Cite as: Keith M. Lundin, Lundin On Chapter 13, § 151.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
Because Chapter 13 is a wholly voluntary chapter and because of long-standing congressional policy favoring attempts by individual debtors to repay creditors, the debtor can dismiss the Chapter 13 case “at any time” under § 1307(b) and the right to dismiss cannot be waived.1 The U.S. Court of Appeals for the Second Circuit has forcefully described § 1307(b) as conferring on Chapter 13 debtors an absolute right to voluntarily dismiss:
We hold that a debtor has an absolute right to dismiss a Chapter 13 petition under § 1307(b), subject only to the limitation explicitly stated in that provision. . . . The term “shall,” . . . generally is mandatory and leaves no room for the exercise of discretion by the trial court. . . . The mandatory nature of § 1307(b) becomes even clearer when the language of that provision is compared with the permissive language of § 1307(c). . . . This conclusion reflects the intention of Congress to create an entirely voluntary chapter of the Bankruptcy Code. . . . [A]lthough § 105(a) grants a Bankruptcy Court broad powers, it does not authorize the Court to disregard the plain language of § 1307(b).2
The legislative history to § 1307 confirms that Congress intended to grant debtors an absolute right to dismiss a Chapter 13 case at any time:
Subsections (a) and (b) confirm, without qualification, the rights of a Chapter 13 debtor to convert the case to a liquidating bankruptcy case under Chapter 7 of title 11, at any time, or to have the Chapter 13 case dismissed. Waiver of any such right is unenforceable.3
Section 1307(b) itself contains only one restriction on voluntary dismissal: the case cannot have been previously converted to Chapter 13 from Chapter 7, 11 or 12 under § 706, 1112 or 1208.4 This exception prevents a debtor from voluntarily dismissing a Chapter 13 case that began in a chapter where there were restrictions on voluntary dismissal. For example, if the debtor began in Chapter 7, the debtor was not free to automatically dismiss the Chapter 7 case under § 706; thus, the debtor cannot convert from Chapter 7 to Chapter 13 and then accomplish a voluntary dismissal.5 In Blaise v. Wolinsky (In re Blaise),6 the Bankruptcy Appellate Panel for the Second Circuit held that the Chapter 13 debtor’s right to voluntarily dismiss under § 1307(b), rather than risk conversion to Chapter 7, evaporated when the debtor’s original Chapter 11 petition was converted to Chapter 13 pursuant to § 1112.
The broad power of Chapter 13 debtors to voluntarily dismiss and the statutory prohibition on waivers of that right have been recognized in reported decisions as important debtor protections that overcome agreements and even court orders that restrict voluntary dismissal. For example, in In re Howard,7 the confirmed plan provided that the debtor “agreed to enter a motion to convert the case to a chapter 7 or to consent to the entry of such motion” if real property was not sold by a specified date. The bankruptcy court declared this provision of the plan unenforceable to the extent it purported to waive the debtor’s right to dismiss under § 1307(b):
[T]he debtor who initiates relief in chapter 13 retains the right to dismiss their case throughout the reorganization process. This remains true notwithstanding the creditor’s reliance on the provisions of a confirmed plan of reorganization. . . . To the extent that the Court may read any provision of this debtor’s plan of reorganization to constitute a waiver of the right to dismiss the case at any time, such waiver is unenforceable.8
It is not uncommon for a Chapter 13 debtor to move for voluntary dismissal in response to a creditor’s motion for conversion to Chapter 7. Many decisions recognize that the mandatory language of § 1307(b) requires granting the debtor’s motion to dismiss notwithstanding a pending motion for conversion to Chapter 7.9
Notwithstanding the absolute language in § 1307(b), some courts have hedged the debtor’s right of voluntary dismissal. For example, in In re Tatsis,10 the bankruptcy court held that the debtor’s right of voluntary dismissal under § 1307(b) is limited when a motion to convert under § 1307(c) is also pending, and the court has discretion to grant either motion depending on which is in the best interests of creditors and the estate. On the facts presented, the court determined that dismissal was not in the best interests of creditors because it would preclude recovery of prepetition preferences. In In re Vieweg,11 the court held that a hearing was necessary under Bankruptcy Rule 9013 to consider the merits of simultaneous motions to convert and for voluntary dismissal. One district court explained that there is no absolute right to voluntarily dismiss a Chapter 13 case if a creditor has filed a motion for conversion under § 1307(c):
Reading [§ 1307(b) and (c)] in pari materia leads one to the conclusion that Congress could not have intended to give a debtor an absolute right to obtain dismissal of a Chapter 13 case. Such a right would give the debtor unfettered power to prevent conversion under § 1307(c) by simply filing a motion to dismiss whenever conversion was requested. For all practical purposes, that would render subsection (c) a nullity, an intent that ought not to be attributed to Congress. Consequently, this Court holds that the conversion provision contained in § 1307(c) operates as a limitation on the debtor’s right to obtain voluntary dismissal under § 1307(b).12
The U.S. Court of Appeals for the Eighth Circuit addressed competing motions to convert and to voluntarily dismiss in a Chapter 13 case in Molitor v. Eidson (In re Molitor).13 In Molitor, the debtor’s third Chapter 13 petition was filed the day before eviction from property the debtor was occupying without paying rent. The owner filed a motion to dismiss or convert, alleging bad faith, misrepresentation and ineligibility. The debtor filed a voluntary dismissal of the Chapter 13 petition. The bankruptcy court refused the voluntary dismissal and granted the owner’s motion to convert to Chapter 7. The debtor appealed.
Citing its own earlier decision in In re Graven,14 the Eighth Circuit found “principles of statutory construction” and broad policy arguments to support the bankruptcy court: “To allow Molitor to respond to a motion to convert by voluntarily dismissing his case with impunity would render section 1307(c) a dead letter and open up the bankruptcy courts to a myriad of potential abuses.”15
The Eighth Circuit does not explain why it rejected the plain reading of “shall dismiss” in § 1307(b) in favor of policy arguments and an imagined conflict between §§ 1307(b) and 1307(c). These two subsections are easily reconciled—§ 1307(c) permits conversion or dismissal “on request of a party in interest or the United States trustee” in all circumstances where no request for voluntary dismissal has been filed by the debtor under § 1307(b). The “myriad of potential abuses” stated (but not explained) by the Eighth Circuit was presumably considered by Congress when it mandated honoring a debtor’s request to voluntarily dismiss a Chapter 13 case. Section 349(a) empowers the bankruptcy court to deal with an abusive voluntary dismissal without disrespecting § 1307(b).16 Molitor cannot be reconciled with the Second Circuit’s view that the debtor’s right to voluntarily dismiss is absolute.17 At least one bankruptcy court in the Eighth Circuit has confined Molitor to circumstances in which the debtor’s voluntary dismissal is a bad-faith or abusive response to a creditor’s motion to convert.18
Many of the cases discussed immediately above in which the debtor’s motion to voluntarily dismiss collides with a creditor’s motion to convert to Chapter 7 involve evidence of misconduct by the debtor during the Chapter 13 case. One reported decision holds that evidence of “fraud, wrongful behavior or abusive misconduct” justifies delaying action on a debtor’s motion for voluntary dismissal to permit contemplation of other remedies.19 The debtor’s absolute right to dismiss has been questioned when the purpose of dismissal is to immediately refile to take advantage of changes in the Bankruptcy Code.20
1 Regan v. Ross, 691 F.2d 81 (2d Cir. 1982) (Chapter 13 is voluntary, and debtor can dismiss at any time under § 1307.). Accord Nash v. Kester, 765 F.2d 1410 (9th Cir. 1985); In re Raikes, 22 B.R. 837 (Bankr. D.N.J. 1982); In re Waldrep, 20 B.R. 248 (Bankr. W.D. Tex. 1982); In re Frost, 19 B.R. 804 (Bankr. D. Kan. 1982); Southern Fed. Sav. & Loan Ass’n v. McFarland, 17 B.R. 242 (Bankr. N.D. Ga. 1982); In re Kahn, 16 B.R. 15 (Bankr. M.D. Ala. 1981); In re Penland, 11 B.R. 522 (Bankr. N.D. Ga. 1981).
2 Barbieri v. RAJ Acquisition Corp. (In re Barbieri), 199 F.3d 616, 618–20 (2d Cir. 1999).
3 S. Rep. No. 95-989, at 141 (1978).
4 11 U.S.C. § 1307(b).
5 See In re Barnes, 275 B.R. 889, 894 (Bankr. E.D. Cal. 2002) (“A debtor has no absolute right to request dismissal of a converted chapter 13 case. Section 1307(b) restricts the debtor’s unqualified right to request dismissal only to cases that have not been previously converted from another chapter.”).
6 219 B.R. 946 (B.A.P. 2d Cir. 1998).
7 179 B.R. 7 (Bankr. D.N.H. 1995).
8 179 B.R. at 9.
9 Socal Communications Sites, LLC v. Bevan (In re Bevan), Nos. 01-56033, CV-00-00931-VAP, 2002 WL 1342906, at *1 (9th Cir. June 19, 2002) (unpublished) (“[W]e have said . . . that the ‘debtor has an absolute right to dismiss a Chapter 13 petition.’ . . . Even though Socal Communications had moved to convert, the Bevans made their request for dismissal before conversion took place.”); Beatty v. Traub (In re Beatty), 162 B.R. 853, 857–58 (B.A.P. 9th Cir. 1994) (Bankruptcy court inappropriately granted creditor’s motion to convert to Chapter 7 when debtor moved to voluntarily dismiss the Chapter 13 case before entry of the order of conversion. Bankruptcy court orally “granted” motion to convert. Before the court signed or entered an order converting the case, the debtor filed an application to voluntarily dismiss under § 1307(b). “The better reasoned view is that a court must dismiss the case upon the debtor’s request for dismissal under section 1307(b) if that request is made prior to the effective time of an order converting the case to Chapter 7. . . . We determine that the conversion is not effective upon the oral ruling. . . . Given that the rules consistently rely upon the entry of the judgment or order as the effective date for the consequences of the judgment or order, we decline to decide that conversion is effective upon oral ruling for purposes of determining whether a debtor retains his or her right to dismiss a Chapter 13 case.”); Zeman v. Dulaney (In re Dulaney), 285 B.R. 10, 14 (D. Colo. 2002) (“When a court is presented with competing § 1307(b) and § 1307(c) motions the normal usage of the words should control; the court must dismiss the Chapter 13 case. . . . Since the purpose of Chapter 13 is to encourage voluntary petitions, that policy is served by preserving the debtor’s right to dismissal in the face of a competing motion to convert to Chapter 7.”); Clearstory & Co. v. Blevins, 225 B.R. 591, 592 (D. Md. 1998) (Acknowledging the split of authority, Chapter 13 debtor has an absolute right to dismiss a Chapter 13 case notwithstanding a creditor’s motion to convert to Chapter 7 and allegations that the Chapter 13 filing was in bad faith. “Section 1307(b) is unequivocal in stating that the debtor may request dismissal ‘at any time’ and that when such a request is made, the court ‘shall’ dismiss the case. . . . [S]ections 1307(b) and 1307(c) do not stand in contradiction to one another since nothing in section 1307(b) divests a bankruptcy court of power to order conversion in lieu of dismissal where the debtor does not request dismissal.”); In re Eddis, 37 B.R. 217 (E.D. Pa. 1984); In re Gillion, 36 B.R. 901 (E.D. Ark. 1983); In re Neiman, 257 B.R. 105, 108–09 (Bankr. S.D. Fla. 2001) (Debtor’s right to voluntarily dismiss trumps creditor’s pending motion to convert notwithstanding substantial evidence of debtor misconduct and manipulation. “The split of authority is highlighted by comparing the Second Circuit’s decision, [Barbieri v. RAJ Acquisition Corp. (In re Barbieri),] 199 F.3d 616, 619 (2nd Cir. 1999) holding that a debtor’s right to dismiss a chapter 13 case is absolute . . . with the Eighth Circuit’s decision, [Molitor v. Eidson (In re Molitor),] 76 F.3d 218, 220 (8th Cir. 1996) restricting a chapter 13 debtor’s right to voluntary dismissal and converting a case for cause in order to prevent abuse of the bankruptcy system . . . . The Court concurs with the § 1307 statutory analysis presented by the Second Circuit. The word ‘shall’ in § 1307(b) means the directive is mandatory. The Court has no discretion under this provision but to grant the Debtor’s Motion, despite the § 1307(c) Creditor’s Motion pending before the Court.” Court grants the debtor’s motion to dismiss but with prejudice to refiling in any jurisdiction for two years.); In re Whitmore, 225 B.R. 199, 202 (Bankr. D. Idaho 1998) (Debtors’ voluntary motion to dismiss under § 1307(b) should be granted notwithstanding a simultaneously pending motion by the trustee under § 1307(c) to dismiss the case for failure to make payments. In prior Chapter 13 case, Chapter 13 trustee moved to dismiss for cause based on the debtors’ failure to make payments under their confirmed plan. In response, the debtors filed a motion to dismiss the prior case voluntarily under § 1307(b). The day after filing the motion to voluntarily dismiss the prior case, the debtors filed a second Chapter 13 case. By inadvertence, the trustee’s motion to dismiss the first case for cause was entered. A creditor moved to dismiss the second case based on § 109(g)(1), claiming that the dismissal for cause of the first case barred the refiling within 180 days. First noting that a voluntary dismissal of a Chapter 13 case under § 1307(b) is accomplished by the debtor by merely filing a motion and without a hearing, court holds, “When the court is faced with two competing motions, one the debtors’ under § 1307(b) and the other under § 1307(c), the court must give effect of the debtor’s motion so long as the requirements of § 1307(b) have otherwise been met.” Once the court corrected the record to reflect that the prior case was dismissed voluntarily under § 1307(b), the creditor’s motion to dismiss the second case under § 109(g)(1) was denied.); In re Patton, 209 B.R. 98, 100–02 (Bankr. E.D. Tenn. 1997) (Debtors’ motion to dismiss trumps creditor’s prior motion to convert. “Looking to the language employed in subsections (b) and (c) of § 1307, there is no ambiguity. Subsection (b) plainly establishes that if a debtor, at any time, moves to dismiss a case that has not previously been converted, then the court ‘shall’ dismiss the case. The term ‘shall’ is unambiguously understood to impose a mandatory requirement. . . . Subsection (c) plainly establishes that the court, after notice and a hearing, ‘may’ convert a Chapter 13 case for ‘cause’ . . . . The term ‘may’ is unambiguously understood to create a permissive option. . . . Nevertheless, the statutory scheme set forth in § 1307 is not consistent. In the event of competing motions filed under subsections (b) and (c), one subsection will inevitably prevail at the expense of rendering the other subsection a nullity. . . . The legislative history to § 1307 provides in material part: ‘Subsections (a) and (b) confirm, without qualification, the rights of a chapter 13 debtor to convert the case to a liquidating bankruptcy case under chapter 7 of title 11, at any time, or to have the chapter 13 case dismissed. Waiver of any such right is unenforceable.’ . . . S. REP. NO. 95-989, at 141 (1978) . . . . The legislative history clearly establishes that a debtor has a right to dismiss the case ‘without qualification,’ and that a court is required to do so upon request of the debtor. Nothing in the legislative history indicates that the court may exercise discretion when considering a debtor’s motion to dismiss. . . . [T]he objectives and policies underlying the Bankruptcy Code persuasively establish Congress’ intent that a debtor’s right of dismissal trumps a creditor’s right to convert.”); In re Greenberg, 200 B.R. 763, 766–67 (Bankr. S.D.N.Y. 1996) (Debtor’s motion to voluntarily dismiss under § 1307(b) filed in response to Co-op’s motion to convert must be granted; however, under § 349(a), dismissal is conditioned that the stay will not automatically apply in any future bankruptcy case with respect to Co-op. “The plain language of the statute suggests that ‘[s]ection 1307(b) is mandatory and the court has no choice but to dismiss a Chapter 13 proceeding on the debtor’s motion.’ . . . [U]nlike the granting of a competing conversion motion under 11 U.S.C. § 1307(c), a dismissal with conditions does not contravene the debtor’s absolute right to dismiss her case under section 1307(b).”); In re Harper-Elder, 184 B.R. 403, 405–08 (Bankr. D.D.C. 1995) (Debtor’s absolute right to dismiss under § 1307(b) trumps a creditor’s earlier filed motion to convert. “[T]he debtor’s right to a dismissal under § 1307(b) is absolute. . . . Interpreting identical language in § 1208(b), the courts of appeals ruled that shall does not mean shall, granting the bankruptcy court the discretion to consider other currently pending motions. [See Graven v. Fink (In re Graven), 936 F.2d 378 (8th Cir. 1991); In re Foster, 121 B.R. 961 (N.D. Tex. 1990), aff’d without opinion, 945 F.2d 400 (5th Cir. 1991), cert. denied, 502 U.S. 1074, 112 S. Ct. 972, 117 L. Ed. 2d 136 (1992).] . . . [T]his court disagrees with these rulings. . . . The clear language of § 1307(b) provides that the court ‘shall’ dismiss the debtor’s chapter 13 case upon the debtor’s request, a request which the debtor may make ‘at any time’ by motion. . . . Furthermore, no waiver of the dismissal right under subsection (b) is enforceable. . . . Nowhere in subsection (b) is there any requirement that the debtor’s case will be dismissed only if it is in the best interest of creditors and the estate. Such a result would render subsection (b)’s lack of restriction absolutely meaningless. . . . [T]he court retains jurisdiction sufficient to impose any proper sanctions on the debtor for improper behavior under 11 U.S.C. §§ 349(a) and 109(g). . . . [T]he debtor does not benefit in any real sense nor are the creditors harmed by such a dismissal. . . . [T]he debtor’s absolute right to dismiss her chapter 13 petition is directly in harmony with the purpose of chapter 13. . . . It would be unfair to the debtor and counter to the spirit of the Code for the court to permit the creditor to avoid compliance with the involuntary petition provisions by utilizing the conversion language of chapter 13 to force the reluctant debtor into liquidation.”); In re Sanders, 100 B.R. 338 (Bankr. S.D. Ohio 1989); In re Looney, 90 B.R. 217 (Bankr. W.D. Va. 1988); In re Rebeor, 89 B.R. 314 (Bankr. N.D.N.Y. 1988); In re Turiace, 41 B.R. 466 (Bankr. D. Or. 1984); In re Zarowitz, 36 B.R. 906 (Bankr. S.D.N.Y. 1984); In re Benediktsson, 34 B.R. 349 (Bankr. W.D. Wash. 1983); In re Hearn, 18 B.R. 605 (Bankr. D. Neb. 1982).
10 72 B.R. 908 (Bankr. W.D.N.C. 1987).
11 80 B.R. 838 (Bankr. E.D. Mich. 1987).
12 Gaudet v. Kirshenbaum Inv. Co. (In re Gaudet), 132 B.R. 670, 676 (D.R.I. 1991) (Debtor’s right to voluntarily dismiss a Chapter 13 case under § 1307(b) is not necessarily absolute when a creditor has also filed a motion for conversion under § 1307(c). Section 1307(c) requires the bankruptcy court to select between conversion and dismissal based on which is in the best interests of creditors and the estate. That the debtor’s Chapter 13 case was filed in bad faith does not automatically require conversion over dismissal. Instead, there must be a showing consistent with § 1307(c) to determine whether conversion or dismissal is in the best interests of creditors and the estate. Bankruptcy court has authority to prevent and punish abuse of process in § 105, in Bankruptcy Rule 9011, and in extreme cases the use of contempt under Bankruptcy Rule 9020.). Accord In re Cobb, No. CIV. A. 99-3193, 2000 WL 17840, at *3 (E.D. La. Jan. 11, 2000) (“This Court concludes that the right to dismiss voluntarily under § 1307(b) is limited by § 1307(c). To conclude otherwise would render § 1307(c) nugatory and would encourage abuse of the bankruptcy system. The Court thus finds that when, as here, a creditor has filed a motion to convert a Chapter 13 case on the grounds of fraud, and the motion was filed before the debtor filed a motion to dismiss under § 1307(b), the bankruptcy court must conduct a hearing on the merits of the two motions.”); In re Crowell, 292 B.R. 541, 543–45 (Bankr. E.D. Tex. 2002) (“[T]he Debtor’s ‘absolute’ right to dismiss a case under § 1307(b) is a myth and a misreading of the Code. The right is conditional. . . . In this case, the creditor filed its motion to convert, appropriate notice was given . . . the Debtor chose not to respond or object to the motion to convert . . . . [T]he motion to convert was fully adjudicated by default. . . . To prevent or postpone entry of an order of conversion of the case to a Chapter 7, the Debtor need only to have filed a response or objection. . . . The Debtor chose not to litigate conversion directly, but instead to ‘dodge the bullet’ via dismissal. . . . Crowell lost her right of dismissal ‘upon request’ under § 1307(b) when the case converted to a Chapter 7 case.”); In re Cowper, 266 B.R. 669, 670–71 (Bankr. W.D. Mich. 2001) (“We believe Congress did not contemplate that a debtor could prevent conversion under § 1307(c) simply by filing a motion to dismiss whenever and for whatever reason conversion is requested. To do so would read the ‘honest debtor’ requirement out of the Bankruptcy Code . . . . [W]hen a motion to convert is filed prior to a debtor’s motion to dismiss, a hearing should be allowed to consider the merits of a conversion motion before ruling on the debtor’s motion to dismiss.”); In re Johnson, 228 B.R. 663, 667–69 (Bankr. N.D. Ill. 1999) (Debtor’s voluntary right to dismiss third Chapter 13 petition is trumped by competing motions to convert to Chapter 7 based on debtor’s gross abuse of the bankruptcy process. During serial cases, debtor concealed lawsuit settlements exceeding $1 million. “[T]he better reasoned authorities hold that a debtor’s right to voluntary dismissal of a Chapter 13 petition under § 1307(b) can be trumped under certain circumstances by a motion to convert under § 1307(c). . . . A debtor with an absolute right to dismissal would have ‘unfettered power to prevent conversion under § 1307(c) by simply filing a motion to dismiss whenever conversion was requested. For all practical purposes, that would render subsection (c) a nullity, an intent that ought not be attributed to Congress.’ . . . [H]e attempted to use § 1307(b) as an escape hatch once the creditors caught up with him. To allow Debtor to respond to a motion to convert by voluntarily dismissing his case with impunity under the foregoing circumstances would render § 1307(c) a dead letter and open up the bankruptcy courts to a myriad of potential abuses.”); In re Howard, 179 B.R. 7, 10 (Bankr. D.N.H. 1995) (“[T]o provide the debtor with the right to dismiss under § 1307(b) at any time under any circumstance would effectively nullify the involuntary conversion provisions of § 1307(c). Instead, the two sections should be interpreted in pari materia leading to the conclusion that the conversion provision of § 1307(c) places a limitation on the debtor’s otherwise consummate right to dismissal under § 1307(b). This Court hereby adopts this reasoning.” Debtor cannot waive the right to voluntarily dismiss in § 1307(b)—not even with a provision of a confirmed plan by which the debtor “agreed” to conversion if property was not sold by a certain date—but upon exercise of that right, the best interests of creditors and the estate must be measured against creditor’s rights to conversion under § 1307(c).); In re Powers, 48 B.R. 120, 121 (Bankr. M.D. La. 1985) (“[W]hile the right [to dismiss] is otherwise absolute, it does not apply where the debtor has filed the case for an improper purpose, in bad faith, or to abuse or misuse the bankruptcy process.” Court grants creditor’s motion to convert and denies debtor’s motion to dismiss where debtor omitted assets, grossly undervalued tax refund and otherwise acted in bad faith.).
13 76 F.3d 218 (8th Cir. 1996).
14 936 F.2d 378 (8th Cir. 1991) (In a Chapter 12 case, the analogous provisions of § 1208(b) and (d) did not afford a Chapter 12 debtor an unlimited right to voluntarily dismiss.).
15 76 F.3d at 220.
16 See § 339.1 [ Court-Imposed Conditions and Restrictions on Dismissal ] § 153.3 Court-Imposed Conditions and Restrictions on Dismissal. See also § 20.1 [ Court-Imposed Restrictions on Eligibility to Refile ] § 24.1 Court-Imposed Restrictions on Eligibility to Refile.
17 See Barbieri v. RAJ Acquisition Corp. (In re Barbieri), 199 F.3d 616 (2d Cir. 1999), discussed above in this section.
18 In re Casteel, 207 B.R. 185, 186–88 (Bankr. E.D. Ark. 1997) (Applying Molitor v. Eidson (In re Molitor), 76 F.3d 218 (8th Cir. 1996), debtor’s motion to dismiss prevails over creditor’s motion to convert absent proof of bad faith or abuse of the bankruptcy process by the debtor. “There is a split of authority among the circuits as to whether a debtor has an absolute right to dismiss a case . . . . [I]t is well-settled in this circuit that a debtor does not have the absolute right to dismiss a voluntary Chapter 13 case where abuse of the Bankruptcy Code is shown. . . . [C]ourts which restrict dismissal uniformly require some form of bad faith or abuse of the bankruptcy process. . . . Indeed, the Court has found no authority which denied the debtor’s right to dismiss a case, despite the pendency of a motion to convert, absent circumstances of bad faith. . . . It may be, under the circumstances, that should the debtor not be able to satisfy his debts outside of bankruptcy that an involuntary case is the only remedy available to the creditors. While the debtor’s right to dismiss his case is not, in the face of bad faith or abuse, unfettered, this Court is unwilling, in light of the mandatory language of section 1307(b) and the purposes of Chapter 13, to extend the policy and exception stated in Molitor to circumstances in which bad faith is not factually present. Inexperience and ineptitude, coupled with the extremely poor advice and the incompetent assistance of not only a manager but several attorneys, do not amount to the bad faith necessary to overcome the debtor’s right not to continue a voluntary Chapter 13 case.” Debtor was a barber who entered into a partnership to operate a farm equipment business. Debtor comingled assets and liabilities of the business, and by the time of the bankruptcy filing, debtor’s finances were hopelessly confused. Debtor was “incapable of operating a complex business,” but there was no evidence of bad faith or abuse in connection with the Chapter 13 case.).
19 In re Jones, 231 B.R. 110, 112 (Bankr. N.D. Ga. 1999) (Voluntary dismissal is delayed because of misconduct by debtor; consensual dismissal with prejudice to refiling for two years results. “Under § 1307(b), a Chapter 13 debtor generally has a right to immediate dismissal. . . . Because fraud, wrongful behavior or abusive misconduct was alleged in the case, the court delayed action on Debtor’s motion for voluntary dismissal pursuant to 11 U.S.C. § 1307(b).”).
20 See, e.g., Clifton Sav. Bank v. Jackson (In re Jackson), 184 B.R. 16, 20–21 (D.N.J. 1995) (Court rejects engineered dismissal of a Chapter 11 case filed before October 22, 1994, in which a motion for relief from stay had been filed and debtors desire to refile a Chapter 13 case under the 1994 Act. Because of the Third Circuit’s [First National Fidelity Corp. v. Perry, 945 F.2d 61 (3d Cir. 1991),] opinion, debtors’ efforts to reorganize a mortgage that had been reduced to a foreclosure judgment ended up in a Chapter 11 case. Five days after the 1994 Act became effective, the mortgage holder moved for relief from the stay and for conversion to Chapter 7. The debtors responded with an “Application for Appropriate Action” that asked the bankruptcy court to dismiss the Chapter 11 case in a manner that would not trigger § 109(g) so that the debtors could file a Chapter 13 case utilizing new § 1322(c). The bankruptcy court obligingly dismissed the Chapter 11 case in an order that required the debtors to file a new Chapter 13 case within 15 days. Citing Alice in Wonderland, the district court held, “A request for conversion does not cease to be a request for conversion simply by designating it an ‘Application for Appropriate Action.’ We see no reason to characterize the bankruptcy court’s dismissal order, which includes a condition that the debtors refile immediately, as anything but the granting of a faintly concealed conversion motion. . . . [B]ecause we find that the Chapter 11 case was actually converted to a Chapter 13 proceeding, we must dismiss [the debtors’ new Chapter 13 filing]. ‘If a bankruptcy action is pending, a bankruptcy action which purports to affect the same debt cannot be maintained.’”); In re Fitzpatrick, 175 B.R. 436, 437–38 (Bankr. D.N.H. 1994) (Debtor in a Chapter 11 case filed before October 22, 1994, cannot convert to Chapter 13 to take advantage of the higher debt limits in the Bankruptcy Reform Act of 1994; neither can debtor dismiss the Chapter 11 case as part of a scheme to refile a Chapter 13 case under the new debt limits. “[S]ection 702(b) of the Reform Act specially provides that, except for certain enumerated exceptions, ‘the amendments made by this Act shall not apply with respect to cases commenced under title 11 of the United States Code before the date of enactment of this Act.’ . . . [T]he debtors cannot now convert their case to Chapter 13 as they do not qualify for such relief under the pre–Reform Act debt limits and nothing before the Court indicates that the plain language of section 702(b) does not control. . . . [T]o allow a dismissal and a refiling would just abrogate or end-run the prohibition that Congress intended that pending cases would not benefit by other than a few provisions of the Bankruptcy Reform Act of 1994.”). But see In re Elrod, 178 B.R. 5 (Bankr. N.D. Okla. 1995) (That debtors dismissed Chapter 13 case and refiled nine days later is not cause for dismissal where first petition was filed when the debtors were not eligible under former § 109(e) and refiling on November 10, 1994, permitted debtors to use the higher eligibility limits in the Bankruptcy Reform Act of 1994.).