Cite as: Keith M. Lundin, Lundin On Chapter 13, § 23.1, at ¶ ____, LundinOnChapter13.com (last visited __________).
Except as provided in § 109(g),1 an individual who was a debtor in a prior bankruptcy case is not ineligible for Chapter 13. The second (third, fourth, . . . ) serial case may be dismissed or denied confirmation on a variety of theories,2 the debtor may not receive a discharge3 and the automatic stay may be less robust,4 but a debtor is not ineligible for Chapter 13 by virtue of any particular prior bankruptcy experience.5
It is probably worth a paragraph to distinguish “serial” filers from its superset, “repeat” filers. It is a fact of Chapter 13 life that many debtors in pending cases are not bankruptcy virgins. Researchers estimate that somewhere between 30 percent6 and 50 percent7 of Chapter 13 debtors have had a prior bankruptcy. “Serial” is not a term of art in the Bankruptcy Code and is not uniformly defined in case law. It certainly implies petitions relatively close in time and a serial filer connotes somewhat more approbation that a repeat filer. As explained below, serial bankruptcy filers have received congressional attention: a Chapter 13 filing within one year8 of a prior pending bankruptcy case or within two years9 or four years10 of a prior bankruptcy discharge is worthy of fewer protections and rewards. Perhaps “serial” is best defined with reference to the issue at hand. All bankruptcy filings by an individual debtor within one year of a prior, pending bankruptcy are serial when the automatic stay is the issue. When the focus is discharge, a Chapter 13 filing within two years of a prior Chapter 13 discharge has serial attributes. Likewise, serial could describe a Chapter 13 filing within four years of a prior Chapter 7 discharge. The counting of these time periods requires some further analysis.11
It is common for debtors emerging from Chapter 7 to file Chapter 13 as a method of dealing with claims that survived the Chapter 7 discharge or to control property that remains subject to liens. Sometimes called “Chapter 20,” the Chapter 13 case filed on the heels of a Chapter 7 discharge is not categorically forbidden by the Code, but the practice raises difficult issues. Courts have generally held that it is not per se bad faith for a debtor to seek Chapter 13 relief soon after completion of a Chapter 7 case; however, serial filings are a factor indicative of a lack of good faith for purposes of dismissal under § 130712 and for purposes of the good-faith filing requirement in § 1325(a)(7)13 and the good-faith requirement for confirmation of a plan in § 1325(a)(3).14 The courts are more resistant when the Chapter 13 case is filed before the Chapter 7 is closed—the simultaneous cases situation discussed above.15
Especially prior to the 2011 enactment of Bankruptcy Rule 3002.1,16 Chapter 13 debtors who owned homes routinely arrived at the end of the case to find out for the first time that they were thousands of dollars behind on monthly payments, fees, costs and/or expenses. Some of these debtors would immediately refile—a “Chapter 26” case—to deal with home mortgage lender and servicer issues.
Prior to 1991, there was a split of authority whether a debtor could manage liens that survived Chapter 7 discharge in a subsequent Chapter 13 case, especially when the debtor sought to cure default and reinstate a home mortgage that remained a lien but was unsupported by personal liability of the debtor.17 In 1991 the Supreme Court resolved that the surviving lien is a claim that may be provided for in a subsequent Chapter 13 case.18 The debtor coming out of a routine Chapter 7 case is usually eligible for Chapter 13 and can accomplish the restructuring of liens securing claims on which the debtor is no longer personally liable. In the course of dealing with surviving liens, the Supreme Court had this to say about “serial” filings:
Congress has expressly prohibited various forms of serial filings. See, e.g., 11 U.S.C. § 109(g) (no filings within 180 days of dismissal); . . . . The absence of a like prohibition on serial filings of Chapter 7 and Chapter 13 petitions, combined with the evident care with which Congress fashioned these express prohibitions, convinces us that Congress did not intend categorically to foreclose the benefit of Chapter 13 reorganization to a debtor who previously has filed for Chapter 7 relief.19
Addressed elsewhere in greater detail,20 the courts have not consistently resolved how to count liens that survived discharge in a prior bankruptcy case for eligibility purposes in a subsequent Chapter 13 case. We know from the Supreme Court’s decision in Johnson that the lien is a claim in the subsequent Chapter 13 case. We also know that the debtor discharged personal liability in the prior bankruptcy case. This creates issues whether to count the surviving lien as “debt” for eligibility purposes and, if so, whether that debt is counted toward the secured or unsecured eligibility limit in § 109(e).
There are at least two variations on this issue: (1) when the surviving lien is partially secured and “bifurcation”21 would produce both a secured and an unsecured claim; and (2) when the lien is wholly unsecured and the lien can be “stripped off,”22 leaving only an unsecured claim that is not supported by value in the collateral or by personal liability. After the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,23 there is the complicating factor that the debtor may be ineligible for discharge because of § 1328(f)24 and then the eligibility question becomes: if the debtor is not eligible for a discharge, can the wholly unsecured surviving mortgage lien be stripped off and, if so, how is that lien counted for eligibility purposes?
Some bankruptcy courts account for the unsecured portion of a lien that survived discharge in a prior Chapter 7 case as unsecured debt, notwithstanding the absence of personal liability. For example, in In re Cavaliere,25 the debtors were discharged in a Chapter 7 case in 1993 and filed Chapter 13 in 1995. The debtors scheduled 17 mortgages and judgment liens aggregating nearly $1.2 million, all “secured” by a residence valued at $350,000. The Chapter 13 trustee moved to dismiss for ineligibility under § 109(e). The debtors responded with a motion to split claims under § 506(a),26 arguing that the unsecured portions of the liens and mortgages were discharged in the prior Chapter 7 case and were not counted for eligibility purposes under § 109(e). The bankruptcy court concluded that the debtors were ineligible because the unsecured portions of the judgments and liens were counted notwithstanding discharge of the debtors’ personal liability.
A chapter 7 discharge “extinguishes only ‘the personal liability of the debtor’ . . . . [T]he Code provides that a creditor’s right to foreclose on the mortgage survives or passes through the bankruptcy.” Johnson v. Home State Bank, 501 U.S. 78[, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (June 10, 1991)] . . . . The court further held that the surviving mortgage interest is a “claim” subject to inclusion in a chapter 13 case, and is “an ‘enforceable obligation’ of the debtor.” . . . It follows then that the [unsecured portion of the liens and mortgages] survived the discharge and are enforceable obligations in this chapter 13 case. . . . The chapter 7 discharge did indeed protect the debtors from personal liability on claims scheduled in that case. . . . So, when a debtor files a chapter 13 petition after a chapter 7 discharge, as permitted by Johnson, that protection is still effective. That result would not follow, however, if an allowed secured claim is redefined under § 506(a) and the resulting unsecured claim is not disallowed under § 502(b)(1). . . . The unsecured debt arising out of the § 506(a) Order would exceed the debt limitation imposed by § 109(e) which is a specific statement of federal policy that restricts bankruptcy protection to a limited class of eligible debtors. . . . Since at the commencement of this case, the amount of secured debt exceeded the permissible limits decreed by § 109(e), it is apparent that the purpose of the § 506(a) valuation was to reduce the amount of that debt for eligibility purposes. Accordingly, I conclude that the debts . . . which resulted from the valuation were owed unsecured debt as of the date of the commencement of this case.27
On appeal, the bankruptcy court decision in Cavaliere was reversed.28 The district court reasoned by analogy that the surviving Johnson-lien is a nonrecourse debt, the unsecured portion of which is not enforceable and not counted toward eligibility in a subsequent Chapter 13 case. The district court observed, “[C]ongressional intent seems little advanced by denying the benefits of Chapter 13 protection merely on the basis of a large quantity of unenforceable debt.”29
The district court in Cavaliere has the better of this argument. The claim-splitting process under § 506(a) does not resurrect the unsecured portion of a lien for purposes of the eligibility calculation in a subsequent Chapter 13 case. The lien discussed by the Supreme Court in Johnson v. Home State Bank30 is a claim notwithstanding discharge of the debtor’s personal liability because of the definition of claim in § 101(5). Nothing in § 101(5) suggests that the unsecured portion of a lien remains a debt for bankruptcy purposes after discharge in a Chapter 7 case.
In contrast to Cavaliere, the bankruptcy court in In re Blackwell31 concluded, citing Johnson, that the entire amount of an undersecured home mortgage lien is treated as secured debt for eligibility purposes notwithstanding discharge of personal liability in a prior Chapter 7 case. The Blackwell court explained:
Johnson is not an eligibility case . . . [h]owever, the language is very broad in terms of how a court determines whether a creditor has a claim (and thus debtor has a debt) after personal liability has been discharged in a chapter 7 case. . . . [Johnson] held that a mortgage lien remains a claim against the debtor that may be “rescheduled” in a chapter 13 case, notwithstanding discharge of the debtor’s personal liability in a previous chapter 7 case. . . . [T]he Supreme Court’s opinion appears to foreclose any argument that because the claim cannot be enforced against the debtor personally, it does not count toward the eligibility requirements. Under Johnson, if, as of the petition date, the claim is enforceable against either debtor or property of the debtor, it should be included in the eligibility calculation. . . . “[The secured creditor’s] claim against the property is [the full amount of the obligation] because it has the right to payment of that amount from the property or from the proceeds of the sale of the property. Although, as a practical matter, [secured creditor] will only be able to collect the value of the property, it has the right to payment of the entire obligation if under some circumstance, the property is sold for more than its present value.” . . . The debt at issue here is analogous to a nonrecourse debt . . . . As such, . . . the entire amount of the debt must be counted for eligibility purposes.32
When the lien that survived discharge in a prior Chapter 7 case is wholly unsecured by any value in the collateral, debtors will argue that the surviving lien is not counted at all for eligibility purposes in a subsequent Chapter 13 case. The logic here is that the wholly unsecured lien can be “stripped off” because there is no value to support a secured claim for § 506(a) purposes.33 If the lien is not available to secure the claim and the debtor is not personally liable to the lienholder, there is no “debt” for eligibility purposes. This view has been accepted by some courts34 and rejected by others.35
BAPCPA put an interesting spin on the eligibility of Chapter 13 debtors who can strip off a wholly unsecured lien that survived discharge in a prior Chapter 7 case. Detailed below,36 BAPCPA added a new § 1328(f) which limits discharge in a Chapter 13 case when the current case is filed within four years of a prior Chapter 7 filing or within two years of a prior Chapter 13 filing in which the debtor received a discharge.37 It has been held that the new limitation on successive discharges in § 1328(f) is not a limitation on eligibility for Chapter 13.38 But unavailability of discharge has figured mightily in the treatment of a wholly unsecured surviving lien that could otherwise be stripped off in the Chapter 13 case.39 The conflicting authority with respect to whether a Chapter 13 debtor can strip off a wholly unsecured lien when the debtor is not eligible for discharge because of § 1328(f) complicates the disagreement whether a surviving lien that can be stripped off is counted for eligibility purposes and, if so, is it counted as secured or unsecured debt?40
“Abuse” of bankruptcy by debtors filing serial bankruptcy cases was often mentioned by the proponents of BAPCPA as a major reason bankruptcy reform was needed.41 The pre-BAPCPA statutory barrier to serial filing in § 109(g) was not changed by BAPCPA.42 In other words, there was nothing in BAPCPA that changed eligibility for Chapter 13 relief based on prior bankruptcy experience of the debtor.43
What BAPCPA contained to address the perceived abuse of serial filing was a less robust automatic stay for some Chapter 13 debtors with prior bankruptcy experience44 and new limits on successive discharges.45 Rather than forbid repeat bankruptcy filings, BAPCPA acknowledged but burdened second and third (or more) filings by the same debtor and extended the time between permitted discharges.
Detailed elsewhere,46 new § 362(c)(3) terminates parts of the automatic stay 30 days after the petition with respect to certain debts and creditors when a prior case of the debtor was pending within the year preceding the current petition but was dismissed. Under new § 362(c)(4), if two or more cases of the debtor were pending within the year before the current petition but were dismissed, then no automatic stay goes into effect in the current case except upon court order.47 After BAPCPA, the filing of a Chapter 13 petition does not stay enforcement of a lien against real property if the filing is in violation of a court order in a prior case that prohibits refiling or is within 180 days of a dismissal that renders the debtor ineligible under § 109(g).48 Finally, BAPCPA put statutory legs under the concept of “in rem” relief from the stay by authorizing stay relief orders that can be entered in a (prior) bankruptcy case, then recorded to be effective in any future bankruptcy for two years.49
These new limitations on the automatic stay do not render any individual debtor ineligible for Chapter 13 relief. Changes to the automatic stay by BAPCPA reduce the relief that an eligible debtor realizes after the Chapter 13 petition is filed.
It is significant to Chapter 13 practitioners that the limitations on the automatic stay in BAPCPA have no analogues with respect to the codebtor stay in § 1301.50 When an eligible debtor files a Chapter 13 case, the codebtor stay protects a codebtor with respect to all codebtor obligations notwithstanding that BAPCPA limits the automatic stay in the filing debtor’s case.51 A serially filing debtor who has lost some or all protection of the automatic stay can still expect the full protection of the codebtor stay with respect to cosigned debts. The codebtor stay may prohibit collection action with respect to collateral for a cosigned debt even when the debtor is not protected personally by the automatic stay.52
The limitations on successive discharges in Chapter 13 cases added by BAPCPA are found in § 1328(f):
Notwithstanding [§ 1328(a) and (b)], the court shall not grant a discharge of all debts provided for in the plan or disallowed under section 502, if the debtor has received a discharge—
(1) in a case filed under chapter 7, 11, or 12 of this title during the 4-year period preceding the date of the order for relief under this chapter, or
(2) in a case filed under chapter 13 of this title during the 2-year period preceding the date of such order.53
Perhaps by confusion or just a long hope, § 1328(f) has inspired preemptive strikes on Chapter 13 cases filed within the four-year or two-year discharge limitations. One prong of attack has been the misguided claim that the limitation on successive discharges in § 1328(f) is an eligibility provision that stops a Chapter 13 case at the door if the debtor can’t get a discharge. Less direct, but a bit better tractioned, it has been argued that the filing by a debtor not eligible for discharge lacks good faith and should be dismissed—if for no other reason, because the Chapter 13 case will “unreasonably delay” collection of debts that will not be discharged.54
To date, these arguments have been rejected by most courts. As explained by the United States Court of Appeals for the Fourth Circuit in Branigan v. Bateman (In re Bateman):55
[W]e do not believe that § 1328(f) is an eligibility provision. . . . Section 1328(f) never mentions the word “filing,” speaks only of “discharge,” and does not purport to limit the eligibility provisions of § 109(e). We therefore hold that the plain language of § 1328(f) does not prohibit a debtor who is eligible for a discharge from filing a Chapter 13 petition.56
Recognized in Bateman, there is a fundamental difference between eligibility for Chapter 13 and discharge of debt at completion of payments under a plan. There are many reasons why debtors eligible for Chapter 13 do not discharge some or all of their debts—including that some debtors never complete payments under the plan and some debts are statutorily excepted from discharge.57 Neither the Bankruptcy Code nor reported decisions confused eligibility requirements with conditions for discharge prior to BAPCPA and there is nothing in BAPCPA to suggest that confusion is now warranted.58
There is also the question of how to count debt for eligibility purposes when there is uncertainty whether the debt was dischargeable in a prior bankruptcy. Entry of discharge in a Chapter 7 case does not automatically resolve whether a debt is counted toward eligibility in a subsequent Chapter 13 case. For example, in In re Ekeke,59 the debtors were discharged in a Chapter 7 case and filed Chapter 13 two weeks later. In the Chapter 7 case, the debtors scheduled a debt to the IRS of $281,302.34. The debtors did not file a complaint to determine whether the IRS’s claim was dischargeable under § 523(a)(1). In the Chapter 13 case, the IRS filed a proof of claim for an even larger amount and moved to dismiss arguing the unsecured debt limitation in § 109(e). The debtors responded that the tax claims were not counted because they were discharged in the Chapter 7 case. The bankruptcy court concluded that scheduling the tax debts in the Chapter 7 case did not render those debts contingent or unliquidated for eligibility purposes in the subsequent Chapter 13 case. Moreover, discharge in the Chapter 7 case did not automatically exclude the tax claims from the § 109(e) computation:
[T]he Debtors must have taken an affirmative step in the Chapter 7 case to discharge the debt owed to the IRS. After careful review of the Debtors’ Chapter 7 case, the Court concludes that the Debtors did not seek a discharge under § 523(a)(1). . . . [T]he IRS claim . . . includes taxes from 1987 through 1990. The IRS contends these debts are nondischargeable under § 523(a)(1)(C) . . . . Debtor vigorously disputes these accusations, yet they have never sought determination that this liability was discharged. Thus, the IRS claim is disputed but neither discharged under § 523(a)(1) or unliquidated. Accordingly, the tax liabilities from 1987 through 1990 are included in the § 109(e) computation.60
Consistent with Ekeke, another court found debts that were the subject of nondischargeability litigation in a simultaneously pending Chapter 7 case were liquidated, noncontingent and counted toward the debt limitations as if not dischargeable.61 In Wisconsin v. Weller (In re Weller),62 the court concluded that a debtor was ineligible for Chapter 13 based upon a state court judgment for unfair rental practices notwithstanding entry of discharge in a prior Chapter 7 case because the judgment (in excess of the unsecured debt limitation) was nondischargeable under § 523(a)(7).
The message for debtors is that eligibility in a subsequent Chapter 13 case may depend on initiating and succeeding in dischargeability litigation in a prior Chapter 7 case. Under § 523(c)(1), discharge automatically relieves a debtor from the fraud debts described in § 523(a)(2), (a)(4) and (a)(6) unless “on request of the creditor” the bankruptcy court determines the debt to be excepted from discharge. Absent timely creditor action in the Chapter 7 case, discharge determines that claims described in § 523(c)(1) are unenforceable and are not counted in the eligibility calculus in a subsequent Chapter 13 case.63 In contrast, the dischargeability of debts not listed in § 523(c)(1) can be determined at any time during or after discharge in a Chapter 7 case and on the request of any party.64 The tax debts in Ekeke and the unfair trade violations in Weller are not listed in § 523(c)(1). Absent dischargeability litigation in the prior Chapter 7 cases, these debts were counted toward the debt limitations in the subsequent Chapter 13 cases.
The use of Chapter 13 to manage a claim declared nondischargeable in a prior Chapter 7 case is commonplace. As a general rule, an individual is eligible for Chapter 13 notwithstanding that the purpose of the Chapter 13 case is in whole or in part to deal with a nondischargeable claim from a prior case. The debtor’s good faith in proposing the Chapter 13 plan is more appropriately assessed at confirmation than as an element of eligibility.65
The creditor faced with a Chapter 13 filing by a debtor recently emerged from Chapter 7 can attack the serial filing by motion to dismiss or motion for relief from the stay. A motion to dismiss alleging bad faith is more likely of success than a challenge to eligibility. Creditor attacks on serial filings have been particularly successful when the subsequent Chapter 13 case is filed solely to deal with the grant of relief from the stay in a prior Chapter 7 case.66 If the new case was filed within 180 days of the voluntary dismissal of a prior case, creditors should check the docket sheet in the prior case to see if there was a motion for relief from the stay that would render the debtor ineligible under § 109(g)(2).67 Creditors that were discharged in a prior Chapter 7 case might consider the creative remedy fashioned by the bankruptcy court in In re Taylor:68 when the debtor and the debtor’s husband filed a series of Chapter 7 and Chapter 13 petitions to prevent creditors from reaching the equity in a homestead, the court reopened and consolidated the prior Chapter 7 cases with the pending Chapter 13 case to entitle the (discharged) creditors to share in the Chapter 13 estate.
In the unusual situation that a Chapter 11 debtor files a Chapter 13 case—a “Chapter 24” case—one bankruptcy court held that the limitations on modification of a Chapter 11 plan in § 1127 are not a bar to eligibility in the subsequent Chapter 13 case when an “unanticipated change in circumstances” improved the likelihood of success and the subsequent case was filed in good faith.69
3 See 11 U.S.C. § 1328(f), discussed below in this section and in § 156.2 Limitations on Successive Discharges.
5 But see 11 U.S.C. § 109(g), discussed in § 25.1 180-Day Bar to Eligibility in 11 U.S.C. § 109(g)—In General, § 25.2 11 U.S.C. § 109(g)(1)—Willful Failure to Abide by Court Order or to Appear in Proper Prosecution and § 25.3 11 U.S.C. § 109(g)(2)—Voluntary Dismissal after Request for Relief from Stay; and court-ordered restrictions on eligibility, discussed in § 24.1 Court-Imposed Restrictions on Eligibility to Refile.
6 Ed Flynn, Success Rates in Chapter 13, 36-AUG Am. Bankr. Inst. J. 38, 56–57 (2017) (Using data available through the Federal Judicial Center’s Interactive Data Base (IDB), “[a]bout 30.8 percent of the chapter 13 debtors in the IDB sample report that they have had at least one prior filing in the previous eight years. . . . (In contrast, less than 10 percent of chapter 7 debtors report a prior filing.) There is some variation in the refiling rates by location. In nine states, more than 40 percent of chapter 13 debtors were repeat customers, while in 19 other states, Puerto Rico and the District of Columbia, the refiling rate was under 25 percent . . . .”).
7 Scott F. Norberg & Andrew J. Velkey, Debtor Discharge and Creditor Repayment in Chapter 13, 39 Creighton L. Rev. 473, 497 (2006) (“The available data probably somewhat understate the incidence of other bankruptcy filings by the sample debtors. . . . Among the most remarkable findings of the Project is that at least half of all of the Chapter 13 debtors in the sample had filed one or more bankruptcy cases in addition to the sample case. As shown in Figure 3, the available data reveal that half of the debtors had filed only the sample case, while nearly 30% had filed one other case, 10% had filed two other cases, and 10% had filed three or more other cases.”).
8 See discussion of 11 U.S.C. § 362(c)(3) and (c)(4) beginning at § 59.1 In General.
9 See discussion of 11 U.S.C. § 1328(f)(2) in § 156.2 Limitations on Successive Discharges.
10 See discussion of 11 U.S.C. § 1328(f)(1) in § 156.2 Limitations on Successive Discharges.
18 Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (June 10, 1991).
19 Johnson v. Home State Bank, 501 U.S. at 87.
20 See § 14.3 Use of Statements and Schedules in Eligibility Calculations, § 14.4 Are Claims Split under 11 U.S.C. § 506(a)? and § 80.13 Modification of Unsecured Home Mortgage: Before and After BAPCPA.
23 Pub. L. No. 109-8, 119 Stat. 23 (2005).
24 See below in this section and see § 156.2 Limitations on Successive Discharges.
25 194 B.R. 7 (Bankr. D. Conn. Apr. 1, 1996) (Shiff), rev’d, 208 B.R. 784 (D. Conn. May 30, 1997) (Arterton).
27 In re Cavaliere, 194 B.R. at 11–13. Accord In re DiClemente, No. 12-1226 (FLW), 2012 WL 5211942 (D.N.J. Oct. 22, 2012) (unpublished) (Wolfson) (Substantially undersecured in rem claim that debtor discharged in prior Chapter 7 case is counted as unsecured debt in subsequent Chapter 13 case and renders debtor ineligible. Debtor failed to demonstrate likelihood of success on appeal of ineligibility.); In re Wimmer, 512 B.R. 498, 509–12 (Bankr. S.D.N.Y. June 30, 2014) (Morris) (Citing Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (June 10, 1991), Chapter 20 debtor is ineligible under § 109(e) because unsecured deficiency is counted toward debt limit notwithstanding Chapter 7 discharge. Under Johnson “‘a mortgage lien for which the debtor no longer has personal liability as the result of a chapter 7 discharge is a claim . . . .’ . . . [T]he in rem rights of the Creditor against the property create a secured claim in the bankruptcy case notwithstanding the discharge of personal liability. . . . Secured claims are also valued pursuant to § 506(a), which only leaves only two possible results: a secured portion to the extent of the value of the collateral and an unsecured portion to the extent of the deficiency. There is no provision in § 506(a) to eliminate a portion of the claim altogether. . . . The issue is whether the chapter 7 discharge affects the analysis under § 109(e) by rendering the now-unenforceable unsecured portions irrelevant. . . . Section 109(e) applies to ‘debts’ that the individual ‘owes.’ ‘Debt’ is defined in § 101(12) to mean ‘liability on a claim.’ At first glance, this definition would seem to indicate that the debtor must have ‘liability on’ the claim for there to be a ‘debt,’ liability that would have been extinguished by the chapter 7 discharge. There are two problems with this interpretation. First, nothing in § 101(12) indicates that ‘liability’ is the same as the ‘personal liability’ of the debtor. As illustrated in Johnson, collateral may be liable in rem for a claim even if the debtor is not. . . . Section 524(a), governing the effect of discharge, confirms this suspicion. Under § 524(a)(1), a discharge ‘voids any judgment . . . to the extent that such judgment is a determination of the personal liability of the debtor. . . .’ Section 524(a)(2) similarly provides that the discharge ‘operates as an injunction against the commencement or continuation of an action . . . to collect . . . any such debt as a personal liability of the debtor. . . .’ Both provisions provide that the discharge affects the ‘personal liability’ of the debtor, whereas § 101(12) only references the broader term ‘liability.’ The result is that some form of liability, presumably in rem liability, can remain after ‘personal liability’ is discharged. Similarly, § 524(f) provides that the discharge does not prevent the debtor from voluntarily repaying any ‘debt.’ The implication is that a ‘debt’ can survive discharge and be voluntarily repaid. . . . [There is a] difference between discharging a debt and its elimination. . . . The debt is still ‘owed’ notwithstanding the discharge; it is merely unrecoverable from the debtor personally. . . . This does not mean that every debt discharged in chapter 7 will count towards the debt limit in a subsequent chapter 20 case. To be a ‘debt’ for purposes of § 109(e), there must be a ‘claim.’ . . . Here, the secured debts constitute ‘claims’ by virtue of the Johnson decision, as they are enforceable against property of the estate. . . . If the debts were originally unsecured and discharged in the chapter 7, there would be neither in rem enforceability nor enforceability against the Debtors. This would render the claims disallowable under § 502(b)(1). . . . ‘[T]he undischarged in rem claim remaining after a Chapter 7 discharge[, however,] is subject to the treatment in a subsequent Chapter 13 case. As a result, the Court must also include the unsecured in rem claim when determining a debtor’s eligibility for relief under § 109(e).’”); In re Neuman, No. 12-12067, 2013 WL 256741 (Bankr. N.D. Cal. Jan. 23, 2013) (Jaroslovsky) (In rem mortgage claim that survived discharge in prior Chapter 7 case rendered debtor ineligible.); In re Scotto-DiClemente, 463 B.R. 308 (Bankr. D.N.J. Jan. 25, 2012) (Kaplan), aff’d, No. 12-1266 (FLW), 2012 WL 3314840 (D.N.J. Aug. 13, 2012) (unpublished) (Wolfson) (Under Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (June 10, 1991), wholly unsecured in rem claim remaining after Chapter 7 discharge must be counted for eligibility purposes.), denying reconsideration of 459 B.R. 558, 570 (Bankr. D.N.J. Nov. 18, 2011) (Kaplan) (In Chapter 20 case, in rem claim remaining after Chapter 7 discharge can be managed through Chapter 13 plan but must be included to determine eligibility; debtor ineligible for Chapter 13 discharge because of § 1328(f) can strip off wholly unsecured junior lien, but resulting unsecured claim renders debtor ineligible for Chapter 13 altogether. “Section 109(e) offers only two alternative classifications for debt: secured debt or unsecured debt (assuming such debt is noncontingent and liquidated). Neither alternative lends the Debtor much comfort towards confirmation of a plan. As discussed, if the in rem claims were regarded as secured, the ‘lien retention’ provisions of § 1325(a)(5) bar the proposed ‘strip-off’ of Amboy’s liens. On the other hand, if the in rem claims are treated as unsecured, the Debtor must overcome § 109(e) restraints.”). See also § 14.4 Are Claims Split under 11 U.S.C. § 506(a)?.
28 In re Cavaliere, 208 B.R. 784, 786 (D. Conn. May 30, 1997) (Arterton).
29 In re Cavaliere, 208 B.R. at 787.
30 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (June 10, 1991).
31 514 B.R. 19 (Bankr. N.D. Cal. June 30, 2014) (Weissbrodt).
32 In re Blackwell, 514 B.R. at 23–25. Accord FitzGerald v. Gorman, No. 1:14-cv-01017-GBL-JFA, 2014 WL 11512353, at *2–*3 (E.D. Va. Nov. 14, 2014) (Lee) (Citing Nobleman v. American Savings Bank, 508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (June 1, 1993), and Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (June 10, 1992)—and notwithstanding discharge of personal liability in a prior Chapter 7 case—undersecured mortgage on principal residence cannot be bifurcated for eligibility purposes; entire mortgage of $1.4 million is secured debt for eligibility purposes when value of underlying real property is only $1 million. “A debtor may not bifurcate the undersecured portion of a secured debt if the debt is a mortgage that is secured only by the debtor’s principal residence. . . . [U]nder 11 U.S.C. § 1322(b)(2) Appellant is precluded from bifurcating the mortgage secured by Appellant’s home . . . . Consequently, the entire mortgage claim must be included as a secured debt for determining Appellant’s eligibility . . . . An undersecured mortgage lien secured by a principal residence that is discharged during Chapter 7 proceedings may not be bifurcated under a Chapter 13 plan into secured and unsecured components for the purpose of determining a debtor’s eligibility for Chapter 13 relief. . . . If Appellant’s property was not his primary residence, the general Fourth Circuit rule allowing for the bifurcation of secured from unsecured claims would apply. . . . [I]f Appellant’s property was wholly unsecured, instead of partially secured, the debt could be stripped off of the property. . . . [N]either rule is applicable here.”), aff’d, 599 F. App’x 522 (4th Cir. Apr. 27, 2015) (unpublished) (Duncan, Shedd, Thacker) (per curiam). See § 14.4 Are Claims Split under 11 U.S.C. § 506(a)?.
34 See, e.g., Asset Mgmt. Holdings, LLC v. Hernandez (In re Hernandez), No. 8:15-bk-10563-TA, 2017 WL 1395741 (B.A.P. 9th Cir. Apr. 11, 2017) (unpublished) (Lafferty, Kurtz, Faris) (Citing Free v. Malaier (In re Free), 542 B.R. 492 (B.A.P. 9th Cir. Dec. 17, 2015) (Jury, Kirscher, Faris), wholly unsecured second mortgage that was discharged in prior Chapter 7 case is not counted as secured or unsecured debt for eligibility purposes in subsequent Chapter 13 case in which the lien will be stripped.); Free v. Malaier (In re Free), 542 B.R. 492, 496–501 (B.A.P. 9th Cir. Dec. 17, 2015) (Jury, Kirscher, Faris) (Wholly unsecured junior lien is not counted toward unsecured debt eligibility limit in § 109(e) when debtors discharged personal liability in a prior Chapter 7 case. “‘The term “debt” means liability on a claim.’ . . . [T]here is no ‘unsecured debt’ unless the creditor has a ‘right to payment’ on an unsecured basis. . . . Debtors discharged their personal liability . . . when they received their § 727 discharge. . . . [N]o creditor can demand payment on a discharged debt, and the debtors have no personal liability to pay such a debt. The references to ‘personal liability’ in § 524(a) preserve any in rem rights a creditor might have in the debtor’s property. . . . But the discharge bars any claims that are not secured. Thus, applying the statutory definitions to the words of § 109(e), debts that were discharged in chapter 7 are not ‘unsecured debts.’ . . . [D]ebts for which the in personam liability was discharged in a prior chapter 7 should not be counted toward the unsecured debt limit for eligibility under § 109(e). . . . Parties have argued against allowing a chapter 20 debtor to ‘two-step’ around the [Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (Jan. 15, 1992); Bank of America, N.A. v. Caulkett, ___ U.S. ___, 135 S. Ct. 1995, 192 L. Ed. 2d 52 (June 1, 2015),] restrictions . . . . [T]hat argument is better addressed by filing an objection to confirmation based on bad faith rather than eligibility. . . . [S]erial filings are not per se bad faith . . . . [I]n [Mortgage Investment Trust, Series 2006-1 v. Blendheim (In re Blendheim), 803 F.3d 477 (9th Cir. Oct. 1, 2015) (Paez, Bybee, Callahan)], . . . the court went so far as to find no per se bad faith even if a chapter 13 petition was filed while the chapter 7 was still pending.”). See § 14.4 Are Claims Split under 11 U.S.C. § 506(a)?.
36 See below in this section and see § 156.2 Limitations on Successive Discharges.
37 11 U.S.C. § 132(f)(1) and (f)(2), discussed in § 156.2 Limitations on Successive Discharges.
38 See below in this section and see § 156.2 Limitations on Successive Discharges.
40 See discussion in this section and see § 14.4 Are Claims Split under 11 U.S.C. § 506(a)? and § 80.13 Modification of Unsecured Home Mortgage: Before and After BAPCPA.
41 See, e.g., H.R. Rep. No. 109-31, at 3 (“S. 256 . . . includes provisions intended to deter serial and abusive bankruptcy filings.”).
42 See 11 U.S.C. § 109(g)(1), discussed in § 25.2 11 U.S.C. § 109(g)(1)—Willful Failure to Abide by Court Order or to Appear in Proper Prosecution, and 11 U.S.C. § 109(g)(2), discussed in § 25.3 11 U.S.C. § 109(g)(2)—Voluntary Dismissal after Request for Relief from Stay.
43 There is one new eligibility requirement in § 109(h) that is not related to prior bankruptcy experience. See discussion beginning at § 18.1 In General.
44 See discussion of 11 U.S.C. § 362(c)(3) and (c)(4) below in this section and beginning at § 59.1 In General.
46 See discussion beginning at § 60.1 When Does § 362(c)(3) Apply?.
47 See discussion beginning at § 61.1 When Does § 362(c)(4) Apply?.
48 See 11 U.S.C. § 362(b)(21), discussed in § 58.9 Real Estate, Landlord and In Rem Exceptions after BAPCPA. See, e.g., Houck v. Substitute Tr. Servs., Inc., 791 F.3d 473 (4th Cir. July 1, 2015) (Niemeyer, Diaz, Floyd) (When a debtor is ineligible under § 109(g), the Chapter 13 petition does not stay some acts to enforce liens under § 362(b)(21)(A). Creditor failed to prove that dismissal of prior case was based on a “willful” failure of the debtor to file required documents. Debtor was eligible, and stay arose at second petition within 180 days.); In re Bryant, No. 10-95778-MGD, 2010 WL 5691671 (Bankr. N.D. Ga. Dec. 14, 2010) (Diehl) (When debtor was ineligible due to § 109(g)(2), new § 362(b)(21)(A) provided that filing did not operate as stay to prevent enforcement of lien or security interest on real property. GMAC Mortgage was entitled to order confirming that automatic stay was not in effect.).
49 See 11 U.S.C. § 362(b)(20) and (d)(4), discussed in § 58.9 Real Estate, Landlord and In Rem Exceptions after BAPCPA.
53 11 U.S.C. § 1328(f), discussed in § 156.2 Limitations on Successive Discharges.
54 See 11 U.S.C. § 1307(c)(1) (“unreasonable delay . . . prejudicial to creditors” is a ground for conversion or dismissal), discussed in § 141.2 Conversion on Request of Creditor or Trustee and § 141.3 Cause for Conversion. See, e.g., In re Beasley, No. 11-40642-JJR13, 2011 WL 4498942, at *4, *4 (Bankr. N.D. Ala. Sept. 27, 2011) (unpublished) (Robinson) (“While this Court believes there is a strong argument to be made that chapter 13 relief is no longer available under any circumstances when § 1328(f)(1) prohibits discharge, until the appellate case law further develops, this Court will continue to recognize the limited exceptions discussed above.” The court found lack of good faith when the discharge-ineligible debtors filed Chapter 13 because of bad credit decisions. “Bankruptcy courts should not sanction and enable the squandering of a financial fresh start by allowing a non-discharge-eligible chapter 13 case to proceed without proof of unforeseen, uncontrollable and unfortunate events that reasonably justified the debtor’s incurring post-discharge obligations, or which events were the primary cause of post-discharge home mortgage arrears. Additionally, good faith can be found in a chapter 13 case that was immediately filed on the heels of a chapter 7 discharge . . . for the purpose of curing home mortgage defaults pursuant to § 1322(b)(5) that remained outstanding after a recently granted chapter 7 discharge.”); In re Hieter, 414 B.R. 665 (Bankr. D. Idaho Mar. 13, 2009) (Pappas) (Debtors, who received discharge in Chapter 7 case filed on November 24, 2004, filed Chapter 13 on February 6, 2008, confirmed a plan but then dismissed on December 17, 2008, and refiled on December 23, 2008, unfairly manipulated bankruptcy system and cannot satisfy good-faith requirement for confirmation in § 1325(a)(7); dismissal is appropriate under § 1307(c) with bar to filing for 13 months to prevent prior Chapter 13 cases from allowing expiration of four-year bar to discharge in § 1328(f).).
55 515 F.3d 272 (4th Cir. Feb. 4, 2008) (Williams, Duncan, Bailey).
56 In re Bateman, 515 F.3d at 281, aff’g In re Bateman, 341 B.R. 540, 542 (Bankr. D. Md. May 1, 2006) (Adopting holding in In re Lewis, 339 B.R. 814 (Bankr. S.D. Ga. Mar. 27, 2006) (Dalis), new § 1328(f) is not an eligibility provision. “Congress just completed a massive renovation of the Bankruptcy Code. If it had intended to make ineligibility for a discharge a further bar to filing a bankruptcy case under § 109, it would have done so.”); accord Gagne v. Fessenden (In re Gagne), 394 B.R. 219 (B.A.P. 1st Cir. Sept. 19, 2008) (Feeney, Boroff, Rosenthal) (Section 1328(f) is not an eligibility provision but bars successive discharges measured from filing of prior case to filing of current case.); South Beach Mortg. & Inv. Corp. v. Avila, No. 1:11-cv-24187-KMM, 2012 WL 2050619 (S.D. Fla. June 6, 2012) (unpublished) (Moore) (Section 1328(f) bars discharge but not eligibility when debtors received discharge in prior Chapter 7 case within four years of current Chapter 13 petition.); Branigan v. Khan (In re Khan), Nos. DKC 2006-2818, DKC 2006-2788, 2006 WL 3716036, at *2–*3 (D. Md. Dec. 14, 2006) (unpublished) (Chasanow) (Section 1328(f) is not an eligibility provision and does not require dismissal of Chapter 13 petition by debtor ineligible to receive a discharge. “[E]ligibility to file a Chapter 13 petition is set forth in 11 U.S.C. § 109 . . . . While there are some limitations on that general grant of eligibility, see, e.g., § 109(g), there is no prohibition based on the inability to be granted a discharge or the fact that the debtor is a serial filer. . . . Congress did not intend categorically to foreclose the benefit of Chapter 13 reorganization to a debtor who previously has filed for Chapter 7 relief. . . . The language of section 1328(f) is clear and unambiguous. It prohibits only the grant of a discharge under Chapter 13, and does not address the circumstances, set out in section 109, under which a Chapter 13 bankruptcy petition may be filed.”); In re Lindley, No. A11-00913-DMD, 2011 WL 6208699 (Bankr. D. Alaska Dec. 14, 2011) (MacDonald) (Section 1328(f) addresses successive discharges but does not limit eligibility for Chapter 13 relief.); In re Garcia, No. 10-55411 SLJ, 2011 WL 867344 (Bankr. N.D. Cal. Mar. 10, 2011) (Johnson) (Pro se debtors are eligible for relief in a Chapter 13 case filed on May 24, 2010, notwithstanding a pending Chapter 7 case in which the debtors received a discharge on May 25, 2010. That debtors are not eligible for Chapter 13 discharge is not a predicate to lien stripping because eligibility is not conditioned on the availability of discharge.); In re Jarvis, 390 B.R. 600 (Bankr. C.D. Ill. July 9, 2008) (Gorman) (Debtor not eligible for Chapter 13 discharge because of recent Chapter 7 discharge can maintain Chapter 13 case; plan cannot strip off and void wholly unsecured mortgage lien because lien stripping can only be accomplished through completion of plan and discharge.); In re McGhee, 342 B.R. 256, 258 (Bankr. W.D. Ky. Apr. 26, 2006) (Fulton) (Citing In re Lewis, 339 B.R. 814 (Bankr. S.D. Ga. Mar. 27, 2006) (Dalis), with approval, that debtors received a Chapter 7 discharge within four years of filing the current Chapter 13 petition precludes discharge but does not prohibit eligibility. “[I]t is clear that a debtor who received a discharge in a Chapter 7, 11, or 12 case filed within four years of the debtor filing a subsequent Chapter 13 petition is ineligible for a discharge in his/her subsequent Chapter 13 case. . . . [T]he discharge prohibition in § 1328(f) does not prevent an individual from seeking and receiving chapter 13 relief. . . . Eligibility for chapter 13 relief is governed by 11 U.S.C. § 109(e). . . . A plain reading of § 1328(f) only prevents a discharge in certain circumstances . . . . [T]hat a chapter 13 petition was filed with the knowledge that a discharge is not available is not in itself sufficient to find that the chapter 13 petition was not filed in good faith. Indeed, there may be occasions in which a financially distressed debtor would find it advantageous to seek relief under Chapter 13 knowing that a discharge is not available.”); In re Lewis, 339 B.R. 814, 816, 817 (Bankr. S.D. Ga. Mar. 27, 2006) (Dalis) (Limitation on successive discharges in § 1328(f) is not an eligibility provision; that the debtors had a prior Chapter 7 case within four years and will not be entitled to a Chapter 13 discharge does not preclude eligibility for Chapter 13. “[Section] 1328(f) is not an eligibility provision. Whether an individual is eligible to be a debtor under chapter 13 is established under 11 U.S.C. § 109(e). . . . [T]he debtors are eligible to be debtors under a chapter 13 plan and § 1328(f) standing alone does not affect that eligibility.” With respect to the trustee’s claim that the Chapter 13 case should be dismissed for lack of good faith: “The availability of a discharge to the debtor is a factor for consideration. However, this is only one factor, and that factor standing alone is insufficient to overcome the other criteria which the Trustee concedes warrants a determination of good faith and confirmation of the debtors’ 100% plans. . . . [B]ecause a creditor might be required to wait to pursue the balance remaining under the obligation after conclusion of the case standing alone does not establish an unreasonable delay. In the present cases, the debtors propose to pay all creditors in full. . . . [E]ven with less than a 100% case, the lack of available discharge does not establish an unreasonable delay if the plans are otherwise confirmable. . . . Unsecured creditors have a better chance and more cost-efficient opportunity to be paid in a chapter 13 plan under court supervision than contemplated under available state debt-collection law. Merely because the chapter 13 debtor will not receive a discharge under an otherwise confirmable plan does not establish unreasonable delay that is prejudicial to creditors.”).
57 See 11 U.S.C. § 1328, discussed beginning at § 157.1 Broadest Discharge Available.
58 Counting the two-year and four-year periods in new § 1328(f) is another story altogether. See § 156.2 Limitations on Successive Discharges.
59 198 B.R. 315 (Bankr. E.D. Mo. June 14, 1996) (Schermer).
60 In re Ekeke, 198 B.R. at 318–19.
61 In re Redburn, 193 B.R. 249 (Bankr. W.D. Mich. Feb. 29, 1996) (Gregg). See § 22.1 Eligibility of a Simultaneous Filer.
62 189 B.R. 467 (Bankr. E.D. Wis. Dec. 11, 1995) (Ihlenfeldt).
63 See Fed. R. Bankr. P. 4007(c).
64 See Fed. R. Bankr. P. 4007(b).
65 See, e.g., In re Yunker, 328 B.R. 591, 594 (Bankr. M.D. Fla. July 14, 2005) (Paskay) (It was not per se bad faith for debtor to file Chapter 13 in 2005 after a claim was held nondischargeable in a Chapter 7 case in 2003; ample opportunity to challenge good faith of the plan is available at confirmation. “The Debtor’s fraudulent conduct which was the basis of this Court’s . . . Judgment entered in the Chapter 7, is not sufficient, by itself, to support the finding of bad faith. . . . [L]iberal application of the relief available under Chapter 20 would be a perversion of the Code. A Debtor should not obtain judicial approval when it seeks to avoid paying a nondischargeable obligation by offering the creditor virtually nothing in a subsequent Chapter 13 case. Clearly changed circumstances in the financial affairs of a Debtor are a factor to be considered, together with the proposed Plan.” Proposed plan would pay 90% to unsecured creditors, including objecting creditor. Debtor had married, was now supporting a family and now had regular income. Motion to dismiss was premature as to issues relevant at confirmation.). See also discussion of good faith at confirmation when the debtor seeks to compromise claims that are or may be nondischargeable in a Chapter 7 case beginning at § 106.1 In General.
66 See § 152.4 Cause for Dismissal, Including Bad-Faith, Multiple and Abusive Filings. See also discussion of 11 U.S.C. § 362(c)(3) and (4) beginning at § 59.1 In General.
67 See § 25.3 11 U.S.C. § 109(g)(2)—Voluntary Dismissal after Request for Relief from Stay, § 151.3 Strategic Considerations: Consequences of Voluntary Dismissal and § 152.6 Strategic Considerations. See, e.g., Rivera v. Matos (In re Rivera), 494 B.R. 101 (B.A.P. 1st Cir. June 26, 2013) (Hillman, Deasy, Bailey) (By any theory, debtor was ineligible under § 109(g)(2) when stay relief was granted in prior case, debtor voluntarily dismissed and immediately refiled to stop foreclosure.).
68 261 B.R. 877 (Bankr. E.D. Va. Apr. 30, 2001) (Mayer).
69 In re Lemus, 516 B.R. 333, 337–40 (Bankr. E.D. Va. Sept. 7, 2014) (Huennekens) (Debtor confirmed and substantially consummated a Chapter 11 plan but then defaulted. Debtor then filed a Chapter 13 petition to stop foreclosure. “HSBC is correct that modification of a chapter 11 plan following substantial consummation of the plan is generally prohibited by Bankruptcy Code § 1127(b). However, an exception exists in Bankruptcy Code § 1127(e) when the debtor is an individual. Congress added subsection (e) to § 1127 through the [BAPCPA]. . . . What has occurred here, however, is not a modification of the Debtor’s confirmed Chapter 11 Plan . . . but rather a subsequent filing of an entirely new bankruptcy case. Further financial reorganization in a subsequent bankruptcy case does not constitute a plan modification in the prior case. . . . The res judicata standard that was applicable to a plan modification initiated by the Chapter 13 Trustee in [Murphy v. O’Donnell (In re Murphy), 474 F.3d 143 (4th Cir. Jan. 18, 2007) (Williams, Traxler, Hamilton),] is not applicable here. . . . Nothing in the Bankruptcy Code prohibits a debtor from having successive chapter 11 and chapter 13 cases. . . . [T]he good faith requirement is applicable to a chapter 13 case filed while the debtor is still involved in an active chapter 11 case. . . . [T]he Debtor . . . has . . . experienced a substantial and unanticipated change in her financial condition. . . . [T]he Debtor in this case has experienced a positive change in her financial condition. The Debtor’s monthly income has increased . . . . [T]he Debtor is now capable of paying her secured, priority, and unsecured creditors in her proposed Chapter 13 Plan, something she was incapable of doing in her Chapter 11 Bankruptcy Case. . . . [Section] 1127 does not prevent the Debtor from filing a subsequent chapter 13 case after substantial consummation of her Chapter 11 Plan. . . . [T]he Debtor has experienced a substantial and unanticipated change in her financial condition and . . . she is proceeding in her Chapter 13 Bankruptcy Case with a good faith effort to repay her creditors.”).