Dismissal under Section 109(g)(2)

Posted by NCBRC - July 31, 2013

Rivera v. Matos (In re Rivera), No. 12-87 (B.A.P. 1st Cir. June 26, 2013), involved application of section 109(g)(2) which provides that no individual 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.” The facts were not good for the debtor. He filed his first chapter 13 bankruptcy on the eve of foreclosure but when he failed to respond to the mortgagee’s motion for relief from stay, the court lifted the stay thereby permitting the creditor to pursue his state foreclosure rights. One week before the scheduled foreclosure, Debtor moved to dismiss his bankruptcy for the express purpose of re-filing in order to prevent the foreclosure. The day before the scheduled foreclosure, the court granted the motion to dismiss. The debtor filed a new chapter 13 bankruptcy petition hours later. The creditor moved to dismiss the petition on the basis of section 109(g)(2)’s proscription against serial filings and on the basis of alleged bad faith. The court granted the motion solely pursuant to section 109(g)(2).

The BAP agreed that the case was properly dismissed under section 109(g)(2) and that it was unnecessary to make a determination as to bad faith. In so holding, the court discussed the subtleties of section 109(g)(2) noting that courts are divided on its application. In In re Durham, 461 B.R. 139, 142 (Bankr. D. Mass. 2011), the court delineated three approaches to section 109: the mandatory approach, under which the court must dismiss a case that meets the criteria set forth in section 109(g)(2), see, e.g., In re Andersson, 209 B.R. 76, 78 (6th Cir. BAP 1997); the discretionary approach, under which the court may take into consideration the debtor’s motives and whether the creditor has demonstrated bad behavior, see, e.g., Leafty v. Aussie Sonoran Capital, 479 B.R. 545 (B.A.P. 9th Cir. 2012) (section 109(g)(2) dismissal discretionary);

In re Richter, 2010 WL 4272915, at *3 (Bankr. N.D. Iowa 2010); and the causal approach, under which the case will be dismissed only where there is a connection between the filing of the motion for relief from stay and the debtor’s voluntary dismissal. See In re Payton, 481 B.R. 460 (Bankr. N.D. Ill. 2012) (finding that the most reasonable interpretation of “following” in section 109(g)(2) is “as a result of”). In Payton, the court reasoned that the causal approach harmonizes with congressional intent to prevent debtors from filing serial bankruptcies and dismissing in order to avoid the consequences of court-ordered relief from stay. See In re Riekena, 456 B.R. 365, 368 (Bankr.C.D.Ill.2011) (“It is widely acknowledged that Congress enacted section 109(g)(2) for the purpose of curbing abusive repetitive filings by debtors attempting to nullify a stay relief order entered in a prior case by obtaining a new automatic stay upon refiling.”); In re Beal, 347 B.R. 87 (E.D. Wisc. 2006) (finding that dismissal pursuant to section 109(g)(2) is inappropriate where the motion for relief from stay was denied).

While some courts in the First Circuit have adopted the causal approach, see, e.g. Durham, 461 B.R. 139; In re Lopez Ramos, 212 B.R. 29, 30 (Bankr. D.P.R. 1997), the Rivera court found that it did not have to make a choice as the case would be subject to dismissal based on any of the three approaches. Because the debtor explicitly informed the court that he sought dismissal of the earlier case as a result of the court’s granting of the motion for relief from stay and the pending foreclosure he admitted the causal connection. Moreover, there was no suggestion of bad faith on the part of the creditor and further delay of the foreclosure resulting from the second bankruptcy petition would prejudice the creditor.

The court was also not faced with the question of whether the automatic stay is in effect until such time as it is determined whether the debtor is ineligible, or whether section 362(b)(21)(A), which provides that the automatic stay does not come into play when the debtor is ineligible under section 109(g), is self-executing. See Anjos v. Bank of America, No. 12-11553 (Bankr. D. Mass. Nov. 5, 2012) (interpreting section 109(g)(1) and finding that the automatic stay is in effect until such time as debtor’s ineligibility is determined). See also Durham, 461 B.R. at 141 (“Thus until the court rules on eligibility, the filing of a petition by an individual possibly ineligible under § 109(g) effectively commences a bankruptcy case.”).

Rivera opinion


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