One Hundred Eighty Day Rule:
Debtors are ineligible for bankruptcy relief when they were debtors in a case pending under the Code at any time during the 180 days preceding the filing of the new petition if:
1. the prior case was dismissed by the court “for willful failure of the debtor to abide by orders of the court, or to appear before the court in proper prosecution of the case; or
2. the debtor requested and obtained voluntary dismissal of the prior case “following the filing of a request for relief from the automatic stay.”
11 USC § 109(g)
Summary – Statute protects the bankruptcy process: must abide by court rules, show up when required, and not abuse system to evade creditors.
Also consider:
Rule 9011: filings may not be for ‘improper purpose, such as to harass or to cause unnecessary delay.’
- Violation of this rule can result in sanctions upon parties, attorneys or firms brought by motion.
- Party prevailing on motion may be awarded reasonable fees incurred in presenting or opposing the motion.
Case
On November 30, 2005, Judge Mitchell issued an opinion in the case styled In re Henneghan, Ch. 13 Case No. 05-15853, where the debtor was before him to show cause why the case should not have been dismissed with prejudice, or other sanctions imposed, for filing the case when the debtor was ineligible to do so.
In this case, the debtor filed for bankruptcy relief pro se, or without an attorney on November 2nd, 2005. This was his seventh bankruptcy filed in as many years, and his fourth since 2001. In his most recent case prior to the case at issue, the debtor filed a Chapter 7 case on February 17th, 2005. On March 11, 2005, the debtor’s case was dismissed by the clerk for failure to comply with filing requirements. However, the dismissal order was vacated and the case was reinstated on the docket on March 18th, 2005. The case was converted to a Chapter 13 case on April 7, 2005. Later, the trustee filed a motion to dismiss the case with prejudice, then debtor filed his own motion for voluntary dismissal on June 9th, 2005.
The debtor filed this case 146 days after the dismissal of the previous case. In response to the rule to show cause, the debtor cited, as his reason for eligibility, that his credit report indicated that his previous case was dismissed on March 11th, 2005 therefore, he was outside the statutorily required 180 days.
Judge Mitchell held that, because the earlier case was reinstated on March 18th, 2005, that case was pending before the court until the dismissal on June 9th, 2005 and, therefore, the present case must be dismissed. Judge Mitchell also noted that the court does not report to credit agencies; those agencies perform their own review of the court’s public records. The credit agencies interpretation cannot bind the court or otherwise substitute for the court’s official record.
Judge Mitchell importantly noted two sections of the BAPCPA, effective April 20, 2005, that are applicable to repeat filings. The first, §362(c)(3), specifies that if, at the time a new case is filed, the debtor has had one prior case dismissed within the previous year, the automatic stay terminates after 30 days. The second, §363(c)(4), states that if the debtor has had two cases dismissed in the previous year, no automatic stay arises. In this situation, an automatic stay will only arise based on an affirmative finding by the court that the case was filed in good faith.
Lesson:
This case highlight’s the importance of utilizing an experienced bankruptcy attorney to guide you through the process to protect you and your assets. An attorney would have been able to advise the debtor on important timing legal, and procedural issues and would have prevented the above debtor from being shut out of the bankruptcy process.
