Section 707(b) applies to Converted Case

Posted by NCBRC - April 25, 2016

In a succinct opinion acknowledging a split in the courts, the district court for the Southern District of Florida found that section 707(b)(1) applies to cases that are converted from chapter 13 to chapter 7. Pollitzer v. Gebhardt (In re Pollitzer), No. 15-20376 (S.D. Fla. March 23, 2016).

After Stratton C. Pollitzer had a plan confirmed in chapter 13, he converted to chapter 7 noting on the means test that his income level created a presumption of abuse under section 707(b). The trustee moved to dismiss arguing that Mr. Pollitzer had disposable income of $1,500 per month and could pay $80,000 to his creditors through a chapter 13 plan. The bankruptcy court granted the trustee’s motion.

On appeal the district court looked to the language of section 707(b)(1), which permits a court to dismiss “a case filed by an individual debtor under this chapter . . . if it finds that the granting of relief would be an abuse of the provisions of this chapter.” The controversy raised by this case surrounded whether the phrase “a case filed by an individual debtor under this chapter” means “a case filed . . . under this chapter,” or “a case . . . under this chapter,” (“filed by an individual debtor”). Mr. Pollitzer argued that section 707(b)(1) does not apply to cases that are originally filed under another chapter and converted to chapter 7. The court disagreed. While it found no case out of the Eleventh Circuit resolving the issue, the district court was persuaded by the decisions in In re Davis, 489 B.R. 478 (Bankr.. S.D. Ga. 2013), and Advanced Control Sols., Inc. v. Justice, 639 F.3d 838 (8th Cir. 2011), where the courts held that section 707(b) applies to any chapter 7 case regardless of the original filing (disagreeing with In re Layton, 480 B.R. 392 (Bankr. M .D. Fla. 2012) where the court found for section 707(b) to apply the case must have been originally filed in chapter 7).

This case is currently on appeal to the Eleventh Circuit, No. 16-11506.

Pollitzer SD Fla opinion

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