Filing Injunction Section 1307(b) Voluntary Dismissal Discretion of Court
In re Ross, PICS Case No. 17-1054 (3rd Cir. June 8, 2017) Vanaskie, J. (16 pages).
Bankruptcy court had the authority to issue a filing injunction against a debtor who requested voluntary dismissal under 1307(b) because nothing in the bankruptcy code said otherwise but the injunction the court issued was an abuse of discretion since it failed to explain its reasoning for an injunction that was far broader than the one sought by credit union bringing the action. Order vacated.
Appellant and his wife fell behind on their mortgage, credit union filed a foreclosure action, state court entered a default judgment and credit union scheduled a sheriff's sale. The day before the sheriff's sale, appellant alone, without his wife, filed the first of three Chapter 13 bankruptcy petitions. That petition triggered the Chapter 13 automatic stay and halted the sheriff's sale. That petition was dismissed six months later because appellant failed to make the required payments and credit union rescheduled the sheriff's sale. On the day of the rescheduled sale, appellant filed a second Chapter 13 petition, again stopping the sale. The bankruptcy court granted credit union relief from the automatic stay, the sheriff's sale was rescheduled again and on the day of that sale, appellant's wife filed her own Chapter 13 bankruptcy petition, delaying the sale of the property for the third time. Wife's petition was later dismissed for failure to obtain the required prepetition credit counseling. Credit union filed a motion to convert appellant's second bankruptcy case to Chapter 7 or to dismiss it for bad-faith use of the bankruptcy process. The day before the hearing, appellant requested that his case be dismissed pursuant to 1307(b). Appellant did not appear at the hearing and the bankruptcy court dismissed appellant's case with prejudice and issued an order providing that appellant was not permitted to file another bankruptcy case without express permission from the court. Credit union filed a motion in wife's bankruptcy case requesting a filing injunction and the bankruptcy court enjoined wife from filing another bankruptcy petition for 180 days and ordered that the automatic stay was not to operate against actions to enforce the mortgage foreclosure action. Appellant appealed.
Appellant argued that the bankruptcy code prohibited a bankruptcy court from issuing a filing injunction against a debtor who requested dismissal under 1307(b). He contended that the court's general authority to issue such injunctions conflicted with the express terms of 1307(b) which stated that a court "shall" dismiss a Chapter 13 case on the "request" of the debtor. The court found that even if appellant were correct, the bankruptcy court could just as easily have attached its filing injunction to appellant's requested dismissal order. Appellant asserted that such a conclusion undermined the purposes of several other bankruptcy code provisions that addressed the problem of repeat filers but the court found there was nothing in the text of 1307(b) that prohibited the entry of a filing injunction alongside a 1307(b) dismissal order and the purposes behind the other statutory provisions cited by appellant were irrelevant. Additionally, appellant's argument by way of analogy to Fed. R. Civ. P. 41 failed because the text of 1307(b) did not contain the automatic dismissal language in rule 41.
However, the bankruptcy court's filling injunction was problematic in this case because it went beyond what the credit union had asked for and it was harsher than the filing injunction against wife. The bankruptcy court's lack of explanation for its reasoning led the court to find that the bankruptcy court abused its discretion in issuing such a broad injunction.