Cite as: Keith M. Lundin, Lundin On Chapter 13, § 151.1, at ¶ ____, LundinOnChapter13.com (last visited __________).
At any time, so long as the case has not previously been converted to Chapter 13 from Chapter 7, 11 or 12, the debtor can voluntarily dismiss the Chapter 13 case.1 Bankruptcy Rule 1017(f)(2) tells us that voluntary dismissal under § 1307(b) is initiated by motion filed and served as required by Bankruptcy Rule 9013. Bankruptcy Rule 9013 ambiguously refers to other rules or court orders without specifying on whom to serve a motion for voluntary dismissal. Because creditors have statutory authority under § 349(a) to ask for conditions on the dismissal of a Chapter 13 case,2 all creditors have a right to notice of a Chapter 13 debtor’s motion for voluntary dismissal under § 1307(b).
Applying Bankruptcy Rule 1017(f), it has been held that voluntary dismissal under § 1307(b) is accomplished by motion and not by filing a “notice” of dismissal.3 On the other hand, another bankruptcy court observed that a “request” is all that is needed for voluntary dismissal—at least implying that a request is different from a motion for purposes of Bankruptcy Rule 1017(f).4 This distinction between a request and a motion is elusive given that Bankruptcy Rule 9013 provides that “a request for an order . . . shall be by written motion, unless made during a hearing.”5
After the fact, the actual dismissal of a Chapter 13 case must be noticed to all creditors under Bankruptcy Rule 2002(f). By local rule or practice, either the debtor, the clerk or the Chapter 13 trustee gives notice to all creditors of voluntary dismissal of a Chapter 13 case.
It has been held that the bankruptcy court should refuse a Chapter 13 debtor’s oral motion to dismiss because creditors are without notice that § 1307(b) is at issue.6 In contrast, it has also been held that a Chapter 13 debtor is not necessarily entitled to a hearing on dismissal—and creditors are not necessarily entitled to notice of dismissal—when a “probationary order” triggered dismissal upon occurrence of the condition in the order.7
“Automatic” dismissal is a real problem for creditors. Typically, there will be no notice of the prior order setting conditions nor will there be notice when the condition occurs and the case is (automatically) dismissed. In this situation, it is not obvious how a creditor would know to ask for conditions on dismissal or to argue for the alternative of conversion to Chapter 7.8
A debtor’s motion for voluntary dismissal does not automatically commence a contested matter.9 The ordinary requirement for a hearing and notice with respect to dismissal of a bankruptcy case in Bankruptcy Rule 1017(a) does not apply to voluntary dismissal of a Chapter 13 case under § 1307(b).10 It has been said that the mandatory language of § 1307(b) requires the bankruptcy court to honor the debtor’s request to dismiss a Chapter 13 case without conducting a hearing.11
This neglect in the Bankruptcy Rules of any requirement for notice or a hearing with respect to voluntary dismissal of a Chapter 13 case is not benign. Creditors have rights to ask the court to condition or restrict the voluntary dismissal of a Chapter 13 case.12 To timely object to voluntary dismissal and raise arguments for conditions or restrictions on dismissal, creditors have to know that the debtor has filed a motion to dismiss. A creditor should promptly file a written objection as soon as the creditor learns of the debtor’s motion. The creditor’s written objection should commence a contested matter under Bankruptcy Rule 9014.
In the absence of a timely written objection, most courts simply enter an order dismissing the Chapter 13 case, and no hearing is scheduled. In some jurisdictions, voluntary dismissal is handled by notice from the debtor to all creditors, and the notice specifies a period within which objections must be filed, else an order of dismissal is entered without a hearing.
1 11 U.S.C. § 1307(b).
3 In re Crowell, 292 B.R. 541, 543 (Bankr. E.D. Tex. 2002) (“Under Federal Rule of Bankruptcy Procedure 1017(f), ‘dismissal under . . . § 1307(b) shall be on motion filed and served as required . . .’. Under Local Rule of Bankruptcy 1017(b), ‘[d]ismissals by the debtor pursuant to . . . § 1307(b) shall be by motion served on the trustee and United States Trustee.’ A notice is not proper as a means of dismissing a Chapter 13 case. . . . [N]otice of the dismissal does not effect ‘automatic’ dismissal.”).
4 See In re Hasan, 287 B.R. 308, 311 (Bankr. D. Conn. 2002) (“Although the debtors filed a motion to dismiss their second case, all they needed to do was file a request, as to which, ‘the court shall dismiss’ the case. See § 1307(b).”).
5 Fed. R. Bankr. P. 9013.
6 In re Bistrian, 184 B.R. 679, 683 (E.D. Pa. 1995) (Bankruptcy court did not commit error by refusing to consider debtor’s oral motion to dismiss Chapter 13 case offered at a hearing on motions by creditors to convert to Chapter 7. To consider the debtor’s oral motion would have precluded notice to absent creditors that § 1307(b) would be at issue and would create “institutional chaos” for the bankruptcy courts. Conversion was appropriate notwithstanding that trustee filed a motion to dismiss that was set for hearing at the same time as the motions to convert. “[E]ven if all creditors had notice of the Trustee’s motion, they had no notice that § 1307(b) would be an issue.”).
7 In re Black, 180 B.R. 534, 534–35 (S.D. Ind. 1995) (Debtor is not necessarily entitled to a hearing on dismissal where probationary order dismissed case if the debtor missed payment without satisfactory explanation. “The Bankruptcy Court placed Black’s bankruptcy on probationary status and instructed the Trustee to submit an order dismissing Black’s case ‘in the event future plan payments were not timely made to the trustee without satisfactory explanation.’ . . . [A]fter having been informed by the Trustee that Black had again failed to make timely payments, the Bankruptcy Court dismissed Black’s case. . . . [T]he case was dismissed without a hearing. . . . [A]s used in § 1307(c), the phrase ‘after notice and a hearing’ does not necessarily mean that a hearing is required. . . . Black does not dispute the fact that he received notice from the Bankruptcy Court that his case was going to be dismissed if he missed another payment without adequate explanation. Such notice was sufficient for the purposes of 11 U.S.C. § 1307. . . . Black offers no proof that he requested a hearing or in any way asked the Bankruptcy Court to consider any explanation for why he again failed to make a scheduled payment. Therefore, the Bankruptcy Court was not required to provide Black with a hearing before dismissing the case.”). Accord In re Meints, 222 B.R. 870, 871–72 (D. Neb. 1998) (Sua sponte dismissal without a hearing was appropriate based on unfulfilled conditions in order that dismissed prior bankruptcy case. Distinguishing Tenney v. Terry (In re Terry), 630 F.2d 634 (8th Cir. 1980), district court found authority for bankruptcy court’s sua sponte dismissal without a hearing in § 105 as necessary “to prevent an abuse of the bankruptcy process.”). See also In re Fernandez, 212 B.R. 361, 367 (Bankr. C.D. Cal. 1997) (In a chronicle of five bankruptcy cases by related or affiliated debtors filed “in concert” and “surreptitiously” to frustrate a foreclosure sale, it is appropriate for clerk of bankruptcy court, consistent with local rules, to dismiss Chapter 13 petition with prejudice to refiling for 180 days after written notice to the debtor that petitions, statements and schedules are deficient.), aff’d, 227 B.R. 174 (B.A.P. 9th Cir. 1998); In re Robinson, 196 B.R. 454, 457–59 (Bankr. E.D. Ark. 1996) (Pro se debtor’s fourth Chapter 13 case is dismissed pursuant to a “strict compliance” order that required the debtor to timely make all future payments. “The Court, having long struggled to provide debtor the opportunity to obtain the fresh start in bankruptcy imposed the condition upon the debtor. . . . The debtor failed to comply with this Order of the Court, failed to make full and timely payments and continued to file scandalous and impertinent pleadings. Accordingly, this bankruptcy case shall remain dismissed.”).
8 See discussion beginning at § 152.1 Procedure, Timing and Form; see also § 24.1 Court-Imposed Restrictions on Eligibility to Refile and § 139.2 BAPCPA: More Grounds; Changed Consequences.
9 Fed. R. Bankr. P. 1017(f)(2). The Advisory Committee note to the 1987 revisions to Bankruptcy Rule 1017(d), now redesignated as Rule 1017(f), states:
Subdivision (d) is amended to provide that dismissal . . . pursuant to section . . . 1307(b) is not automatically a contested matter under Rule 9014. . . . [D]ismissal under [§ 1307(b)] is initiated by the filing and serving of a motion as required by Rule 9013. No hearing is required on these motions unless the court directs.
10 Bankruptcy Rule 1017(a) provides, “Except as provided in . . . 1307(b) . . . a case shall not be dismissed on motion of the petitioner . . . before a hearing on notice as provided in Rule 2002.” There is no provision of Bankruptcy Rule 2002 requiring notice of a motion to dismiss in a Chapter 13 case. Contrast the requirement in Bankruptcy Rule 2002(a)(5) that 20 days’ notice be provided by mail of “the hearing on the dismissal” of a Chapter 7, 11 or 12 case.
11 In re Witte, 279 B.R. 585, 586 (Bankr. E.D. Cal. 2002) (“This chapter 13 case was dismissed . . . at the request of the debtor. Because the case had not previously been converted from another chapter, the court was required to dismiss the case without conducting a hearing. 11 U.S.C. § 1307(b).”). See also In re Hasan, 287 B.R. 308 (Bankr. D. Conn. 2002) (After a request from the debtor, the bankruptcy court “shall dismiss” the Chapter 13 case under § 1307(b).).