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Court’s Dismissal of Chapter 13 Bankruptcy Petition Cites Multiple Legal Grounds, Including Failure to File Required Documents

By Oparvez (http://www.flickr.com/photos/oparvez/390728321/) [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia CommonsA U.S. district judge affirmed a bankruptcy court’s dismissal of a Chapter 13 case, finding that the debtor did not respond to two separate motions to dismiss filed by the trustee and a creditor. In re Quezada, No. 1:13-cv-00638, mem. op. (D.D.C., Dec. 20, 2013). While this failure to respond would allow the court to treat any issues presented by the motions to dismiss as conceded by the debtor, the court went further and addressed several other reasons for dismissing the petition. The court’s opinion provides a useful guide to various Chapter 13 filing deadlines and the consequences of missing them.

The debtor was the owner of a multi-unit apartment building in Washington, D.C. The beneficiary of the deed of trust, the Dyer Trust 2012-1 (“Dyer”) foreclosed on the property when the debtor fell behind on mortgage payments. It scheduled a foreclosure sale on January 10, 2013, but the debtor filed a Chapter 13 petition two days earlier. The automatic stay therefore prevented the sale.

The Chapter 13 petition did not include all of the documents required by federal law. The bankruptcy court instructed the debtor to file the remaining required financial documents and a Chapter 13 plan of reorganization within two weeks, and later extended that deadline by another two weeks. The trustee had to cancel a creditor meeting scheduled on February 11, 2013 because the debtor still had not filed the required documents. On February 12, the trustee filed a motion to dismiss the petition, in part for the lack of financial documents and a reorganization plan. Dyer filed a separate motion on February 21, citing additional grounds for dismissal. The debtor did not respond to either motion.

The bankruptcy court granted both motions to dismiss as unopposed on March 18. The dismissal barred the debtor from filing again for 180 days. The debtor filed an appeal to the district court on April 1. In affirming the bankruptcy court’s order, the district court noted that D.C. law allows a court to treat a failure to respond to a motion as a concession by the non-moving party. While the court found that this was a sufficient ground for dismissal, it identified three additional reasons to dismiss the debtor’s Chapter 13 petition:

  1. The debtor failed to file financial documents within fifteen days of filing the petition, which authorized the trustee to move for dismissal. 11 U.S.C. § 1307(c)(9). Because the debtor did not file the documents within forty-five days of the petition, dismissal was “automatic[].” 11 U.S.C. § 521(i)(1).
  2. The debtor did not file a Chapter 13 reorganization plan at all, although it was required within fourteen days of the petition. 11 U.S.C. §§ 1307(c)(3), 1321, Fed. R. Bankr. P. 3015(b).
  3. The debtor was required to submit federal income tax returns prior to the creditor meeting. 11 U.S.C. §§ 521(e)(2)(A), 1308(a). By failing to do so entirely, the court was obligated to dismiss the petition. 11 U.S.C. §§ 521(e)(2)(B), 1307(e).

Bankruptcy attorney Devin Sawdayi has over sixteen years’ experience guiding clients in the Los Angeles area through Chapter 7 and Chapter 13 bankruptcies. Contact us today online or at (310) 475-9399 for a free and confidential consultation to see how we can assist you.

More Blog Posts:

Creditor Challenges Debtor’s Transfer of Business Assets to Himself Prior to Chapter 13 Bankruptcy Filing, Los Angeles Bankruptcy Lawyer Blawg, Decemner 16, 2013

Evictions During Bankruptcy Under California Law, Los Angeles Bankruptcy Lawyer Blawg, November 29, 2013

Quitclaim Deed Deemed a Fraudulent Transfer by California District Court, Los Angeles Bankruptcy Lawyer Blawg, November 26, 2013

Photo credit: By Oparvez [CC-BY-SA-2.0], via Wikimedia Commons.