2001) (“when a motion to convert is filed prior to a debtor’s motion to dismiss, a hearing should be allowed to consider the merits of the conversion motion before ruling on the debtor’s motion to dismiss.”) and In re Rosson, 545 F.3d 764, 774 (9th Cir. 1992) (holding that although a debtor had an absolute right to dismiss a bankruptcy filing at anytime, the Court was not required to act immediately upon the debtor’s request for voluntary dismissal and could delay its decision while considering other motions, i.e., a motion to convert) In re Molitor, 76 F.3d 218 (8th Cir.1996) (finding that a bad faith debtor does not have unfettered right to dismiss in the face of motion to convert.) In re Cowper, 266 B.R. In summary, Crowell concluded that to permit a debtor to answer a motion to convert on grounds of fraud, whether it be actual fraud, or fraud on the court and creditors arising from falsified schedules or bad faith filings intended to delay litigation, through a motion to dismiss, would encourage abuses of the bankruptcy system by dishonest debtors and render nugatory Section 1307(c), an outcome that could not have been contemplated by Congress.
In order to warrant conversion in the face of the debtor’s conflicting motion to dismiss, the creditor must prove that “cause” exists to warrant relief and that conversion is in the best interest of the creditors and the estate. The bankruptcy court must conduct a hearing on the merits of the two motions. The court stated that when a creditor files a motion to convert a Chapter 13 case on the grounds of fraud prior to the debtor’s filing of a motion to dismiss under Section 1307(b): 2002), where the court held that the right to dismiss under Section 1307(b) was limited by Section 1307(c). a debtor could invoke the automatic stay to effectively and indefinitely prevent secured and unsecured creditors from collecting legitimate debts.Ī similar conclusion was reached in In re Crowell, 292 B.R. Congress included no expressly stated good faith requirement for filing a chapter 13 petition.
To say Congress intended that a debtor could thwart a creditor’s opportunity even to present his proofs by filing a motion to dismiss, thus relegating the creditor to pursuit of his remedies in yet another forum, a state Court, defies reason. 1987), the court harmonized Sections 1307(b) and 1307(c) as follows:Ĭlearly Congress contemplated that for some reasons, and it listed several but not all in §1307(c), “a party in interest” could request and receive an order of conversion upon presentation of proper proofs and under some burden of persuasion. However, a bad faith finding is required. 1999), the court ruled that a debtor’s right to voluntary dismissal of a Chapter 13 petition under Section 1307(b) can be trumped under certain circumstances by motion to convert under Section 1307(c). (4) failure to commence making timely payments under Section 1326 of this title…Īuthorities have split on the issue of whether debtor has an absolute right to dismiss under Section 1307(b), especially in light of an intervening motion to convert. (1) unreasonable delay by the debtor that is prejudicial to creditors * * * on request of a party in interest or the United States trustee and after notice and a hearing, the court may convert a case under this chapter to a case under chapter 7 of this title, or may dismiss a case under this chapter, whichever is in the best interest of creditors and the estate, for cause, including Any waiver of the right to dismiss under this subsection is unenforceable.” Section 1307(c) states, in part: Section 1307(b) of the Bankruptcy Code provides that “n request of the debtor at anytime, if the case has not been converted under Sections 706, 1112, or 1208 of this title, the court shall dismiss a case under this chapter.