Jeffrey P. Gogna

SSE

So Ordered. BN | al ae

Dated: November 23, 2022 New iki

ne sens cy

Beth E. Hanan

United States Bankruptcy Judge

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF WISCONSIN

In re:

Jason Gogna, Case No. 22-23459-beh

Debtor. Chapter 13

ORDER ON BOARDWALK PROPERTIES, LLC’S MOTIONS FOR

EXAMINATION OF THE DEBTOR AND MAREN GOGNA

Before the Court are creditor Boardwalk Properties, LLC’s (“Boardwalk”)

motions to examine the debtor, Jason Gogna, and his non-filing spouse, Maren

Gogna (“Mrs. Gogna”), under Fed. R. Bankr. P. 2004. ECF Nos. 21 and 24.

Boardwalk seeks information regarding the debtor’s income so as to make an

informed decision on whether it will object to plan confirmation based on

feasibility. Boardwalk states it is unable to verify, based on the limited record

of the debtor’s self-employment income, whether debtor can make consistent

monthly payments required to complete a plan of reorganization under Chapter

13 of the Bankruptcy Code. ECF No. 38, at 3. Boardwalk also states it is

concerned that recent state court judgments against debtor will limit his ability

to earn income sufficient to fund his plan and notes a conviction for a Class A

misdemeanor (i.e., value does not exceed $500) based on fraud on a financial

institution. ECF No. 21, at 1-2. As for Mrs. Gogna, Boardwalk contends her

financial condition “is essential to the financial condition of the debtor.” ECF

No. 24, at 2. The first motion requests copies of debtor’s personal and/or

business state and federal tax returns for tax years 2020 and 2021, debtor’s

personal and/or business financial statements from January 1, 2021 to

present, and all records relating to debtor’s income as of January 1, 2021.

Boardwalk also requests all of debtor’s debit and card statements for 2022, and

his personal and/or business bank statements for 2022, and the oral

deposition of debtor. ECF No. 21. The second motion seeks to take the oral

deposition of debtor’s spouse, and also asks that she be required to produce

her 2020 and 2021 state and federal income tax returns, her debit and credit

card statements for 2022 and her bank statements for calendar year 2022.

ECF No. 24, at 2.

BACKGROUND

Debtor filed his bankruptcy petition on August 8, 2022. ECF No. 1. On

August 22, 2022 he filed his bankruptcy schedules and Chapter 13 plan, ECF

Nos. 11-12, and several days later filed a supplemental Schedule I Attachment:

Business income. ECF No. 16. Debtor stated on his schedules that he is self-

employed and that his business, Iconic Image, LLC, an auto detailing shop, has

operated since 2019. ECF No. 11 at 28. Schedule I and his Form 122C-2 list

his monthly net income from operating a business, before expenses, as

$7,244.90, and his non-filing spouse’s monthly take home pay from her work

as a nurse as $6,088.17. While debtor’s Schedule I lists his gross income from

operating a business for the years 2020 and 2021 as “unknown”, the

supplement he filed states that for the twelve months before filing his

bankruptcy case (August 2021 through July 2022), his gross income from his

business was $63,345.72, his estimated average future gross monthly income

is $8,050, and after estimated future monthly expenses, his average net

monthly income would be $7,245.00. ECF No. 16 at 1. His Schedule J reports

his monthly net income after monthly expenses as $2,568.07. His schedule

A/B lists an interest in a residence on Black Earth Dr. in De Pere WI, which

debtor valued at $720,000. His Schedule D notes that Boardwalk Properties

LLC has a matured, secured interest in the Black Earth Dr. residence by virtue

of a land contract, and debtor valued Boardwalk’s claim as worth $625,406.83.

Debtor’s Chapter 13 plan proposes a 60-month plan period, during

which he will pay $800/month into the plan. ECF No. 12. His plan proposes to

pay secured creditor Boardwalk directly, and also to pay 100% of the general

unsecured claims, estimated to total $5,000.00. Id. His plan proposes to pay

Brown County Circuit Court its secured claim based on past due real estate

taxes in the amount of $25,379.36 by making pro rata payments at an interest

rate of 12%. Id. at 4. In sec. 8.1 of his plan, debtor proposes to remain in the

homestead property on Black Earth Dr., and beginning in September 2022 to

make monthly adequate protection payments of $3,473.00, constituting

principal and interest at 5.3%, to Boardwalk, as well as to maintain property

insurance (of $180/mo.; see ECF No. 11 at 20). The special provision also

states “within one year of confirmation of a Ch. 13 Plan, the debtor or his non-

filing spouse, will obtain financing sufficient to pay the matured land contract

balance owed to Board … in exchange for a deed in fulfillment of the land

contract or similar deed conveying the homestead.”

Boardwalk’s motion for Rule 2004 examination asserts that it filed a

foreclosure action against the debtor and his spouse in 2021, based on the

land contract the Gognas executed with Boardwalk in 2019 in the original

amount of $535,000, secured by the Black Earth Dr. residence. ECF No. 21.9

DISCUSSION

Rule 2004 allows examinations of debtors and any of their affiliate

persons and entities on matters that relate to “the acts, conduct, or property or

to the liabilities and financial condition of the debtor, or to any matter which

may affect the administration of the debtor’s bankruptcy estate, or to the

debtor’s right to a discharge.” Fed. R. Bankr. P. 2004(b). The Rule continues,

“In … an individual’s debt adjustment case under chapter 13 … the

examination may also relate to the operation of any business and the

desirability of its continuance, the source of any money or property acquired or

to be acquired by the debtor for purposes of consummating a plan and the

consideration given or offered therefor, or any other matter relevant to the case

or to the formulation of a plan.”

Boardwalk maintains the Rule is far-reaching, so long as the

examination does not involve issues that are related directly to a pending

adversary proceeding, citing In re Buick. 174 B.R. 299, 305 (Bankr. D. Colo.

1994). The debtor argues (1) Boardwalk has not demonstrated why an

examination is necessary so early in the case, (2) that forcing him and his

spouse to undergo such an examination would result only in additional

expenses, and (3) that Boardwalk is assuming duties that are normally

reserved for the trustee. ECF No. 30, at 2. Boardwalk does not seek information

regarding the asserted value of the real estate securing its interest via this Rule

2004 request.

Whether the request is to examine a debtor or a third party via Rule

2004, the text of the Rule does not require that a movant establish good cause,

or cause, to obtain the information it seeks. With regard to examination of the

debtor, courts are in agreement that a Rule 2004 request can be broad, so long

as the information sought relates to the administration of the bankruptcy

estate:

An investigation under Fed. R. Bankr. P. 2004 may seem analogous to

the discovery provisions of the Federal Rules of Civil Procedure, but the

provisions are actually quite different. No “good cause” language is

included in the Rule. Generally, a Rule 2004 examination is a broad

“fishing expedition” into a party’s affairs for the purpose of obtaining

information relevant to the administration of the bankruptcy estate. In re

Szadkowski, 198 B.R. 140, 141 (Bankr. D. Md. 1996). Rule 2004 is

substantially a “pre-litigation device for assessing whether grounds exist

to commence an action…” In re French, 145 B.R. 991, 992 (Bankr. D.

S.D. 1992).

In re Handy Andy Home Imp. Centers, Inc., 199 B.R. 376, 380 (Bankr. N.D. Ill.

1996) (addressing request by creditors committee in involuntary Ch. 11 case

for protective order). See also, In re J& R Trucking, Inc., 431 B.R. 818, 821

(Bankr. N.D. Ind. 2010) (describing a Rule 2004 examination of debtor as a

broad-ranging inquiry into debtor’s assets, liabilities, financial affairs and

anything else that might affect the administration of the bankruptcy estate.)

Noting some qualifications to this broad scope, the Collier on Bankruptcy

explains, “courts are generally reluctant to allow escape from a Rule 2004

examination unless the party can show that the examination is oppressive and

burdensome. See In re Vantage Petroleum Corp., 34 B.R. 650, 652 (Bankr E.D.

N.Y. 1983). For example, the movant should not be allowed to proceed if the

disruption or cost to the debtor far outweighs any benefits to the creditor. See

In re Express One Int’l, Inc., 217 B.R. 216 (Bankr. E.D. Tex. 1998); In re Eagle-

Picher Indus., Inc., 169 B.R. 130, 134 (Bankr. S.D. Ohio 1994). Other courts

may limit discovery under Rule 2004 where, they feel, discovery interferes with

other bankruptcy or nonbankruptcy policies. See In re Eagle-Picher Indus.,

Inc., 169 B.R. 130 (Bankr. S. D. Ohio 1994) (the court denied discovery of

mediation and plan drafts).” 9 Collier on Bankruptcy ¶ 2004.01 (16th ed.

2018).

Debtor Gogna has argued that Boardwalk essentially is acting as the

trustee in seeking these examinations, and that such exam requests should be

made solely by the Chapter 13 trustee. But other courts have allowed creditors

to obtain Rule 2004 exams if the particular request is not of the type reserved

to trustees. See, e.g., In re J & R Trucking, Inc., 431 B.R. 818, 822 (Bankr. N.D.

Ind. 2010); citing Matter of Perkins, 902 F.2d 1254, 1258 (7th Cir. 1990)

(noting, in chapter 7 cases, that it was the trustee’s duty to investigate the

debtor’s affairs and rights of the estate, and to the extent movants sought to

discover avoidable transfers, there was nothing the movants could do with

such information once obtained – that was the exclusive purview of the

trustee). In contrast, § 1325 affords trustees and creditors the opportunity to

object to a Chapter 13 plan. As such, the mere infrequency of creditor requests

for a Rule 2004 exam to enable the creditor to assess plan feasibility is not a

basis to deny the request. Moreover, while there will be some additional costs

involved in meeting the request of debtor, there is no showing here that those

costs would be of an oppressive magnitude.

Consequently, the Court will grant Boardwalk’s request to conduct an

examination of Mr. Gogna at a mutually convenient date and time within the

next 30 days, and to obtain the financial records requested. Requiring debtor to

produce his personal and business state and federal tax returns for tax years

2020 and 2021, his personal and business financial statements from January

1, 2021 to present, and all business records relating to debtor’s income as of

January 1, 2021 will allow Boardwalk to assess whether debtor’s sources of

income are likely to make his plan feasible. The Court has some reluctance to

order production of debtor’s bank, credit and debit card statements which

show historical payments for expenses, when the purpose of Boardwalk’s

request is to assess plan feasibility and availability of income to fund the

prospective plan term. Debtor already has described his ongoing expenses in

his schedule J and supplemental statement of business expenses and has

appeared at the initial § 341 meeting. ECF No. 35. Notwithstanding this

reluctance, there is no doubt Rule 2004 has been read to apply broadly to

debtors: “The scope of such an examination … [relates] to just about anything

that deals with the debtor’s action, assets, liabilities or financial affairs, its

right to a discharge, or any matter affecting the administration of the

bankruptcy estate.” In re Sheetz, 452 B.R. 746, 748 (Bankr. N.D. Ind. 2011)

(citations omitted.) Therefore, the Court will require debtor Gogna to produce

the requested personal and business bank statements, and his credit and debit

card statements as well.

Next, Boardwalk asserts it has good cause to examine Mrs. Gogna and

obtain her financial records. Boardwalk considers that an examination of the

non-filing spouse will aid in its assessment of plan feasibility and basis to

object, since the debtor relies on Mrs. Gogna’s income to help fund his plan.

Boardwalk asks to question her, and to obtain her two most recent tax returns

and her 2022 bank, credit card, and debit card statements. ECF No. 24, at 2.

The debtor objects, arguing that Boardwalk has not shown good cause to

examine Mrs. Gogna, a third party, citing In re Wilcher. 56 B.R. 428 (Bankr.

N.D. Ill. 1985). Wilcher explains, in the context of a Rule 2004 request of a

third party, that when there has been a motion to quash, or objection to Rule

2004 request for production, “the examiner bears the burden of proving that

good cause exists for taking the requested discovery.” 56 B.R. at 434 (citations

omitted). That court continued:

Good cause may ordinarily be shown by a claim that the requested

documents are necessary to establish the movant’s claim or that denial

of production would cause undue hardship or injustice, however the

burden of showing good cause is an affirmative one and is not satisfied

merely by a showing that justice would not be impeded by production of

the requested documents.

56 B.R. at 434-35.

The Court accepts that inquiring as to “sources of any money . . .

acquired by the debtor for purposes of consummating a plan . . .” is within the

scope of the Rule. Fed. R. Bankr. P. 2004(b). And, given the debtor’s reliance on

his wife’s income to help fund his Chapter 13 plan, the Court finds Boardwalk

has established good cause to examine income records of Mrs. Gogna. Those

income records are her state and federal tax returns for tax years 2020 and

2021.

But the other records Boardwalk seeks—Mrs. Gogna’s 2022 bank, credit

card and debit card statements—need not be produced. The same reluctance

identified above to require production of historical expense records from the

debtor is only magnified when Boardwalk seeks such records from a non-

debtor. Moreover, while Wilcher explained that good cause may be shown if the

requested documents are necessary to establish movant’s claim, here there is

no “claim”, at least in the form of an objection to plan confirmation, presently

lodged by Boardwalk. Consequently, records of the non-debtor’s expenses are

even more tenuously related to any potential plan objection Boardwalk may

raise. This portion of Boardwalk’s request is denied. Nonetheless, recognizing

that Mrs. Gogna’s 2022 bank statements may contain some information

disclosing her 2022 income, the Court will require production of her 2022 pay

stubs in lieu of those over-inclusive bank statements.

The Court also denies Boardwalk’s request to examine Mrs. Gogna via

deposition. Not only would such an examination be burdensome to the non-

debtor and generate increased attorney fees, but production of the multi-year

income-related documents allowed above should be sufficient to permit an

assessment of feasibility of debtor’s plan and thereby avoid any undue

hardship to the creditor.

For the foregoing reasons, Boardwalk’s motions are GRANTED in part

and DENIED in part, and are limited to copies of the following documents,

which must be submitted to Boardwalk by December 22, 2022:

• Jason Gogna’s personal and business state and federal tax returns for

tax years 2020 and 2021.

• Jason Gogna’s personal and business financial statements from

January 1, 2021 to present.

• Jason Gogna’s 2022 personal and business bank statements, and his

credit and debit card statements.

• Maren Gogna’s state and federal tax returns for tax years 2021 and

2022.

• Maren Gogna’s 2022 pay stubs.

In addition, Jason Gogna must submit to an oral examination at a

mutually convenient time within the 30 days of the date of this order.

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