In Re Merritt

39 B.R. 462, 10 Collier Bankr. Cas. 2d 940, 1984 Bankr. LEXIS 5811
CourtUnited States Bankruptcy Court, E.D. Pennsylvania
DecidedApril 25, 1984
Docket19-10982
StatusPublished
Cited by23 cases

This text of 39 B.R. 462 (In Re Merritt) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Merritt, 39 B.R. 462, 10 Collier Bankr. Cas. 2d 940, 1984 Bankr. LEXIS 5811 (Pa. 1984).

Opinion

OPINION

EMIL F. GOLDHABER, Bankruptcy Judge:

The issues presented in the controversy at hand are whether a debtor’s absolute right of dismissal of a chapter 13 proceeding is effected without court action, and, if it is not, whether we may delay the dismissal until the entry of an order protecting the rights of other parties which were acquired in reliance on the bankruptcy. For the reasons stated herein we find that the dismissal is effected only by the entry of an order, that the dismissal may be delayed in the proper case for the entry of orders protecting certain rights, but that in this case a sufficient showing for such a protective order has not been made.

*463 The facts of this case are as follows: 1 The debtor filed her first petition for relief under the Bankruptcy Code (“the Code”) under chapter 13 on March 6, 1981. The plan was ultimately confirmed although apparently the debtor failed to make the requisite payments under it. Consequently, the Philadelphia Savings Fund Society (“PSFS”) filed a motion to modify the automatic stay imposed by 11 U.S.C. § 362(a) so it could foreclose its security interest in the debtor’s real property. Two days prior to the hearing on the PSFS motion the debtor served PSFS with a document entitled “Debtor’s election to dismiss chapter 13 case,” which was filed with the court several days later. PSFS then moved 2 for an order that would insulate the creditor’s foreclosure action from the effect of the automatic stay that would arise on the debtor’s filing of a future petition.

An individual may file a petition under chapters 7, 11 or 13 of the Code, and the provisions of the chapter so elected govern the parties’ rights to dismissal as well as conversion of the case to* another chapter. In chapter 13 the debtor has an absolute right to convert the case to a chapter 7 proceeding although the petition may have been originally filed under chapter 7 or 11. 11 U.S.C. § 1307(a). Of importance in the case at bench is the debtor’s absolute right to dismiss a chapter 13 proceeding if the case has not previously been converted from chapters 7 or 11. § 1307(b). The debtor asserts that the right to dismissal under § 1307(b) is effected on the instant that a praecipe 3 for such relief is filed with the Clerk of the court but PSFS contends that the proper vehicle for such relief is a motion which would result in dismissal of the case only on the entry of an order of the bankruptcy judge.

Our analysis begins with the Code provision on which the debtor predicates her contentions, § 1307(b):

(b) On request of the debtor at any time if the case has not been converted under section 706 or 1112 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable. (Emphasis added).

Obviously this subsection does not indicate whether dismissal may be effected by prae-cipe or by motion and order, but the above highlighted language does state that the entity which must act in order to dismiss the case is “the court,” i.e., the bankruptcy judge. The legislative history of the Code indicates that the drafters of the statute intended that the Bankruptcy Rules or local rules, both of which had yet to be adopted, would govern the method for dismissal under § 1307. 4 A review of the rules provides something less than a lucid treatment of the topic. Bankruptcy Rule 1017, which is entitled “Dismissal of Case; Suspension,” states as follows in relevant part:

Rule 1017. Dismissal of Case; Suspension
(a) VOLUNTARY DISMISSAL; DISMISSAL' FOR WANT OF PROSECUTION. Except as provided in § 1307(b) of the Code, a petition shall not be dismissed on motion of the petitioner or for want of prosecution or other cause or by *464 consent of the parties prior to a hearing on notice to all creditors as provided in Rule 2002(a). For such notice, the debtor shall file a list of all creditors with their addresses within the time fixed by the court unless the list was previously filed. If the debtor fails to file the list, the court may order the preparing and filing by the debtor or other person.
*****•!:
(d) PROCEDURE FOR DISMISSAL OR CONVERSION. A proceeding to dismiss a case or convert a case to another chapter is governed by Rule 9014.

The reference to § 1307(b) in Rule 1017(a) merely indicates that dismissals arising under § 1307(b) are not governed by the general rule of 1017(a). Thus, Rule 1017(a) does not dictate how § 1307(b) should be implemented. The ambiguity of Rule 1017(a) is alleviated by Rule 1017(d) which expressly states that a “proceeding to dismiss a case or convert a case to another chapter is governed by Rule 9014.” The Advisory Committee notes to this provision indicate “[a]ny proceeding, whether by a debtor of another party, to dismiss or convert a case under §§ 706, 707, 1112, or 1307 is commenced by a motion pursuant to Rule 9014.” Consequently, Rule 1017(d) clearly dictates that a dismissal under § 1307(b) is executed only through the submission of a motion and the entry of an order. Although § 1307(b) gives the debt- or an absolute right to dismissal if the case has not previously been converted, the section does not govern the time or manner by which the order of dismissal must be entered. Hence a dismissal through motion and order is not at odds with the language of § 1307(b). In Re Pocklington, 21 B.R. 199 (Bkrtcy.S.D.Cal.1982).

The conclusion that § 1307(b) is implemented only through a motion is supported by the legislative history and language of § 349 5 which is entitled “Effect of dismissal.” Section 349 expresses the general rule that the dismissal of a petition reverses to the extent possible, what has transpired during the bankruptcy. This is succinctly summarized in the legislative history with the following language:

Subsection (b) specifies that the dismissal reinstates proceedings or custodi-anships that were superseded by the bankruptcy case, reinstates avoided transfers, reinstates voided liens, vacates any order, judgment, or transfer ordered as a result of the avoidance of a transfer, and revests the property of the estate in the entity in which the property was vested at the commencement of the case. The court is permitted to order a different result for cause. The basic purpose of the subsection is to undo the bankruptcy case, as far as practicable, and to restore all property rights to the position in which they were found at the commencement of the case. This does not necessarily encompass undoing sales of property from the estate to a good faith purchaser. Where there is a question over the scope of the subsection, the court will make the appropriate orders to protect rights acquired in reliance on the bankruptcy case. (Emphasis added).

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Cite This Page — Counsel Stack

Bluebook (online)
39 B.R. 462, 10 Collier Bankr. Cas. 2d 940, 1984 Bankr. LEXIS 5811, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-merritt-paeb-1984.