Opinion
CASE NO. 01-00359-AJM-13
January 11, 2001
Randall Shouse, Attorney for the Debtors.
ORDER DISMISSING CASE
Prior to the filing of this chapter 13 case, the Debtors voluntarily filed and dismissed two previous chapter 13 cases, thus prompting the Chapter 13 Trustee to move to dismiss this case under § 109(g)(2).
The First Case
On July 19, 1996 (the "First Petition Date"), the Debtors filed a chapter 13 case (Case No. 96-06779-FJO-13) (the "First Case"). However, the full schedules and chapter 13 plan were not filed on the First Petition Date and therefore, in accordance with local rules, the Debtors filed a "Certificate of Emergency" which set forth the emergency which prevented them filing the complete schedules and chapter 13 plan. The chapter 13 plan in the First Case was confirmed on November 13, 1996.
In July of the next year, creditor Union Federal Savings Bank of Indianapolis ("Union Federal") filed its motion for relief from stay and/or adequate protection, which resulted in an agreed entry being filed by Union Federal and the Debtors and approved by the Court on September 18, 1997. However, the Debtors failed to abide by the terms of that agreed entry, and, after Union Federal filed an affidavit with the Court as to the breach of the agreed entry, the stay was lifted as to Union Federal on December 11, 1997. Thereafter, on June 11, 1998, the Debtors moved to dismiss their chapter 13 case. Because the case had not been previously converted, the Debtors had an automatic right to dismissal, and the First Case was dismissed on June 12, 1998.
See § 1307(b).
The Second Case
Four days later on June 16, 1998 (the "Second Petition Date"), the Debtors filed their second chapter 13 case (Case No. 98-07839-JKC-13) (the "Second Case"). Again, the full schedules and chapter 13 plan were not filed on the Second Petition Date and a Certificate of Emergency was filed. The Chapter 13 plan in the Second Case was confirmed on February 3, 1999 (and the amended plan was approved/ confirmed on February 28, 2000) and on October 5, 1999, Union Federal filed its motion for relief from stay which ultimately resulted in the amending of the Debtors' chapter 13 plan on February 2, 2000 and an agreed entry between Union Federal and the Debtors on February 14, 2000. On November 13, 2000, the Debtors moved to dismiss their chapter 13 case, and again, because there had been no previous conversion of the case, the case was dismissed as requested by the Debtors on November 16, 2000.
The Third (and current) Case
The Debtors filed a voluntary petition under Chapter 13 of the Bankruptcy Code on January 11, 2001 (the "Third Petition Date"), less than two (2) months after dismissal of the Second Case. Once again, the Debtors did not file all of the required schedules or the chapter 13 plan on the Third Petition Date, but, in compliance with local rules, did file a "certificate of emergency" which indicated that a "sheriff's sale was set for January 24, 2001". The Debtors filed their initial chapter 13 plan on February 2, 2001 and that plan has been amended and/or modified at least twice, with the most recent amended plan having been filed on April 30, 2001 (the "Amended Plan"). The Chapter 13 Trustee has objected to confirmation of the Amended Plan (the "Trustee's Objection") and, on April 17, 2001 also moved to dismiss the chapter 13 case (the "Trustee's Motion") on the basis that the Debtors are not eligible to be debtors under Bankruptcy Code Section 109(g)(2) because this Third Case was filed less than 180 days after the dismissal of the Second Case.
A hearing on confirmation of the Amended Plan, the Trustee's objection, and the Trustee's Motion was held on June 26, 2001 wherein the Chapter 13 Trustee, Robert Brothers, appeared; the Debtors appeared by counsel, Randall Shouse. With respect to the Trustee's Objection, the Debtors were ordered to file an amended plan within thirty (30) days, or the failure to do so would result in dismissal without further notice or hearing. A written order to this effect was entered on June 28, 2001, and therefore, by written court order, the Debtors were to have filed an amended plan on or before July 27, 2001. The Court has reviewed the docket, and no modified plan has been filed.
With respect to the Trustee's Motion, the Court took ruling on that matter under advisement, allowing counsel for the Debtors to submit authority as to why the case should not be dismissed under § 109(g). Counsel for the Debtors submitted such authority on July 10, 2001 and the Court has reviewed that submission.
Discussion
Section 109(g) provides in pertinent part:
Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under this title who has been a debtor in a case pending under this title at any time in the preceding 180 days if — . . .
(2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by section 362 of this title.
Literally applied, a debtor that voluntarily requests and obtains a dismissal of her case after the filing of a lift stay motion cannot refile another bankruptcy case (e.g. "cannot be a debtor") for 180 days. Nothing in the statute suggests that the 180-day bar applies only if the debtor has acted in "bad" faith; indeed, the statute itself does not condition its application on the debtor's motive or intent in requesting a voluntary dismissal, although the legislative history suggests that the purpose of § 109(g)(2) is to curb the abuses of debtors who dismiss and then refile to frustrate the creditor's attempt to foreclose. See, In re Tooke, 149 B.R. 687, 691 (M.D.Fla. 1992) (applying § 109(g)(2) in the chapter 11 context).
The question, then is whether § 109(g)(2) should be strictly and mechanically applied, or, even though the debtor's dismissal meets the literal prerequisites of the statute, whether dismissal is discretionary with the court. There is disagreement among courts as to which approach to take. Even those courts that hold that dismissal under this section is permissive have still required that there be a causal connection between the filing of the lift stay motion and the voluntary dismissal i.e., that the debtor (in requesting voluntary dismissal) was acting in response to the creditor's lift stay motion. See, In re Sole, 233 B.R. 347, 350 (Bankr.E.D.Va. 1998).
For an excellent discussion of the three approaches taken in applying § 109(g)(2) that have developed within the Fourth Circuit, see the case of (cited by the Debtors in their submission of authorities) In re Sole, 233 B.R. 347 (Bankr.E.D.Va. 1998), discussing the (1) equitable (2) strict and (3) causal approaches. The Sole case applied the causal approach. There, a creditor filed a lift stay motion which was resolved by agreement, and, twenty months later, the debtors voluntarily moved to dismiss their chapter 13 case, and refiled another chapter 13 case three days after dismissal of the earlier case. The Sole court determined that there was no causal connection between the agreed relief from stay and the dismissal which cam e twenty months later, and therefore denied the chapter 13 trustee's motion to dismiss.
The Debtors argue that this Court should interpret § 109(g)(2) permissively and that the Debtors have not acted in "bad faith" in dismissing their two previous chapter 13 cases because the dismissals were attributable to Mr. O'Haver's continuing illness and interruption of employment. However, even under a permissive interpretation of § 109(g)(2), all three cases were emergency filings and the most recent certificate of emergency filed in the Third Case noted that the reason of the emergency filing was to prevent a sheriff's sale that was set for January 24, 2001. Clearly the reason for filing the Third Case was to avoid or delay the consequences of a creditor realizing upon its collateral.
It may very well be that the Debtors felt compelled to dismiss their previous cases due to Mr. O'Haver's continuing health and employment problems. However, chapter 13 debtors can do something short of dismissing their case: they can ask for a suspension of plan payments either under § 1323 (pre confirmation modification) or § 1329 (post confirmation modification) in such cases to preserve that which has already been paid into the plan and to creditors. Having said that, the Court is left with a situation where, in both the First and the Second Cases, Union Federal filed a lift stay motion which ultimately resulted in lifting of the stay. The lift stay motions were then followed by the debtors' dismissal motions, and "bare bones" refilings with certificates of emergency, the third of which clearly stated that the bankruptcy was filed to prevent a January 24, 2001 sheriff's sale. Assuming that § 109(g)(2) should be permissively applied, and given the facts here, the Court finds that there was a causal connection between the lift stay motions and the Debtors' dismissal motions and that the Trustee's Motion should be granted.
However, any discussion with respect to § 109(g)(2) may be academic, since this case should be dismissed for other reasons. On June 28, 2001, the Debtors were ordered to file an amended plan within thirty (30) days or face dismissal of their case without further notice or hearing. The Court's file and the case docket indicate that no amended plan has been filed. Accordingly, based on the Court's June 28, 2001 order, the Court ORDERS that this case is DISMISSED.