Sarah No v. Thomas Gorman
Opinion
The U.S. Bankruptcy Court for the Eastern District of Virginia dismissed Appellant's bankruptcy case without a hearing under Local Bankruptcy Rule 3070-1(C),
1
and the district court affirmed. Because the plain language of
I.
On November 30, 2016, Sarah Hyunsoon No filed a voluntary petition for Chapter 13 bankruptcy under § 301 of the U.S. Bankruptcy Code (the "Bankruptcy Code").
See
On January 13, 2017, Thomas P. Gorman, the Chapter 13 Trustee, filed a "Local Bankruptcy Rule 3070-1(C) Certification" stating that No had failed to commence timely payments as required by
The bankruptcy court scheduled a hearing on the motion to dismiss for February 9, 2017, with responses to be filed at least five days before that hearing, and it notified the parties. 3 However, the bankruptcy court dismissed the case on January 17, 2017, before the scheduled hearing could occur. Its dismissal relied solely on Local Bankruptcy Rule 3070-1(C) and Gorman's certification under that Rule that No had failed to commence timely payments. In re No , No. 16-14062-BFK (Bankr. E.D. Va. Jan. 17, 2017); J.A. 72.
No appealed to the district court. The district court affirmed, holding that "because the Local Bankruptcy Rules required the dismissal of [No]'s bankruptcy case, the Bankruptcy Court did not err when it dismissed the case prior to holding a motion to dismiss hearing." No v. Gordon ( In re No ), Ch. 13 Case No. 16-14062-BFK, Adv. No. 1:17-cv-135-GBL-IDD, slip op. at 3-4 (E.D. Va. April 28, 2017); J.A. 158-59. No appealed pro se to this court, and we assigned amicus curiae counsel to argue in support of her position.
II.
The issue presented is whether Local Bankruptcy Rule 3070-1(C)'s procedure for dismissal of a voluntary bankruptcy case conflicts with the notice and hearing requirement of § 1307 of the Bankruptcy Code. We conclude that it does. We review such questions of law de novo.
See
In re Frushour
,
Section 1307 of the Bankruptcy Code permits a bankruptcy court to, "on request of a party in interest or the United States trustee and after notice and a hearing, ... dismiss a case under this chapter ... for cause, including ... failure to commence making timely payments under section 1326 of this title."
On appeal, Gorman argues in part that the requirements of § 1307"[p]rocedurally
and technically" would not apply here because "this case was not dismissed upon the motion of a party in interest or the U.S. Trustee," but rather on the court's own authority.
4
Appellee's Br. at 10. However, we note that § 1307 does not require a "motion" to dismiss, per se, but rather the "
request
of a party in interest or the United States trustee."
See
Because § 1307 applies, we must reverse. Simply put, Local Bankruptcy Rule 3070-1(C) allows dismissal pursuant to
A local rule of bankruptcy procedure cannot be inconsistent with the Bankruptcy Code.
See
Fed. R. Bankr. P. 9029(a) (authorizing local bankruptcy rules "which are consistent with ... Acts of Congress"). Therefore, we hold that Local Bankruptcy Rule 3070-1(C) is invalid to the extent that it is inconsistent with
III.
For these reasons, we reverse and remand for proceedings consistent with this opinion.
REVERSED AND REMANDED
Local Bankruptcy Rule 3070-1(C) provides that:
[E]ach chapter 13 debtor shall commence payments proposed by the plan not later than 30 days after the date of the filing of the plan or the order for relief, whichever is earlier, unless the Court has set some different time. If payments are not received as required, the trustee shall certify the same to the Clerk. Upon receipt of such a certification, the Clerk shall enter an order dismissing the case.
Bankr. E.D. Va. R. 3070-1(C).
"The commencement of a voluntary case under a chapter of this title constitutes an order for relief under such chapter."
A few days later, Gorman also filed a separate motion objecting to the confirmation of the Chapter 13 Plan on good-faith and feasibility grounds. Because this motion did not implicate dismissal for failure to commence timely payments, it does not weigh in our analysis.
Gorman's brief also raises other grounds upon which the bankruptcy court could have relied to dismiss No's case, including her failure to attend the required creditors' meeting and flaws in her proposed Chapter 13 Plan, but these arguments address neither the bankruptcy court's actual order nor the legal issue that we must decide on appeal.
The Local Bankruptcy Rule states that "[i]f payments are not received as required, the trustee shall certify the same to the Clerk," then "[u]pon receipt of such a certification, the Clerk shall enter an order dismissing the case." Bankr. E.D. Va. R. 3070-1(C). This two-step procedure does not describe a sua sponte dismissal. Instead, the certifying party communicates information to the clerk which leads to dismissal. This is the functional equivalent of a "request" that the case be dismissed.
Reference
- Full Case Name
- Sarah Hyunsoon NO, Debtor-Appellant, v. Thomas Patrick GORMAN, Trustee-Appellee. Paula Steinhilber Beran, Court-Assigned Amicus Counsel.
- Cited By
- 9 cases
- Status
- Published