This website is not intended to be a legal advice resource. It is only meant to be used for educational reasons. Please don’t take any action or refrain from taking any action based on what you’ve read on this website. This website, article, or link may contain outdated, incorrect, or irrelevant information. It is your obligation to speak with an expert attorney who can apply current legislation or laws to your personal situation in a professional manner.
There is no attorney-client relationship formed by using this site or communicating with Law Office of D.L. Drain or any of our employees. Please read the complete disclaimer for additional information.
It is vital that you seek legal advice from a qualified attorney on your individual situation. It will almost certainly cost you less to seek advice before acting than it will to repair your mistakes.
DISMISSAL OF BANKRUPTCY
IMPORTANT: THIS FIRM MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR CURRENT STATUS OF ANY LAW, CASE, ARTICLE OR PUBLICATION CITED HEREIN OR LINKED TO. WARNING – SOME OF THESE REFERENCES ARE PRE-BAPCPA.
See In re Acosta-Rivera, 557 F3d 8 (1st Cir. 2009) held that the court has discretion not to dismiss a case where missing pay stubs or other required information has become irrelevant or extraneous. Note however, that in this case debtor sought dismissal to prevent the trustee from administering an asset that would generate enough to pay all claims in full.
In re Warren, 568 F3d 1113 (9th Cir. 2009) agreed with Acosta-Rivera to hold that the bankruptcy court has discretion not to dismiss an “automatically dismissed” case where the missing information is not important or as in this case, dismissal is should by the debtor.
In re Jackson, 348 B.R. 487 (Bkrtcy.S.D.Iowa 2006) LEE M. JACKWIG, Bankruptcy Judge WHERE DEBTOR FAILS TO TIMELY FILE REQUIRED DOCUMENTS CASE IS DEEMED AUTOMATICALLY DISMISSED ON 46TH DAY ONLY IF REQUESTED BY PARTY IN INTEREST § 521(a)(1), 521(i)(2)
As of the 45th day after filing the petition debtor was still one credit advice short thus failing to satisfy § 521(a)(1)(B)(iv). Debtor’s error was due to mistaken numbering on the payment advices. The court issued an order dismissing the case, and debtor moved for reinstatement on the basis of excusable neglect.
The court reinstated the case, not on the basis of excusable neglect, but on the theory that despite the “automatic” term in the statute the court should not sua sponte dismiss the case without a motion to do so by a party in interest pursuant to § 521(i)(2). Thus the “automatic” language of § 521(i)(1) is qualified by subparagraph (2) which requires a motion.
In re Ott, 343 B.R. 264 (Bkrtcy.D.Colo. 2006) COURT HAS NO DISCRETION TO ENLARGE THE TIME LIMITATIONS PRESCRIBED IN THE CODE SECTION GOVERNING DEBTOR’S FAILURE TO FILE ALL REQUIRED INFORMATION § 521(a)(1)(B)(iv)
Debtor filed chapter 7 two days after effective date of BAPCPA. Debtor failed to file required “payment advices” (pay stubs or other evidence of income) as required under BAPCPA per § 521(a)(1)(B)(iv) within 45 days of filing the petition as required under § 521(i). Debtor’s counsel informed court he may have inadvertently failed to inform debtors that pay stubs had to be filed by a certain date. Case was dismissed automatically on the 46th day.
Debtors moved for relief from judgment based on counsel’s confusion over the filing requirements of BAPCPA. The court, observing that by passing BAPCPA Congress viewed debtors “as the moral equivalent of shoplifters” reluctantly held that the court had no discretion to retroactively extend the 45-day deadline. Citing Judge Keith Lundin’s treatise on Chapter 13, the court observed that the dismissal is automatic and requires no order by the court.
“BAPCPA is a complex and extensive statute that is, at times, unforgiving to debtors and to their counsel. Snares and traps are present throughout BAPCPA for unwary debtors. By the design of Congress, the Court is not in a position to extricate counsel and debtors from these perils.”
In re Lovato, 343 B.R. 268 (Bkrtcy.D.N.M. 2006). HELD: FAILURE TO SUBMIT “PAYMENT ADVICES” GIVES COURT NO CHOICE BUT TO DISMISS CASE 11 U.S.C. § 521(a)(1)(B) Pro per debtor filed Chapter 7 bankruptcy but failed to provide “payment advices” or other evidence of income and tax returns within 45 days of filing the petition. the Code requires that the debtor filed payment advices or other evidence of income received within the 60 days immediately prior to filing the bankruptcy, or the case shall be dismissed on the 46th day. Failure to do so leaves the court no option but to dismiss. (note: the local rule in this court was not to file the documents with the court but rather with the trustee).
Section 707: In re Price (01/07/04 – No. 02-16458) U.S. 9th Circuit Court of Appeals) Bankruptcy court was justified in dismissing a Chapter 7 petition for substantial abuse pursuant to 11 U.S.C. section 707(b), based on findings that the debtor had primarily consumer debts and had the ability to fund a Chapter 13 plan, despite evidence that the debt to be discharged consisted primarily of commercial debt. http://caselaw.lp.findlaw.com/data2/circs/9th/0216458p.pdf The remaining substantive issue is whether Price meets the substantial abuse standard of Section 707(b). The term “substantial abuse” is not defined in the Bankruptcy Code. Rather, courts have examined the totality of the circumstances in determining whether substantial abuse exists in a particular case, utilizing criteria such as the following:
(1) Whether the debtor has a likelihood of sufficient future income to fund a Chapter 11, 12, or 13 plan which would pay a substantial portion of the unsecured claims;
(2) Whether the debtor’s petition was filed as a consequence of illness, disability, unemployment, or some other calamity;
(3) Whether the schedules suggest the debtor obtained cash advancements and consumer goods on credit exceeding his or her ability to repay them;
(4) Whether the debtor’s proposed family budget is excessive or extravagant;
(5) Whether the debtor’s statement of income and expenses is misrepresentative of the debtor’s financial condition; and
(6) Whether the debtor has engaged in eve-of bankruptcy purchases.
3 Norton Bankruptcy Law and Practice 2d § 67:5, at 67-10 (William L. Norton, Jr. et al. eds., 1997).
The primary factor defining substantial abuse is the debtor’s ability to pay his debts as determined by the ability to fund a Chapter 13 plan. Thus, we have concluded that a “debtor’s ability to pay his debts will, standing alone, justify a section 707(b) dismissal.” Kelly, 841 F.2d at 914.
The trustee argues that we need not reach any of the issues raised by Price because Congress created a bright line test: that dismissal is required whenever a debtor is able to fund a Chapter 13 plan. However, the text of the section and its legislative history belie this interpretation. Indeed, Congress specifically rejected such proposals. See 6 Collier ¶ 707.04, at 707-16. Rather, Congress committed the question of what constitutes substantial abuse to the discretion of bankruptcy judges within the context of the Code. Section 707(b) provides that the court “may” dismiss a case “if it finds that the granting of relief would be a substantial abuse of the provisions of this chapter.” Put another way, while “debtor’s ability to pay his debts will, standing alone, justify a section 707(b) dismissal,” Kelly, 841 F.2d at 914, the debtor’s ability to pay his or her debts does not compel a section 707(b) dismissal of the petition as a matter of law. In addition, as Kelly noted, a bankruptcy court could make a finding of substantial abuse under the facts of a particular case even if the debtor did not have the ability to fund a Chapter 13 plan. Id. at 914-15. Thus, Kelly did not establish an absolute, per se rule. Rather, Kelly quite appropriately held that ability to fund a Chapter 13 plan is the most important consideration under § 707(b), and that a finding of ability to pay alone is sufficient to sustain a § 707(b) dismissal.
Note – pre-BAPCPA
Dismissal with Prejudice: Local Rule – 1017 (e)
In re Tennant (9th Cir. BAP 2004) BAR TO REFILING MAY BE INVALID WITHOUT HEARING. The BAP has “serious doubts” whether a local rule providing for an automatic bar on refiling for 180 days after dismissal for failure to file schedules is enforceable in the absence of a motion, hearing and finding of willful failure.
In the 9th Circuit: ABSOLUTE RIGHT TO DISMISS CHAPTER 13
1307(b): On request of the debtor at any time, if the case has not been converted under section 706, 1112, or 1208 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable. But see notes below*:
Dismissal of Chapter 13 – absolute right:
Aviles v Fear & Tsang, BAP no. 23-1208-GFB (9th Cir BAP 8/12/24) Chapter 13 debtors Martha and Antonio Aviles (“Debtors”) appeal the bankruptcy court’s decision denying their motion for reconsideration of the court’s order vacating their voluntary dismissal. The bankruptcy court determined that Debtors did not have an absolute right to dismiss under § 1307(b) because they previously converted their case under § 706, and they were judicially estopped from arguing otherwise. But Debtors did not convert their case under § 706. They moved, pursuant to Civil Rule 60(b), made applicable by Rule 9024, to set aside the court’s prior order converting their case to chapter 7. The court granted Debtors’ motion, and the result was as if the case had never been converted from chapter 13. Thus, Debtors retained their right to dismiss the case under § 1307(b). Accordingly, we REVERSE and reinstate the order dismissing Debtors’ case.
The ineligibility to be a chapter 13 debtor does not deprive the debtor of the near-absolute right to dismiss the chapter 13 case.
Tico Construction Co. v. Van Meter (In re Powell), 22-1014 (B.A.P. 9th Cir. Oct. 21, 2022). Jason Philip Powell sought to dismiss his chapter 131 bankruptcy case. Judgment creditor TICO Construction Company, Inc. (“TICO”) objected, arguing that Mr. Powell did not have an absolute right to dismiss his case because he was abusing the bankruptcy process and was not eligible to be a chapter 13 debtor. TICO argued that the bankruptcy court should instead convert the case to one under chapter 7. The bankruptcy court disagreed with TICO’s analysis and dismissed the case.
TICO appeals. We discern no error and AFFIRM.
We publish to explain that ineligibility to be a chapter 13 debtor does not deprive the debtor of the near-absolute right to dismiss the chapter 13 case.
In re Nichols, (US CT of Appeals – No.20-60043, BAP No AZ-20-1032-TaLB (9/1/21) The panel reversed the bankruptcy court’s decision denying Chapter 13 debtors’ motion to voluntarily dismiss their bankruptcy case pursuant to 11 U.S.C. § 1307(b), and remanded to the bankruptcy court for further proceedings.
Although § 1307(b) confers upon a Chapter 13 debtor the right to request dismissal “at any time,” the bankruptcy court concluded that under In re Rosson, 545 F.3d 764 (9th Cir. 2008), there was an implied exception to § 1307(b) where the debtor had engaged in bad faith or abuse of the bankruptcy process. The bankruptcy court concluded that this exception applied, justifying denial of the motion to dismiss, and it then converted the case to a liquidation under
Chapter 7.
The panel held that Rosson was effectively overruled by Law v. Siegel, 571 U.S. 415 (2014), which held that a bankruptcy court may not use its equitable powers under 11 U.S.C. § 105 to contravene express provisions of the Bankruptcy Code. The panel held that Rosson therefore is no longer binding precedent. Considering the question anew, and agreeing with the Second and Sixth Circuits, the panel held that a bankruptcy court is prohibited from invoking equitable considerations to contravene § 1307(b)’s express language conferring upon Chapter 13 debtors an absolute right to dismiss their case.
Brown v. Billingslea (In re Brown) (9th Cir BAP, July 23, 2015) To the extent Debtor argues that he has an absolute right to dismiss his case under § 1307(b) he is mistaken. The Ninth Circuit in Rosson held that a chapter 13 debtor’s right of voluntary dismissal under § 1307(b) was not absolute, but was qualified by the authority of a bankruptcy court to deny dismissal on grounds of bad faith conduct or “to prevent an abuse of process.” 545 F.3d at 774 (citing § 105(a)).
VI. CONCLUSION Having found no error, we AFFIRM.
In re Rosson, 545 F.3d 764 (9th Cir. 2008): A chapter 13 debtor does not have an absolute right to dismiss his case. The bankruptcy court did not clearly err in converting the debtor’s case to chapter 7, where the debtor engaged in bad faith conduct by failing to deliver arbitration proceeds to the chapter 13 trustee. This is true even though the debtor received virtually no notice of the sua sponte conversion.
*In re Minogue, 21-01779-JW (S.D. South Carolina, 9/21/21) Judge Waites compares the ‘absolute right to dismiss with opinions from the Fifth and Eighth Circuits holding that dismissal under Section 1307(b) may be conditioned on the debtor’s good faith.’ citing in part Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007), where the Supreme Court held under Section 706(a) that the bankruptcy court has discretion to deny conversion of a chapter 7 case to chapter 13 as a consequence of the debtor’s bad faith. (Marrama was a 5/4 decision. The dissenters in Marrama saw nothing in the text of Section 706(a) to deprive the debtor of the right to convert.)
But then came Law v. Siegel, 571 U.S. 415 (2014), where the Supreme Court held that a bankruptcy court may not use its equitable powers under Section 105(a) to contravene express provisions of the Bankruptcy Code. More particularly, the Court held that a bankruptcy court may not employ equitable powers to invade a debtor’s homestead exemption.
On motions by a debtor to dismiss under Section 1307(b), Judge Waites said that “[r]ecent and more convincing authorities” have taken Law to mean that a chapter 13 debtor may not “be precluded from voluntarily dismissing his or her Chapter 13 case in the face of a pending motion to convert or allegations of bad faith conduct.” Judge Waites continued, that his understanding of Section 1307(b) “does not preclude the view that other portions of the Bankruptcy Code, such as 11 U.S.C. § 349(a) or 11 U.S.C. § 109(g), provide the Court with authority to issue remedial orders in addition to an order granting a debtor’s motion to dismiss under § 1307(b) to address a debtor’s bad faith conduct or abuse of the bankruptcy process.”
- In re Formaneck, 2015 Bankr. LEXIS 2307 (Bankr. D. Colo. July 13, 2015) (Romero, C.B.J.). Case dismissed as failure to make postpetition mortgage payments directly to creditor was a material default under debtor’s chapter 13 plan.
In re Sobczak, 369 B.R. 512 (9th Cir. BAP 2007). In a case arising out of Arizona, the BAP reversed the Bankruptcy Court’s dismissal of the debtor’s case, holding that (a) the debtor in a case converted from Chapter 7 to Chapter 13 had standing to move for dismissal of his bankruptcy, but (b) dismissal of the debtor’s bankruptcy in the circumstances presented was improper. The BAP found that the debtor’s realization that in bankruptcy he was limited by §522 to Ohio’s $5,000 homestead exemption, rather than the Arizona $150,000 exemption that would apply if he were not in bankruptcy, was not a proper basis for allowing the debtor to move under §1307 to dismiss his case.
In re Pak, 343 B.R. 239 (Bkrtcy.N.D.Cal. 2006). HELD: A DEBTOR’S ACTUAL AND ANTICIPATED FUTURE INCOME MUST BE CONSIDERED IN DECIDING WHETHER TO GRANT OR DENY MOTION TO DISMISS AS AN ABUSE 11 U.S.C. § 707(b)(3)(B)
Under the “totality of circumstances” test for abuse in chapter 7 as prescribed by 11 U.S.C. § 707(b)(3)(B) where the debtor’s income is below the state median, the debtor’s actual and anticipated future income may be taken into consideration.
Unless the court orders otherwise, no stay applies after dismissal. Once the case is dismissed, the automatic stay of 11 U.S.C. § 362(a) terminates, pursuant to 11 U.S.C. § 362(c)(2)(B). 11 U.S.C. § 362(c)(2) provides that the stay of any other act under subsection (a) of this section continues until the … the time the case is dismissed…. It would have been incumbent upon the debtor to re-file or seek a stay pending appeal.
Note: Some attorneys believe a temporary stay of the dismissal order arises under Federal Rule of Bankruptcy Procedure 7062 and Federal Rule of Civil Procedure 62(a). Rule 7062 simply says Rule 62 “applies in adversary proceedings,” and Rule 62(a) says, “Except as stated in this rule, no execution may issue on a judgment, nor may proceedings be taken to enforce it, until 14 days have passed after its entry.” But FRBP 9014(c), which makes certain rules of civil procedure applicable in contested matters, specifically does not apply Rule 7062 in contested matters, unless the court orders otherwise.
Debtor has “near-absolute right to dismiss the chapter 13 case”.
In re: JASON PHILIP POWELL NV-22-1014-FLB (9th Circuit, Oct 21,2022) Published Ruling : Jason Philip Powell sought to dismiss his chapter 131 bankruptcy case. Judgment creditor TICO Construction Company, Inc. (“TICO”) objected, arguing that Mr. Powell did not have an absolute right to dismiss his case because he was abusing the bankruptcy process and was not eligible to be a chapter 13 debtor. TICO argued that the bankruptcy court should instead convert the case to one under chapter 7. The bankruptcy court disagreed with TICO’s analysis and dismissed the case.
TICO appeals. We discern no error and AFFIRM. We publish to explain that ineligibility to be a chapter 13 debtor does not deprive the debtor of the near-absolute right to dismiss the chapter 13 case.
9TH CIRCUIT BAP REVERSED DISMISSAL OF CHAPTER 13 DUE TO DELAY IN CONFIRMING PLAN
(reprint from [email protected], https://hillsboroughbankruptcy.com
In Gross v. Rojas (In re Gross), 2019 Bankr. LEXIS 2452, BAP No. CC-18-1218-SKuTa (9th Cir. BAP 7 August 2019) the appellate panel reversed the California bankruptcy court’s dismissal of the case for not confirming the plan in 14 months after filing. The confirmation hearing had been continued seven times, due to the debtors’ (Arnold & Laurie Gross) successful challenge of two secured claims. The Grosses had continued to timely make the trustee payments. Given the fact based ruling by both courts, a detailed analysis of the facts are in order.
The chapter 13 case was filed in May 2017, proposing $2500/mo payments to the trustee for 60 months, with full payment to priority creditors and a 32% dividend to unsecured claims and a cure of arrearages on the mortgage on the 1st mortgage on their home with an avoidance of the 2nd mortgage. The trustee objected to the plan in July 2017, shortly before the first confirmation, based on service errors, disclosure of a prior chapter 7 case, insufficient income information, and feasibility. The feasibility objection was based on not providing for a $127,904 secured claim of the IRS, whose claim totaled over $135,000. The trustee also objected as to the best interest requirement of §1325(b)(1)(B) and requested additional documentation as to expenses.
Roughly a month following this hearing the Grosses filed to avoid the junior mortgage lien and the IRS lien, both as being fully unsecured. Shortly before the hearing on these motions, the trustee filed another objection to confirmation under the same grounds as the first, but raised additional concerns regarding incomplete schedules having omitted a vehicle. In November 2017 an amended motion to avoid the 2nd mortgage lien was filed, correcting the name of the lienholder; and changing the request against the IRS from avoiding the lien to an objection to claim. The Grosses also filed amended schedules A/B adding the omitted vehicle, noting they had co-signed for their son who maintained the vehicle and made all payments on it.
The hearings on the confirmation and objection to the IRS were continued a few times until the IRS objection was finalized at a March 22 2018 hearing. In June 2018 the Grosses filed and served a first amended chapter 13 plan, amending the plan to provide for a trustee fee of 11%, $2,000 in debtor counsel attorney fees, the IRS priority claim, and surrender of the vehicle the son maintained. The plan erroneously stated an intent to avoid the 2nd mortgage lien, which had already been avoided, misstated the dates of the confirmation hearings and the room number of the upcoming confirmation hearing, and was missing Mrs. Gross’s signature. The plan also reduced the dividend to unsecured creditors from 32% to 31%.
At the July 2018 hearing the trustee for the first time claimed that the Grosses were ineligible due to the debt limits. No advance notice of this objection was given to the Grosses or counsel, and coverage counsel was unable to address the concerns and did not specifically ask for a continuance of the hearing. The court ruled at the hearing that the case would be dismissed unless converted within seven days. Instead Grosses counsel sought reconsideration, pointing out that the trustee has miscomputed the amount of debt, and the Grosses were not over the debt limit, and that they were not given due notice of the objection. They also noted the trustee had been in error in asserting that Mrs. Gross’es signature was missing from the plan form. The Grosses also alleged the error as to the confirmation date and room were clerical errors that should not result in dismissal of the case, and that they could quickly and easily fix the only remaining issue: the trustee’s request for the 2017 tax return. The bankruptcy court denied reconsideration and dismissed the case. The Grosses filed a timely appeal.
The BAP first noted 11 U.S.C. 1307(c) which permits the court to dismiss a chapter 13 case for cause, setting forth non exhaustive list of grounds for dismissal. While not specified in the bankruptcy court’s decision, possible grounds under these facts would be §1307(c)(1) and (c)(5). §1305(c)(1) permits dismissal for a debtor’s unjustified failure to expeditiously accomplish any task required either to propose or confirm a chapter 13 plan. However, in order to justify dismissal under this ground, the delay must be both unreasonable and prejudicial to creditors.1
While the bankruptcy court seems to have considered the delay in confirmation to be unreasonable, the original apparent basis for dismissal, the debt limit issue, has been conceded by the trustee to be based on an error by the trustee’s office in double counting the IRS debt. The only remaining issues then supporting the court’s conclusion that the plan could not have been confirmed at the last hearing was the non-receipt by the trustee of the 2017 tax return and noticing errors. Under §1307(c)(1) ‘unreasonable delay’ is a term of art, and should be viewed as a determination of ultimate fact encompassing an equitable assessment of all relevant circumstances akin to the ‘excusable neglect’ standard of Rule 9006(b)(1) articulated in Pioneer Inv. Sev. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 391-96, 113 S.Ct. 1489, 123 L.Ed.2d 74 (1993).
An exhaustive analysis of all circumstances leading to dismissal may not be required where it is apparently from the record that further delays would be futile; such as where they demonstrate that they are unwilling or unable to propose a feasible chapter 13 or fail to address plan defects pointed out by the court and trustee at prior hearings.2 A showing of bad faith, such as a disregard by the debtors of the need to promptly and accurately discharge their chapter 13 duties also will support dismissal.3 Finally, a debtor’s defiance of the court’s orders and directives, and dictates of chapter 13 of the Code can support a decision to dismiss the case.
The bankruptcy court below made no findings that any of these critical factors were present. The record does not indicate futility, bad faith, or defiance. Instead, only two legitimate flaws prevented confirmation at the last hearing: defective notice and a missing copy of the last tax return. Both matters that could be quickly remedied. The efforts of the Grosses to date reflected their serious attempt to confirm the plan, including timely payments to the trustee for the 14 months the plan was pending, and successful challenges to the secured claims of the 2nd mortgage and the IRS. These types challenges often delay confirmation but are not ‘unreasonable delay’ absent other circumstances not identified here.
Even if the delay had been unreasonable, the court did not identify any prejudice to the creditors caused by the delay, nor did the BAP find any such prejudice. The noticing defect could have been quickly and easily remedied. No creditors had challenged confirmation of the plan. Ultimately, the interest of the Grosses’ creditors in the reasonable prospect of partial repayment is paramount, as recognized in §1307(c)(1). Under the circumstances, a dismissal was dramatically more prejudicial to unsecured creditors than an additional continuance.
The other basis to dismiss, §1307(c)(5), requires both a denial of confirmation and a denial of a request for additional time to file another plan or modification. This section cannot be properly applied unless the debtor was given a reasonable opportunity to correct or explain the trustee’s perceived deficiencies. No such opportunity was given in the bankruptcy court.
Given the absence of any other cause for dismissal specified by the bankruptcy court, the appellate court would not presume such a basis. Nor did it note any findings or evidence that would support a finding of unenumerated cause for dismissal. The bankruptcy court’s power to fashion a cause for dismissal does not give the court authority to dismiss for a type of delay different than that contemplated by Congress in the Code. The courts general and equitable powers cannot be exercised in a manner inconsistent with the Code’s express provisions.4
The BAP reversed the bankruptcy court’s dismissal of the case.
1 Ellsworth v. Lifescape Med. Assocs., P.C. (In re Ellsworth), 455 B.R. 904, 915 (9th Cir. BAP 2011) (citing §1307(c)(1).↩
2 See, e.g., In re de la Salle, 461 B.R. 593, at 596-99, 605 (9th Cir. B.A.P. 2011) (court gave debtors detailed instructions after denial of second amended plan but debtors did nothing); see also Villalon v. Burchard (In re Villalon), BAP No. NC-14-1414-KiTaD, 2015 Bankr. LEXIS 1747, 2015 WL 3377854, at *1-3 (9th Cir. BAP May 22, 2015) (debtor unable to cure even a small fraction of her large delinquency in plan payments though court gave her repeated opportunities to do so).↩
3 See, e.g., In re de la Salle, 461 B.R. at 606 (debtors enjoyed the protection of the automatic stay, made zero payments to their secured creditor, and refused to propose a plan providing for its claim, instead focusing on their spurious noteholder standing litigation); In re Ellsworth, 455 B.R. at 920 (numerous indica of bad faith, including suspicious timing of petition filing and apparent intent of debtor to defeat collection of a single disputed judgment debt).↩
4 Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365, 382, 127 S. Ct. 1105, 166 L. Ed. 2d 956 (2007) (citing Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 206, 108 S. Ct. 963, 99 L. Ed. 2d 169 (1988)).↩
Michael Barnett
Michael Barnett, PA
506 N Armenia Ave.
Tampa, FL 33609-1703
813 870-3100
[email protected]
https://hillsboroughbankruptcy.com
BAD LEGAL ADVICE IS NOT A GOOD REASON FOR DISMISSAL
In re Anselmo and Alma Cabral, BAP No. CC-20-1061-LST (9th Cir BAP, 11/5/20) The BAP affirmed the bankruptcy court (C.D. Cal.) in full in that no cause for dismissal existed to allow the Debtors to dismiss their Chapter 7 under 11 U.S.C. § 707(a). The BAP noted that the Debtors conceded on appeal that bad legal advice is not cause for dismissal. The BAP also agreed that the creditors would be prejudiced by the dismissal, because there would be a substantial delay to payment, if one ever came. Dismissal under § 707(a), according to the BAP, requires payment to the creditors that is prompt and certain.
In re Hale, BAP Case No. CC-19-1225-SFL (9th Circuit, Sep 28,2020) Chapter 7 debtor, Hale, did not disclose a prepetition interest in his father’s probate estate, once it was discovered by the trustee Hale attempted to dismiss his bankruptcy, offering to pay his creditors. Conclusion: the potential voluntary repayment was speculative. The record supports the bankruptcy court’s determination that Hale’s creditors would be prejudiced if he were permitted to dismiss his case. Accordingly, the bankruptcy court did not abuse its discretion in denying dismissal and, therefore, we AFFIRM.