Please note that this writer is not licensed to practice law in Oregon. This means that he is not legally permitted to give any legal advice or perform any legal services. This Bulletin and the entire contents of this website is written only for attorneys. and is not intended for the public. If any non-attorney is reading this, you must consult an attorney about ANYTHING you read here. Nothing in this website is intended to be nor should be read as being legal advice to anyone.
n re Kellett, Oregon Bankruptcy Court Case No. 06-30047-rld7
In re Corbin, Oregon Bankruptcy Court Case No. 07-31645-tmb7
12/03/07
The Issue
Under BAPCPA must a debtor who convert to Chapter 7 from Chapter 13 file a Form B22A in that Chapter 7 case, even after having filed a Form B22C in the prior Chapter 13 case?
The Not-So-Quick Answer
In 17 pages, Judge Dunn answers: Yes, with exceptions possible on a case by case basis. Why does that take 17 pages? His honest answer: "The Motions [to Strike Requirement to File Official Form B22A by the debtors in the two different cases] present issues that appear to be fairly limited and straightforward at face, but as with virtually all issues that have arisen in relation to interpretation of BAPCPA provisions, there is more to these matters than at first meets the eye."
The Key Point in the Analysis
As to a debtor who FILED her Chapter 13 case but then CONVERTED to a Chapter 7 case, was that Chapter 7 case "FILED" for purpose of the "means test" requirement of § 707(b)? The § 707(b) "means test" provides that the court "may dismiss a case FILED by an individual debtor under this chapter whose debts are primarily consumer debts . . . if it finds that the granting of relief would be an abuse of this chapter . . . ." [emphasis added]. If a converted case is not a "filed" Chapter 7 case, then "the 'means test' provisions of § 707(b) are not triggered, and any requirement(s) of the FRBPs or local bankruptcy rules that the Debtors file Forms B22A in their converted cases are precluded as inconsistent with the provisions of the Bankruptcy Code itself."
Judge Dunn's Rationale and Ruling
Most of the judge's analysis involved weighing the arguments contained in two recent competing bankruptcy court opinions, In re Fox, 370 B.R. 639 (Bankr. D. N. J. 2007), championed by the debtors, and In re Kerr, 2007 WL 2119291 at *5 (Bankr. W.D. Wash. July 18, 2007), favoring the U.S. Trustee's position. The former interpreted the "case filed . . . under this chapter" phrase strictly, the latter "holistically." "[T]he bankruptcy court in Fox found nothing ambiguous in Congress’s use of the phrase 'filed...under this chapter' in § 707(b)(1) and determined that § 707(b) did not apply to cases converted from another chapter." Whereas in Kerr: "The cases are now [upon conversion] entered on the Court’s docket under Chapter 7 as a result of the debtors’ filing motions for conversion. While the cases were filed under Chapter 13, they are now filed under Chapter 7."
After acknowledging that "[l]egitimate points are made on both sides of this argument," the judge was "ultimately . . . persuaded that the phrase 'case filed by an individual debtor under this chapter' does not make appropriate sense viewed in isolation and must be interpreted to encompass cases converted to chapter 7 from other chapters as well as cases filed originally in chapter 7." Beyond the statutory construction analysis, Judge Dunn also referred to the public policy argument that to decide otherwise "opens the door to abuses": "A debtor seeking to avoid the chapter 7 'means test' and § 707(b) 'abuse' scrutiny could file a petition in chapter 13 and then turn around and convert the case to chapter 7."
The Judge's Explicit Limitations to His Holding
1) The judge acknowledged the potential practical problem of Chapter 13's which get converted to Chapter 7 because the debtor, in spite of her best efforts, could not meet the terms of the plan, but then get dismissed for "abuse" in the Chapter 7 case, leaving the debtor "with no realistic remedy in bankruptcy." Or if reconverted into Chapter 13, "the debtor could begin cycling through a perpetual 'do loop' of failures" back and forth between the two Chapters. The solution: "I hope and expect that" the U.S. Trustee will exercise discretion to avoid this.
2) Under § 348(a), conversion does not change the date of the original "petition filing," that is, it is still fixed to when the original Chapter 13 was filed. So Form B22A in the "converted case is prepared based on the debtor’s income averaged over the six months preceding the month during which the debtor’s original [Chapter 13] bankruptcy petition was filed." Since this could be years later "[i]t is questionable how meaningful an analysis based on [this] 'current monthly income' can be. Judge Dunn's solutions: 1) The debtor can rebut the presumption of abuse.; or 2) can file a motion for waiver of the requirement to file Form B22A.
3) In the two cases here, the judge exercised the case by case discretion that he promoted in his holding, waived the filing of Form B22A because in the meantime in both cases the U.S. Trustee had investigated and decided not to pursue abuse determinations, and the time for raising objections to discharge and filing motions to dismiss for abuse had expired.
by Andrew Toth-Fejel
Bankruptcy Litigation Support for Attorneys
Andy@BLSforAttorneys.com
Please note that this writer is not licensed to practice law in Oregon. This means that he is not legally permitted to give any legal advice or provide and legal services. This Bulletin and the entire contents of this website is written only for attorneys. and is not intended for the public. If any non-attorney is reading this, you must consult an attorney about ANYTHING you read here. Nothing in this website is intended to be nor should be read as being legal advice to anyone.
© 2008 Bankruptcy Litigation Support for Attorneys
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