§ 152.2     Cause for Dismissal—In General
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 152.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Section 1307(c) permits dismissal of a Chapter 13 case for “cause.” The 10 nonexclusive examples of cause listed in § 1307(c) include unreasonable delay by the debtor, failure to timely file a plan,1 failure to commence making timely payments under § 1326,2 denial of confirmation, material default with respect to the terms of a confirmed plan, revocation of confirmation under § 13303 and denial of confirmation of a modified plan under § 1329.4 The courts have supplemented this list with many other examples of cause. Primary among the additions is “bad faith.”5 The dismissal determination is fact-bound—for almost every reported decision finding a particular fact pattern sufficient to justify dismissal, there is a reported decision on similar facts refusing dismissal.6

[2]

One of the included grounds for conversion or dismissal of a Chapter 13 case in § 1307(c)(2)—that the debtor has failed to pay any fee or charge required under 28 U.S.C. Chapter 123—is specifically addressed in Bankruptcy Rule 1017(b). This Rule provides that “[i]f any installment of the filing fee has not been paid, the court may, after a hearing on notice to the debtor and the trustee, dismiss the case.”7 This oddly focused little rule is probably a vestige of former practice. Under pre-Code law, there was controversy whether the failure of a Chapter XIII debtor to pay the filing fee was a ground for dismissal and, if so, whether that dismissal was with prejudice to discharge in a subsequent bankruptcy case.8 Bankruptcy Rule 1017(b) clarifies that dismissal is the appropriate remedy for failure to pay a filing fee. It has been held that failure to pay the filing fee in installments prior to confirmation is cause for dismissal.9 Filing fees are sometimes paid through the plan after confirmation.10

[3]

Bankruptcy Rule 1017(b) says nothing about conversion as a remedy for failure to pay a filing fee, notwithstanding that conversion might be the option in the best interests of creditors and the estate under 11 U.S.C. § 1307(c)(2). Also, Bankruptcy Rule 1017(b) is not clear how dismissal for failure to pay a filing fee will come before the bankruptcy court. Presumably, some party in interest would make a motion to dismiss—the trustee or the U.S. trustee being the most likely candidates.

[4]

Similarly, Bankruptcy Rule 1017(c) specifically addresses dismissal of a Chapter 13 case under § 1307(c)(9) on the motion of the U.S. trustee when the debtor fails to timely file the list of creditors, schedules and statement of financial affairs. As mentioned above,11 Rule 1017(c) is unfortunately worded to limit notice of the hearing on dismissal when the debtor has failed to file necessary documents. It is odd that the Rules drafters have singled out this particular ground for dismissal of a Chapter 13 case for a special limitation on notice. The failure to file necessary documents is a common characteristic of an abusive or serial filing,12 and notice of dismissal on this ground is particularly important to creditors that wish to argue for conversion or to impose conditions on dismissal of the case.13


 

1  See §§ 38.2 [ Time for Filing Schedules, Statement of Financial Affairs, Plan and Other Documents ] § 37.4  Time for Filing Schedules, Statement of Financial Affairs, Plan and Other Documents and 55.1 [ Debtor Must File a Plan ] § 51.2  Debtor Must File a Plan.

 

2  See discussion beginning at § 44.1  First Test of Debtor’s Good Intentions.

 

3  See § 224.1 [ Revocation of Confirmation ] § 117.3  Revocation of Confirmation.

 

4  See discussion beginning at § 126.1  Standing, Timing and Procedure and § 127.1  To Suspend Payments.

 

5  See § 24.1  Court-Imposed Restrictions on Eligibility to Refile§ 139.2  BAPCPA: More Grounds; Changed Consequences§ 152.3  Cause for Dismissal Added or Changed by BAPCPA§ 152.4  Cause for Dismissal, Including Bad-Faith, Multiple and Abusive Filings and § 153.3  Court-Imposed Conditions and Restrictions on Dismissal.

 

6  See § 335.1 [ Cause Not Found ] § 152.5  Cause Not Found.

 

7  Fed. R. Bankr. P. 1017(b)(1).

 

8  See, e.g., In re Seiden, 174 F.2d 586 (2d Cir. 1949).

 

9  In re Ennis, 178 B.R. 189, 191–92 (Bankr. W.D. Mo. 1995) (“Debtor was permitted to pay the filing fee in installments. Only part of the filing fee has been paid and $70.00 remains unpaid. In addition, debtors have not paid to the Clerk’s Office a previously-billed $25.00 charge for a returned check. . . . The filing fee must accompany the petition at the commencement of the case unless payment in installments is permitted, in which case all installments must be paid within 120 days after filing of the petition. . . . There is no provision for waiver of the filing fee. . . . The plan cannot be confirmed because it violates 11 U.S.C. § 1325(a)(2), which requires that all fees be paid before confirmation. Debtors must pay the filing fee or the case must be dismissed. . . . Debtors have refused to pay the filing fee so there is no recourse except to dismiss the case.”).

 

10  See § 37.5  Filing Fee and Option to Pay in Installments and § 113.2  Filing Fee Payment Requirement.

 

11  See § 332.1 [ Procedure, Timing and Form ] § 152.1  Procedure, Timing and Form. See also § 311.2 [ Conversion on Request of Creditor or Trustee ] § 141.2  Conversion on Request of Creditor or Trustee.

 

12  See § 152.3  Cause for Dismissal Added or Changed by BAPCPA and § 152.4  Cause for Dismissal, Including Bad-Faith, Multiple and Abusive Filings.

 

13  See § 24.1  Court-Imposed Restrictions on Eligibility to Refile and  § 153.3  Court-Imposed Conditions and Restrictions on Dismissal.