《楊清泉律師專欄》VOLUNTARY DISMISSAL OF CHAPTER 13 IS NOT ABSOLUTE (Part I)

《楊清泉律師專欄》VOLUNTARY DISMISSAL OF CHAPTER 13 IS NOT ABSOLUTE (Part II)

11 U.S.C. SS1307(b) states “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.” A plain reading of this provision supports the argument that the debtor has an absolute right to have his chapter 13 case dismissed. However, the Court of Appeals for the 5th Circuit, and the Court of Appeals for the 6th Circuit have ruled that debtor’s right to have his Chapter 13 case is not absolute even though the plain language of 1307(b) can be read to confer an absolute right to dismiss.

In Marrama v. Citizens Bank of Massachusetts, the Court of appeals said that the right to dismiss under 1307(b) is subject to a limited exception for bad faith conduct or abuse of the bankruptcy process. Marrama dealt with a debtor’s right to convert a case from Chapter 78 to Chapter 13 where the Court of Appeals for the 5th Circuit agreed with the 9th Circuit Court of Appeal’s statement in Re Rosson, that the “important point established by Marrama is that even otherwise unqualified rights in the debtor are subject to limitation by the bankruptcy court’s power under Section 105(a) to police bad faith and abuse of process.” In Jacobsen, the debtor asked the court to dismiss his case after the trustee moved to convert the case to Chapter 7.

The bankruptcy court found that the debtor acted in bad faith by failing to disclose all his assets. The debtor argued that many of the assets belonged to his wife, but the court noted that the debtor misspelled his wife’s name in his schedules. He said that was an accident, but it supported a finding that the debtor acted in bad faith. The court denied the debtor’s motion and granted the Chapter 13 trustee’s motion. The District Court affirmed, as did the 5th Circuit. On appeal, the debtor argued that 1307(b) gave him an absolute right to have his case dismissed, and that his motion trumped the trustee’s motion. The 5th Circuit found that there are no absolute rights in bankruptcy after Marrama.

(TO BE CONTINUE...)