Trustee Blog

Bankruptcy Dismissal 109(g) part two

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Here is what Judge Houle did with the matter….

Debtor is correct in asserting that the BAP instructs courts to follow a discretionary approach to the application of § 109(g). In re Carty, 149 B.R. 601 (9th Cir. BAP 1993).

Debtor relies heavily on In re Luna to demonstrate that the bankruptcy court abused its discretion in dismissing her case in reliance on § 109(g)(2). However the narrow, equitable exception to dismissal under § 109(g)(2) in In re Luna has no application in this case. There is nothing in the record that shows dismissal of debtor’s second bankruptcy case was illogical or unjust under the circumstances. However, it does not appear that the facts of this case represent the type of situation which the § 109(g)(2) bar was meant to prevent. Specifically, in this case, relief from stay was granted on January 26, 2012 as to a timeshare interest held by the Debtors. See RFS Motion, Doc. #31. After granting of relief from the stay as to the timeshare interest, the Debtor did not immediately request a voluntary dismissal and re-file. Instead, the case proceeded until the Trustee filed a motion to dismiss for failure to make plan payments in April 2013. The Debtors filed their request for voluntary dismissal on June 4, 2013. Subsequently, the Debtors filed the instant Motion on July 5, 2013 – a full year and seven months after granting of relief from the automatic stay as to the timeshare interest. Here, there is no indication that the Debtors are attempting to delay foreclosure. Additionally, Hilton has now had approximately one year and 8 months to enforce any state law remedies to foreclose on their interest. As such, the Court finds that strict application of § 109(g)(2) to the case at bar is not warranted.

Practice Pointer:  Keep the above in mind when asking for the court to vacate a 109(g) dismissal.  The rule was put in place to allow a secured creditor time to foreclose on real property. If the secured lender does not exercise its rights then the rule has no application.  Keep this analysis in your back pocket as it may help you.

In the above case the motion to vacate was approved and the debtors were allowed to file again.

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