Posted by NCBRC - January 31st, 2023
A chapter 13 debtor’s statutory right to dismiss his bankruptcy is not precluded by bad faith or ineligibility under section 109(e). Powell v. TICO Construction Co. Inc., No. 22-1014 (B.A.P. 9th Cir. Oct. 21, 2022).
TICO Construction, a judgment creditor in the debtor’s chapter 13 case, opposed the debtor’s motion to voluntarily dismiss his bankruptcy under section 1307(b). TICO alleged both that the debtor’s unsecured debts exceeded the debt limit set forth in section 109(e), and that the debtor abused by the bankruptcy process by transferring non-exempt assets to his ex-wife in “sham” divorce proceedings. TICO requested that, instead of granting the debtor’s motion to dismiss, the court should convert the case to chapter 7 or 11. Read More
Posted by NCBRC - September 6th, 2021
Section 1307(b) grants debtors an absolute right of dismissal which is not limited by the court’s inherent power to punish bad faith conduct. Nichols v. Marana Stockyard & Livestock Market, No. 20-60043 (9th Cir. Sept. 1, 2021).
After the debtors filed their chapter 13 petition, they were indicted on a scheme to defraud the Marana Stockyard & Livestock Market. In order to avoid disclosing information that might harm their federal criminal case, the debtors declined to attend their 341 meeting of creditors, provide tax returns, or submit a proposed plan. Marana, acting as a claimant in the bankruptcy case, eventually moved to have the case converted to chapter 7 and the debtors responded with a motion to stay the bankruptcy proceedings. The bankruptcy court denied the motion for stay and granted the motion for conversion “for cause.” The debtors then moved for voluntary dismissal under section 1307(b) which provides: “On request of the debtor at any time, if the case has not been converted . . ., the court shall dismiss a case under this chapter.”
Denying the debtors’ motion for voluntary dismissal, the bankruptcy court relied on In re Rosson, 545 F.3d 764 (9th Cir. 2008), where the circuit court held that there was an implied bad faith exception to a debtor’s right to voluntarily dismiss. The Bankruptcy Appellate Panel for the Ninth Circuit affirmed. Read More
Posted by NCBRC - February 4th, 2021
The debtor was permitted to voluntarily dismiss her chapter 13 case under section 1307(b) despite the judgment creditor’s objections and a technical error, where, even if a good faith component is read into the statute, the creditor failed to provide evidence of bad faith and was otherwise provided due process. Murphy v. Marinari (In re Marinari), No. 19-3642 (3rd Cir. Jan. 19, 2021) (unpublished).
The judgment creditor filed a claim and an adversary proceeding in the debtor’s chapter 13 case. The debtor filed an “application” to voluntarily dismiss her bankruptcy case under section 1307(b). When the bankruptcy court dismissed the case over the creditor’s objection, the creditor appealed. The district court affirmed. Read More
Posted by NCBRC - August 10th, 2018
The chapter 13 debtors who voluntarily dismissed their bankruptcy case were entitled to the proceeds from the sale of their homestead. Viegelahn v. Lopez, No. 17-50297 (5th Cir. July 31, 2018).
Chapter 13 debtors, Manuel and Dolores Lopez, sold their homestead without prior court approval and did not use the proceeds to purchase another home. Their confirmed plan provided that estate property would not revest in the debtors except upon order of the court. For various reasons, including Mr. Lopez’s arrest and deportation, the Lopezes had difficulty making plan payments. In response to the trustee’s third motion to dismiss, Ms. Lopez sought to use the proceeds from the sale of their homestead for plan payments after she paid approximately $20,000 for mandatory eye surgery. The trustee objected to any hold-back of the sale proceeds. The bankruptcy court agreed to allow Ms. Lopez’s modification, adding that if the Lopezes voluntarily dismissed their bankruptcy, they would be entitled to retain all the proceeds from the homestead sale. The Lopezes moved for voluntary dismissal and the trustee objected on the basis of bad faith. The bankruptcy judge granted the motion to dismiss and found that the proceeds should be returned to the Lopezes. The district court affirmed the dismissal but reversed on the issue of returning the proceeds. Read More
Posted by NCBRC - September 22nd, 2017
Undistributed funds in the hands of the chapter 13 trustee at the time of the debtor’s voluntary dismissal revest in the debtor, and where the debtor’s contract with her bankruptcy counsel provided for payment of attorney’s fees out of undistributed funds there was “cause” for the court to order such payment. In re Beaird, No.16-21725 (Bankr. D. Kans. Sept. 11, 2017).
When Ms. Beaird voluntarily dismissed her chapter 13 plan, the trustee held $13,788.87 in undistributed funds earmarked for distribution to Rushmore Loan Management Corp. The accumulation of funds was a result of Rushmore’s delay in filing its proof of claim until approximately ten months after Ms. Beaird filed her petition. Read More
Posted by NCBRC - June 5th, 2017
A chapter 13 debtor’s right to dismiss is absolute even in the face of a creditor’s prior motion to convert to chapter 7. In re de Lamadrid Perez, 2017 WL 1458857 (Bankr. D. Puerto Rico, April 24, 2017) (No. 12-2042).
Two of Julio Enrique Gil de Lamadrid Perez’s creditors moved the court to convert his chapter 13 case to chapter 7. Mr. de Lamadrid Perez opposed the motion then moved to dismiss under section 1307(b). The creditors argued that a debtor’s right to voluntarily dismiss his bankruptcy case is limited once there has been a motion to convert. Read More
