§ 5-18.1    Consequences of Ineligibility: Jurisdiction; Automatic Stay; Strike, Dismiss or Excuse?
Revised:  July 14, 2014
Cite as:
Keith M. Lundin, Chapter 13 Bankruptcy, 5th Edition, § 5-18.1, at ¶ ____,
Sec. Rev. July 14, 2014, www.Ch13online.com.

¶1Filing a Chapter 13 petition for an ineligible individual will at least be a waste of the debtor’s money, it may provide no protection from creditors, and it can expose both the debtor and counsel to sanctions. Creditors must assess the debtor’s eligibility to determine whether to seek a preemptive dismissal, to determine whether to object to confirmation and in some jurisdictions to determine whether the filing invoked the automatic stay.

¶2When it turns out the debtor was not eligible to file a Chapter 13 case1 a host of new questions arises:

1.
Is ineligibility for Chapter 13 “jurisdictional,” and how does the answer to that question impact the next three questions?
2.
Did the “petition” filed by an ineligible individual commence a bankruptcy “case”?
3.
Did the automatic stay arise when the “petition” was filed?
4.
What is the proper remedy when the individual who filed the petition was not eligible to be a Chapter 13 debtor—Strike the petition? Dismiss the petition? Dismiss the case? Allow the case to continue?

¶3Bankruptcy practitioners care whether eligibility is “jurisdictional” because jurisdictional questions refuse to die. We learn in law school that the subject matter jurisdiction of a federal court cannot be waived or stipulated.2 If the “petition” filed by an ineligible individual did not invoke the subject matter jurisdiction of the bankruptcy court, then the platform for the Chapter 13 case remains flimsy notwithstanding the passage of time, the confirmation of a plan or perhaps the entry of important orders such as discharge. If eligibility for Chapter 13 is not jurisdictional, then any challenge to eligibility must be raised by timely motion or objection else confirmation of a plan will preclude later contest.3 Debtors and creditors need to know earlier, rather than later in the case, whether and how ineligibility infects bankruptcy court jurisdiction.

¶4Many courts have analyzed eligibility for Chapter 13 as if it is a “jurisdictional” issue. Eligibility for Chapter 13 is most starkly presented to bankruptcy courts in jurisdictional terms when a creditor or trustee has delayed challenging eligibility until after an order of confirmation and the eligibility challenge will survive confirmation only if it is characterized as jurisdictional. Creditors alleged to have violated the automatic stay will sometimes defend by arguing that the petition did not commence a Chapter 13 case and did not give rise to an automatic stay because the debtor was not eligible for Chapter 13. By adding new prefiling eligibility requirements—including the prepetition “briefing” in § 109(h)4—the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)5 multiplied the contexts in which eligibility for Chapter 13 takes on jurisdictional overtones.

¶5District court—and, derivatively, bankruptcy court—jurisdiction over bankruptcy cases is found in § 1334(a) of Title 28 of the United States Code.6 Eligibility requirements for Chapter 13 are in § 109(e),7 (g)8 and (h)9 of Title 11. 28 U.S.C. § 1334(a) anchors bankruptcy court jurisdiction to the existence of a “case” under Title 11 without mention of eligibility for relief under any particular chapter. 11 U.S.C. § 109(e), (g) and (h) speak in terms of who “may be a debtor” and contain none of the words normally used to describe federal court jurisdiction. A substantial number of courts—including every circuit court of appeals to consider the issue—have held that the eligibility limitations in § 109(e), (g) and (h) are not jurisdictional, and thus the bankruptcy court acquires jurisdiction over the debtor, the estate and the bankruptcy case even though the debtor eventually is determined to be ineligible for Chapter 13 relief.10

¶6But there is some logic to the argument that the bankruptcy court does not acquire jurisdiction in the 28 U.S.C. § 1334 sense if the petitioning individual is not eligible under 11 U.S.C. § 109. 28 U.S.C. § 1334(a) grants the district court “original and exclusive jurisdiction of all cases under title 11.” Under 11 U.S.C. § 301, a “voluntary case under a chapter” of Title 11 “is commenced by the filing . . . of a petition under such chapter by an entity that may be a debtor under such chapter.” From this plain language it can be argued that a petition by an individual who is not eligible for Chapter 13 does not commence a voluntary case under Chapter 13. Absent the commencement of a case, to what does district court jurisdiction attach under 28 U.S.C. § 1334(a)?

¶7This logic was first addressed in pre-BAPCPA cases with respect to the debt limitations in § 109(e)11 and the 180-day refiling bar in § 109(g).12 Several decisions that followed this logic to the conclusion that ineligibility under § 109(e) or (g) was jurisdictional have been broadly questioned or overruled or are unreported.13 One court concluded that the debt limitations in § 109(e) “are jurisdictional” but then allowed the debtors 14 days to convert the “case” to Chapter 7 or Chapter 11.14

¶8Courts rejecting the view that ineligibility under § 109(e) is a jurisdictional problem reason that an individual not eligible for Chapter 13 under § 109(e) would almost assuredly be eligible for a Chapter 7 case under § 109(b), thus the petition filed by the ineligible Chapter 13 debtor commences a case under a different chapter for § 1334(a) purposes. Several of the cases cited above speak of the court’s “acquiring jurisdiction” to convert the ineligible Chapter 13 petitioner to a debtor under another chapter.15 But the petition filed in all such cases is a Chapter 13 petition that could not commence a case under Chapter 13 because of § 109(e). What “case” is commenced under these circumstances, and when, for § 1334 purposes?

¶9If conversion “cures” the jurisdictional defect by commencing a case under a chapter for which the debtor is eligible, how do we make sense of 11 U.S.C. § 348(a),16 which presupposes the (nonexistent) commencement of a case before conversion?

¶10This response to the § 109(e) jurisdictional argument collapses when the Chapter 13 debtor’s ineligibility arises from § 109(g)17 or (h).18 Discussed in detail elsewhere,19 § 109(g) goes further than the eligibility limitation in § 109(e)§ 109(g) states, “Notwithstanding any other provision of this section, no individual . . . may be a debtor under this title who” has experienced the dismissal of a prior case within 180 days under the circumstances described in § 109(g)(1) or (g)(2).20 Similarly, § 109(h) broadly provides, “[A]n individual may not be a debtor under this title” unless the proper prepetition briefing was obtained or an exception applies.21 In contrast, § 109(e) only defines who “may be a debtor under Chapter 13 of this title.22

¶11If the petition by an individual who is ineligible for Chapter 13 under § 109(e) nonetheless commences a bankruptcy case for purposes of district court jurisdiction under 28 U.S.C. § 1334 because the petitioner is eligible for relief under other chapters, the same cannot be said for an individual who files a Chapter 13 petition in violation of § 109(g) or (h). It requires only a slight fiction that a debtor ineligible for Chapter 13 under § 109(e) can convert the petition (that did not commence a Chapter 13 case) to a case under another chapter. But the petitioner who files in violation of § 109(g) or (h) cannot commence a bankruptcy case under any chapter, by conversion or otherwise. What logic saves jurisdiction with respect to a petition that cannot commence a case under any provision of Title 11? Perhaps the court “acquires jurisdiction” over such a non-case only to determine its own jurisdiction and to then dismiss the petition.23

¶12Several courts of appeals have spoken broadly that ineligibility under § 109(g) is not a jurisdictional defect. For example, citing earlier Eighth Circuit authority that the debt limitations in § 109(e) are not jurisdictional, the Eighth Circuit in a footnote in Montgomery observed, “We have held that 11 U.S.C. § 109 is not meant to restrict the jurisdiction of the federal courts. . . . Section 109 determines eligibility for bankruptcy relief, not jurisdiction.”24 Similarly, in Promenade National Bank v. Phillips (In re Phillips),25 the United States Court of Appeals for the Fifth Circuit had this to say about the jurisdictional argument when the debtor was ineligible under § 109(g):

The Bank had argued that eligibility under § 109(g) raised an issue of subject matter jurisdiction. We disagree. . . . [T]he courts holding that the issue is not jurisdictional generally have engaged in an analysis of the issue, while the courts holding that it is a matter of jurisdiction have not. . . . [S]ubject matter jurisdiction of the bankruptcy court comes from 28 U.S.C. § 1471 and 28 U.S.C. § 157 . . . . [I]ssues pertaining to whether a debtor meets the requirements of § 109(g)(2) only “determine whether or not the court must dismiss the case. They are factual or legal questions which the court must determine. They are the issues raised by the pleadings. They are defenses not jurisdictional requirements.” . . . To hold that the issue of debtor eligibility implicates subject matter jurisdiction would have far-reaching consequences. If eligibility raised an issue of subject matter jurisdiction, the parties could not expressly waive, or be held to have waived, their objections on the issue. . . . In short, a closer analysis of the question indicates that eligibility does not raise an issue of subject matter jurisdiction.26

¶13What does this jurisdictional discussion tell us about the automatic stay27 when an ineligible individual files a Chapter 13 petition? Maybe not enough.

¶14Creditors, of course, are vitally concerned whether a bankruptcy stay is in effect that precludes collection action and subjects violators to sanctions.28 In particular, creditors that have been repeatedly stayed from completing foreclosure actions want certainty whether the next Chapter 13 filing by an individual who is not eligible for Chapter 13 nonetheless invokes an automatic stay, at least until the bankruptcy court dismisses the last filed petition. Creditors get the certainty they want if either of two propositions is correct: a Chapter 13 petition by an ineligible individual fails a statutory precondition to the automatic stay; or ineligibility is a jurisdictional defect that interrupts the ordinary operation of the automatic stay. These propositions are closely related by statutory interpretation and should give creditors the same comforting answer; but the reported cases don’t always get there.

¶15Start with the clearer case—a petitioner ineligible to be a debtor under any bankruptcy chapter because of § 109(g) or (h). Under § 362 of the Code, “a petition filed under section 301 . . . operates as a stay.”29 “Petition” is a term of art, inartfully defined by § 101(42) as “‘petition’ means petition filed under section 301, . . . commencing a case under this title.30 As explained above, under 11 U.S.C. § 301, a voluntary bankruptcy case can only be commenced by an entity that “may be a debtor.” An individual disqualified by § 109(g) or (h) to be a debtor under any chapter of Title 11 cannot commence a bankruptcy case under § 301 and, the argument goes, cannot file papers that would constitute a petition as defined in § 101(42). Only a petition propagates an automatic stay under § 362(a)—no petition, no stay. At least when ineligibility is total because of § 109(g) or (h), several courts, including one “withdrawn” decision from the United States Court of Appeals for the Ninth Circuit, have held that the “petition” does not invoke the automatic stay.31

¶16In the Ninth Circuit case, the debtor filed a Chapter 13 petition in Arizona in violation of a California bankruptcy court order dismissing the debtor’s prior Chapter 13 case with a bar to refiling for 180 days. The Ninth Circuit held that the Arizona filing did not trigger the automatic stay notwithstanding that the California court later modified its dismissal order to eliminate the bar to refiling:

[A] petition filed in contravention of a court imposed bar is without effect. . . . Umali’s filing of the Arizona bankruptcy petition failed to trigger the automatic stay provisions of the bankruptcy code, because the Arizona petition was filed in violation of the 180-day bar against refiling in effect. Although it is true that the 180-day bar was eventually lifted by the California bankruptcy court, Umali filed the Arizona petition knowing that the bar had not yet been lifted.32

¶17The cases holding that no stay arises at the filing of a Chapter 13 petition in violation of § 109(g) or (h) sometimes hedge this logic with a grant of relief from the stay or a declaration annulling the stay effective as of the filing date.33 If these cases are right for § 362(a) purposes that the petition filed by an ineligible individual is not a petition because it does not commence a bankruptcy case, then the jurisdictional proposition should also be true—no petition, no case, no jurisdiction.

¶18But as we saw above, the reported decisions are generally in agreement that ineligibility is not an obstacle to bankruptcy court jurisdiction, even when ineligibility is total under § 109(g) or (h).

¶19These holdings leave debtors and creditors in the less than perfect position that the bankruptcy court acquires jurisdiction over the (nonexistent) bankruptcy case filed by an individual who cannot be a debtor under any chapter because of § 109(g) or (h), but it is possible that no automatic stay is in effect. This outcome doesn’t tell us about the automatic stay when a Chapter 13 petition is filed by an individual who is ineligible under the chapter-specific § 109(e).

¶20Based on the same (rejected) logic discussed above with respect to bankruptcy court jurisdiction, it is arguable that the papers filed by an individual who is not eligible to be a debtor under Chapter 13 because of § 109(e) are not a petition because they cannot commence a case under Chapter 13. No stay arises under § 362 for the same reason identified in the § 109(g) and (h) cases—there is no petition to operate as an automatic stay.

¶21But it seems unlikely that courts willing to find jurisdiction over whatever it is that is commenced by a Chapter 13 petitioner who is ineligible under § 109(e) will also hold that there is no automatic stay while conversion or dismissal is considered. The jurisdiction cases suggest that the courts will distinguish ineligibility under § 109(e) from ineligibility under § 109(g) or (h) for § 362 purposes. The small stretch that finds jurisdiction to convert a Chapter 13 case filed by an individual not eligible for Chapter 13 because of § 109(e) might also stretch the petition of such an ineligible individual into a real petition under another chapter for which the debtor is eligible for § 362 purposes. One reported decision doubts whether the automatic stay is kindled by a petition for a debtor ineligible under § 109(g) but holds that the petition for a debtor who exceeded the debt limitations in § 109(e) commenced a case that could be converted and invoked the automatic stay.34

¶22BAPCPA inflamed this debate by action in two respects and by vacuum in a third. Section 109(h) is an unyielding obstacle to eligibility under any chapter of Title 11, requiring every individual debtor to obtain a prepetition briefing or to slot into a temporary or permanent waiver of the briefing requirement.35 Curiously, BAPCPA also amended § 362(b)(21) to state that the automatic stay of an act to enforce a lien or security interest in real property does not arise at the filing of a petition by a debtor “ineligible under section 109(g).”36 BAPCPA did not amend § 362 with respect to the automatic stay and an individual not eligible by virtue of the new prepetition briefing requirement in § 109(h) or because of the debt limitations in § 109(e).

¶23BAPCPA thus answered part of the question whether the automatic stay arises when an individual ineligible under § 109(g) files a “petition”—under § 362(b)(21) no stay arises with respect to “any act to enforce any lien against or security interest in real property.”37 But what about the stay with respect to other acts such as repossession of a car? And why would Congress create a limited new “exception” to the stay in § 362(b)(21) if no stay arose in the first instance because of ineligibility? And what does § 362(b)(21) tell us about the automatic stay when the petition is filed by an individual who did not obtain the prepetition briefing required by § 109(h)—the eligibility condition added in 2005 by the same statute that gave us new § 362(b)(21)?

¶24Not surprisingly, decisions are fractured with respect to whether the automatic stay arises when an individual ineligible for Chapter 13 under § 109(h) files a “petition.” In the pre-BAPCPA world, in In re Hollberg,38 the United States Bankruptcy Court for the District of Columbia concluded the automatic stay did not arise when an individual ineligible for bankruptcy relief under § 109(g) filed a bankruptcy petition. The Hollberg court reasoned that the stay arises only upon the commencement of a case under Title 11 and a case cannot be commenced by an individual ineligible to be a debtor under § 109(g).39 Nearly a decade later, the same court considered a debtor who appeared to be ineligible under § 109(h). In In re Hawkins,40 the court denied the debtor’s request for temporary exemption from the prepetition briefing requirement under § 109(h)(3)41 and then ordered the debtor to show cause why the Chapter 13 case should not be dismissed. The debtor responded that she obtained “credit counseling” prior to the petition and satisfied § 109(h)(1).42

¶25Acknowledging the similar language in § 109(h) and § 109(g), the bankruptcy court reviewed its earlier decision in Hollberg:

[In Hollberg] the court construed § 109(g) as operating as a jurisdictional bar to the filing of a petition to commence a new bankruptcy case, which would therefore prevent the automatic stay from arising as a result of the filing of such a petition (as the petition would not be “a petition filed under section 301, 302 or 303 of this title” within the meaning of § 362(a)).43

¶26Although there is no discussion of “jurisdiction” in Hollberg, the characterization in Hawkins of the § 109(g) discussion in Hollberg as jurisdictional staged a dilemma with respect to new § 109(h). Stepping right in, the Hawkins court said this about the prepetition briefing requirement in § 109(h)(1) and the new stay exception in § 362(b)(21):

If § 109(h) is just an “eligibility” requirement, the court could conceivably permit the debtor’s creditors, the chapter 7 trustee, and the United States Trustee to waive it, but if fulfillment of the requirement also determines whether the court can assert subject matter jurisdiction, the court has a sua sponte duty to determine whether the requirement has been met. . . . Because Congress singled out § 109(g) for exemption from the automatic stay only with respect to liens or security interests in real property, the court must infer that bankruptcy cases commenced in violation of the other sub-parts of § 109 or cases commenced in violation of § 109(g) that do not involve liens or security interests in real property give rise to the automatic stay. . . . A title 11 case must commence for a court to assert jurisdiction under § 1334. . . . [A]n individual who fails to obtain pre-petition credit counseling of the kind described in § 109(h) “may not be a debtor under this title.” 11 U.S.C. § 109(h)(1). Ergo, a petition filed by an individual who has failed to obtain pre-petition credit counseling does not “commence[ ]” a title 11 case, which means that there is no case conferring subject matter jurisdiction . . . . Every federal court necessarily has the jurisdiction to determine whether it has subject matter jurisdiction over the case or controversy before it. . . . Section 362(b)(21) must be read as implying that the automatic stay is in effect while the court makes this threshold determination of jurisdiction.44

¶27The Hawkins court concluded that § 109(h) is jurisdictional, that the automatic stay arises while the bankruptcy court assesses whether it has subject matter jurisdiction and that if the debtor is ineligible by virtue of § 109(h), the “case” must be dismissed. Each of these holdings is controversial.

¶28Noted above, many reported decisions dispute the characterization of § 109(h) as “jurisdictional.” As explained by the Bankruptcy Court for the Northern District of Georgia:

[E]ligibility under § 109 in general and under § 109(h) in particular is not jurisdictional . . . . [T]he filing of a petition by a debtor ineligible to do so nevertheless commences a bankruptcy case that is neither a “nullity” nor void ab initio. . . . Congress did not view § 109(g) as being a jurisdictional provision. New § 362(b)(21)(A) provides an exception to the automatic stay of § 362(a) with regard to foreclosure of real property if the debtor is ineligible under § 109(g). If such a filing were void ab initio and did not result in an automatic stay under existing law, such an amendment would not have been necessary. . . . If every case is subject to being dismissed as void ab initio at a later time, creditors and other parties will face enormous uncertainty.45

¶29But even among courts holding that § 109(h) is not jurisdictional, there is disagreement whether the “petition” filed by a § 109(h) ineligible individual commences a bankruptcy case and whether an automatic stay arises. For example, the bankruptcy court in In re Elmendorf46 “clarified” that it had subject matter jurisdiction to consider a § 109(h) ineligible debtor’s petition but that the petition did not commence a bankruptcy case and did not propagate an automatic stay:

A voluntary case is commenced only if an entity eligible to be a debtor files a petition with the bankruptcy court . . . . Section 109(h) provides that an individual may not be a debtor unless credit counseling is obtained pre-petition, or the bankruptcy court grants an extension. . . . When read together, §§ 109(h), 301 and 362(a) establish that no stay can exist for debtors who fail to obtain the required credit counseling or qualify for an exception. . . . For this reason, the Court determined in [In re Rios, 336 B.R. 177 (Bankr. S.D.N.Y. Dec. 19, 2005) (Morris),] that a petition filed by the ineligible debtor rendered that filing void ab initio; however, the Court never even implicated in Rios that it did not have jurisdiction over filings made by individuals or other entities ineligible to be bankruptcy debtors . . . . [S]ubsequent courts interpreting Rios assume that because the Court determined the filing in that particular case was void, the Court was of the opinion that it did not have jurisdiction. . . . That was not the case at all . . . . The Court does not believe that an exercise of jurisdiction over a bankruptcy case is correspondent with, or dependent on, the existence of the automatic stay. . . . As the stay does not come into effect upon a filing of a petition that does not comply with Section 109(h) . . . there is no need to create an exception to the automatic stay pursuant to Section 362(b) in those circumstances. Section 362(b)(21) is not rendered a nullity by this interpretation, because ineligibility pursuant to § 109(g) may be waived by the Court upon a proper showing made by the Debtor, whereas ineligibility pursuant to Section 109(h) is fatal to a bankruptcy filing. . . . Congress obviously intended Section 109(h) ineligibility to have a preclusive effect; there was no need to provide an exception to the automatic stay for ineligible individuals by virtue of § 109(h) because no case is commenced by a bankruptcy filing in that regard; and no stay invoked thereby.47

¶30The bankruptcy court decision in Elmendorf was ultimately reversed in part, affirmed in part and remanded by the United States Court of Appeals for the Second Circuit. In Adams v. Zarnel (In re Zarnel),48 the Second Circuit held that § 109(h) is not jurisdictional and the “petition” filed by an ineligible individual commences a Chapter 13 case that engages the automatic stay. The Second Circuit explained:

We conclude that § 301, as well as §§ 302 and 303 . . . , define the prerequisites for relief under particular chapters of the Bankruptcy Code, rather than the existence in a jurisdictional sense of a voluntary, joint, or involuntary case. We thus reject the position . . . that a debtor ineligible for bankruptcy pursuant to § 109(h) does not commence a case by filing a petition pursuant to § 301. . . . [A] petition filed under §§ 301, 302, or 303 both ‘operates as a stay,’ . . . and commences a bankruptcy case . . . . [A]lthough an individual may be ineligible to be a debtor under the Bankruptcy Code for failure to satisfy the strictures of § 109(h), the language of § 301 does not bar that debtor from commencing a case by filing a petition; it only bars the case from being maintained as a proper voluntary case under the chapter specified in the petition. . . . Section 362(b) lists circumstances under which the filing of a petition does not operate as a stay, but the debtor’s ineligibility is not among them. . . . [H]aving the automatic stay commence even when a debtor fails to satisfy the credit-counseling requirements both fits into the overall purpose and framework of the stay and ensures that eligible debtors receive protection from the bankruptcy system.49

¶31There is a smile in the way the bankruptcy courts in Hawkins and Elmendorf use the new exception to the automatic stay in § 362(b)(21) as proof of opposite conclusions. BAPCPA added § 362(b)(21) as an exception to the automatic stay only with respect to liens and security interests in real property in an individual bankruptcy case commenced in violation of § 109(g).50Hawkins finds in § 362(b)(21) an implication that the automatic stay must be in effect for all other purposes while the bankruptcy court determines what to do with a bankruptcy case commenced in violation of § 109(h). Elmendorf finds the absence of a stay exception like § 362(b)(21) with respect to § 109(h) indicates that no case was commenced and no stay arose when a “petition” was filed by a § 109(h) ineligible individual. There are tools of statutory construction to support every holding.

¶32Splitting the hair further, the bankruptcy court in In re Thompson51 reached an outcome similar to Hawkins without jurisdictional overtones: the “petition” filed by a § 109(h) ineligible debtor invoked the automatic stay notwithstanding that it did not commence a Chapter 13 case. The Thompson court made this interesting distinction between filing a petition and commencing a bankruptcy case:

[M]y reading of §§ 301 and 302 leads me to conclude that the “filing of a petition” is not synonymous with “the commencement of a case.” The phrase “an entity that may be a debtor under such chapter” or “an individual that may be a debtor under such chapter” qualifies “petition” and that only those petitions filed by those eligible to be debtors “under such chapters” can “commence” a “case.” . . . It follows that, if no “case” is commenced, there is no “case” to “dismiss.” . . . [W]hen it has been determined that a debtor who files a bankruptcy petition is ineligible under § 109(h) to commence a case under title 11 . . . the petition should be stricken. . . . This Court does not believe that the “commencement” of the case is the exclusive prerequisite of the imposition of the automatic stay. . . . [T]he event triggering the stay is the filing of a petition . . . . [Sections] 301, 302, and 303 allow for petitions to be filed by ineligible debtors, they just don’t allow cases to be commenced by petitions filed by ineligible debtors. So, it is possible for the stay to be imposed without a case having been commenced. . . . [L]ike § 109(g), petitions filed by ineligible § 109(h) debtors do trigger the automatic stay but, unlike § 109(g), there is no statutory carve out that allows secured creditors to proceed against real property.52

¶33The tail wags the dog when courts must decide what to do with a “case” filed by a § 109(h) ineligible individual. There are at least three distinct positions: allow the case to continue; dismiss the case; strike the petition.

¶34Consistent with the view that § 109(h) is not “jurisdictional,” one line of cases recognizes discretion in the bankruptcy court to waive or excuse ineligibility and allow the Chapter 13 case to continue. Several decisions hinge this outcome on timing: failure to raise ineligibility as a barrier to confirmation or a ground for dismissal before confirmation “waives” ineligibility under § 109(h).53 Other decisions excuse or finesse “technical noncompliance” with the eligibility requirement in § 109(h) to allow the Chapter 13 case to continue notwithstanding that the debtor was ineligible at the petition.54 Sometimes citing a bankruptcy court decision from the District of Vermont, In re Hess,55 several cases consider six factors to determine whether “substantial compliance” with § 109(h) warrants the exercise of discretion to allow the Chapter 13 case to continue in spite of an eligibility defect:

The Hess court set forth six factors to consider when deciding whether to dismiss for “cause” for failure to comply with section 109(h): (a) whether the debtor filed the case in good faith; (b) whether the debtor took all reasonable steps to comply with statutory requirements; (c) whether the debtor’s failure to comply was the result of circumstances beyond the debtor’s control; (d) whether the debtor’s conduct meets the minimum requirements of section 109(h); (e) whether any party would be prejudiced by allowing the case to proceed; and (f) whether there are any unique equitable factors that tip the balance in one direction or the other.56

¶35Most reported decisions either “dismiss” the case or “strike” the petition filed by an individual ineligible because of failure to satisfy the prepetition briefing requirements in § 109(h). Dismissing the case is to some extent a concession that a “case” exists that can be dismissed. “Striking” the petition signals that the “petition” filed by the § 109(h) ineligible individual commenced something other, perhaps less, than a bankruptcy case.

¶36A strong majority of reported decisions dismiss the “petition” or “case” filed by an individual ineligible under § 109(h)—some with and some without discussion of the striking alternative.57 A minority of courts—basically those identified above finding no “case” is commenced by a § 109(h) ineligible individual—have allowed the “petition” to be stricken rather than dismissed.58 One district court observed that the bankruptcy court has “historic and inherent power” to strike rather than dismiss a Chapter 13 petition filed by a § 109(h) ineligible debtor and the U.S. trustee lacks standing to appeal that choice.59

¶37You might be wondering why it matters whether a court chooses to “dismiss” or “strike” when the effect of either is to end the current Chapter 13 adventure. Perhaps the answer is elsewhere in BAPCPA.

¶38Among the many new punishments of debtors meted out in 2005,60 Congress enacted new limitations on the automatic stay in § 362(c)(3) and (4).61 Section 362(c)(3) causes some aspects of the automatic stay62 to terminate 30 days after the petition when a prior case of the debtor was pending within the preceding year but was dismissed.63 If two or more cases were pending but were dismissed during the preceding year, no stay arises upon a third (or more) filing under § 362(c)(4).64 These new limitations on the automatic stay were enacted to address congressional (mis)perception that debtors filing serial bankruptcy petitions were abusing the bankruptcy system.65 The § 109(h) prepetition briefing requirement for Chapter 13 eligibility also enacted by BAPCPA put long teeth into the new limitations on the automatic stay in § 362(c)(3) and (4).

¶39There is no mention in the legislative history of BAPCPA that the interaction of §§ 362(c)(3), 362(c)(4) and 109(h) was intended. But bankruptcy practitioners quickly saw the dark connection: If the debtor neglects the prepetition briefing requirement in § 109(h), the debtor is not eligible and any bankruptcy case filed by that debtor is likely to be dismissed; that dismissed case may then count as a prior “pending . . . but dismissed” case for purposes of the new limitations on the automatic stay in a subsequent case within a year under § 362(c)(3)or (4). As stated passionately by the United States District Court for the Southern District of New York:

Congress has, by its terms, so constructed § 109[(h)] that it is impossible to relieve non-compliance even in the most compelling situation, where no credit counseling has been obtained or certified to have been timely sought and not obtained within five days of a request for same. This is so even where credit counseling would be an empty charade, for example, where sudden illness, loss of employment, divorce, incarceration of the breadwinner or any number of causes not related to fiscal irresponsibility, compel a person to seek refuge in the bankruptcy court. The draconian consequences of a dismissal could include a resultant limited applicability of the fundamental protection of the automatic stay under § 362(c), in subsequent filings, merely for an initial failure to comply properly with the credit counseling requirement. This Court is loathe to believe that those drafting this “reform” legislation, in this nation whose westward expansion was largely facilitated by those fleeing debtor’s prison, intended such a consequence.66

¶40Not surprisingly, some courts have resisted the notion that dismissal based on failure to obtain a prepetition briefing under § 109(h) limits the automatic stay in a subsequent case within a year. Parsing § 362(c)(3) and (4), the new stay limitations arise only when a “case” of the debtor was pending within the preceding year and was “dismissed.” If no case was pending or if that prior case was not dismissed, then § 362(c)(3) and (4) do not apply. With § 362(c)(3) and (4) in mind, several courts have elected to “strike” rather than “dismiss” a petition filed by an individual ineligible because of a briefing failure under § 109(h)(1). As explained by the bankruptcy court in In re Thompson:67

[P]etitions filed by ineligible § 109(h) debtors are not void ab initio . . . . However, a “case” has not “commenced” until it is determined that the debtor filing the petition is eligible for bankruptcy relief under § 109(h). In the event the debtor is determined to be ineligible under § 109(h), the petition is stricken; there was no “case” to “dismiss.” And, if there was no “case” to “dismiss,” then there could not have been a “pending case.”68

¶41Other courts have held that a prior filing by a § 109(h) ineligible debtor commenced a case that counts for § 362(c)(3) or (4) purposes when the debtor refiles within a year.69

¶42Notice that if the consequence of ineligibility under § 109(h) (or § 109(e) or (g)) is dismissal, there is an odd overlap, if not redundancy, between § 362(c)(3) and (c)(4) and § 362(b)(21). As discussed above, BAPCPA added the § 362(b)(21) exception to the automatic stay when a prior case was commenced in violation of § 109(g)—no stay arises with respect to liens and security interests in real property. If dismissal is the proper remedy for ineligibility under § 109(g) and there is a refiling within the 180-day prohibited period—in addition to the new stay limitation in § 362(b)(21)—either parts of the stay expire in 30 days under § 362(c)(3) or if more than one prior case was dismissed within the year, no stay arises under § 362(c)(4). The stay with respect to liens and security interests in real property is implicated by both “exceptions.” The uncertain intersection of these consequences suggests that no one focused on how many punishments would be inflicted by BAPCPA for the same transgressions.

¶43The contortions in the case law warn debtors to strive to satisfy the prepetition briefing requirement in § 109(h). Failing to do so produces a significant risk that dismissal of the § 109(h) deficient case has refiling consequences under § 362(c)(3) and (4). At refiling, the debtor may have to win the argument that the later case is in “good faith” to extend the stay beyond 30 days70 or to have a stay in the first instance.71 This is expensive and uncertain litigation that could result in evaporation of the stay or no stay in the subsequent case based on a prepetition briefing misstep in a prior case. This penalty is out of proportion to the offense and an outcome to be avoided by careful attention to the § 109(h) prepetition briefing requirement in every Chapter 13 case.

¶44The dangerous interaction between § 109(h) and § 362(c)(3) and (4) suggests an aggressive strategy for a debtor who has failed to obtain a prepetition briefing in a pending Chapter 13 case. The stay limitations in § 362(c)(3) and (4) apply only if one or more prior cases were “dismissed” within the preceding year.72 If the subsequent case is filed before the prior case is “dismissed,” the prior case does not count for § 362(c)(3) and (4) purposes. This maneuver produces the awkward circumstance of two pending Chapter 13 cases,73 but that circumstance is explained for exactly what it is: an effort to avoid the (unintended?) interaction of the prepetition briefing requirement in § 109(h) and the stay limitations in § 362(c)(3) and (4). Dismissal of the prior case immediately after filing a second case eliminates the simultaneously pending case issue without triggering the stay limitations in § 362(c)(3) or (4). This is an aggressive play but something for counsel to consider on the right facts.

¶45At this writing, controversy is the message with respect to the consequences of ineligibility under new § 109(h). There is disagreement whether a “petition” filed by a § 109(h) ineligible individual commences a Chapter 13 case. There is disagreement whether an automatic stay arises if the debtor is not eligible under § 109(h). There is disagreement whether to strike or dismiss a case or petition filed by a § 109(h) ineligible individual. A few courts continue to debate whether § 109(h) is “jurisdictional.”

¶46The last point expands. As explained in Hawkins,74 if prepetition briefing is prerequisite to subject matter jurisdiction, the debtor must make a prima facie showing of compliance with § 109(h) in every Chapter 13 case. Upon objection at any time during the case, the bankruptcy court must examine the “factual and legal” basis for jurisdiction.75 In the § 109(h) context, this means determining whether the debtor received a “briefing” that satisfies the requirements of § 109(h)(1).76

¶47In Hawkins, the debtor claimed to have received prepetition “credit counseling.” The court considered a letter from the prepetition counselor that described the services provided to the debtor to determine whether the debtor received a briefing that “outlined the opportunities for available credit counseling and assisted . . . in performing a related budget analysis.”77

¶48The scary part about this portion of Hawkins is that bankruptcy court jurisdiction over the entire Chapter 13 case depended upon proof that the debtor actually received the “briefing” described in § 109(h) and that inquiry could occur anytime upon a motion to dismiss. An evidentiary hearing was required and the debtor had the burden to prove the content of the prepetition briefing. Of course, the content of that briefing is beyond the control of Chapter 13 debtors and their attorneys. The Non-profit Budget and Credit Counseling Agencies (NBCCAs) that administer briefings are “approved” by the U.S. trustee and policed by the U.S. trustee.78 If § 109(h) has jurisdictional character, the consequences of ineligibility under § 109(h) can be visited upon Chapter 13 debtors in many awkward contexts at any time during the Chapter 13 experience.

¶49What’s a creditor to do when there is evidence the debtor is not eligible under § 109(h)? The safe option—previewed in Hawkins—is to file a motion to dismiss. Filing that motion sooner in the Chapter 13 case limits the possibility that a court will determine that § 109(h) is not “jurisdictional” and that ineligibility is waived by passage of time or events.

¶50The brave (foolhardy?) creditor might simply proceed with collection, anticipating safety in any one of the arguments above—that no “case” was commenced by the § 109(h) ineligible individual; that the “petition” filed by an ineligible individual does not invoke the automatic stay; or that a case commenced and the stay arose but relief from the stay79 is appropriate because the debtor was not eligible. Until some settling out in the § 109(h) case law, risk-averse creditors will move to dismiss and/or for relief from the stay when there is doubt about § 109(h) eligibility.

¶51A final note about ineligibility under § 109(h) and, perhaps by analogy, ineligibility under § 109(e) or (g): don’t plan on using ineligibility as an escape from some worse outcome. For example, in Goldberg v. Goodman (In re Goodman),80 the bankruptcy court found that the debtor’s attorney or staff impersonated the debtor to improperly obtain a prepetition briefing certificate. The court found that this conduct violated several Bankruptcy Rules and ethical rules and subjected counsel to sanctions. To avoid sanctions, counsel argued that the bankruptcy court was without jurisdiction because the debtor failed to comply with § 109(h). The Bankruptcy Appellate Panel for the Ninth Circuit rejected this perverse defense observing that debtor’s counsel would have to first admit violations of various rules to then assert that ineligibility rendered the bankruptcy court powerless to regulate that misconduct.

¶52Similarly, in Simon v. Amir (In re Amir),81 the Bankruptcy Appellate Panel for the Sixth Circuit rejected the debtor’s argument that the debtor’s Chapter 13 petition should have been dismissed because he did not obtain the prepetition briefing required by § 109(h). The BAP held that the debtor waived this argument by waiting until after conversion and until after the Chapter 7 trustee pursued recovery of property to assert ineligibility as a bar to recovery by the trustee. In In re Fiorillo,82 the district court judicially estopped the debtor to assert ineligibility under § 109(h) as a ground for dismissal when the debtor invoked ineligibility as a defense to conversion from Chapter 13 to Chapter 7. In In re Hudson,83 a lender that conducted a foreclosure sale after the Chapter 13 petition in violation of the automatic stay was precluded to argue ineligibility under § 109(h) as a defense to violation of the stay.

¶53It is unfortunate that fundamentals such as bankruptcy court jurisdiction and the existence of the automatic stay are less than clear when ineligibility is an issue. This unsatisfying situation must be reckoned with by creditors who would risk sanctions by proceeding with collection action against a Chapter 13 petitioner, no matter how clearly it appears that the debtor is not eligible under § 109(e), (g) or (h).

¶54If the eligibility limitations in § 109 are not jurisdictional, then it is essential that an objection to eligibility based on the debt limitations be raised prior to confirmation, or the order of confirmation will be conclusive of eligibility.84 There is no strategic advantage for creditors to delay raising an objection to the debtor’s eligibility. The eligibility challenge should be raised by motion to convert or dismiss or certainly no later than an objection to confirmation.

¶55For debtors, the filing of a Chapter 13 petition, even by an ineligible debtor, commences a case under Title 11 in most districts, the automatic stay arises in most districts and the bankruptcy court acquires jurisdiction over the debtor and the debtor’s property, notwithstanding that the debtor is later determined to be ineligible for Chapter 13. There will be some expense in litigating eligibility, and then the debtor may face conversion to another chapter or dismissal. It is also possible, however, that even an “ineligible” debtor will remain in Chapter 13. If no creditor or other party in interest objects—or if the stars align and the court exercises discretion to allow the case to continue—an order of confirmation is likely to shield the (ineligible) debtor from further hassle.

¶56This is not to say that debtor’s counsel should always file a Chapter 13 case on behalf of an individual debtor, ignoring the eligibility limitations in § 109(e), (g) or (h). Although possible that an ineligible debtor will sneak into Chapter 13 because creditors are unaware or choose not to object, if ineligibility was apparent upon reasonable inquiry, the debtor and counsel risk sanctions if a creditor or trustee does object.85

1 The statutory conditions for Chapter 13 eligibility are summarized in § 5-14.1.   [ Back ]

2 See, e.g., Kontrick v. Ryan, 540 U.S. 443, 455, 124 S. Ct. 906, 157 L. Ed. 2d 867 (Jan. 14, 2004) (“A litigant generally may raise a court’s lack of subject-matter jurisdiction at any time in the same civil action, even initially at the highest appellate instance.”) (citing Mansfield, C. & L.M. Ry. Co. v. Swan, 111 U.S. 379, 4 S. Ct. 510, 28 L. Ed. 462 (Apr. 21, 1884) (federal court subject matter jurisdiction may be challenged at any stage in proceeding, or by the court sua sponte)).   [ Back ]

3 See below in this section and § 229.1.   [ Back ]

4 See 11 U.S.C. § 109(h), discussed below and in §§ 369.1369.13.   [ Back ]

5 Pub. L. No. 109-8, 119 Stat. 23 (2005).   [ Back ]

6 28 U.S.C. § 1334(a) provides:

Except as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all cases under title 11.   [ Back ]

7 11 U.S.C. § 109(e), discussed below and in §§ 11.118.1.   [ Back ]

8 11 U.S.C. § 109(g), discussed below and in §§ 21.123.1.   [ Back ]

9 11 U.S.C. § 109(h), discussed below and in §§ 369.1369.13.   [ Back ]

10 Adams v. Zarnel (In re Zarnel), 619 F.3d 156, 169 (2d Cir. Aug. 26, 2010) (Leval, Katzmann, Livingston) (Citing Arbaugh v. Y & H Corp., 546 U.S. 500, 126 S. Ct. 1235, 163 L. Ed. 2d 1097 (Feb. 22, 2006), § 109(h) is not jurisdictional. “[W]e find that the restrictions of § 301 and § 109(h) are not jurisdictional, but rather elements that must be established to sustain a voluntary bankruptcy proceeding. Restricting whether an individual may be a debtor either under the Bankruptcy Code in general or under a given chapter does not speak in jurisdictional terms or invoke the jurisdiction of the district court.”); Montgomery v. Ryan (In re Montgomery), 37 F.3d 413, 415 n.5 (8th Cir. Oct. 6, 1994) (Arnold, Wollman, Beam) (“We have held that 11 U.S.C. § 109 is not meant to restrict the jurisdiction of the federal courts. . . . Section 109 determines eligibility for bankruptcy relief, not jurisdiction.”); In re Lybrook, 951 F.2d 136 (7th Cir. Dec. 18, 1991) (Bauer, Posner, Flaum) (Bankruptcy court acquired jurisdiction over Chapter 13 case notwithstanding that debtors had unsecured debts in excess of $100,000 at the time of filing. “[J]urisdiction is determined by good faith allegations rather than by what the evidence eventually shows.”); Rudd v. Laughlin, 866 F.2d 1040 (8th Cir. Jan. 31, 1989) (Arnold, Fagg, Wollman); Pomenade Nat’l Bank v. Phillips (In re Phillips), 844 F.2d 230 (5th Cir. May 6, 1988) (Timbers, King, Higginbotham); Goldberg v. Goodman (In re Goodman), No. NV-12-1643-KiCoD, 2013 WL 4767741, at *14 (B.A.P. 9th Cir. Sept. 5, 2013) (unpublished) (Kirscher, Collins, Dunn) (Section 109(h) is not jurisdictional. “[Section] 109(h) is not jurisdictional and the filing of a petition, even by an ineligible debtor, nevertheless commences a bankruptcy case and provides the court with jurisdiction.”); In re Fiorillo, 455 B.R. 297 (D. Mass. June 24, 2011) (Woodlock) (Section 109(h) is not jurisdictional.); Federal Deposit Ins. Corp. v. Wenberg (In re Wenberg), 94 B.R. 631 (B.A.P. 9th Cir. Dec. 13, 1988) (Mooreman, Volinn, Meyers); In re Haylock, No. 08-325 (RJL), 2009 WL 840190 (D.D.C. Mar. 31, 2009) (unpublished) (Leon) (Sanctions were appropriate notwithstanding that § 109(h) is “nonjurisdictional.”); Jones v. United States (In re Jones), 134 B.R. 274 (N.D. Ill. Nov. 26, 1991) (Kocoras) (Debt limitations are eligibility requirements, not jurisdictional limitations.); United States v. Edmonston (In re Edmonston), 99 B.R. 995 (E.D. Cal. Apr. 14, 1989) (Coyle); In re Bilter, No. 05-37702-DOT, 2007 WL 2109884, at *1 (Bankr. E.D. Va. July 16, 2007) (unpublished) (Tice) (Citing Wenberg v. FDIC (In re Wenberg), 902 F.2d 768 (9th Cir. May 7, 1990) (Nelson, Norris, O’Scannlain), Rudd v. Laughlin, 866 F.2d 1040 (8th Cir. Jan. 31, 1989) (Arnold, Fagg, Wollman), and Shaw v. Ehrlich, 294 B.R. 260 (W.D. Va. June 20, 2003) (Turk), debt limitations under § 109(e) “do not impact the bankruptcy court’s subject matter jurisdiction but instead determine only the debtor’s eligibility for relief”; debtor ineligible for Chapter 13 may still convert case to Chapter 7.); In re John, 479 B.R. 643, 648 (Bankr. M.D. Pa. June 4, 2012) (Thomas) (“I agree with the majority of Courts that Section 109(h) is not jurisdictional.”); In re Williams, No. 1-09-44856-dem, 2010 WL 411108, at *2 (Bankr. E.D.N.Y. Jan. 27, 2010) (unpublished) (Milton) (“Eligibility under Section 109 is not jurisdictional and the filing of a petition by an individual ineligible to do so commences a bankruptcy case that is neither a nullity nor void ab initio.”); In re Wise, 415 B.R. 579, 583 (Bankr. N.D. Ala. Sept. 2, 2009) (Robinson) (Ineligibility under § 109(h) is not jurisdictional. “Congress did not intend for Section 109(h) to implicate subject matter jurisdiction. Section 109(h) contains no ‘jurisdictional language.’ . . . [T]he conclusion that Section 109(h) is not jurisdictional is in line with the grant of bankruptcy case jurisdiction in title 28. . . . [T]he plain language of Section 109(h) affirmatively indicates that the section is not jurisdictional.”); In re DeHoog, No. 13-08-12312 SF, 2008 WL 5191389 (Bankr. D.N.M. Sept. 17, 2008) (unpublished) (Starzynski) (Court assumes that prepetition briefing requirement is not jurisdictional.); In re Bartlett, No. 07-63647-fra13, 2008 WL 337380 (Bankr. D. Or. Feb. 5, 2008) (unpublished) (Alley) (Section 109(h) is not jurisdictional.); In re Francisco, 386 B.R. 854 (Bankr. D.N.M. Jan. 25, 2008) (Starzynski) (Section 109(h) is not jurisdictional.), rev’d on other grounds, 390 B.R. 700 (B.A.P. 10th Cir. July 2, 2008) (Bohanon, Cornish, Thurman); In re Rios, No. 07-66047-PWB, 2007 WL 7136473, at *2 (Bankr. N.D. Ga. Nov. 5, 2007) (unpublished) (Bonapfel) (“The eligibility requirement of § 109(h) is not jurisdictional.”); In re Falcone, 370 B.R. 462 (Bankr. D. Mass. May 31, 2007) (Pollack) (Section 109 is not jurisdictional.); In re Henderson, 364 B.R. 906, 912 (Bankr. N.D. Tex. Mar. 27, 2007) (Jernigan) (“Section 109(h)(3) is not jurisdictional[.]”); In re Manalad, 360 B.R. 288, 295 (Bankr. C.D. Cal. Jan. 25, 2007) (Zurzolo) (Citing Arbaugh v. Y & H Corp., 546 U.S. 500, 126 S. Ct. 1235, 163 L. Ed. 2d 1097 (Feb. 22, 2006), “Congress has not inserted in § 109(h) or anywhere else in the Code that eligibility is a jurisdictional issue. Therefore, I conclude that § 109(h) eligibility is not jurisdictional in nature.”); In re Dillard, No. 06-30128-RFH, 2006 WL 3658485, at *5 (Bankr. M.D. Ga. Dec. 11, 2006) (unpublished) (Walker) (“[T]he eligibility question is not jurisdictional[.]”); In re Burch, No. 06-10228, 2006 WL 3922511 (Bankr. N.D.N.Y. Oct. 23, 2006) (unpublished) (Littlefield) (Section 109(h) is not jurisdictional.); In re Verdunn, 210 B.R. 621, 624–25 (Bankr. M.D. Fla. July 24, 1997) (Baynes) (“This Court is persuaded by and adopts the majority view and concludes it did not lack subject matter jurisdiction over the Chapter 13 case and properly permitted the Debtor to exercise his right to convert the case to one under Chapter 7. . . . [T]he Debtor’s contention that his ineligibility somehow entitles him to recover the payments made to the IRS under the terms of his confirmed Chapter 13 plan . . . could only be a consequence of lack of jurisdiction which is clearly not the situation here.”); In re Nikoloutsos, 199 B.R. 624, 625–27 (Bankr. E.D. Tex. May 14, 1996) (Abel) (Because debt limitations are not jurisdictional, failure to clearly articulate an objection to confirmation on the basis of § 109(e) is fatal to postconfirmation motion to dismiss on the ground of ineligibility.), aff’d, 222 B.R. 297 (E.D. Tex. July 7, 1998) (Schell), rev’d, 199 F.3d 233 (5th Cir. Jan. 6, 2000) (Garza. Jolly, DeMoss); Franklin Fed. Bancorp, FSB v. Lochamy (In re Lochamy), 197 B.R. 384 (Bankr. N.D. Ga. Dec. 26, 1995) (Cotton) (Because debt limitations are not jurisdictional, bank’s failure to assert ineligibility as an objection to confirmation precludes bank from arguing ineligibility as a ground for conversion or dismissal after confirmation.); In re Griggs, 181 B.R. 111, 113 (Bankr. N.D. Ala. Sept. 15, 1994) (Cohen) (“[T]he requirements in section 109(e) are eligibility limits not jurisdictional ones.”); In re Toronto, 165 B.R. 746, 756 (Bankr. D. Conn. Mar. 31, 1994) (Shiff) (“I agree with those courts that have held that a court retains jurisdiction to convert a chapter 13 case to a chapter 7 case upon a determination that the debtors are not eligible for chapter 13 relief. . . . Section 109(e) relates to the eligibility of a debtor for chapter 13 relief, not the jurisdiction of the court.”); In re Brandon, 93 B.R. 1002 (Bankr. D. Idaho Dec. 2, 1988) (Hagan); In re Jarvis, 78 B.R. 288 (Bankr. D. Or. Oct. 1, 1987) (Hess); In re Tatsis, 72 B.R. 908 (Bankr. W.D.N.C. Apr. 29, 1987) (Wooten); In re Hutchens, 69 B.R. 806 (Bankr. E.D. Tenn. Jan. 20, 1987) (Stair).   [ Back ]

11 11 U.S.C. § 109(e) is discussed in §§ 11.118.1.   [ Back ]

12 11 U.S.C. § 109(g) is discussed in §§ 21.123.1.   [ Back ]

13 See, e.g., Ekeke v. United States, 133 B.R. 450 (S.D. Ill. Oct. 3, 1991) (Stiehl) (“[T]his court is persuaded that the plain language of § 109(e) makes the amount of the plan [sic] a jurisdictional prerequisite, as opposed to an eligibility measure.” The court affirms dismissal after confirmation where motion to dismiss shows that debtor has unsecured claims in excess of $100,000. Bankruptcy court has “inherent equitable power under § 105(a) . . . to revoke the confirmation” based on the debtor’s ineligibility.); In re Sakhrani, No. 06-16563 (DHS), 2006 WL 3483928, at *5 (Bankr. D.N.J. Nov. 29, 2006) (unpublished) (Steckroth) (Chapter 13 petition filed 70 days after dismissal of Chapter 11 in which bank was granted relief from stay is dismissed under § 109(g)(2): “[T]his Court lacks subject matter jurisdiction over the instant bankruptcy petition pursuant to 11 U.S.C. § 109(g)(2). Therefore, this Court grants FNBA’s motion to dismiss the bankruptcy petition and grants FNBA prospective relief from the automatic stay for future bankruptcy filings by Mr. Sakhrani.”); In re Wulf, 62 B.R. 155 (Bankr. D. Neb. Apr. 28, 1986) (Mahoney), rev’d by Rudd v. Laughlin, 866 F.2d 1040 (8th Cir. Jan. 31, 1989) (Arnold, Fagg, Wollman); In re Denson, 56 B.R. 543 (Bankr. N.D. Ala. Jan. 6, 1986) (Watson); In re Koehler, 62 B.R. 70 (Bankr. D. Neb. Jan. 6, 1986) (Mahoney) (A voluntary Chapter 13 case can be commenced under 11 U.S.C. § 301 only by an entity “that may be a debtor under such chapter.” The filing of a petition by an ineligible individual does not commence a Chapter 13 case. Absent commencement of a case, no order for relief would be required by 11 U.S.C. § 301. If the debtor is not eligible, a Chapter 13 petition by an ineligible debtor does not commence a bankruptcy case, and there is no case pending that might then be converted to another chapter. Ineligibility can be raised as a ground for dismissal at any stage of the case, even after confirmation.), rev’d by Rudd v. Laughlin, 866 F.2d 1040 (8th Cir. Jan. 31, 1989) (Arnold, Fagg, Wollman); In re Kinney, 51 B.R. 840 (Bankr. C.D. Cal. July 30, 1985) (Mund); In re Keziah, 46 B.R. 551 (Bankr. W.D.N.C. Feb. 7, 1985) (Wooten).   [ Back ]

14 In re Brown, 302 B.R. 913, 915 (Bankr. D. Or. Aug. 13, 2003) (Alley).   [ Back ]

15 See, e.g., In re Bilter, No. 05-37702-DOT, 2007 WL 2109884, at *1 (Bankr. E.D. Va. July 16, 2007) (unpublished) (Tice) (Debtor ineligible under § 109(e) may convert Chapter 13 case to Chapter 7.).   [ Back ]

16 11 U.S.C. § 348(a) provides:

Conversion of a case from a case under one chapter of this title to a case under another chapter of this title constitutes an order for relief under the chapter to which the case is converted, but, except as provided in subsections (b) and (c) of this section, does not effect a change in the date of the filing of the petition, the commencement of the case, or the order for relief.   [ Back ]

17 11 U.S.C. § 109(g) is discussed in §§ 21.123.1.   [ Back ]

18 11 U.S.C. § 109(h) is discussed in §§ 369.1369.13.   [ Back ]

19 11 U.S.C. § 109(g) is discussed in §§ 21.123.1.   [ Back ]

20 11 U.S.C. § 109(g) (emphasis added).   [ Back ]

21 11 U.S.C. § 109(h)(1), discussed in §§ 369.1369.13.   [ Back ]

22 11 U.S.C. § 109(e) (emphasis added).   [ Back ]

23 See, e.g., In re Mills, 341 B.R. 106 (Bankr. D.D.C. Apr. 20, 2006) (Teel) (Because § 109(h) is jurisdictional, bankruptcy court has jurisdiction to determine its own subject matter jurisdiction but then must dismiss a petition filed by an ineligible individual.); In re Hawkins, 340 B.R. 642, 646 (Bankr. D.D.C. Apr. 20, 2006) (Teel) (“Every federal court necessarily has the jurisdiction to determine whether it has subject matter jurisdiction over the case or controversy before it.”).   [ Back ]

24 Montgomery v. Ryan (In re Montgomery), 37 F.3d 413, 415 n.5 (8th Cir. Oct. 6, 1994) (Arnold, Wollman, Beam).   [ Back ]

25 844 F.2d 230 (5th Cir. May 6, 1988) (Timbers, King, Higginbotham).   [ Back ]

26 844 F.2d at 236 n.2.   [ Back ]

27 The automatic stay in Chapter 13 cases is discussed in §§ 68.183.1 and 429.1435.1.   [ Back ]

28 See §§ 68.173.1.   [ Back ]

29 11 U.S.C. § 362(a).   [ Back ]

30 11 U.S.C. § 101(42) (emphasis added).   [ Back ]

31 See Umali v. Dhanani (In re Umali), 345 F.3d 818 (9th Cir. Oct. 3, 2003) (Filing in violation of 180-day bar did not trigger automatic stay.), op. withdrawn by 382 F.3d 1158 (9th Cir. Sept. 10, 2004) (Ferguson, McKeown, Rawlinson) (“The opinion filed October 3, 2003, published at 345 F.3d 818 (9th Cir.2003), is WITHDRAWN. It may not be cited as precedent by or to this court or any district court of the Ninth Circuit.”); Goldenberg v. Deutsche Bank Nat’l Trust Co. (In re Papazov), No. CC-12-1584-KiClD, 2013 WL 2367802 (B.A.P. 9th Cir. May 30, 2013) (unpublished) (Kirscher, Clement, Dunn) (No stay arose to void foreclosure sale during Chapter 13 case filed in violation of § 109(g)(1).); Rowe v. Ocwen Fed. Bank & Trust, 220 B.R. 591, 594–95 (E.D. Tex. Dec. 16, 1997) (Cobb) (Fifth Chapter 13 case filed within 180 days of dismissal with prejudice of fourth case was nullity and never invoked automatic stay; bankruptcy court appropriately granted relief from the stay to validate a foreclosure sale that occurred one day after the fifth petition. Fourth bankruptcy case was “dismissed with prejudice on motion of Ocwen, 180-day ban on re-filing imposed.” Within 180 days and on the day before Ocwen’s foreclosure sale, debtor filed fifth petition. Bankruptcy court dismissed the fifth petition for bad faith and “[a]fter finding that Rowe’s petition was filed in bad faith, the bankruptcy court used its authority under 11 U.S.C. § 362(d) to lift the automatic stay ab initio. By doing so, the court validated the foreclosure sale of Rowe’s house.” “[B]ecause Rowe’s Chapter 13 petition was filed in bad faith and in violation of the 180-day ban, the petition was a nullity and consequently, the automatic stay never actually came into effect.”); In re Ruetz, No. 6:08-BK-00780-ABB, 2008 WL 4572374, at *1 (Bankr. M.D. Fla. Feb. 5, 2008) (unpublished) (Briskman) (“The Debtor did not obtain credit counseling within the 180 day prepetition period pursuant to 11 U.S.C. Section 109(h)(1). . . . The Debtor was ineligible to commence a bankruptcy case . . . . No case resulted from the filing of the petition pursuant to 11 U.S.C. Section 301(a) and no automatic stay of 11 U.S.C. § 362(a) arose. The Debtor’s petition is due to be stricken[.]”.); In re Bartlett, No. 07-63647-fra13, 2008 WL 337380, at *3 (Bankr. D. Or. Feb. 5, 2008) (unpublished) (Alley) (Although § 109(h) is not jurisdictional, briefing 185 days before petition leaves debtors ineligible for Chapter 13 and debtors are not entitled to automatic stay or discharge; dismissal is appropriate notwithstanding inconvenience and expense and notwithstanding that no party-in-interest sought dismissal. “Under § 109(h), a debtor who has not complied with the briefing requirement is not entitled to any relief under Title 11, including the benefit of the automatic stay or any discharge.”); In re Lami, No. 02-36595DWS, 2003 WL 262484, at *2 (Bankr. E.D. Pa. Jan. 2, 2003) (unpublished) (Sigmund) (Ninth Chapter 13 filing during period when debtor was barred from filing bankruptcy without court permission did not trigger automatic stay. “Debtor was not an authorized debtor under § 301, and the stay does not apply to him nor his property.”); McKay v. Alliance Mortg. Corp. (In re McKay), 268 B.R. 908, 911 (Bankr. W.D. Va. Sept. 25, 2001) (Krumm) (Debtor was not eligible to file a second Chapter 13 case within 180 days of the voluntary dismissal of first case; second case did not invoke automatic stay and did not invalidate foreclosure sale conducted after filing of second petition. “[I]t is a petition, properly filed by an individual who may be a debtor, that invokes the automatic stay. . . . [A]n entity, ineligible under § 109(g), cannot commence a voluntary case under § 301 by filing a purported petition, nor can the entity avail itself of the protection provided by 11 U.S.C. § 362(a).”); In re Hollberg, 208 B.R. 755, 756 (Bankr. D.D.C. Apr. 30, 1997) (Teel) (Dismissal under § 109(g) precludes eligibility for 180 days; thus, a filing within the 180-day period does not invoke the automatic stay. Under § 301, a voluntary bankruptcy case is commenced by the filing of a petition by “an entity that may be a debtor under such chapter.” Under § 109(g), “no individual . . . may be a debtor under this title” who has experienced a dismissal described in § 109(g)(1) and (2). “Thus, a § 109(g) dismissal . . . precludes a case from being commenced regarding the debtor during the 180 days following dismissal. Thus, any document labeled ‘petition’ that such a debtor files during the 180-day bar of a § 109(g) dismissal is not the filing of a petition as defined in § 101(42) and thus gives rise to no automatic stay under § 362(a).”); In re Prud’Homme, 161 B.R. 747 (Bankr. E.D.N.Y. Dec. 20, 1993) (Holland) (Filing in violation of § 109(g)(1) does not invoke the automatic stay. Creditor is not entitled to relief from the stay because the automatic stay is not invoked upon a filing by an ineligible debtor. “Where a debtor’s lack of entitlement under § 109(g) is clear and unquestioned, the filing is void ab initio and there exists no automatic stay for this court to address.”). Contra In re Flores, 291 B.R. 44, 47, 52–62 (Bankr. S.D.N.Y. Mar. 21, 2003) (Hardin) (Refiling within 180 days of dismissal under § 109(g) is not void and does invoke automatic stay. Prior Chapter 13 case was “dismissed pursuant to 11 U.S.C. [§] 1307(c)(6) and Section 109(g) with prejudice for 180 days from the date hereof for failure to comply with the Orders of this Court.” One day before foreclosure sale and within 180 days of prior dismissal, debtor filed a pro se bare-bones petition. Mortgage holder was unaware of filing and went ahead with foreclosure. “Section 109(g) . . . does not say that a subsequent filing within 180 days is void ab initio or a legal nullity, or that the automatic stay is void in such a filing. Indeed, the Bankruptcy Code does not articulate any consequence of a voluntary or involuntary filing by or against a debtor within 180 days of a dismissal under Section 109(g). . . . The initial consequence of such a filing is that the burden falls on the debtor to seek modification of or relief from the 180-day bar of the dismissal order and permission to proceed with the subsequent bankruptcy case. . . . [A] blanket judge-made rule that a subsequent filing in violation of a Section 109(g) dismissal order is a nullity or void ab initio would be contrary to the interests of both debtor and creditors and would confound the objectives of the Bankruptcy Code. . . . [A] bankruptcy filing within 180 days of a prior dismissal under Section 109(g) cannot be a nullity or void ab initio, because there is a threshold issue to be decided, the issue of whether the debtor ‘may be a debtor’ in the subsequent case. . . . It is not up to a secured creditor to make the determination that a filing in violation of the 180-day bar is void ab initio and, therefore, that the automatic stay does not apply . . . . Nor is there any support in Section 362 for the proposition that a filing in violation of a Section 109(g) dismissal does not invoke the automatic stay. . . . The Code contemplates that an unauthorized or unlawful filing commences a ‘case’ (with all that it entails, including the automatic stay) which remains a case until dismissed by an order of the court.”).   [ Back ]

32 Umali v. Dhanani (In re Umali), 345 F.3d 818, 823–24 (9th Cir. Oct. 3, 2003), op. withdrawn by 382 F.3d 1158 (9th Cir. Sept. 10, 2004) (Ferguson, McKeown, Rawlinson).   [ Back ]

33 See, e.g., Rowe v. Ocwen Fed. Bank & Trust, 220 B.R. 591 (E.D. Tex. Dec. 16, 1997) (Cobb).   [ Back ]

34 Shaw v. Ehrlich, 294 B.R. 260, 265–72 (W.D. Va. June 20, 2003) (Turk) (“Nowhere does the code define ‘petition’ to require that a court take an initial look at the eligibility of a debtor before the automatic stay comes into effect. . . . Absent from [§ 362(b)] is the failure of a debtor to qualify under the particular chapter in which the debtor files for bankruptcy. . . . [M]istaken filers who are eligible for some form of relief under Title 11 but file under a different chapter should certainly be protected by the automatic stay until a bankruptcy court reaches the merits of their petitions. . . . The two factors that have motivated courts to carve out an exception to the immediate nature of the automatic stay under [§] 109(g), judicial convenience and protection against bad faith filings, do not exist in dismissing a case under section 109(e). . . . While a debtor who is barred from any of the protections of Title 11 under section 109(g) may be an exception to the rule, section 362(a) of the Code dictates that the automatic stay comes into effect when a petition in bankruptcy is filed, with no consideration of the debtor’s ineligibility for relief under a specific chapter.”). See also In re Wiencko, 275 B.R. 772 (Bankr. W.D. Va. Apr. 3, 2002) (Krumm).   [ Back ]

35 See 11 U.S.C. § 109(h), discussed in §§ 369.1369.13. 11 U.S.C. § 109(h) states an individual “may not be a debtor under this title” unless the individual satisfies at least one of the following conditions:

1.
Receives a prepetition briefing from an approved nonprofit budget and credit counseling agency (NBCCA) that outlines the opportunities for available credit counseling and assists in performing a related budget analysis;
2.
Qualifies for temporary exemption from the prepetition briefing requirement by filing a certification that describes exigent circumstances that merit a waiver and that states that the debtor requested credit counseling services from an NBCCA but was unable to obtain the services during the five-day period after that request, and the certification is satisfactory to the court;
3.
Files in a district in which the U.S. trustee or bankruptcy administrator determines that the approved NBCCAs are not reasonably able to provide adequate services; or
4.
Based on incapacity, disability or active military duty in a military combat zone, the court determines the debtor is not able, after reasonable effort, to participate in the briefing required by § 109(h)(1).   [ Back ]

36 11 U.S.C. § 362(b)(21), discussed in § 431.1.   [ Back ]

37 11 U.S.C. § 362(b)(21)(A), discussed in § 431.1.   [ Back ]

38 208 B.R. 755 (Bankr. D.D.C. Apr. 30, 1997) (Teel).   [ Back ]

39 In re Hollberg, 208 B.R. 755 (Bankr. D.D.C. Apr. 30, 1997) (Teel).   [ Back ]

40 340 B.R. 642 (Bankr. D.D.C. Apr. 20, 2006) (Teel).   [ Back ]

41 See 11 U.S.C. § 109(h)(3), discussed in §§ 369.5369.9.   [ Back ]

42 See 11 U.S.C. § 109(h)(1), discussed in §§ 369.1369.4.   [ Back ]

43 340 B.R. at 644.   [ Back ]

44 340 B.R. at 643–46. Accord In re Mills, 341 B.R. 106, 109–10 (Bankr. D.D.C. Apr. 20, 2006) (Teel) (Because § 109(h) is jurisdictional and to accommodate new § 362(b)(21), bankruptcy court has jurisdiction to determine its own subject matter jurisdiction under § 109(h) but then must dismiss a petition filed by an ineligible individual. “[Section] 109(h) imposes a jurisdictional prerequisite as well as a condition of debtor eligibility because debtor eligibility is a prerequisite to this court’s jurisdiction under a plain reading of 28 U.S.C. §§ 1334 and 157 and 11 U.S.C. § 301(a). . . . [Section] 362(b)(21)(A) . . . which provides that the automatic stay does not arise with respect to an act to enforce a lien against or a security interest in real property ‘if the debtor is ineligible under [§ ] 109(g) to be a debtor in a case under this title.’ would be rendered superfluous if a case commenced in error were considered void ab initio. . . . [A] case commenced improperly by a person ineligible to be a debtor created a case for the limited purpose of determining whether the court lacked subject matter jurisdiction over the case. . . . During the pendency of that determination, the automatic stay would be in effect unless the § 362(b)(21)(A) exception applied.”).   [ Back ]

45 In re Ross, 338 B.R. 134, 136–40 (Bankr. N.D. Ga. Feb. 8, 2006) (Bonapfel). Accord Adams v. Finlay, No. 06 Civ. 6039 (CLB), 2006 WL 3240522, at *6 (S.D.N.Y. Nov. 3, 2006) (unpublished) (Brieant) (“Failure to receive counseling in compliance with the statute is not jurisdictional, rather it goes to whether the petition states a claim upon which relief can be granted. See Bell v. Hood, 327 U.S. 678[, 66 S. Ct. 773, 90 L. Ed. 939 (Apr. 1, 1946)].”), rev’d and remanded sub nom. Adams v. Zarnel (In re Zarnel), 619 F.3d 156 (2d Cir. Aug. 26, 2010) (Leval, Katzmann, Livingston); In re Burch, No. 06-10228, 2006 WL 3922511, at *3 (Bankr. N.D.N.Y. Oct. 23, 2006) (unpublished) (Littlefield) (“The court cannot accept the proposition that a finding of non-eligibility divests this court of jurisdiction.”).   [ Back ]

46 345 B.R. 486 (Bankr. S.D.N.Y. July 18, 2006) (Morris), rev’d and remanded sub nom. Adams v. Zarnel (In re Zarnel), 619 F.3d 156 (2d Cir. Aug. 26, 2010) (Leval, Katzmann, Livingston).   [ Back ]

47 345 B.R. at 497–502. Accord In re England, 500 B.R. 161 (Bankr. M.D. Fla. Sept. 27, 2013) (Williamson) (Individual that failed to receive prepetition briefing is not eligible to be debtor and did not commence bankruptcy case by filing petition.); In re Cooper, No. 6:07-BK-05979-ABB, 2008 WL 4569860, at *1 (Bankr. M.D. Fla. Feb. 27, 2008) (Briskman) (“The Debtor did not obtain credit counseling within the 180-day prepetition period pursuant to 11 U.S.C. Section 109(h)(1). . . . The Debtor was ineligible to commence a bankruptcy case on the Petition Date . . . . No case resulted from the filing of the petition pursuant to 11 U.S.C. Section 301(a).”); In re Ruetz, No. 6:08-BK-00780-ABB, 2008 WL 4572374, at *1 (Bankr. M.D. Fla. Feb. 5, 2008) (unpublished) (Briskman) (“The Debtor did not obtain credit counseling within the 180 day prepetition period pursuant to 11 U.S.C. Section 109(h)(1). . . . The Debtor was ineligible to commence a bankruptcy case . . . . No case resulted from the filing of the petition pursuant to 11 U.S.C. Section 301(a) and no automatic stay of 11 U.S.C. § 362(a) arose.”); In re Mancilla, No. 6:07-bk-00941-ABB, 2007 WL 4348081, at *1 (Bankr. M.D. Fla. Apr. 12, 2007) (unpublished) (Briskman) (Debtors who did not obtain a briefing before the petition and are not eligible for waiver are ineligible to be debtors. “The Debtors were ineligible to commence a bankruptcy case on the Petition Date pursuant to Section 109(h)(1). No case resulted from the filing of the Petition pursuant to Section 301(a) and there is no case to dismiss.”); In re Salazar, 339 B.R. 622, 624–32 (Bankr. S.D. Tex. Mar. 29, 2006) (Isgur) (On motion to reconsider, see In re Hubbard, 333 B.R. 377 (Bankr. S.D. Tex. Nov. 16, 2005) (Isgur), filing of petition by § 109(h) ineligible debtor does not commence a bankruptcy case and no automatic stay arises. “[B]oth logic and the statute dictate that no automatic stay arises on the filing of a petition by an ineligible person. . . . [W]hen read together, §§ 109(h), 302, and 362(a) establish that no stay can exist for debtors who fail to obtain the required credit counseling or qualify under an exception. . . . It is implausible to believe that Congress specifically identified people to exclude from the bankruptcy process, yet permitted those same people to benefit from bankruptcy’s most powerful protection: the automatic stay. . . . Congress did not provide for dismissal when a debtor was not eligible to file in the first place. By not providing that a filing would be dismissed for failure to obtain credit counseling, either Congress regarded the credit counseling as less important than other matters that would result in a dismissal or Congress intended that there would be no case to dismiss. The first interpretation is implausible. It is not more important to file the credit counseling certificate than to obtain the credit counseling itself. . . . [T]he petition is ‘stricken’ because an ineligible debtor can file a petition with the clerk, but that act alone does not invoke the automatic stay.”).   [ Back ]

48 619 F.3d 156 (2d Cir. Aug. 26, 2010) (Leval, Katzmann, Livingston).   [ Back ]

49 619 F.3d at 166–71. Accord Goldberg v. Goodman (In re Goodman), No. NV-12-1643-KiCoD, 2013 WL 4767741, at *14 (B.A.P. 9th Cir. Sept. 5, 2013) (unpublished) (Kirscher, Collins, Dunn) (“[T]he filing of a petition, even by an ineligible debtor, nevertheless commences a bankruptcy case and provides the court with jurisdiction.”); In re Williams, No. 1-09-44856-dem, 2010 WL 411108, at *2–*3 (Bankr. E.D.N.Y. Jan. 27, 2010) (unpublished) (Milton) (Expired briefing certificate rendered debtor ineligible under § 109(h), but case commenced and stay was in effect on petition date.); In re Brown, 342 B.R. 248, 255 (Bankr. D. Md. May 6, 2006) (Keir) (Foreclosure sale between filing and dismissal of Chapter 13 petition by debtor who failed to get a prepetition briefing under § 109(h) violated automatic stay and was void; petition commenced a case and invoked automatic stay else new § 362(b)(21) is superfluous. “[T]he filing of a petition by a debtor who is ineligible to be a debtor pursuant to Section 109(h)(1), with or without a certification requesting waiver under Section 109(h)(3), does create an automatic stay under Section 362(a).”); In re Mills, 341 B.R. 106, 110 (Bankr. D.D.C. Apr. 20, 2006) (Teel) (“[A] case commenced improperly by a person ineligible to be a debtor created a case for the limited purpose of determining whether the court lacked subject matter jurisdiction over the case. . . . During the pendency of that determination, the automatic stay would be in effect unless the § 362(b)(21)(A) exception applied.”); In re Tomco, 339 B.R. 145, 154–59 (Bankr. W.D. Pa. Feb. 27, 2006) (Deller) (Debtor who failed to request a prepetition briefing is not eligible, but the petition commenced a case that is not void ab initio. “[I]f a creditor or other party in interest had failed to timely and promptly ask the Court for a review of the merits of the Certificate of Exigent Circumstances, such party could conceivably be barred from later challenging the debtor’s eligibility pursuant to doctrines of waiver, estoppel, or res judicata. . . .  This Court respectfully disagrees with [In re Rios, 336 B.R. 177 (Bankr. S.D.N.Y. Dec. 19, 2005) (Morris)] . . . . [T]he word ‘may’ in Section 301 has an expansive connotation. . . . [T]he word ‘may’ . . . means ‘might’ or is meant to express a ‘possibility.’ . . . [T]he operative event that triggers the commencement of a bankruptcy case, and this Court’s jurisdiction, is the filing of a petition. . . . [A] case commenced by an ineligible debtor is not void ab initio.”); In re Bell, No. 06-11115 EEB, 2006 WL 1132907 (Bankr. D. Colo. Apr. 27, 2006) (unpublished) (Brown) (Prior filing by ineligible debtor who failed to comply with § 109(h) commenced a case.); In re Ross, 338 B.R. 134, 136 (Bankr. N.D. Ga. Feb. 8, 2006) (Bonapfel) (Debtor who did not receive or request a prepetition briefing is not eligible, but petition commenced a bankruptcy case. “[T]he filing of a petition by a debtor ineligible to do so nevertheless commences a bankruptcy case that is neither a ‘nullity’ nor void ab initio.”).   [ Back ]

50 11 U.S.C. § 362(b)(21), discussed in § 431.1.   [ Back ]

51 344 B.R. 899 (Bankr. S.D. Ind. June 5, 2006) (Metz), vacated by 249 Fed. Appx. 475 (7th Cir. Oct. 2, 2007) (unpublished) (Easterbrook, Kanne, Evans).   [ Back ]

52 344 B.R. at 905–07, vacated by 249 Fed. Appx. 475 (7th Cir. Oct. 2, 2007) (unpublished) (Easterbrook, Kanne, Evans). Accord In re Burch, No. 06-10228, 2006 WL 3922511, at *4 (Bankr. N.D.N.Y. Oct. 23, 2006) (unpublished) (Littlefield) (“The trigger to the stay is not the commencement of a case, but the filing of a petition.”).   [ Back ]

53 See, e.g., Simon v. Amir (In re Amir), 436 B.R. 1 (B.A.P. 6th Cir. Aug. 5, 2010) (Boswell, McIvor, Rhodes) (Chapter 7 debtor waived argument that preconversion Chapter 13 petition should have been dismissed because he did not obtain prepetition briefing required by § 109(h). Debtor did not raise argument for many months. Debtor appeared and litigated extensively before and after conversion to Chapter 7, and § 109(h) issue was not raised until Chapter 7 trustee pursued recovery of property.); In re Wise, 415 B.R. 579, 581–83 (Bankr. N.D. Ala. Sept. 2, 2009) (Robinson) (Ineligibility under § 109(h) is not jurisdictional, and failure to raise the issue until after confirmation waives the argument. On same day as entry of confirmation order, creditor filed motion to set aside confirmation and to dismiss because debtors received briefing on same day they filed petition. “A creditor seeking dismissal based on the debtor’s ineligibility to file must timely raise the objection or it will be waived. . . . Congress did not intend for Section 109(h) to implicate subject matter jurisdiction. Section 109(h) contains no ‘jurisdictional language.’ . . . [T]he conclusion that Section 109(h) is not jurisdictional is in line with the grant of bankruptcy case jurisdiction in title 28. . . . [T]here is no indication from the text of Section 109(h) that Congress intended for bankruptcy courts to sua sponte investigate whether a debtor has complied with the credit counseling requirement. . . . [T]he plain language of Section 109(h) affirmatively indicates that the section is not jurisdictional.”); In re Rios, No. 07-66047-PWB, 2007 WL 7136473, at *2–*4 (Bankr. N.D. Ga. Nov. 5, 2007) (unpublished) (Bonapfel) (Although debtor is ineligible based on failure to receive a prepetition briefing under § 109(h), that section is not jurisdictional and ineligibility was waived when the trustee did not prosecute dismissal for five months. Chapter 13 case was filed on April 16, 2007. Briefing occurred three days after petition on April 19, 2007. “The eligibility requirement of § 109(h) is not jurisdictional. . . . [I]t may be waived. . . . If compliance with § 109(h) and Interim Bankruptcy Rule 1007(c) appears to be lacking, the proper administration of a case requires that a party concerned about the issue must assert the debtor’s ineligibility and pursue dismissal of the case as soon as practicable. Otherwise, the absence of a determination of eligibility under § 109(h) until the hearing on confirmation (in this case, almost five months after filing) has the unintended consequence of wasting resources of the debtor, the trustee, creditors, their attorneys, and the court. . . . [O]nce the parties have devoted significant time to the case, and after the Debtor has satisfactorily responded to all other substantive objections to confirmation such that payments to creditors may begin under a confirmable plan, it is too late to insist on dismissal due to ineligibility. . . . By the time the eligibility issue was presented to the Court for ruling on September 12, a timely determination of ineligibility of the Debtor was not possible. Accordingly, the Court concludes that, under the circumstances of this case, the eligibility requirement of § 109(h) has been waived. The Debtor’s ineligibility, therefore, does not provide a basis for dismissal of this case or for denial of confirmation of the plan.”).   [ Back ]

54 See, e.g., In re John, 479 B.R. 643, 648 (Bankr. M.D. Pa. June 4, 2012) (Thomas) (“I agree with the majority of Courts that Section 109(h) is not jurisdictional.” Although debtors did not satisfy § 109(h) because briefing certificate was dated more than 180 days before the petition, technical noncompliance is excused when debtors have completed payments under the plan and no prejudice is apparent by entry of discharge and closing of case.); In re Wilcher, No. 06-20513, 2008 WL 7390620 (Bankr. S.D. Ga. Aug. 15, 2008) (unpublished) (Dalis) (“Cumulative errors” by debtors’ attorney, by Clerk’s office, and by Chapter 13 and Chapter 7 trustees over period of two years should not penalize debtors when a timely request for exemption from § 109(h) prepetition briefing requirement would have been granted had proper certificate and application been filed; two years after Chapter 13 petition and one year after conversion to Chapter 7, court grants 30-day exemption “nunc pro tunc” to date of the petition based on affidavit that debtors requested briefing on day of the petition and were unable to receive a briefing until one day after petition but were forced to file by a pending home foreclosure and car repossession.); In re Anderson, 391 B.R. 758 (Bankr. S.D. Tex. June 26, 2008) (Isgur) (Failure to obtain a prepetition briefing under § 109(h) can be cured by filing an “amended petition”; court instructs clerk to reopen dismissed Chapter 13 case and to accept amended petition, and the order for relief is “effective” on date of filing amended petition.).   [ Back ]

55 347 B.R. 489 (Bankr. D. Vt. Aug. 14, 2006) (Brown).   [ Back ]

56 In re Henderson, 364 B.R. 906, 912–13 (Bankr. N.D. Tex. Mar. 27, 2007) (Jernigan). Accord In re Manalad, 360 B.R. 288, 295–308 (Bankr. C.D. Cal. Jan. 25, 2007) (Zurzolo) (“I conclude that Congress intended that dismissal is not mandated when debtors do not comply with the Credit Counseling Requirements. . . . Congress, by choosing not to mandate dismissal as the consequence for failing to comply with the Credit Counseling Requirements, gave the courts discretion to fashion a remedy that is appropriate under the circumstances of each case. . . . I conclude that it is appropriate to exercise my discretion in determining whether this bankruptcy case should be dismissed due to ineligibility under § 109(h). The following factors are pertinent: 1. The debtor has a reasonable explanation for not participating in budget and credit counseling within 180 days prior to filing a bankruptcy petition; 2. The debtor participates in budget and credit counseling once the debtor learns that it is necessary; and 3. At the budget and credit counseling session, it is determined that the individual’s debts could not have been paid outside of bankruptcy. . . . Debtor has a reasonable explanation. Debtor’s Counsel advised him that the Credit Counseling Requirements only applied to debtors with consumer debts . . . . Debtor has proposed a 100% payout to his creditors under a chapter 13 plan. It would be a harsh result if Debtor suffered a dismissal with all the negative consequences that flow from that because Debtor consistently followed the advice of his counsel. . . . I ordered Debtor to participate in budget and credit counseling . . . and Debtor timely complied . . . . [A]s part of his participation in budget and credit counseling, a budget and repayment plan was not prepared by the approved credit counseling agency.”); In re Dillard, No. 06-30128-RFH, 2006 WL 3658485, at *3–*5 & n.5 (Bankr. M.D. Ga. Dec. 11, 2006) (unpublished) (Walker) (Citing In re Hess, 347 B.R. 489 (Bankr. D. Vt. Aug. 14, 2006) (Brown), and assuming that court has discretion whether to dismiss a Chapter 13 case when debtor fails to obtain prepetition briefing, even if clerk did not give § 342(b) notice, it is not manifestly unjust to expect pro se debtor to know about prepetition briefing requirement; § 109 defect is not jurisdictional and was not waived. “[Section] 109(h) itself does not require dismissal of a case for failure to obtain prepetition credit counseling. . . . [I]t mentions no consequences . . . Section 1307(c) authorizes a court to dismiss a Chapter 13 case for ‘cause,’ upon the motion of a party in interest. . . . Ineligibility to be a debtor is sufficient cause to dismiss a case. . . . However, both [§ 1307(c) and § 707(a)] provide that the court ‘may’ dismiss the case. Hence, the court in Hess reasoned, dismissal for cause is discretionary. . . . Assuming for the sake of argument that Hess provides the correct analysis for consideration of a § 109(h) issue, Debtor in this case has failed to demonstrate that, under the circumstances, termination of her case would be manifestly unjust. . . . Debtor’s failure to obtain legal advice or to take any action until the day of foreclosure, while unfortunate, does not redeem her. . . . [R]equiring the credit counseling to take place prepetition demonstrates Congress’s intent to prevent debtors from waiting until the last minute to deal with dire financial straits. . . . [T]he Court is not persuaded that any action or inaction by the Clerk’s Office shows that termination of the Debtor’s case would result in manifest injustice. . . . A supply of the [§ 342(b)] notices is located in a document rack by the elevator in the intake area of the Clerk’s Office . . . but they are not personally handed to pro se debtors. . . . Even if Debtor is correct that by making the notice available the clerk has not satisfied the requirement to ‘give’ the notice to individual debtors, it does not excuse Debtor’s failure to obtain credit counseling. . . . Debtor signed a statement on the petition that reads, . . . ‘I have obtained and read the notice required by § 342(b)’ . . . Debtor’s ignorance of the credit counseling requirement should be attributed to her own carelessness and haste in filing her petition. . . . The Court agrees with the majority position that the appropriate method of termination when a debtor has failed to satisfy § 109(h) is dismissal of the case rather than striking the petition. . . . [T]he eligibility question is not jurisdictional and does not prevent an ineligible debtor from commencing a case and having that case dismissed.” In a note: “No party raised the issue of credit counseling prior to the earlier dismissal of her case, and no party objected to or appealed the reinstatement of the case. . . . [T]he Trustee had no way of knowing that the counseling occurred postpetition rather than prepetition until after the reinstatement, which is when she filed the motion to dismiss. There may be circumstances in which ineligibility under § 109(h) is waived—for example, if termination of the case would prejudice creditors—but this case does not present them.”).   [ Back ]

57 See In re Ingram, 460 B.R. 904, 910 & n.2 (B.A.P. 6th Cir. Dec. 16, 2011) (Boswell, Fulton, McIvor) (Case must be dismissed when debtors completed Internet portion of briefing before the petition but telephone portion and budget analysis after the petition. BAP does not reach question whether “equitable doctrines may be invoked in ‘extraordinary cases’ to excuse a failure to comply with § 109(h) under the doctrine of ‘manifest injustice.’ . . . Compliance with § 109(h) is a prerequisite to obtaining relief under the Bankruptcy Code. By definition, an individual may not be a debtor who is eligible for bankruptcy relief unless he has complied with § 109(h). . . . [T]he bankruptcy court properly dismissed the Debtor’s case.”); Gibson v. Dockery (In re Gibson), No. CC-10-1399-PaHKi, 2011 WL 7145612, at *5 (B.A.P. 9th Cir. Dec. 1, 2011) (unpublished) (Pappas, Hollowell, Kirscher) (Debtor completing credit counseling four days after filing was not eligible; sua sponte dismissal without notice or opportunity to be heard was appropriate. Debtor had knowledge of consequences of noncompliance with § 109(h), including warning in Exhibit D to Official Form 1 and notice from clerk that prepetition counseling was mandatory. “[I]t should have come as no surprise to Debtor when, upon review of her petition and the certificate showing Debtor completed counseling on August 24, the bankruptcy court dismissed her case.”); Dixon v. LaBarge (In re Dixon), 338 B.R. 383 (B.A.P. 8th Cir. Feb. 17, 2006) (Kressel, Federman, Mahoney); In re Fitzhugh, No. 09-10397-RGS, 2009 WL 3764026 (D. Mass. Nov. 10, 2009) (unpublished) (Stearns) (Dismissal is appropriate when pro se debtor failed to respond timely to trustee’s motion alleging failure to obtain prepetition briefing.); In re Mitrano, 409 B.R. 812 (E.D. Va. Aug. 4, 2009) (Trenga) (Citing § 105 and absent “extraordinary circumstances,” bankruptcy court has no discretion to excuse noncompliance with prepetition briefing requirement in § 109(h); bankruptcy court has authority to dismiss sua sponte when debtor is not eligible because of noncompliance with § 109(h).); In re Wood, No. 13-10480, 2013 WL 1969303 (Bankr. S.D. Ga. May 13, 2013) (Barrett) (On show cause by court, debtor is ineligible and case must be dismissed when debtor failed to get a briefing until after the petition because debtor did not have money to pay for briefing.); In re Larijani, No. 13-11163-RGM, 2013 WL 1385222 (Bankr. E.D. Va. Apr. 3, 2013) (Mayer) (In fifth tandem filing by debtor and spouse, motion to vacate dismissal based on failure to get § 109(h) briefing is denied. Chapter 13 case would be futile because debtor does not have enough income to deal with sole creditor—a foreclosing mortgage holder.); In re Mikell, No. 08-60473, 2008 WL 7390622, at *3 (Bankr. S.D. Ga. Oct. 9, 2008) (unpublished) (Dalis) (Dismissal with prejudice to refiling for 180 days is appropriate when debtor filed false certificates with respect to prepetition briefing and did not actually receive a briefing until seven days after petition. “Mikell certified under penalty of perjury that she requested credit counseling but was unable to obtain it pre-petition and also certified that she obtained pre-petition credit counseling, when in fact she neither requested nor received credit counseling until after her case had been filed. Thus Mikell not only failed to receive pre-petition credit counseling, making her ineligible to be a debtor under the Bankruptcy Code, she also falsely certified to two mutually exclusive conditions under which she either could have been eligible or could have qualified for a waiver of the pre-petition credit counseling requirement.”); In re DeHoog, No. 13-08-12312 SF, 2008 WL 5191389 (Bankr. D.N.M. Sept. 17, 2008) (unpublished) (Starzynski) (Even if prepetition briefing requirement is not jurisdictional, briefing more than 180 days before petition does not satisfy § 109(g) and no exception applies; consequence of failure to comply with § 109(h) is dismissal.); In re Nealen, No. 07-71235JAD, 2008 WL 8746011, at *1 (Bankr. W.D. Pa. Mar. 18, 2008) (unpublished) (Deller) (When pro se debtor filed neither a certificate of credit counseling nor a certificate of exigent circumstances, debtor did not comply with § 109(h) and is ineligible; dismissal rather than closing case administratively is appropriate remedy “to avoid any uncertainty or confusion regarding the status of the . . . case.”); In re Bartlett, No. 07-63647-fra13, 2008 WL 337380, at *3 (Bankr. D. Or. Feb. 5, 2008) (unpublished) (Alley) (Although § 109(h) is not jurisdictional, briefing 185 days before petition leaves debtors ineligible for Chapter 13, and debtors are not entitled to automatic stay or discharge; dismissal is appropriate notwithstanding inconvenience and expense and notwithstanding that no party-in-interest sought dismissal. “Under § 109(h), a debtor who has not complied with the briefing requirement is not entitled to any relief under Title 11, including the benefit of the automatic stay or any discharge.”); In re Francisco, 386 B.R. 854 (Bankr. D.N.M. Jan. 25, 2008) (Starzynski) (Dismissal is appropriate remedy when debtor filed petition on same day as briefing.), rev’d on other grounds, 390 B.R. 700 (B.A.P. 10th Cir. July 2, 2008) (Bohanon, Cornish, Thurman); In re Elieff, No. 07-22537 JPK, 2007 WL 4893492 (Bankr. N.D. Ind. Nov. 14, 2007) (unpublished) (Klingeberger) (Debtor who did not obtain briefing before petition and stated no grounds for relief under § 109(h)(3)(A) is ineligible and case must be dismissed under § 1307(c).); In re Winston, No. 07-20593-D-13L, 2007 WL 1650926 (Bankr. E.D. Cal. June 6, 2007) (unpublished) (Bardwil) (Debtor not exempt under § 109(h)(4) who obtained by mistake a course on personal financial management is not eligible and the Chapter 13 case must be dismissed.); In re Falcone, 370 B.R. 462 (Bankr. D. Mass. May 31, 2007) (Pollak) (Section 109 is not jurisdictional; dismissal is proper remedy when debtor fails to comply with § 109(h).); In re Williams, 359 B.R. 590 (Bankr. E.D.N.C. Feb. 9, 2007) (Doub) (Chapter 13 case is dismissed for failure to comply with § 109(h) when debtor certified briefing 182 days prior to petition.); In re Swiatkowski, 356 B.R. 581, 585 (Bankr. E.D.N.Y. Nov. 16, 2006) (Cyganowski) (In Chapter 13 case filed on November 4, 2005, trustee’s motion to dismiss filed on September 28, 2006, is granted because debtor did not obtain prepetition briefing; Official Form B23 filed 13 days after petition was not a motion for exemption and failed to establish disability or incapacity. “The Court declines to follow that line of cases which ‘strike’ rather than dismiss petitions for Section 109(h) deficiencies.”); In re Burch, No. 06-10228, 2006 WL 3922511, at *4 (Bankr. N.D.N.Y. Oct. 23, 2006) (unpublished) (Littlefield) (“[T]he more accurate approach would be to simply dismiss what is before it, namely the chapter 13 petition. Less than the ‘case’ contemplated by § 301, but certainly more than the nullity the ‘striking’ courts suggest.”); In re McBride, 354 B.R. 95 (Bankr. D.S.C. Sept. 1, 2006) (Duncan); In re Kimsel, No. 06-00539, 2006 WL 2380684 (Bankr. D. Haw. Aug. 16, 2006) (unpublished) (Faris) (When debtor is ineligible because of § 109(h), dismissal is appropriate remedy.); In re Wilson, 346 B.R. 59 (Bankr. N.D.N.Y. June 5, 2006) (Gerling) (When debtor is ineligible under § 109(h)(3), remedy is dismissal of the case, not striking the petition.); In re Carr, 344 B.R. 776 (Bankr. N.D. W. Va. June 9, 2006) (Flatley) (Dismissal is appropriate remedy when debtor did not request a prepetition briefing and is not eligible for exemption under § 109(h)(3)(A).); In re Racette, 343 B.R. 200, 202–03 (Bankr. E.D. Wis. May 17, 2006) (Kelley) (Motion to strike rather than dismiss prior Chapter 13 petition filed by debtors who were ineligible because of § 109(h) is denied. In prior Chapter 13 case, debtors misrepresented that they received a prepetition briefing by checking the box on the petition. Misrepresentation was discovered and prior case was dismissed. Debtors then moved to strike rather than dismiss the prior case. “[M]ost of the courts who have considered the issue have ruled that the case should be dismissed rather than declared a nullity. . . . [Section] 362(b)(21) . . . strongly suggests that a case has indeed been commenced by an ineligible debtor. Perhaps the most compelling reason to dismiss the case rather than strike the petition is the confusion that would ensue.”); In re Afolabi, 343 B.R. 195, 200 (Bankr. S.D. Ind. June 2, 2006) (Coachys) (Dismissal is mandatory when debtor doesn’t request briefing at least five days before the petition. “The Court has no discretion but to dismiss a case when the debtor fails to file a certification in compliance with [§ 109(h)].”); In re Bell, No. 06-11115 EEB, 2006 WL 1132907 (Bankr. D. Colo. Apr. 27, 2006) (unpublished) (Brown) (Prior filing by ineligible debtor who failed to comply with § 109(h) commenced a case that was appropriately dismissed rather than stricken. Court finds In re Seaman, 340 B.R. 698 (Bankr. E.D.N.Y. Mar. 30, 2006) (Stong), persuasive and rejects In re Salazar, 339 B.R. 622 (Bankr. S.D. Tex. Mar. 29, 2006) (Isgur); In re Mills, 341 B.R. 106, 109–10 (Bankr. D.D.C. Apr. 20, 2006) (Teel) (Because § 109(h) is jurisdictional and to accommodate new § 362(b)(21), bankruptcy court has jurisdiction to determine its own subject matter jurisdiction under § 109(h) but then must dismiss a petition filed by an ineligible individual. “[Section] 109(h) imposes a jurisdictional prerequisite as well as a condition of debtor eligibility because debtor eligibility is a prerequisite to this court’s jurisdiction under a plain reading of 28 U.S.C. §§ 1334 and 157 and 11 U.S.C. § 301(a). . . . [Section] 362(b)(21)(A) . . . which provides that the automatic stay does not arise with respect to an act to enforce a lien against or a security interest in real property ‘if the debtor is ineligible under [§] 109(g) to be a debtor in a case under this title,’ would be rendered superfluous if a case commenced in error were considered void ab initio. . . . [A] case commenced improperly by a person ineligible to be a debtor created a case for the limited purpose of determining whether the court lacked subject matter jurisdiction over the case. . . . During the pendency of that determination, the automatic stay would be in effect unless the § 362(b)(21)(A)exception applied.”); In re Mingueta, 338 B.R. 833, 839 (Bankr. C.D. Cal. Feb. 13, 2006) (Carroll) (“Having neither obtained credit counseling nor established grounds for a temporary or permanent waiver . . . Mingueta was ineligible . . . . Mingueta’s . . . case will be dismissed without prejudice.”); In re Wallace, 338 B.R. 399, 401 (Bankr. E.D. Ark. Mar. 9, 2006) (Mixon) (Debtor who did not satisfy the prepetition briefing requirement and did not file a certificate of exigent circumstances is not eligible and “the case must be dismissed.”); In re Ross, 338 B.R. 134, 136 (Bankr. N.D. Ga. Feb. 8, 2006) (Bonapfel) (“[U]pon timely determination that an individual ineligible to be a debtor under § 109(h)has filed a petition, the proper remedy is dismissal of the case.”); In re Waggoner, No. 05-57036, 2006 WL 705931 (Bankr. E.D. Ky. Mar. 16, 2006) (unpublished) (Scott) (Motion to dismiss is granted when debtors completed briefing the day after the petition and did not file a certificate of exigent circumstances.); In re Sosa, 336 B.R. 113 (Bankr. W.D. Tex. Dec. 22, 2005) (Monroe) (Debtors who failed to request a briefing before the petition are not eligible and Chapter 13 case must be dismissed.); In re Booth, No. 05-45002-LMK, 2005 WL 3434776 (Bankr. N.D. Fla. Oct. 19, 2005) (unpublished) (Killian) (Debtors who neither obtained nor requested credit counseling prior to the petition are not eligible under § 109(h)and case is dismissed.); In re Talib, 335 B.R. 417 (Bankr. W.D. Mo. Dec. 1, 2005) (Dow) (Ineligibility under § 109(h) is cause for dismissal.); In re Davenport, 335 B.R. 218 (Bankr. M.D. Fla. Dec. 6, 2005) (May) (Debtor who failed to make a prepetition request for a briefing is not eligible to be a debtor and the case must be dismissed.).   [ Back ]

58 See In re England, 500 B.R. 161 (Bankr. M.D. Fla. Sept. 27, 2013) (Williamson) (Individual that failed to receive prepetition briefing is not eligible to be debtor and did not commence bankruptcy case by filing petition; petition is appropriately stricken, not dismissed.); In re Cooper, No. 6:07-BK-05979-ABB, 2008 WL 4569860, at *1 (Bankr. M.D. Fla. Feb. 27, 2008) (unpublished) (Briskman) (“The Debtor did not obtain credit counseling within the 180-day prepetition period pursuant to 11 U.S.C. Section 109(h)(1). . . . The Debtor was ineligible to commence a bankruptcy case on the Petition Date . . . . No case resulted from the filing of the petition pursuant to 11 U.S.C. Section 301(a). The Debtor’s petition is due to be stricken[.]”.); In re Mancilla, No. 6:07-bk-00941-ABB, 2007 WL 4348081, at *1 (Bankr. M.D. Fla. Apr. 12, 2007) (unpublished) (Briskman) (Debtors who did not obtain a briefing before the petition and are not eligible for waiver are ineligible to be debtors. “The Debtors were ineligible to commence a bankruptcy case on the Petition Date pursuant to Section 109(h)(1). No case resulted from the filing of the Petition pursuant to Section 301(a)and there is no case to dismiss. The Debtors’ Petition is due to be stricken.”); In re Elmendorf, 345 B.R. 486, 491–503 (Bankr. S.D.N.Y. July 18, 2006) (Morris) (Reaffirming and explaining In re Rios, 336 B.R. 177 (Bankr. S.D.N.Y. Dec. 19, 2005) (Morris): “[T]he Court still is of the opinion that dismissal of the petition/case . . . is for the most part an inappropriate remedy for a debtor’s innocuous failure to obtain counseling, prior to filing a bankruptcy petition, because (1) no case was ‘commenced’ by such a filing, and (2) Congress did not intend for debtors’ protections under the BAPCPA to be limited in a future bankruptcy filing where the debtor’s failure to comply with § 109(h)was obviously done out of ignorance of the gate-keeping requirement. . . . It may be that in some cases . . . the failure to obtain credit counseling, taken together with other circumstances . . . indicates that the failure to obtain such counseling is not due to ignorance but as part of a larger scheme to delay or hinder creditors. In these circumstances, some sort of relief with prejudice may be appropriate . . . . Congress explicitly made failure to file certain documents pursuant to Section 521(a)(1) and (2) ‘cause’ to dismiss; but did not explicitly include credit counseling certificate among the enumerated causes. . . . The Court’s powers by virtue of Section 105(a)to take appropriate action to carry out the provisions of title 11, and its inherent docket management powers, provide the Court with the ability to decide, given the circumstances of each particular filing, whether a matter filed in violation of Section 109(h) requires striking of the petition and closing of the case, or whether relief with prejudice for ‘cause’ is the appropriate avenue, taking into consideration various factors.”), rev’d and remanded sub nom. Adams v. Zarnel (In re Zarnel), 619 F.3d 156 (2d Cir. Aug. 26, 2010) (Leval, Katzmann, Livingston); In re Thompson, 344 B.R. 899, 904–08 (Bankr. S.D. Ind. June 5, 2006) (Metz), vacated by 249 Fed. Appx. 475 (7th Cir. Oct. 2, 2007) (unpublished) (Easterbrook, Kanne, Evans) (Petition filed by § 109(h)ineligible debtor is stricken, not dismissed. “Neither § 109(h)nor its legislative history explicitly describes how to terminate a case where the debtors have been determined to be ineligible for bankruptcy relief under § 109(h).. . . In the event the debtor is determined to be ineligible under § 109(h), the petition is stricken; there was no ‘case’ to ‘dismiss.’ And, if there was no ‘case’ to ‘dismiss,’ then there could not have been a ‘pending case.’”); In re Salazar, 339 B.R. 622, 632–33 (Bankr. S.D. Tex. Mar. 29, 2006) (Isgur) (On motion to reconsider, see In re Hubbard, 333 B.R. 377 (Bankr. S.D. Tex. Nov. 16, 2005) (Isgur), striking the petition is appropriate remedy for § 109(h) ineligible debtor. “[T]he petition is ‘stricken’ because an ineligible debtor can file a petition with the clerk . . . . [W]hether a petition is “dismissed” or “stricken” for failure to comply with § 109(h) carries the same consequences regardless of semantics.”).   [ Back ]

59 Adams v. Finlay, No. 06 Civ. 6039(CLB), 2006 WL 3240522, at *3–*6 (S.D.N.Y. Nov. 3, 2006) (unpublished) (Brieant) (“What would seem on its face to be a distinction without a difference between ‘striking’ and ‘dismissing,’ was perceived . . . as a necessary and proper means and response of the Bankruptcy Court to relieve from the consequences of their inadvertence or lack of understanding, citizens seeking relief from overwhelming consumer debt. . . . Motions to Strike entire pleadings were once common in the federal courts. They’ve fallen from usage, but have not been forbidden by statute or court rule. . . . [T]he District Court and its constituent, the Bankruptcy Court, retain an historic and inherent power to strike all or part of a pleading for good cause . . . it is clear that the Bankruptcy Court has power to issue the orders to strike petitioners’ pleadings as it did in these instances. . . . Failure to receive counseling in compliance with the statute is not jurisdictional, rather it goes to whether the petition states a claim upon which relief can be granted. See Bell v. Hood, 327 U.S. 678[, 66 S. Ct. 773, 90 L. Ed. 939] ([Apr. 1,] 1946). . . . [I]t is by no means clear to this Court that striking a Petition as an alternative to dismissal would necessarily be regarded in a future lawsuit as having the apparent benefit to the Debtor which the Bankruptcy Judge in these cases assumes it would have, or that it would exempt the would be Petitioners from the adverse statutory consequences imposed by BAPCPA.”), rev’d and remanded sub nom. Adams v. Zarnel (In re Zarnel), 619 F.3d 156 (2d Cir. Aug. 26, 2010) (Leval, Katzmann, Livingston).   [ Back ]

60 See §§ 5-5.3, 5-5.6 and 5-5.9.   [ Back ]

61 11 U.S.C. § 362(c)(3)and (c)(4) are discussed in §§ 432.1434.2.   [ Back ]

62 The extent to which the stay terminates 30 days after the petition under § 362(c)(3) is controversial. See § 432.2.   [ Back ]

63 11 U.S.C. § 362(c)(3), discussed in §§ 432.1432.5.   [ Back ]

64 11 U.S.C. § 362(c)(4), discussed in §§ 433.1434.2.   [ Back ]

65 See H.R. Rep. No. 109-31(1), at 1, 16, 69 (2006).   [ Back ]

66 Adams v. Finlay, No. 06 Civ. 6039(CLB), 2006 WL 3240522, at *2–*3 (S.D.N.Y. Nov. 3, 2006) (unpublished) (Brieant), rev’d in part sub nom. Adams v. Zarnel (In re Zarnel), 619 F.3d 156 (2d Cir. Aug. 26, 2010) (Leval, Katzmann, Livingston).   [ Back ]

67 344 B.R. 899 (Bankr. S.D. Ind. June 5, 2006) (Metz), vacated by 249 Fed. Appx. 475 (7th Cir. Oct. 2, 2007) (unpublished) (Easterbrook, Kanne, Evans).   [ Back ]

68 344 B.R. at 907–08. Accord In re Maxey, No. 06 36773, 2006 WL 3834218, at *3 (Bankr. S.D. Tex. Dec. 27, 2006) (unpublished) (Isgur) (Prior petition within a year stricken rather than dismissed based on § 109(h) ineligibility does not count toward limitations on automatic stay in § 362(c)(3) and (c)(4). Prior petition “did not result in the commencement of a case. See In re Salazar, 339 B.R. 622, 626 (Bankr. S.D. Tex. 2006); Adams v. Finlay, 2006 WL 3240522, at *4 (S.D.N.Y. Nov. 3, 2006). Accordingly, although there were two petitions filed by Ms. Maxey within the previous year, there were not two previous dismissals. Option One did not appeal the Court’s order striking Ms. Maxey’s December 2005 petition rather than dismissing her case. That issue is now resolved.”); In re Salazar, 339 B.R. 622, 624–34 (Bankr. S.D. Tex. Mar. 29, 2006) (Isgur) (A petition filed by § 109(h) ineligible debtor is stricken, not dismissed, which has significance for § 362(c)(3) and (4) purposes. “Prior to BAPCPA’s enactment, the question of whether to dismiss a case or strike a petition was a difference without a distinction. . . . Following the adoption of BAPCPA, the distinction has meaningful consequences under § 362(c)(3) and (4). . . . [S]triking a petition today—with the intention that its filing never commenced a case—is significant when applying § 362(c)(3) and (4). . . . Because the Court sees no distinction between ‘dismissing the petition’ . . . and ‘striking the petition’ . . . the Court declines to modify its order for any semantic reasoning.”); In re Valdez, 335 B.R. 801, 803–04 (Bankr. S.D. Fla. Dec. 13, 2005) (Cristol) (Although pro se debtor who failed to request a briefing before filing Chapter 13 petition is not eligible, dismissal of the current case will not count as a prior case for purposes of limitations on stay in § 362(c)(3) and (c)(4). In dicta, “[b]ecause the petition failed to provide Mirielys Valdez status as a debtor, the Court will not consider this a dismissed case in which the individual was the debtor, for purposes of denying the imposition of the automatic stay in a subsequently filed case pursuant to 11 U.S.C. § 362. Thus, the Court views the criteria established by 11 U.S.C. § 109 as jurisdictional. Should Mirielys Valdez proceed to obtain budget and credit counseling as required under 11 U.S.C. § 109(h)(3), she will then be eligible to become a debtor under 11 U.S.C. § 109 and any petition thereafter filed in a timely manner, within 180 days after completion of the credit counseling services, will be treated as her first petition, not subject to 11 U.S.C. § 362(c)(3) or (c)(4).”).   [ Back ]

69 See, e.g., In re Irwin, No. 09-20007, 2009 WL 5322418 (Bankr. S.D. Ga. Apr. 8, 2009) (unpublished) (Dalis) (Arguably in dicta, because current Chapter 13 case was dismissed for failure of the debtor to obtain prepetition briefing and failure to appropriately respond to clerk’s office notices of deficiency, if debtor files new Chapter 13 case within a year, the presumption of a lack of good faith will arise under § 362(c)(3)(C)(i)(II)(aa) and debtor will be required to prove good faith by clear and convincing evidence to extend automatic stay.); In re Bell, No. 06-11115 EEB, 2006 WL 1132907 (Bankr. D. Colo. Apr. 27, 2006) (unpublished) (Brown). See also Adams v. Finlay, No. 06 Civ. 6039(CLB), 2006 WL 3240522, at *6 (S.D.N.Y. Nov. 3, 2006) (unpublished) (Brieant) (“[I]t is by no means clear to this Court that striking a Petition as an alternative to dismissal would necessarily be regarded in a future lawsuit as having the apparent benefit to the Debtor which the Bankruptcy Judge in these cases assumes it would have, or that it would exempt the would be Petitioners from the adverse statutory consequences imposed by BAPCPA.”), rev’d and remanded sub nom. Adams v. Zarnel (In re Zarnel), 619 F.3d 156 (2d Cir. Aug. 26, 2010) (Leval, Katzmann, Livingston).   [ Back ]

70 See 11 U.S.C. § 362(c)(3)(B), discussed in §§ 432.4 and 432.5.   [ Back ]

71 See 11 U.S.C. § 362(c)(4)(B), discussed in §§ 434.1 and 434.2.   [ Back ]

72 11 U.S.C. § 362(c)(3) & (4), discussed in §§ 432.1 and 433.1.   [ Back ]

73 See § 19.1.   [ Back ]

74 340 B.R. 642 (Bankr. D.D.C. Apr. 20, 2006) (Teel), discussed above in this section.   [ Back ]

75 340 B.R. at 648.   [ Back ]

76 See § 369.2.   [ Back ]

77 11 U.S.C. § 109(h)(1), discussed in § 369.2.   [ Back ]

78 See 11 U.S.C. § 111, discussed in § 369.2.   [ Back ]

79 See, e.g., In re Anderson, 341 B.R. 365 (Bankr. D.D.C. Feb. 6, 2006) (Teel) (One cause for annulling automatic stay to validate state court orders for possession of real property is that debtor was not eligible for Chapter 13 because debtor did not comply with § 109(h).).   [ Back ]

80 No. NV-12-1643-KiCoD, 2013 WL 4767741 (B.A.P. 9th Cir. Sept. 5, 2013) (unpublished) (Kirscher, Collins, Dunn).   [ Back ]

81 436 B.R. 1 (B.A.P. 6th Cir. Aug. 5, 2010) (Boswell, McIvor, Rhodes).   [ Back ]

82 455 B.R. 297 (D. Mass. June 24, 2011) (Woodlock).   [ Back ]

83 352 B.R. 391 (Bankr. D. Md. Sept. 14, 2006) (Derby).   [ Back ]

84 See § 229.1. See, e.g., In re Allison, No. 06-30040, 2006 WL 2620480 (Bankr. S.D. Tex. Sept. 12, 2006) (unpublished) (Isgur) (Creditor cannot collaterally attack eligibility or subject matter jurisdiction by motion to dismiss after confirmation; confirmation order implicitly determined eligibility and subject matter jurisdiction and is res judicata.); In re Nikoloutsos, 199 B.R. 624, 625–27 (Bankr. E.D. Tex. May 14, 1996) (Abel) (Because debt limitations are not jurisdictional, failure to clearly articulate an objection to confirmation on the basis of § 109(e) is fatal to postconfirmation motion to dismiss. After relief from the stay in a Chapter 7 case, state court entered a $863,440 judgment for ex-spouse for malicious assault. Debtor converted to Chapter 13. Before confirmation, ex-spouse filed a motion to dismiss, asserting “that the case should be dismissed because the $863,440.00 judgment ‘is not dischargeable under Chapter 7 or Chapter 13.’” The motion to dismiss was denied. Also before confirmation, ex-spouse filed a complaint asserting that the judgment was nondischargeable in the Chapter 13 case under § 523(a)(6). Before disposition of the dischargeability complaint, ex-spouse filed an objection to confirmation asserting that the court should determine the dischargeability of the $863,440 judgment before confirming a plan. Court confirmed a plan paying $205 per month for 36 months. No appeal was taken. After confirmation, ex-spouse filed a motion to convert or dismiss asserting that the debtor was not eligible under § 109(e). “A majority of courts hold that the eligibility limitations under § 109 are not jurisdictional and the Court subscribes to that view as well. . . . Accordingly, the issue of eligibility may be waived if not timely raised. Because a bankruptcy court makes an implicit determination that a debtor is eligible for Chapter 13 when confirming a Chapter 13 plan, challenges to eligibility must be made no later than confirmation. . . . Wanda failed to fully prosecute her initial objection to the Debtor’s eligibility at the time the case was converted to Chapter 13 and she failed to reargue her objection to eligibility at the confirmation hearing. Because the issue of eligibility was not fully prosecuted by Wanda either prior to or at the confirmation hearing, the issue has been waived. . . . [P]ursuant to 11 U.S.C. § 1327(a), Wanda is bound by the terms of the Plan. . . . Because the Plan was clear regarding how the Debtor proposed to treat the unsecured creditors and because it is undisputed that Wanda had notice of the Plan, Wanda is now bound by the terms of the Plan. Wanda may not use an untimely assertion of ineligibility as ‘cause’ to have the case dismissed or converted.”), aff’d, 222 B.R. 297 (E.D. Tex. July 7, 1998) (Schell), rev’d, 199 F.3d 233 (5th Cir. Jan. 6, 2000) (Garza. Jolly, DeMoss); Franklin Fed. Bancorp, FSB v. Lochamy (In re Lochamy), 197 B.R. 384 (Bankr. N.D. Ga. Dec. 26, 1995) (Cotton) (Because debt limitations are not jurisdictional, bank’s failure to assert ineligibility as an objection to confirmation precludes ineligibility from being a ground for conversion or dismissal after confirmation.); Jones v. United States, 129 B.R. 1003 (Bankr. N.D. Ill. July 29, 1991) (Barliant) (Debt limitations in § 109(e) are not jurisdictional and must be raised prior to confirmation, else challenge to eligibility is barred by confirmation of the plan. The IRS’s failure to object to confirmation defeated its postconfirmation challenge to the debtors’ eligibility when the IRS asserted a claim for $650,000. Section 109(e) is not in Title 28 and deals only with relief under a particular chapter. A bankruptcy petition “invokes all of the court’s powers under all the provisions of Title 11, not merely the particular chapter named in the petition. Thus, when a debtor files a petition for bankruptcy relief, he or she commences a case under Title 11, even if the debtor is not entitled to relief under a specific chapter.”). But see In re Rist, 153 B.R. 79 (Bankr. M.D. Fla. Mar. 29, 1993) (Proctor) (Without discussion of § 1327(a), confirmation order is set aside and Chapter 13 case is dismissed where it appears after confirmation on the motion of a creditor that the debtor was ineligible for Chapter 13 relief because of § 109(g)(2).); In re Powers, 135 B.R. 980 (Bankr. C.D. Cal. Apr. 29, 1991) (Riddle) (Confirmation does not preclude creditor’s motion to dismiss on the ground that the case fits the “new debtor syndrome.”).   [ Back ]

85 See, e.g., Moran v. Frisard (In re Ulmer), 19 F.3d 234 (5th Cir. Apr. 22, 1994) (King, Higginbotham, Barksdale) (Sanctions are appropriate under Bankruptcy Rule 9011 when debtor’s attorney filed Chapter 7 case for debtor ineligible under § 109(g)—within 180 days of voluntary dismissal of a Chapter 13 case in which a creditor had filed a motion for relief from the stay.); Goldberg v. Goodman (In re Goodman), No. NV-12-1643-KiCoD, 2013 WL 4767741 (B.A.P. 9th Cir. Sept. 5, 2013) (unpublished) (Kirscher, Collins, Dunn) (Ineligibility based on false prepetition briefing certificate did not defeat bankruptcy court jurisdiction to sanction attorney for filing false certificate. Attorney’s conduct violated Bankruptcy Rule 9011, several ethical rules and possibly criminal statutes.); In re Haylock, No. 08-325 (RJL), 2009 WL 840190 (D.D.C. Mar. 31, 2009) (unpublished) (Leon) (Sanctions appropriate when debtor’s counsel filed Chapter 13 for debtor not eligible because of failure to comply with briefing requirement in § 109(h); sanctions were appropriate notwithstanding that § 109(h) is “nonjurisdictional.”); In re Pettey, 288 B.R. 14, 23 (Bankr. D. Mass. Jan. 21, 2003) (Kenner) (Debtor’s attorney sanctioned for filing Chapter 13 petition knowing that claim for sexual assault exceeded eligibility limitations. Attorney defended filing the case with argument that property liquidated before the petition should have brought more money, thus lowering the victims’ claim. “[I]n filing the Debtor’s Chapter 13 petition, [the debtor’s attorney] was not aware of a nonfrivolous basis for the Debtor’s eligibility . . . . [T]herefore . . . he signed and filed the petition in violation of [Bankruptcy Rule 9011(b)(2)].” Attorney ordered to pay $3,000 in attorney fees for the Chapter 13 trustee and for counsel to the sexual assault creditors.); In re Conrad, 279 B.R. 320 (Bankr. M.D. Fla. Mar. 7, 2002) (Paskay) (Attorney fees and costs awarded to judgment creditors for litigating dismissal of Chapter 13 case filed by ineligible debtor. After judgment in excess of $6 million, debtor filed four bankruptcy cases for the “sole purpose” of avoiding payment.); In re Donohoo, 243 B.R. 536, 538 (Bankr. M.D. Fla. Oct. 15, 1999) (Paskay) (United States on behalf of the Federal Deposit Insurance Corporation is entitled to sanctions when ineligible debtor filed Chapter 13 case; however, sanctions are reduced because government could have used local U.S. attorney. FDIC held an unsecured claim for $1,000,554. After dismissal of Chapter 13 petition based on ineligibility, government sought reimbursement of expenses. Sanctions were appropriate, but amount was reduced to reflect that “[i]t was unreasonable for the Government to incur the expense of having the Regional Attorney travel from Kansas City, Missouri to Fort Myers, Florida to attend the 341 Meeting.”); In re Smith, 234 B.R. 852, 854–55 (Bankr. M.D. Ga. June 2, 1999) (Walker) (Debtor’s attorney sanctioned $150 under Bankruptcy Rule 9011 for filing a Chapter 13 case for an unemployed and ineligible debtor. Debtor had not been employed for three months. Debtor had minimum wage jobs in the past, and public assistance at the petition was insufficient to cover living expenses. Expectation that Debtor would be fully employed within a reasonable time was “unrealistic because Debtor had not been so employed in the two year period prior to the filing.” That the Debtor would receive financial assistance from her family was “unreasonable and unsubstantiated.” The debtor’s attorney “knew or should have known that the law did not recognize the Debtor as eligible to file a Chapter 13 case.”); In re Robertson, 105 B.R. 504 (Bankr. D. Minn. Sept. 22, 1989) (Dreher) (Sanctions under Rule 9011 are appropriate when reasonable inquiry would have revealed that debtor was patently ineligible for Chapter 13 relief.). See §§ 21.123.1 for further discussion of sanctions for filings in violation of § 109(g).   [ Back ]

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