No Bad Faith in Filing Second Chapter 13 Petition while First Still Pending

Posted by NCBRC - April 16, 2020

The bankruptcy court declined to attribute bad faith to the debtors when they voluntarily dismissed one chapter 13 case after a motion for relief from stay had been filed by the mortgage creditor, and filed a second chapter 13 petition while the first was still pending. 21st Mortgage Corp. v. Wilkinson, No. 19-3021 (Bankr. M.D. Pa. Nov. 26, 2019).

The debtors’ first chapter 13 was filed by counsel, and when the debtors failed to respond to the mortgage creditor’s motion for relief from stay, the court granted default judgment in the creditor’s favor. Five months later, through new counsel, the debtors filed another chapter 13 petition. The following day, they voluntarily dismissed their prior case. Relying on section 109(g)(2), the mortgage creditor filed a motion to dismiss the second petition as being filed in bad faith to avoid the consequences of its motion for relief from stay.

Section 109(g)(2) provides:

(g)Notwithstanding any other provision of this section, 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 court compared the case to its previous decision in In re Swigert, 601 B.R. 913 (Bankr. M.D. Pa. 2019). In that case, the court dismissed the debtors’ overlapping petition after it was persuaded that the debtors acted in bad faith when they voluntarily dismissed a prior petition and filed a second petition for the purpose of avoiding a motion for relief from stay filed in the first case. Critical to its decision was the court’s finding that the debtors’ action was a consequence of the motion for relief from stay. Mere temporal connection was not enough.

Unlike Swigert, the court here found that the creditor here failed to establish by a preponderance of the evidence that there was a connection between the dismissal and refiling of the Wilkinsons’ petitions and the creditor’s motion for relief from stay in the first case.

The court denied the motion to dismiss.

Wilkinson opinion


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