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Debtor Moves for Dismissal of Involuntary Chapter 7 Bankruptcy Petition

A debtor in an involuntary Chapter 7 bankruptcy case has made several unsuccessful attempts to dismiss the case, with the most recent attempt drawing a mild rebuke from the court. In re Viola, No. 4:11-cv-00817, order (N.D. Cal., Mar. 19, 2014). The district court held that the debtor lacked standing to challenge some parts of the case in that forum, and should have raised the issues in the bankruptcy court. It further found that he had not shown cause for relief from the bankruptcy court’s judgment or its own prior orders.

The court notes in its most recent order that the debtor is a “convicted fraudster.” A creditor filed an involuntary bankruptcy petition against him in March 2010. Creditors may file a petition against a person under either Chapter 7 or Chapter 11, provided that the creditors and the debtor meet various criteria set out at 11 U.S.C. § 303. The debtor commenced the present case in U.S. District Court almost a year later, in February 2011. He filed a motion to withdraw the reference from the bankruptcy court. District courts, by law, have original jurisdiction over bankruptcy proceedings, but generally refer them to the bankruptcy courts. A district court can withdraw the reference for cause, and it must do so if it determines that a case mixes questions of law involving bankruptcy and other areas. 28 U.S.C. § 157(d).

Several months later, the debtor filed a motion to stay the bankruptcy court’s order allowing the sale of certain vehicles that he owned, but the district court held that he lacked standing to bring that claim in district court. The debtor filed a motion for relief from judgment under Federal Rule of Civil Procedure 60(b) in November 2011. The court denied both the motion to withdraw the reference and the motion for relief from judgment in an order dated September 28, 2012. It held that his motion to withdraw the reference was untimely, coming almost a year after the commencement of the bankruptcy case. Since the bankruptcy court had handled numerous proceedings in the case, the district court held that withdrawing the reference would “likely have an adverse impact on judicial economy and the administration of justice.” Viola, order at 2, n. 1.

In September 2013, the debtor filed a new motion, which partly sought relief from the September 2012 order and dismissal of the bankruptcy case with prejudice. The court denied both motions. It found that he sought relief from the court’s order on the grounds that it was void, Fed. R. Civ. P. 60(b)(4), but did not cite legal authority to support this assertion. It denied the motion to dismiss, finding that the debtor did not cite any authority, and, in a mild rebuke, it noted that it is the debtor’s job “to inform the discussion and raise the issues to the court.” Id. at 4, quoting Indep. Towers of Wash. v. Wash., 350 F.3d 925, 929 (9th Cir. 2003).

Since 1997, bankruptcy attorney Devin Sawdayi has represented clients in Los Angeles. We help people create plans that enable them to pay debts on a manageable schedule in Chapter 13 cases, sell assets to pay off debts in a Chapter 7 cases, and obtain a final discharge of some remaining debts. Contact us today online or at (310) 475-9399 to schedule a free and confidential consultation to see how we may help you.

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