BAP Explores Requirements for “Automatic Dismissal”

Posted by NCBRC - June 3, 2013

Section 521(i)(1) (a BAPCPA addition to the Code) provides that if a debtor in a chapter 13 case fails to file the documents required by section 521(a)(1) “the case shall be automatically dismissed effective on the 46th day after the date of the filing of the petition.” But does a court really lack discretion to decide not to dismiss, and can the case be dismissed without notice and a hearing? These are a couple of the questions addressed by the BAP for the First Circuit in Soto v. Doral Bank, No. 12-75 (May 8, 2013).

In this case, the debtor failed to file his payment advices as required by section 521(a)(2)(B)(iv) and, at the confirmation hearing seven months after expiration of the 45 day filing period, a creditor, Doral Bank, orally moved to dismiss. The debtor argued that, pursuant to section 1307(c), he was entitled to notice and a hearing and that, under subparagraph (9), only the trustee could seek dismissal. The bankruptcy court disagreed and dismissed the case.

The First Circuit BAP first looked at the nature of a court’s power under section 521(i)(1) noting that the First and Ninth Circuits have held that despite the mandatory language of section 521(i)(1), dismissal is “hardly automatic.” Segarra-Miranda v. Acosta-Rivera (In re Acosta-Rivera), 557 F.3d 8, 11 (1st Cir. 2009); Wirum v. Warren (In re Warren), 568 F.3d 1113 (9th Cir. 2009). See also Simon v. Amir (In re Amir), 436 B.R. 1 (B.A.P. 6th Cir. 2010) (following Acosta-Rivera and Warren). In those cases the courts were faced with situations in which the debtors failed to provide the required documents then, later, moved for application of the automatic dismissal when it appeared to their advantage to do so. These courts found that Congress did not intend for the automatic dismissal provision to benefit recalcitrant debtors and that there was leeway in the pre-BAPCPA language of section 521(a)(1)(B) which introduces the list of required filings with “unless the court orders otherwise.” They found that the court could “order otherwise” even after the expiration of the 45 day filing period. But see Warren v. Wirum, 378 B.R. 640, 647 (N.D. Cal. 2007); In re Spencer, 388 B.R. 418, 422 (Bankr. D. D.C. 2008); In re Hall, 368 B.R. 595, 599 (Bankr. W.D. Tex. 2007); In re Brickey, 363 B.R. 59 (Bankr. N.D. N.Y. 2007); In re Calhoun, 359 B.R. 738, 740 (Bankr. E.D. Mo. 2007) (strictly construing the automatic dismissal as terminating the court’s discretion at the expiration of the 45 days).

Because the Soto case did not turn on exercise of the court’s discretion with respect to whether it could decline to dismiss, this discussion was largely background and the conclusion that discretion exists beyond the mandatory dismissal date remains vulnerable to a plain language attack. See, e.g.,  Spencer, 388 B.R. at 422 (“Dismissal at the point of day 46 of the case is automatically required, with an order of dismissal to be entered under § 521(i)(2) within 5 days of a request being made for dismissal based on § 521(i)(1) having been triggered.”).

The BAP went on to address the debtor’s arguments based on section 1307(c)(9) finding that that section applies only during the 45 day period. Once the 45 day period expires, the panel found, the more specific provision in section 521(i)(1) prevails and dismissal may be instigated by any “party in interest” without notice or hearing. Thus, the panel found that the bankruptcy court did not abuse its discretion in dismissing the case.

Soto opinion


Post a Comment

You must be logged in to post a comment.