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Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1905
Experience:  Twelve years experience in all aspects of debtor & creditor BK.
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Can a debtor have a Chapter 13 case dismissed if the plan has already been confirmed

Customer Question

Can a debtor have a Chapter 13 case dismissed if the plan has already been confirmed? The debtor in this case is specifically attempting to get the case dismissed to hurt an individual creditor to whom the debtor owes additional money that was not included in the plan, but the trustee approved could be paid through the plan. I need case law to justify.
Submitted: 3 years ago via Cornell Legal Info Institute.
Category: Bankruptcy Law
Expert:  Fran-mod replied 3 years ago.

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Expert:  Brent Blanchard replied 3 years ago.
Thank you for your question.

Plan confirmation is not the be-all, end-all of a Chapter 13 case. A multitude of reasons can come up post-confirmation which allow or even demand a dismissal and loss of the Debtor's protections under the Code.

I'm not sure how the Debtor dismissing the case would harm a creditor.

1. Dismissing the case puts ALL debts back into being fully enforceable. The automatic stay and the permanent injunction no longer exist, so all of the reposession, foreclosure, and lawsuit on debt parties can resume or get started with no federal impediments. That looks like a good thing for creditors, not harm.

2. "additional money that was not included in the plan" sounds like post-petition debt. First, that debt should not have been incurred without court permission and some reason to believe --AT THAT TIME--that the Debtor would be able to pay it back and that it would assist the Debtor-in-Possession in continuing whatever activities that would assist the plan. Dismissing the case would not impair the enforceability of any post-petition debt(s).

3. Whatever subjective intent there may be on the part of the Debtor in getting the case dismissed, it really won't affect the "pecking order" amongst the secured and unsecured creditors. Their relative rights and priorities were set long before the case was filed. Any problems of priority or perfection of liens or such are almost always caused by the prepetition acts or omissions of the creditor, not the Debtor.

4. More than half of all Chapter 13 cases end early and are dismissed before the plan is completed anyway, for various reasons ranging from the Debtor loses the regular income needed to fuel the plan, to the Debtor getting huge windfall and being able to pay everyone off early. The first is much more common than the second.

Thank you.

BAB.

Please do not forget to click the green "Accept" button so I can receive credit for my work.
Customer: replied 3 years ago.
Can a creditor stop a debtor from dismissing a Chapter 13 bankruptcy case...if so on what grounds?
Expert:  Brent Blanchard replied 3 years ago.
Please help me understand how the creditor would be better off with the case active, and no ability to try to collect on the debt outside of the Plan payments?
Customer: replied 3 years ago.

I recieved a judgement in small claims court for the limit allowable for unpaid rent. That was $3000. That amount was recorded on original plan, althought the debtor actually owed me and committed to pay me in writing for additional damages to the house which resulted in an additional $8000. When the debtor did not include the additional $8000 in the CHapter 13 case plan, I objected to the plan. We went to court and the court acknowledged the debt and supported adding the $8000 to the Chapter 13. When the debtor saw i was successful in this, he filed to voluntarilty dismiss the case to spite me.

 

NOTE: The court is aware of this persons lack of integrirty, as he previously tried to add this debt to a closed chapter 7 case he filed and closed in 2008 and the debt was incurred in 2009. He thought I would back down through all this and took me through this process. The judge was not impressed when he took it so far as to appear in court to try to add debt to a closed case, and when it was kicked out, he immediately filed the Chapter 13. He has been attempting to avoid this debt so long, through lies and manipulation fo the law and the judge has seen it all. Now he wants to dismiss the chapter 13 so that it will default back to only $3000 judgement and I will have to continue to try to collect. He works for Franklin County Courts so knows how to work the system.

Expert:  Brent Blanchard replied 3 years ago.
"additional damages to the house which resulted in an additional $8000"

Post-petition, per your description.

Small claims court, limit of $3,000.00 for unpaid rent. ANY ability to exercise jurisdiction there for property damage claims? If not, there's trouble if Ohio does not allow non-small claims court claims (like "equitable relief") to be brought in a separate action in an appropriate court. If that is a barrier, that litigation strategy mistake was made years ago and cannot be reversed.

A *later* acknowledgment of the validity of a debt can revive a cause of action, though.
The validity of the property damages debt is now "res judicata" between the two of you, and should now be enforceable in a NEW state court lawsuit, and the statute of limitations should be considered stopped or "tolled" while the case is active.

Unless an attorney has told you the property damage claim can be asserted ONLY in the Chapter 13 case and plan, it appears that you would still have substantial rights if the case was dismissed.

Creditor objections to dismissal are rather rarely accepted because of the availability of other non-BK remedies in most instances. But they tend to be successful most often if the creditor can show a fraudulent purpose for the requested dismissal. Could you please tell us what specific citations to the BK Code or the BK Rules are in the motion for dismissal? Any grounds for creditor opposition to the proposed dismissal would need to correspond to the authority the Debtor is trying to invoke.
Customer: replied 3 years ago.

Hi! You have been extremely helpful...your question re: citations is my issue with this motion as there are no grounds and the motion allows me an opportunity to object as instructions to do so are attached. I would like to object to the motion on the grounds he is filing based on fraud in that he has used the courts and bankrupcty law to delay, hold, suspend and even filed fraudulent documents with the courts - thinking at some point I would back down. When I dont it gets him even more mad. His plan can support the additional debt and his trustee has stated that it can go forward as set and approved with the additional $$. He was moving forward with this full steam until I was successful in getting the additional $$ added to the case. So he is specifically targeting me as now it is about ego and winning. The judge in this case has witnessed it all and knows of the filing of fraudulent docs etc to avoid this. The debtor knows she is onto him and has attempted to have the judge changed. THe courts denied that request.

Here is the exact copy of the motion content. PLease advise. Thanks so much for your help. I am doing this out of principle now as he did the same thing - caused $10,000 of damage and did not pay rent to a neighbor of mine and is getting away with that too and is being successful as he has no more fight in him. Very sad that there are people out there who do this...it makes you not trust folks and that is a very sad state to be in.

MOTION TO VOLUNTARILY

DISMISS CHAPTER 13 BANKRUPTCY

______________________________________________________________________________

Debtor Strother Bracy, by and through Counsel, Erin E. Schrader, requests this Court to voluntarily dismiss his Chapter 13. Debtor no longer wishes to proceed with his case. For this reason, Debtor requests this motion be granted.

Respectfully submitted,

/s/ Erin E. Schrader

Erin E. Schrader(NNN) NNN-NNNN/p>

Rauser and Associates

5 East Long Street Suite 300

Columbus, OH 43215

XXX-XXX-XXXX

Expert:  Brent Blanchard replied 3 years ago.
Ah, this is helpful to establish a basis to deny the effort to dismiss:

His plan can support the additional debt and his trustee has stated that it can go forward as set and approved with the additional $$. [. . .] . So he is specifically targeting me as now it is about ego and winning.

Okay, Ohio is in the 6th Circuit Court of Appeals. A quick look for "voluntary dismissal" (deny or denied) and (fraud or fraudulent or fraudulently) identified nothing from the 6th Circuit, but did show the following:

Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007). Supreme Court IS binding on your local BK Court... A Debtor's right to dismiss under 11 U.S.C. § 1307(b) does NOT extend to instances of bad-faith conduct or abuse of the bankruptcy process. It is a narrow exception.

This part of the BK Code has been used to deny dismissals before (or keep a Chapter 13 case from being dismissed to a Trustee could force it into conversion to Chapter 7):
Except as provided in subsection (e) of this section, on request of a party in interest or the United States trustee and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 7 of this title, or may dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, for cause . . . .
11 U.S.C. § 13071307(c)

Not in this creditor's best interests is a basis to deny the dismissal.

Debtors have been denied dismissals in Molitor v. Eidson (In re Molitor), 76 F.3d 218 (8th Cir. 1996), In re Armstrong, 408 B.R. 559, 571 (Bankr. E.D.N.Y. 2009), and by the Supreme Court in Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007) (this one involved a Chapter 7 debtor filing misleading and incomplete schedules, then being denied a request to convert ot Chapter 13--the principles involved remain similar).

Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764, 770 (9th Cir. 2008) has this little gem: A bankruptcy court has "power under [11 U.S.c.] § 105(a) to police bad faith and abuse of process." Id. at 773 n.12.

Sounds like proving an intent to hinder and delay that one creditor could be easily proven to the degree needed to satisfy the laws and the judge.

So, these are some of the strongest authorities to look into in opposing a debtor's attempt to get out of a Chapter 13 case when it would impair a creditor's ability to get repaid.

Thank you.


BAB.
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1905
Experience: Twelve years experience in all aspects of debtor & creditor BK.
Brent Blanchard and 3 other Bankruptcy Law Specialists are ready to help you
Customer: replied 3 years ago.

You are amazing and wonderful and had I known I would get this level of support I would have offered more than $18. That said, this is exactly what I needed. You rock!

 

I am not sure how I can bump up the payment to you, as I have never used this before, but I will try to find out!

 

Thank you!

Customer: replied 3 years ago.

Oh...I neglected to share that he filed and closed a previous Chapter 7 case, so reverting from 13 to 7 is not possible if I understand the code.

 

So, with your case references...I think I can do this.

 

Thank you so much again.

 

Have a wonderful evening.

Expert:  Brent Blanchard replied 3 years ago.
Pardon me for being perhaps a bit self-serving (I specialize in understatement), but there is an option somewhere to spiff an Expert a bonus.

I welcome them, especially when earning it involves a rewarding journey of learning more details of the ever-changing world of the law. Note--before Maramma in 2007, some circuits, including the 9th where I practice, had been interpreting the statutes to grant debtors an unconditional right to dismiss their cases, especially in Chapter 13. That changed less than 3-1/2 years ago, but had never come up for any of my debtor-side or creditor-side clients (though it had a few months before).

Thank you very much.

BAB.
Customer: replied 3 years ago.

Ooppps..one last question...In their motion they provided no reason for dismissal...how might I phrase the reason I request the motion be denied...

 

SHould I say, "creditor objects to the dismissal of this Chapter 13 case as, a debtor's right to dismiss under 11 U.S.C. § 1307(b) does NOT extend to instances of bad-faith conduct or abuse of the bankruptcy process.

 

Or simply submit the objection and refer to these cases during the hearing.

 

Expert:  Brent Blanchard replied 3 years ago.
Thank you for your follow-up.

AND, thank you for the bonus. I greatly appreciate that.

Check your local BK Court rules. In NV, submitting a motion without a supporting memorandum with citations to authority, or with bare citations and no analysis, is not considered adequate and is basis by itself to deny the motion. If you have a similar LR, use it.

I would put the opposition in two parts:

1. Debtor Cites No Authority for the Requested Dismissal

and then from your insightful approach:
2. Even Authority Otherwise Available to the Debtor Fails to Allow Voluntary Dismissal
Creditor objects to the dismissal of this Chapter 13 case as, a debtor's right to dismiss under 11 U.S.C. § 1307(b) does NOT extend to instances of bad-faith conduct or abuse of the bankruptcy process.

Then cite the authorities, analyze those cases' facts to the facts of this debtor's case, and draw the conclusion that this instance falls into the narrow exception to the otherwise broad right to voluntary dismissal.

Thank you.

BAB.

Edited by Brent Blanchard on 8/7/2010 at 1:22 AM EST

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