October 2006 Marshall Chronicles
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TThhee MMaarrsshhaallll October 2006 #Volume V, Number 10 CChhrroonniicclleess To Discharge Or NAs we “celoebrate ” thte one -yeaTr anniversoary of BA PCPAD’s effec - isW.D.c Wis. 2h006), deaalt with rthe gnewly aemended ?section tive date, I am fixated on a problem that faces all bankruptcy 727(a)(8). While this article will focus on §1328(f), I thought this practitioners – the §1328(f) mystery. What exactly does §1328(f) opinion was relevant and worthy of discussion. The United States mean? Reader, I challenge you to figure it out. §1328(f) states the Trustee for this region, William T. Neary, filed an adversary com - following: plaint to determine the debtor’s eligibility for a discharge. The Notwithstanding subsections (a) and (b), the court debtor filed a Chapter 7 on October 19, 1998, and she received shall not grant a discharge of all debts provided her discharge on January 27, 1999. She later filed another for in the plan or disallowed under section 502, Chapter 7 on January 19, 2006. When she filed if the debtor has received a discharge – her first Chapter 7, the time between Chapter 7 discharges was six years. (1) in a case filed under Chapter 7, 11, or 12 of As we all know, BAPCPA extended this title during the 4-year period preceding the time to eight years, and this pro - the date of the order for relief under this vision was in effect when the debtor Chapter, or filed her second case. She argued that (2) in a case filed under Chapter 13 of this BAPCPA could not be applied to her title during the 2-year period preceding retroactively, and to do so would vio - the date of such order. late her right to file for bankruptcy. The So when can a debtor receive a discharge? court rejected this argument and found Are we to count from filing date to filing that the debtor does not have a right to a date or from discharge date to filing date? discharge. Id. at 4. Congress is free to I could make a straight-faced argument alter the debtor’s ability to receive a dis - that we should count from discharge charge, even if prior conduct is a basis for date to filing date. One could argue disqualification. that if the discharge was received dur - Regarding §1328(f), my primary point of con - ing the four (or two) year period pre - fusion is determining which event should we ceding the subsequent filing, then begin counting. This concern has been an - the debtor is not eligible for another swered by an Arkansas bank ruptcy court. In In discharge. The event that starts the Re: West , 2006 WL 2872275 , *5, (Bankr. E.D. clock is not the filing of the prior Ark. 2006), the court held that the relevant time case, but instead, the granting of period was filing date to filing date. The trustee the discharge. This is just one unan - argued that the debtor was not eligible for a dis - swered question generated by this provision. No - charge because she received a Chapter 13 dis - tably, the U. S. Trustee Program published their interpreta - charge less than two years ago. The debtor’s re - tion of §1328(f) on their website under the “Frequently Asked sponse was simple – the case that resulted in a dis - Question” section. The UST’s answer is that filing date to filing charge was filed in 2001, so, therefore, she is entitled date is the relevant time period. to a discharge. The court agreed with the debtor. The court found What if the case was converted from a 13 to a 7? Should addi - that the plain reading of the statute and the legislative history tional procedures be used to determine discharge eligibility? supported the debtor’s interpretation. Id. Since the statute outlines the discharge qualifications, is an ad - Another one of my issues was addressed in In Re: Capers , 347 versary proceeding necessary? Although we would like to avoid B.R. 169, Bankr. D. S. C. 2006). The debtor filed a Chapter 13 less the mental gymnastics caused by interpreting this sentence, we than four years prior to the filing of her current Chapter 13. She can no longer ignore the conundrum created by §1328(f). later converted her Chapter 13 to a Chapter 7, which resulted in Fortunately, we have been given some direction from the courts. a discharge. The United States Trustee filed a complaint to deny A recent decision, In Re: McKittrick , 2006 WL 2589377, (Bankr. the debtor’s discharge. The trustee asserted that the prior case (Continued on page 2.) October 2006 Volume V, Number 10 Financial To Discharge Or Smooth Case Closing Not To Discharge Is On The Way (Continued from page 1.) The Marshall’s Office is preparing for the should be treated as though it had Midterm Audit. The Midterm Audit is a originally been filed as a Chapter 7. process where cases will be audited mid - Accordingly, the debtor would be way through the life of the case. For exam - ineligible for a discharge because the ple, after the post confirmation review Chapter 7 was filed less than four audit, if the case was confirmed for 60 years ago. The trustee believed that months, the Trustee will audit the case at the policy behind and plain language the 28th-30th month. If the case was confirmed for 36 months, of §1328(f) supported the denial of the discharge. The debtor the Trustee will audit the case at the 16th -18 th month. disagreed and relied on the “filed under” language in the statute. Many may say “that office has too many procedures in place be - The court rejected the debtor’s interpretation after examining the fore a case closes.” The Midterm Audit will allow the cases to legislative history and the practical effects of converting cases. close smoothly in the end. If you have read previous Marshall First, the court concluded that the legislative history conflicts Chronicle articles written by the Financial Department, you have a with the debtor’s argument. Id. at 172. In addition, the debtor’s basic understanding of what kind of problems could occur. Many interpretation could lead to the filing and subsequent conversion of the problems that were found at the end of a case will now be of cases for the purpose of avoiding §1328(f)’s application. Fur - found in the middle of a case. This procedure will allow the thermore, the court found that section 348(a) stands for the no - Trustee to resolve all issues before the completion of payments. tion that converted cases “are deemed to be filed under the The Midterm Audit is a procedure that will help the Trustee to chapter to which the case is converted.” Id. at 171. The court administer the cases according to the bankruptcy code as also considered the harsh result for a hypothetical debtor who amended by BAPCPA. As the Marshall says “there are proce - converted from a 7 to a 13. That debtor would have to wait four dures in place and they must be followed.” Santricia Mack years before receiving a discharge despite having successfully completed the plan. A debtor in that position should not have to wait two years longer than a debtor who originally filed a Chap - The Marshall Chronicles The Editorial Staff: ter 13. The court found that this was not Congress’ intended re - Cheryl Jones, Joanne Coshonis, Shanika Thomas, HVB and Dave Latz. sult and found that the debtor was not eligible for a discharge. Contents and Contributors: Id. at 173. To Discharge Or Not To Discharge?, pg. 1 ...................... Keisha Hooks Undoubtedly, these issues soon will surface locally as we all Smooth Case Closing Is On The Way, pg. 2 .................. Santricia Mack grapple with this new code. Hopefully, the courts in this district Inquiring Minds, pg. 2 ............................................ Anthony Olivadoti will interpret §1328(f) uniformly and the answers will be the Trustee Matters, pg. 3 ........................................... Marilyn O. Marshall same in all courtrooms. Could you imagine what would happen Docketing And Corrective Entries, pg. 5 ................... Carolyn Donahue if all of our judges did not agree? I guess that’s one more con - Closing In On The Closing Process, pg. 5 ......................... Sandra Pillar cern spawned by the §1328 mystery. Keisha Hooks Internet Tidbit, pg. 5 .................................................. Staff Submission Where It All Started, pg. 6 ...................................... Anthony Olivadoti 20 Questions For: Catherine Mendoza, pg. 6 ........ Catherine Mendoza November Events, pg. 6 ...................................................... Dave Latz Inquiring Minds Does Anybody Really Know What Time It Is?, pg. 7 ........ Cliff Tarrance If a case has a status of Confirmation Denied, Faux Plan Processing, pg. 7 .......................................... Rosalind Lanier is the creditor still required to honor the au - Trivia Quiz: Aviation, pg. 8 ......................................... Staff Submission tomatic stay? The Secret Of Mickey And Minnie, pg. 8 ................... Staff Submission Yes. The automatic stay is a creature created by Newsletter Information: the code that lasts until it stops. For a credi - If you would like to contact us or submit ideas or articles for the newsletter, you can do so by: tor to get “relief” from the stay, they must get a Court Order letting them go forward. Stay e-mailing us at [email protected] relief is found under a specific section of the bankruptcy code. dropping your submission or idea in the anonymous newsletter folder locat - ed in the mail room, or The dismissal of a case also causes the stay protection to stop. leaving them with Dave Latz When confirmation of a case is denied, that just means that the Please remember when making a submission to the newsletter, it must be: plan proposed by the debtor does not meet confirmation guide - type-written and lines and that the debtor must take some further action to try and submitted by the first Wednesday of the month via e-mail, a Word document get her case confirmed.