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In today's poor economy, where home foreclosures seem to be
commonplace, and where debtors have few options to stop a foreclosure, when the
bank does not want to negotiate with the debtor, a chapter 13 filing may be the
only way out. The bankruptcy code has
set a time frame which a debtor can not file and obtain a discharge in a
chapter 13 case, if they have already filed another chapter. When a debtor is forced to file a chapter
13, in order to protect their home, many trustees will simply file a motion to
dismiss the case without taking into consideration the strict language of the
code. The code does not in fact
prohibit a debtor from filing a chapter 13, even if they are still in another
13 or 7, but rather, prohibits a discharge.
As such, many trustees do not consider that a debtor may be seeking the
protection of certain chapter 13 benefits outside of a discharge.
There is some, although limited case law on point, which
would protected the homeowner seeking to save their home, by using the
automatic stay, at least for a period of five years. In a 2008 case, the trustee contended that, because debtors were
ineligible for discharges under 11 U.S.C.S. § 1328(f), they should not
be allowed to file a Chapter 13 petition. The court held that a debtor was not
precluded from filing in good faith a new Chapter 13 bankruptcy case even
though he was ineligible for a discharge under § 1328(f). … Whether an individual may be a debtor
under Chapter 13 is established under 11 U.S.C.S. § 109(e) 11
U.S.C.S. § 1328(f) never mentions the word "filing," speaks only
of "discharge," and does not purport to limit the eligibility
provisions of 11 U.S.C.S. § 109(e). Therefore, the plain language of 11
U.S.C.S. § 1328(f) does not prohibit a debtor who is ineligible for a
discharge from filing a Chapter 13 petition. Branigan v. Bateman (In
re Bateman), 515 F.3d 272 (2008).
The Bateman decision further held, 11 U.S.C.S. § 1328(f) does not
prevent a debtor from filing a Chapter 13 bankruptcy case even though he is
ineligible for a discharge.
In Branigan v. Khan (In re Khan), Bankr. L. Rep.
(CCH) P80,820 (2006), the court held a Chapter 13 debtor may not always be
motivated by the availability of a discharge, so courts would be wrong to
impute bad faith to a Chapter 13 petitioner simply because discharge was
unavailable. Although the availability of a discharge is undoubtedly the main
reason Chapter 7 cases are filed and Chapter 7 debtors view the bankruptcy
discharge as "the holy grail," a Chapter 13 debtor ineligible for a
discharge may file a Chapter 13 case and utilize the tools in Chapter 13 to
cure a mortgage, deal with other secured debts, or simply pay debts under a
plan with the protection of the automatic stay. Thus, in many Chapter 13 cases,
it is the ability to reorganize one's financial life and pay off debts, not the
ability to receive a discharge that is the debtor's "holy
grail.". The court father held,
Congress has expressly prohibited various forms of serial filings in 11
U.S.C.S. § 109(g) (no filings within 180 days of dismissal), 11 U.S.C.S. §
727(a)(8) (no Chapter 7 filing within six years of a Chapter 7 or Chapter 11
filing), and 11 U.S.C.S. § 727(a)(9) (limitation on Chapter 7 filing within six
years of Chapter 12 or Chapter 13 filing). The absence of a like prohibition on
serial filings of Chapter 7 and Chapter 13 petitions, combined with the evident
care with which Congress fashioned these express prohibitions, convinces the
Supreme Court of the United States that Congress did not intend categorically
to foreclose the benefit of Chapter 13 reorganization to a debtor who
previously has filed for Chapter 7 relief. ... The language of 11 U.S.C.S. §
1328(f) is clear and unambiguous. It prohibits only the grant of a discharge
under Chapter 13, and does not address the circumstances, set out in 11
U.S.C.S. § 109, under which a Chapter 13 bankruptcy petition may be filed.
The forgoing article was drafted by Attorney Michael
Goldstein for the Massachusetts
Bankruptcy Blog
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