.
Although Sasser had informed her that “the property was exempt and that I could
go ahead and proceed with the sale of the home,” “at some point in the future he suggested
4
Sugar sold her home for a purchase price of just shy of approximately $221,000.
After she paid off the remaining balance on the liens and the like, she received
approximately $94,000 in proceeds from the sale.
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it may be wise to file this after the fact and I agreed with it just to cover bases,” though she
“was still under the impression that the property was exempt and that I had the right to do
with it what I chose without permission.” J.A. 513.
Following Sugar’s testimony, the Trustee and Sasser presented arguments about
what had occurred and how the bankruptcy court should proceed. For his part, Sasser
offered several arguments for why the court could not—and should not—do anything. We
need not cover all of them, but discuss some that reappear in this appeal. For example,
Sasser argued that the court could not enter any additional orders in Sugar’s bankruptcy
case save for discharge under 11 U.S.C. § 1328(a) because she was entitled to discharge
upon paying off the balance of the amount due under the Plan. Sasser claimed that Sugar’s
residence had not been part of the bankruptcy estate (and thus subject to oversight in the
proceeding) at the time of the sale because the Plan said property vested in the debtor at
the time of confirmation. He also maintained that North Carolina’s homestead exemption
classified Sugar’s residence as entirely exempt or “not non-exempt” and thus was not
subject to the Local Rule, which applied only to non-exempt properties. More broadly, he
asserted the Local Rule was “completely incorrect and unjustified” under the Bankruptcy
Code, and thus unenforceable. J.A. 562. And he argued that there had been no harm from
Sugar’s failure to seek a prior court order, so the court should not penalize her.
The bankruptcy court rejected each of Sasser’s arguments and found that dismissal
was appropriate because Sugar had intentionally endeavored to skirt her obligations under
the Plan and the Local Rule so that she could “skate away with $93,000 and not pay a cent
to her creditors.” J.A. 564. Its subsequent written order disposed of Sugar’s various
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arguments opposing a finding of any violation. In discussing the appropriate relief to order
for the violation, the court found that under the circumstances presented, modification of
the Plan was not “appropriate,” and that “cause” for dismissal existed under § 1307(c),
which authorized the court to dismiss “for cause.” J.A. 67. In the court’s view, the
“Debtor’s behavior is indicative of bad faith and an unwillingness to abide by the
restrictions that accompany the benefits of a Chapter 13 reorganization.” J.A. 68. In support
of that conclusion, the court cited the many times Sugar was informed of the Local Rule in
its orders about her case and in the Plan itself. The court recounted its standard practice for
handling the sale of property during the pendency of a bankruptcy proceeding, and Sugar’s
failure to follow that course. It also pointed to the docketed status conference to show that
Sugar should have been on alert that there was a question about her pending sale of the
property and that “[e]ven if [she] did not believe the Local Rule applied to the sale of [her
residence], the proper course of action would have been to request confirmation from the
court that the Local Rule did not apply or seek to be excused from complying with [it].”
J.A. 68. In addition, the court noted that Sugar “may” have acted “to avoid a court order
protecting a portion of the Sale Proceeds until the Trustee had an opportunity to consider
modification of the Plan.” J.A. 68.
The bankruptcy court further deemed it appropriate to bar Sugar from filing for
bankruptcy for a period of five years. It first noted that “cause” for this bar existed under
11 U.S.C. § 349, and that Sugar’s conduct also met the criteria for imposition of sanctions
under Taggart v. Lorenzen, 587 U.S. 554 (2019). J.A. 69. This was so, the court
determined, because Sugar “had no objectively reasonable basis to think that the sale of
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the Property without court approval and without complying with the Local Rule was
appropriate.” J.A. 69–70. The court specifically pointed to her knowledge of the
court-approval requirement in multiple orders as well as her confirmed Plan, that she was
reminded of the provision’s existence by the Administrator’s filing the motion for a status
conference, that she had filed a motion for a court order to render her in compliance, and
that she had decided to proceed with the sale despite these pending matters. The bankruptcy
court scheduled a sanctions hearing regarding both Sugar and Sasser.
During that sanctions hearing, the Bankruptcy Administrator expressed his view that
dismissal with a five-year refiling bar was a sufficient sanction against Sugar, but that
monetary sanctions were also appropriate against Sasser. The bankruptcy court ultimately
agreed with that recommendation, concluding that Sugar’s conduct was adequately
addressed by its earlier order, but that Sasser’s conduct warranted sanctions “to enforce the
Local Rule and ensure future compliance, not only by Mr. Sasser but all members of the
bar.” J.A. 749.
At the hearing, Sasser had testified and argued in opposition to any sanction,
contending that he had correctly advised Sugar in her proceeding and that Sugar did not
violate the Local Rule when she sold her property without first obtaining the court’s
permission. Sasser maintained that he had nothing to apologize for because he’d advised
his client correctly based on his reasonable belief that her property was exempt. The
bankruptcy court expressed reservations about Sasser’s arguments not only because it had
previously ruled against him on the merits of those arguments when it determined that
Sugar’s conduct violated the Local Rule and dismissed her Chapter 13 proceedings, but
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also because it had rejected similar arguments Sasser had made in a separate bankruptcy
proceeding in which he was also counsel. Nevertheless, the court permitted Sasser
considerable latitude to defend his legal position. Sasser also took the stand as a fact
witness, testifying on several points that corroborated Sugar’s earlier testimony about his
communications to her and others about the sale. For example, he explained that he
communicated to them “that the property was exempt and it had vested at confirmation,
but I could get . . . her a court order” if the realtor or mortgage lender needed one. J.A. 668.
He recounted that when the mortgage servicer’s attorney expressly brought up the Local
Rule with him, he “adamantly said we do not need a court order, the [L]ocal [R]ule does
not apply. I never said I wasn’t going to follow the [L]ocal [R]ule. I said it doesn’t apply.”
J.A. 669. Sasser explained that he had not agreed with the Bankruptcy Administrator’s
position expressed in the motion for a status conference, but that he filed the motion to sell
property “out of an abundance of caution, just in case, for whatever reason, it was needed,
I wanted to have it pending” to avoid delay of the sale. J.A. 670. Sasser testified that when
learned that the sale had closed, he withdrew the motion because he believed “it was just a
moot point.” J.A. 671.5
The court determined that “Mr. Sasser, on the other hand, is a different matter,” and
that monetary sanctions were appropriate against him. J.A. 717. The court observed that
Sasser put his client “in a worse position just because of a rule or rules that her lawyer, Mr.
5
The testimony of Sugar and Sasser is unclear on whether Sugar was aware of
Sasser’s decision to withdraw the motion before he did so. The bankruptcy court found that
Sasser acted on his own in withdrawing the motion.
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Sasser, did not agree with. And that’s not fair to her,” J.A. 718, acknowledging that Sasser
wholeheartedly believed his view, but that “doesn’t make it right,” J.A. 717. Pointing to
Sasser’s twenty-plus years of practicing bankruptcy law, the court observed that Sasser
knew the Local Rule required Sugar to obtain a court order before she sold her residence,
that the court routinely granted those orders, even nunc pro tunc, to allow the sale to
proceed while giving the parties time to consider the effect of the sale on the proceedings.
The court concluded that “[b]y ignoring the Local Rule, Mr. Sasser assisted [Sugar] in
avoiding the court’s oversight of the sale and the Sale Proceeds.” J.A. 750.
The court then found, to the extent the Supreme Court’s standard for civil sanctions
orders announced in Taggart applied, there was “no fair ground of doubt whether the Local
Rule applied to the sale of the Property.” J.A. 751 (citing Taggart, 587 U.S. at 557). It
observed that any doubt as to the applicability of the Local Rule to property subject to
North Carolina’s Homestead Exemption was settled by a prior order issued by the same
judge in an earlier bankruptcy proceeding in which Sasser had served as counsel. It also
pointed to Sasser having notice of the Bankruptcy Administrator’s concerns about
proceeding with the sale without a court order, as reflected when it moved for a status
conference. The court concluded that Sasser’s advice to proceed with the sale
notwithstanding this knowledge showed a “lack of deference to the Local Rule and orders
of this court,” which “harmed the integrity of this court and the bankruptcy system as a
whole,” thus warranting sanctions under § 105, the court’s inherent power to sanction those
who come before it, and North Carolina Local Bankruptcy Rule 9011-3. J.A. 752. The
court also found that it had authority to sanction Sasser under Rule 9011 of the Federal
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Rules of Bankruptcy Procedure in light of his decision to withdraw the motion for a court
order without disclosing that the sale had already taken place. Because of these grounds
for sanctioning Sasser, and because of the “aggravating factors that Mr. Sasser has refused
to apologize for his course of action and that he should know better as a seasoned member
of this bar,” the court ordered him to pay a $15,000 monetary sanction.6 J.A. 754.
Sugar and Sasser appealed the bankruptcy court’s orders to the district court, which
affirmed, agreeing with each of the bankruptcy court’s findings and the relief ordered.
Sugar v. Burnett, No. 5:23-cv-082-FL, 2024 WL 1336671 (E.D.N.C. Mar. 28, 2024);
Sasser v. Burnett, No. 5:23-cv-411-FL, 2024 WL 1750552 (E.D.N.C. Apr. 23, 2024).
Thereafter, Sugar and Sasser noted timely appeals, which the Court consolidated for
briefing and argument. We have jurisdiction under 28 U.S.C. § 1291.
II.
On appeal, Sugar—who is still represented by Sasser—and Sasser, on his own
behalf, raise multiple arguments seeking to have the orders entered against them reversed
or modified. In conducting our review, we’ve grouped the arguments into the following
general categories: first, we consider the challenge to the bankruptcy court’s determination
that Sugar violated the Local Rule when she sold her residence without a court order.
Second, we consider whether the bankruptcy court abused its discretion in ruling that this
violation was intentional and thus warranted dismissal of Sugar’s bankruptcy proceedings
6
The court’s bench ruling originally imposed a $10,000 sanction, but the court’s
later written decision increased the amount to $15,000 after discovering “other instances
of Mr. Sasser’s defiance and lack of candor with the court.” J.A. 754.
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and a five-year prohibition on filing for bankruptcy. Third, we consider whether the
bankruptcy court abused its discretion by imposing monetary sanctions on Sasser.
A.
We turn first to the arguments urging us to reverse the lower courts’ determinations
that Sugar violated the Local Rule when she sold her residence before obtaining the
bankruptcy court’s permission.
1.
Sugar raises two threshold arguments challenging whether the bankruptcy court
could even consider the applicability of the Local Rule to her sale: (1) the Local Rule is
invalid, and (2) paying off the balance due under the Plan entitled her to immediate
discharge and deprived the bankruptcy court of authority to consider any other matters.
The text of the Plan leads us to reject both arguments.
Under 11 U.S.C. § 1327(a), “[t]he provisions of a confirmed plan bind the debtor
and each creditor.” Consistent with this view of a confirmed plan as a binding contract, we
have held that “neither a debtor nor a creditor can assert rights that are inconsistent with its
provisions,” though a confirmed plan can be modified as permitted by the plan and
governing standards. In re Varat Enterprises, Inc., 81 F.3d 1310, 1317 (4th Cir. 1996)
(citing Stoll v. Gottlieb, 305 U.S. 165, 170–71 (1938)); see In re Murphy,474 F.3d 143
,
148 (4th Cir. 2007) (“A confirmed Chapter 13 plan is a new and binding contract,
sanctioned by the court, between the debtors and their pre-confirmation creditors. Like
other contracts, a confirmed Chapter 13 plan is subject to modification.” (cleaned up)).
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Sugar’s contention that the Local Rule is invalid fails because, regardless of its
facial validity as a local rule, she agreed to be bound by its provisions under the plain
language of her confirmed Plan. The proper time for lodging any objections to the validity
of the Local Rule or seeking not to be bound by it would have been before or in the
confirmation process, not years later. Instead, Sugar agreed to the terms of her Plan, which
plainly and unreservedly stated that she would also be subject to the Local Rule. See J.A.
149 (Part 7.2: “The use of property by the Debtor(s) remains subject to the requirements
of . . . [the] Local Rules.”). As a matter of simple contract enforcement, then, Sugar cannot
now object to the general proposition that the Local Rule governed her conduct following
Plan confirmation.
Nor did paying off the balance due under the Plan deprive the bankruptcy court of
authority to rule on its order to show cause and the Trustee’s motion to modify or dismiss.
Sugar argues that as soon as she paid the remaining balance of her agreed-to monthly
payments, she was entitled to immediate discharge under 11 U.S.C. § 1328(a). That
argument overlooks one of Sugar’s other obligations under the Plan: her applicable
commitment period. In brief and relevant part, Part 2 of the Plan required Sugar to make
regular payments to the Trustee in the amount of $203 per month for 60 months for a total
estimated payment of $12,180 and Part 2.5 of the Plan stated that Sugar’s “applicable
commitment period” was 36 months. J.A. 146–47. We have previously held that an
“applicable commitment period” “is a length-of-time requirement for Chapter 13 plans.”
Pliler, 747 F.3d at 264. This “temporal requirement” “is a freestanding plan length
requirement” separate and apart from any additional obligation to repay a particular
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amount. Id. (quotation marks omitted). While Sugar or the Trustee could have moved to
modify the applicable commitment period at any time, neither did so. As such, the
applicable commitment period remained in force despite Sugar’s satisfaction of her
separate obligation to make certain payments under the Plan. Thus, she was not entitled to
discharge at that time under § 1328(a), and the bankruptcy court continued to have
authority to entertain other motions relating to Sugar’s still-pending bankruptcy
proceedings.
2.
Having rejected Sugar’s threshold arguments, we next turn to her contentions that
the Local Rule did not apply to the sale of her residence. As recited earlier, the Local Rule
required Sugar to obtain an order authorizing the disposal of “any non-exempt property”
valued at more than $10,000. EDNC Local Rule of Bankruptcy 4002-1(g)(4) (directing that
“[a]fter the filing of the petition and until the plan is completed, the debtor shall not dispose
of any non-exempt property having a fair market value of more than $10,000 by sale or
otherwise without prior approval of the trustee and an order of the court”). In one fashion
or another, each of Sugar’s arguments rests on the mistaken belief that her residence did
not constitute “non-exempt property” subject to this Local Rule.
First, Sugar contends that the North Carolina homestead exemption, regardless of
the plain language of the statute, exempted the entire property not subject to a lien from
the bankruptcy estate. In effect, Sugar’s argument simply rewrites the statute contrary to
its plain meaning and we reject this argument because North Carolina’s homestead
exemption is a dollar-limited exemption. With certain caveats not relevant to this case, the
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North Carolina statute permits a debtor such as Sugar to exempt from her bankruptcy estate
“[t]he debtor’s aggregate interest, not to exceed thirty-five thousand dollars ($35,000) in
value, in real property . . . that the debtor or a dependent of the debtor uses as a residence
. . . .” N.C. Gen. Stat. § 1C-1601(a)(1) (emphasis added). The text speaks for itself,
allowing a debtor to exempt a dollar-limited interest in property, not the property in kind.
Indeed, Sugar’s application for bankruptcy recognized this fact, noting that the value of her
residence was “Claimed as Exempt Pursuant to NCGS 1C-1601(a)(1)” in the amount of
“[$]32,348.81.” J.A. 106.
This understanding of the North Carolina homestead exemption is not novel, as we
have previously held the same, albeit in an unpublished decision, recognizing: “this
exemption stands in contrast to exemptions which pertain to certain property in kind or in
full regardless of value.” Reeves v. Callaway, 546 F. App’x 235, 237 (4th Cir. 2013) (per
curiam). In the context of the Chapter 7 bankruptcy at issue in that case, we rejected the
debtors’ argument that claiming the North Carolina homestead exemption “removed [the]
Residence in its entirety from the bankruptcy estate, such that the bankruptcy court lacked
statutory authority to grant the Trustee permission to sell it.” Id. at 239. Rejecting that
proposition as “without merit,” we noted its “fatal flaw” as “ignor[ing] the distinction
between exempting an asset itself from the bankruptcy estate and exempting an interest in
such asset from the bankruptcy estate.” Id. While the exemption entitled the debtor to the
statutory portion of the residence’s value, it did not entitle the debtor to claim the residence
as a whole as exempt from the control of the bankruptcy court. Id. at 241–42. While the
differences between Chapter 7 and Chapter 13 proceedings distinguish what can be done
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with the property within the context of a debtor’s bankruptcy, those differences have no
bearing on the fundamental character of the North Carolina homestead exemption as a
dollar-limited exemption. For these reasons, we reject Sugar’s contention that her residence
was entirely exempt as a result of her claiming this exemption.
Next, Sugar contends that even if the North Carolina homestead exemption allowed
her to exempt only a dollar amount, the residence was nonetheless properly classified as
“partially exempt” rather than “non-exempt.” As support, she points to dictionary
definitions for the prefix “non-,” such as “not” or “no,” and argues that those absolutes are
not the same as being partly so. This argument is too clever by half. As the bankruptcy
court aptly observed, “[p]roperty, depending upon value and liens, may have aspects of
both exempt and non-exempt property.” J.A. 736. And that is true of Sugar’s residence,
which comprised three parts: (1) the part subject to liens and not the focus of this argument;
(2) the part Sugar claimed as exempt under the North Carolina homestead exemption; and
(3) the part (her equity) that remained, if there was any difference between the market value
and the sum of (1) and (2). This third part is properly classified as “not exempt.” Thus, it
could be equally correct to describe Sugar’s residence as “partially exempt” or “partially
non-exempt,” but neither use of the qualifier “partially” transforms what is not exempt into
what is exempt or vice versa. By its plain terms, the Local Rule applied to the disposal of
any of Sugar’s non-exempt property valued at over $10,000. As a practical matter, Sugar
chose to sell the entire residence, which comprised exempt and non-exempt parts, but that
blended reality of the one transaction did not somehow relieve her of complying with the
Local Rule. Because Sugar’s decision involved the sale of non-exempt property valued at
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over $10,000, the Local Rule applied to the transaction and she was required to obtain a
court order before proceeding.7
Last, Sugar contends that the Local Rule did not apply because the Plan provided
for property to vest with her upon Plan confirmation, at which point the entire residence
was removed from the bankruptcy estate and thus no longer “exempt” or “non-exempt.”
We have previously recognized that “when property vests in the debtor, it vests ‘free and
clear of any claim or interest of any creditors provided for by the plan.’” Trantham v. Tate,
112 F.4th 223, 231(4th Cir. 2024) (quoting11 U.S.C. § 1327
(b)–(c)). And we have further
recognized as a general matter that while vesting generally means that “the debtor is free
to use, sell, or lease that [vested] property as she sees fit,” “when a debtor experiences a
‘substantial and unanticipated’ change of income from selling property that vested in [her]
at plan confirmation, the trustee maintains the ability to seek to modify the debtor’s plan
so that unsecured creditors can recoup such income.” Id. (cleaned up).
Those general principles rejecting Sugar’s argument apply with particular force here
given that her Plan expressly limited her conduct relating to vested property, particularly
by continuing to subject her to the Local Rule she now says did not apply to her.
7
Relatedly, Sugar contends that because the petition-filing date is the usual date to
determine exemption status, any appreciation in her residence’s value that occurred after
the filing date did not yet exist and thus had no classification as exempt or non-exempt.
She argues that the bankruptcy court erred in relying on the sale date to identify part of the
residence—the post-filing appreciation value—as non-exempt property that was subject to
the Local Rule. We find no merit to this argument, which treats classification of estate
property as static as of the date of filing a petition. But it’s not, as evidenced by the fact
that non-exempt property a debtor acquires after a petition is filed can become part of the
bankruptcy estate. See 11 U.S.C. §§ 541, 1306; see also Carroll v. Logan,735 F.3d 147, 151
(4th Cir. 2013).
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Specifically, Part 7 of the Plan addressed vesting, confirming that “[p]roperty of the estate
will vest in the Debtor[s] upon” “plan confirmation,” but the very next paragraph noted
that Sugar’s use of vested property remained subject to the Local Rule and other provisions
that may result in modification of the Plan. J.A. 149. It unambiguously stated that “[t]he
use of [vested] property by the Debtor(s) remains subject to the requirements of . . . [the]
Local Rules.” J.A. 149. Sugar’s argument conflates vesting with what it means for property
to be non-exempt, and it ignores the plain language of her Plan.
****
For the reasons explained, we reject each of Sugar’s arguments challenging the
district court’s determination that she violated the Local Rule when she sold her residence
without a court order.
B.
The question of whether there was a violation of the Local Rule (and thus the Plan)
is distinct from the issue of what consequences are appropriate to redress that violation.
And before discussing separately the bankruptcy court’s decisions as to Sugar and Sasser,
we first address some overarching principles that a court must consider in reaching its
determination.
Bankruptcy courts have a “broad grant of judicial power set forth in 11 U.S.C.
§ 105(a)” to “‘issue any order, process, or judgment that is necessary or appropriate to carry
out the provisions of this title,’” including “any determination necessary or appropriate to
enforce or implement court orders or rules, or to prevent an abuse of process.’” In re
Kestell, 99 F.3d 146, 148(4th Cir. 1996) (quoting11 U.S.C. § 105
(a)). This Court has
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recognized that this provision encompasses the bankruptcy court’s authority to dismiss a
bankruptcy case for lack of good faith, id. at 149, and to hold a party in civil contempt of
court and impose sanctions, In re Walters, 868 F.2d 665, 669 (4th Cir. 1989).
Beyond § 105(a)’s broad grant of authority, when circumstances so warrant,
bankruptcy courts overseeing a Chapter 13 proceeding have specific statutory authority to
respond to changed circumstances or violations that occur during a pending case. For
example, a court can modify a confirmed plan under 11 U.S.C. § 1329, upon a showing
“that the debtor experienced a ‘substantial’ and ‘unanticipated’ post-confirmation change
in his financial condition.” In re Murphy, 474 F.3d at 149 (quoting In re Arnold, 869 F.2d
240, 243(4th Cir. 1989)). And under11 U.S.C. § 1307
, the court can convert the case to a
Chapter 7 proceeding or dismiss it outright upon a showing of “cause.” While § 1307(c)
does not define “cause,” it provides a non-exhaustive list of examples, including “material
default by the debtor with respect to a term of a confirmed plan,” and case law has further
recognized that this term includes bad faith. In re Kestell, 99 F.3d at 148.
The Supreme Court has offered some direction on when dismissal is appropriate
under § 1307(c), cautioning that this harsh result should be reserved for the “atypical
litigant” and “extraordinary case[].” Marrama, 549 U.S. at 375 & n.11. In doing so, the
Supreme Court has acknowledged that “[n]othing in the text of . . . § 1307(c) . . . limits the
authority of the [bankruptcy] court to take appropriate action[, including dismissing a
bankruptcy proceeding,] . . . by the atypical litigant who has demonstrated that he is not
entitled to the relief available to the typical debtor.” Id. at 374–75. And while the Supreme
Court has not yet “articulate[d] with precision what conduct qualifies as ‘bad faith’
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sufficient to permit a bankruptcy judge to dismiss a Chapter 13 case,” it has nonetheless
“emphasize[d] that the debtor’s conduct must, in fact, be atypical” such that dismissal is
“[l]imit[ed] . . . to extraordinary cases.” Id. at 375 n.11.
Intertwined with those concepts is the bankruptcy court’s authority to hold a party
in civil contempt and impose appropriate sanctions against parties or attorneys. That
authority can derive from § 105(a), under which a bankruptcy court can enter an order of
civil contempt and impose sanctions to “coerce” compliance or “compensate” for losses
arising from noncompliance with its orders. Taggart, 587 U.S. at 560. Before elaborating
on Taggart’s standard for imposing sanctions, however, we first recognize that it involved
a Chapter 7, not a Chapter 13, bankruptcy proceeding. Id. at 557. We have not yet opined
on whether Taggart applies to Chapter 13 proceedings and both the lower courts and the
parties assume that it does. And in Beckhart v. NewRez LLC, 31 F.4th 274 (4th Cir. 2022),
we held that the Taggart standard governed Chapter 11 proceedings, observing that
“[n]othing about the Supreme Court’s analysis in Taggart suggests . . . that the Court’s
decision turned on considerations unique to the Chapter 7 context,” and that the Court’s
analysis began with generally applicable bankruptcy provisions. 31 F.4th at 277–78. The
reasoning of Beckhart applies equally in the context of Chapter 13 cases, thus making the
Taggart standard appropriate in assessing civil contempt sanctions imposed in a Chapter
13 proceeding such as the one before us.
The Supreme Court emphasized in Taggart that an “objective” standard applies
when determining whether to impose such sanctions, meaning that there must not be “a
‘fair ground of doubt’ as to whether the . . . conduct might be lawful.” 587 U.S. at 565.
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Thus, while “a party’s subjective belief that she was complying with an order ordinarily
will not insulate her from civil contempt if that belief was objectively unreasonable,” “a
party’s good faith, even where it does not bar civil contempt, may help to determine an
appropriate sanction.” Id. at 561–62.
In addition to these overarching rules pertinent to sanctioning parties and attorneys
in a bankruptcy proceeding, the EDNC specifically authorizes sanctions when “any
attorney or party willfully fails to comply with any Local Bankruptcy Rule of this court.”
Rule 9011-3(a). And whenever a bankruptcy court holds parties or attorneys in contempt,
it has “broad discretion” to fashion an appropriate sanction. De Simone v. VSL Pharms.,
Inc., 36 F.4th 518, 535–36 (4th Cir. 2022).
Given the above principles, there’s no question that the bankruptcy court had the
authority to enter the orders that it did in this case as to both Sugar and Sasser.8 The
question then becomes whether it correctly exercised that authority on the record before it.
8
To clarify given the multitude of orders in this case, the bankruptcy court decided
to exercise its authority to dismiss Sugar’s Chapter 13 proceeding “for cause” under § 1307
after determining that she had acted in bad faith by intentionally violating the Local Rule.
J.A. 67–69. (For its part, the district court also understood the bankruptcy’s decision to
dismiss the proceeding as the relief ordered under § 1307(c) for the violation of the Local
Rule as opposed to sanctions per se. See J.A. 909–10.)
In contrast, the five-year prohibition on refiling appears to have been grounded on
split reasoning, as the bankruptcy court first recognized its statutory ability to impose a
five-year prohibition on refiling “for cause” under § 349, and then also referred to this bar
as a civil contempt sanction to which the Taggart standard applied. J.A. 69, 716–17 (“I
think [Ms. Sugar] was a victim of some very poor advice. And so I think that the suffering
that she has received for the five year prohibition of future filing is enough. . . . I’m not
going to impose any additional sanctions upon Ms. Sugar.”).
(Continued)
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1.
We consider first the bankruptcy court’s decision to dismiss Sugar’s bankruptcy
proceeding and impose a five-year prohibition on refiling for bankruptcy. For the reasons
that follow, we vacate the judgment against Sugar and remand so that the bankruptcy court
can fully assess and explain the remedy it decides to impose as a consequence of the
violation of the Local Rule and her confirmed Plan.
To put it briefly, the court’s entire analysis as to Sugar suffered because it failed to
consider what, if any, effect evidence that she acted according to Sasser’s incorrect advice
that her residence was exempt and that she did not need to obtain a court order before
selling her residence. This fundamental omission connects to our other concerns with the
adequacy of the court’s explanations about why dismissal was warranted and why an
additional five-year prohibition on refiling a bankruptcy petition was also included.
We begin by briefly recounting the uncontradicted record evidence showing that
Sugar relied on Sasser’s advice when selling her residence during her Chapter 13
bankruptcy proceeding. Throughout her testimony during the show-cause and motions
hearing, Sugar repeatedly expressed that when her realtor and others involved in the sale
of her residence raised the issue of whether a court order was necessary to proceed, she
Similarly, the imposition of monetary sanctions against Sasser personally was
entirely a sanction that the court ordered while citing four independent grounds of
authority: (1) § 105(a), as informed by the Taggart standard; (2) the court’s inherent power
to impose sanctions in the face of “unapologetic defiance” of the court’s rules and orders,
J.A. 752; (3) Federal Rule of Bankruptcy Procedure 9011, which requires counsel to
disclose pertinent information and facts relevant to filings; and (4) EDNC Local
Bankruptcy Rule 9011-3.
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both asked Sasser about this issue and had him communicate with them about it. Based on
Sasser’s representations to Sugar, she was under the belief that her residence as a whole
was “exempt,” that she was free to sell the property at her discretion, and that she did not
need anyone’s permission before doing so. E.g., J.A. 482 (“I asked my bankruptcy
attorneys. . . . I was under the understanding that my house was exempt from the
bankruptcy. So, I didn’t believe that I needed permission to do anything with it because it
was not part of the bankruptcy.”); J.A. 503 (“I asked my bankruptcy attorney [who] . . .
confirmed that the house was exempt.”); J.A. 507 (“I have understood myself that the house
was exempt based on documents that I saw and what I was told by my attorney.”). 9
Consistent with Sugar’s representations, Sasser’s later testimony during the sanctions
hearing confirmed that he had advised Sugar that her property was fully exempt and that
she did not need a court order before selling her home, and that he reiterated that view to
those involved in the sale of her property. On this record, Sugar may well have a viable
argument that she reasonably believed that her actions complied with her Plan and any
governing rules, and that she formed that belief and acted based on the advice of Sasser,
her bankruptcy attorney.
9
Indeed, at the hearing, the bankruptcy court asked questions consistent with its
articulated belief that Sugar may have been acting based on Sasser’s counsel and that this
fact would not be a defense to finding a violation, but could influence its decision about
what relief to order, including whether to impose sanctions. Regardless of that viewpoint,
the court’s written order did not address this evidence or evaluate the role of advice of
counsel in making its decision to dismiss Sugar’s Chapter 13 proceeding and impose a five-
year refiling bar.
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This is so in part because a debtor’s good faith reliance on advice of counsel is part
of the totality of circumstances relevant to determining whether “cause” exists to dismiss
under § 1307(a).10 Admittedly, we have not previously addressed advice of counsel in the
precise context of the appropriate relief for violating a Local Rule that a debtor had agreed
to abide by in her confirmed Plan, but our conclusion finds support in existing case law.
Namely, if the “cause” relied on to dismiss is a debtor’s “bad faith,” then courts must
consider the totality of the circumstances—including evidence of advice of counsel—when
assessing whether the requisite bad faith exists. E.g., In re Brown, 742 F.3d 1309, 1317
(11th Cir. 2014) (citing other circuit courts to support the conclusion that bankruptcy courts
look to the totality of the circumstances to assess good and bad faith for purposes of
considering whether “cause” under § 1307(a)); see also In re U.S. Optical, Inc., 991 F.2d
792, *4 (4th Cir. 1993) (table dec.) (concluding that bad faith is grounded in the “totality
of the circumstances” and “[n]o one single factor will show bad faith”). In considering
dismissal of a Chapter 7 proceeding for “cause” based on a debtor’s bad faith, we have
previously recognized that “bad faith” “does not lend itself to a strict formula” and that
“[c]ourts must consider the totality of the circumstances underlying each case to determine
whether a debtor has acted in bad faith.” Janvey v. Romero, 883 F.3d 406, 412 (4th Cir.
2018) (quoting In re Piazza, 719 F.3d 1253, 1271 (11th Cir. 2013)). This same
understanding of “bad faith” applies in the context of considering “cause” to dismiss a
10
This observation would hold true for a court’s determination of “cause” to either
dismiss or convert to Chapter 7. Because the bankruptcy court dismissed here, the rest of
our discussion focuses on the even narrower circumstances in which there may be cause to
dismiss.
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Chapter 13 proceeding under § 1307(a). Given that dismissal is a harsh remedy and courts
should “maintain the balance of remedies in bankruptcy,” the Court has acknowledged that
“the bar for finding bad faith is a high one” and should be found “only where the petitioner
has abused the provisions, purpose, or spirit of bankruptcy law.” Id. at 412 (cleaned up).
That holding comports with the Supreme Court’s guidance that not every violation—or
even every “cause”—will support the severe remedy of dismissing the debtor’s case as
opposed to ordering different relief. Instead, courts must consider whether the case presents
an “atypical litigant” whose misconduct constituted an “extraordinary case.” Marrama,
549 U.S. at 375 & n.11.
Our concern about the potential effect that advice of counsel may have in the overall
assessment of bad faith is particularly acute given that the district court concluded that
Sugar’s conduct was “indicative of bad faith” based on several events that were directly
tied to information within the specialized knowledge and counsel of her bankruptcy
attorney. Principally, of course, was the failure to abide by the Local Rule. But the
bankruptcy court also pointed to its usual practices when non-exempt property accrues in
value, information that Sugar cannot be expected to know given that she is a one-time
debtor (not a repeat filer) and her attorney repeatedly told her that her residence was
exempt. The court also reasoned that “[e]ven if the Debtor did not believe the Local Rule
applied to the sale of the [residence], the proper course of action would have been to request
confirmation from the court.” J.A. 739. However, that again imputed to Sugar—who was
represented by counsel in her Chapter 13 proceeding—the responsibility and duty to ignore
her lawyer. Similarly, the bankruptcy court appears to have faulted Sugar for not personally
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“attend[ing] the status conference scheduled to inquire about the potential sale of the
Property” when there’s no indication in the record that Sugar was ordered to appear
personally and her attorney did attend. J.A. 739.
The bankruptcy court’s failure to consider the totality of the circumstances
demonstrated in the record is particularly troubling here given that it had the option of
imposing several less-harsh remedies to address Sugar’s changed financial condition and
violation of the Local Rule, including modification of the Plan or conversion to Chapter 7.
The bankruptcy court’s explanation must be sufficient to understand the nature of its
findings as to what about Sugar’s own conduct warranted the specific remedy of dismissal.
Here, the court’s explanation fell short.
We note, for example, that the bankruptcy court’s analysis of bad faith and cause to
dismiss interchangeably referred to Sugar and Sasser’s acts and representations as one, and
it failed to consider how advice of counsel factored into its assessment of bad faith on the
part of Sugar. And, specifically, it failed to consider this component in explaining what
about her entire conduct, a significant part of which was her reliance on Sasser’s advice,
was egregious enough to warrant dismissal. Because evidence in the record demonstrates
that Sugar relied on Sasser’s incorrect advice that her residence was exempt and that no
court order was required, and because the bankruptcy court did not consider that evidence
as part of its determination that “cause” to dismiss existed under § 1307(a), the bankruptcy
court’s judgment as to Sugar must be vacated and the matter remanded for the court to
undertake the required review under a totality-of-the-circumstances standard.
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Apart from § 1307(a), advice of counsel is also relevant to two components of a
sanctions-based decision to dismiss a bankruptcy proceeding or to impose a refiling
prohibition.11 In that context, we have recognized that “[a]dvice of counsel may be a
defense in a criminal contempt proceeding because it negates the element of willfulness.”
In re Walters, 868 F.2d at 668. But it is not a “defense” to holding someone in civil
contempt because “lack of willfulness is not a defense in a proceeding for civil contempt.”
Id. Consistent with this framework, the Supreme Court in Taggart reiterated that the
standard for holding someone in contempt is objective, rather than subjective, and that “a
party’s subjective belief that she was complying with an order ordinarily will not insulate
her from civil contempt if that belief was objectively unreasonable.” 587 U.S. at 561. And,
in light of Taggart, we recognized that even though advice of counsel would not ordinarily
be a defense to the finding of contempt itself, “a party’s reliance on guidance from outside
counsel may be instructive, at least in part, when determining whether that party’s belief
that she was complying with the order was objectively unreasonable.” Beckhart, 31 F.4th
at 278 n.*. What’s more, Taggart recognized that “a party’s good faith, even where it does
not bar civil contempt, may help to determine an appropriate sanction.” 587 U.S. at 562.
Pulling these principles together reflects the following implications for Sugar’s case.
Advice of counsel would be relevant to determining whether to impose sanctions because
11
Although the bankruptcy court relied on § 1307(a) to order dismissal, it appears
to have viewed the five-year prohibition on refiling as a sanction reviewable under Taggart.
It’s not entirely clear whether the basis for the sanction was the court’s general power to
hold a party in contempt or the EDNC’s local rule authorizing sanctions for willful
violations of the Local Rules. See E.D.N.C. LBR 9011-3(a).
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it could negate a finding of “willfulness,” which is required to impose sanctions under the
local rule authorizing them. E.D.N.C. LBR 9011-3(a); see In re Walters, 868 F.2d at 668.
And even though “advice of counsel” is not ordinarily a defense to imposing civil contempt
sanctions under § 105(a) under Taggart and Beckhart, it may prove relevant to determining
whether Sugar’s belief that she was complying with the rules governing her conduct was
“objectively unreasonable.” Taggart, 587 U.S. at 561; Beckhart,31 F.4th at 278
n.*. While
an advice-of-counsel defense poses no absolute bar to imposing some sort of sanction, to
the extent it would demonstrate Sugar’s good faith belief, it would be relevant to deciding
the type of sanction to impose. Taggart, 587 U.S. at 562.
For these reasons, Sugar’s reliance on advice of counsel was directly relevant to the
bankruptcy court’s decision whether to impose sanctions in the form of dismissal or a
prohibition on filing for bankruptcy for five years. Yet the bankruptcy court did not
consider that factor at all, which was error and requires consideration on remand.
2.
In contrast to Sugar, Sasser bears full responsibility for his actions advising Sugar
incorrectly in this case. The record ably supports that the bankruptcy court did not abuse
its discretion in sanctioning him with a fine of $15,000. Notably, Sasser’s chief argument
in opposing the order against him is to reiterate that the sale of Sugar’s residence did not
violate the Local Rule. But we have previously rejected that argument.
The record shows that Sasser has been a licensed member of the bar for over two
decades, and has practiced consumer bankruptcy law in North Carolina for most of that
time. He has appeared in numerous Chapter 13 bankruptcy cases not just in the Eastern
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District of North Carolina, but before the same bankruptcy judge presiding over Sugar’s
Chapter 13 proceeding. The bankruptcy court reasonably held Sasser responsible for
understanding his client’s confirmed Plan, including the numerous rules that governed his
client’s conduct. Further, he was reasonably held responsible for knowing case law from
this Court and the bankruptcy court regarding how those rules applied to his client.
Of particular concern leading to the bankruptcy court’s determination was Sasser’s
advice to Sugar he knew to be wrong based on a prior decision by the same bankruptcy
judge interpreting the scope of the Local Rule in similar circumstances in a case in which
Sasser represented the debtor. In re Pulliam, No. 19-03887-5-DMW, 2020 WL 1860113
(Bankr. E.D.N.C. Apr. 13, 2020). The court’s ruling in that case informed Sasser of
numerous legal rulings that rejected identical arguments (and variants of arguments) he
made in that case, and that he later made in Sugar’s case regarding whether the Local Rule
applied to vested property, the scope of North Carolina’s Homestead Exemption, and the
effect of paying off an unpaid balance due on the Plan when the Plan’s applicable
commitment period had not ended. Whatever Sasser’s views of the propriety of the
bankruptcy judge’s decision in Pulliam, he did not challenge it in an appeal. Nor did he
preemptively raise these arguments as grounds for not requiring Sugar to obtain a court
order before she attempted to sell her residence.12 Instead, he waited to raise his arguments
against the applicability of the Local Rule to the sale of Sugar’s residence only after
12
We also observe that Pulliam rested on non-binding, but extant, unpublished
Fourth Circuit case law (Reeves) and Supreme Court precedent to set forth persuasively
why the Local Rule would apply to the sale of a residence in a pending Chapter 13
proceeding.
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advising his client in a manner inconsistent with the Plan and only after Sugar had sold her
property without a court order. Further, his advice fell well after this Court and the
bankruptcy judge presiding over Sugar’s case had both expressed prior interpretations of
at least some of the relevant provisions that were contrary to Sasser’s position. That
obstinate conduct demonstrates the requisite willfulness and bad faith on Sasser’s part to
support the bankruptcy court’s decision to sanction him under § 105(a), its inherent
contempt authority, and Local Bankruptcy Rule 9011-3.13
Relatedly, the docket in Sugar’s Chapter 13 proceeding also demonstrates that
Sasser had reasonable notice that the Local Rule would apply to the sale. As just two
examples, the Bankruptcy Administrator filed the motion for a status conference directly
in response to the potential sale of the residence without a prior court order and Sasser
decided to file a motion for a court order authorizing the sale that he later withdrew. Thus,
the concern about the Local Rule’s applicability had been flagged in advance of the sale.
In affirming the bankruptcy court’s sanction order against Sasser, we want to be
clear that attorneys are called to diligently represent their client’s interests and that
fulfilling this duty does not immediately expose them to potential sanctions. Attorneys can
and should advance viable positions with uncertain and unsuccessful outcomes or
encourage changes in the law in a manner that is consistent with the court’s rules and the
13
The bankruptcy court also relied on Rule 9011 of the Federal Rules of Bankruptcy
Procedure to support sanctions for Sasser’s decision to withdraw the motion for a court
order without Sugar’s authorization and without disclosing that Sugar had already closed
on the sale of her residence. Given our affirmance of the other grounds for sanctioning
Sasser, we need not review these specific findings or this ground.
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proper times for doing so. But that is not the type of conduct that formed the basis of the
bankruptcy court’s sanctions against Sasser. Here, the court cited Sasser’s reckless advice
to his client in the face of numerous signals—including from the judge presiding over
Sugar’s proceeding—indicating that he was incorrectly advising her that the Local Rule
did not apply to the sale of her residence and she did not need a court order before
proceeding. Nevertheless, Sasser persisted, advising his client in a manner that was
contrary to the law and against his client’s interests.
Because the record fully supports the bankruptcy court’s determination that Sasser
willfully advised his client to violate the Local Rule and there was “no fair ground of doubt”
as to whether the Plan and the Local Rule permitted the sale of Sugar’s residence without
a prior court order, we affirm the order of monetary sanctions against Sasser. Taggart, 587
U.S. at 557 (emphasis omitted).14
III.
For the reasons stated above, we affirm the bankruptcy court’s determination that
Sugar’s sale of her residence without first obtaining an order from the bankruptcy court
violated the terms of the Local Rule, which she agreed to be bound by in her confirmed
Plan. But we vacate the judgment insofar as it ordered the dismissal of Sugar’s Chapter 13
14
Notably, while Sasser urges that the bankruptcy court abused its discretion in
imposing monetary sanctions, his arguments about this point remain focused on the
viability of his legal position about the Local Rule’s applicability to Sugar’s sale of her
residence. He does not specifically take issue with any of the court’s remaining findings or
its legal authority for doing so.
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proceeding and barred her from refiling for bankruptcy for five years. And we remand the
case so that the bankruptcy court can assess the record evidence relating to Sugar’s bad
faith, and particularly how her reliance on advice of counsel factors into the overall
assessment, in determining what relief or sanctions were appropriate in light of the
violation of the Local Rule and Sugar’s confirmed Plan. Last, we affirm the district court’s
order affirming the bankruptcy court’s imposition of monetary sanctions against Sasser.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
34
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