Cite as: Keith M. Lundin, Lundin On Chapter 13, § 37.1, at ¶ ____, LundinOnChapter13.com (last visited __________).
Jurisdiction to accept the filing of a Chapter 13 petition is vested by statute in the U.S. District Court.1 The clerk of the U.S. Bankruptcy Court for the district is the individual with whom the filing of a Chapter 13 petition is ordinarily accomplished.2 In a few jurisdictions, the clerk of the district court and the clerk of the bankruptcy court have combined operations and/or occupy the same location.
Venue of a Chapter 13 case is in the district in which the domicile, residence, principal place of business or principal assets of the debtor have been located for the greatest portion of the 180 days immediately preceding filing.3 For Chapter 13 debtors, this is usually where the debtor currently resides. Debtors who have moved recently and debtors domiciled in one district but residing in another—for example, a member of the armed services who is temporarily residing at a military base—may have some choice of venue.
The test for proper venue is similar to but should not be confused with the eligibility requirement in 11 U.S.C. § 109(a) that only an individual who “resides or has a domicile, a place of business, or property in the United States” may be a debtor in a Chapter 13 case. It has been held that an individual not a U.S. citizen who does not have a domicile in the United States is nonetheless eligible to be a Chapter 13 debtor under § 109(a), and venue is proper in the district where the debtor resides and maintains assets.4
A not uncommon venue question in Chapter 13 practice concerns the debtor who resides in one judicial district but works in another. If the debtor’s workplace constitutes a “principal place of business,” then the debtor may argue for venue either where the debtor resides or where the debtor works. In In re McDonald,5 the debtor lived in Arkansas but worked in Memphis, Tennessee. It was conceded that it was more convenient for the debtor to appear in bankruptcy court in Memphis, Tennessee, where the debtor worked. The court concluded, however, that venue for the debtor’s Chapter 13 case was in Arkansas because “a salaried individual debtor’s place of employment does not equate to the ‘place of business’ specified in [28 U.S.C. § 1408].”6 McDonald would present a harder case, for example, if the debtor was self-employed and maintained a place of business (rather than a place of employment) in Tennessee.
When McDonald and related cases were appealed, the Sixth Circuit addressed the issue whether the bankruptcy court had discretion to retain a Chapter 13 case that was filed in the wrong venue. The Sixth Circuit held that “the venue requirements of 28 U.S.C. § 1408 are mandatory, not optional.”7 Bankruptcy Rule 1014, which provides for the transfer of cases to another venue, does not grant discretion to retain a case filed in the wrong venue. This outcome depended on timely objection by the U.S. trustee. Absent objection, the case may proceed in the wrong venue. In other words, improper venue is waivable if no one objects or moves to change venue.8
Venue of a Chapter 13 case may be changed “in the interest of justice or for the convenience of the parties.”9 Motions to change venue before the meeting of creditors can create difficult problems for the court, the trustee, the debtor, debtor’s counsel and anyone interested in the case. The court clerk and trustee are anxious to mail notice of the meeting of creditors within the
tight time constraints of the Bankruptcy Rules.10 However, there is reluctance to mail the notice of the § 341 meeting until the court acts on the motion to change venue.
When a case is filed in the proper venue, Rule 1014(a) permits transfer of the case, but it may be difficult for the debtor to prove inconvenience. For example, one court denied a change of venue from Alabama to Georgia notwithstanding the debtors’ arguments that it was closer for them to drive to court in Georgia and that their attorney practiced in Georgia.11 After all, the debtor chose the venue by voluntarily filing in Alabama.12 If the debtor intentionally filed the case in the wrong venue, the Sixth Circuit would mandate change of venue upon a timely objection or motion to change venue.
One appellate decision holds that an objection to confirmation can be a timely challenge to improper venue. In Donald v. Curry (In re Donald),13 the Bankruptcy Appellate Panel for the Ninth Circuit also held that it was unnecessary for the trustee to object to venue in a separate motion. This holding recognizes the reality that when confirmation comes quickly in a Chapter 13 case, addressing venue in that context may be timely, as Rule 1014(a) requires.
Sometimes change of venue of a Chapter 13 case can be accomplished on the motion of a creditor, for example, when the debtor has recently moved and some or all creditors are located closer to where the debtor used to live. In In re Teal,14 the debtor was the defendant in dischargeability litigation in a Chapter 7 case filed in the Southern District of Georgia when the debtor filed a Chapter 13 case in the Southern District of Florida. The plaintiff in the dischargeability litigation moved the Georgia bankruptcy court to transfer the Florida case to Georgia. Applying Bankruptcy Rule 1014(b),15 the Georgia bankruptcy court transferred the Chapter 13 case to Georgia based on these considerations:
There is no doubt that the Southern District of Georgia is a more convenient venue for deciding the issues in the Adversary Proceeding. . . . [T]he location of the creditors and proximity of witnesses with respect to claims in the Florida case favor transfer of the Florida case to this Court. . . . The Chapter 7 dischargeability proceeding has been stalled by Debtor’s failure to attend depositions, even as Debtor’s Schedule F in his Chapter 13 case evidences his attempt to discharge his debt to [the plaintiff]. . . . For now, both the Chapter 7 and the Chapter 13 cases will proceed in this Court.16
A motion to change venue must be “timely.”17 After confirmation, change of venue is rare even if the debtor moves because postconfirmation administration of a Chapter 13 case is not usually impaired by a change in residence as long as funding of the plan is not interrupted.18
On fascinating facts, one reported bankruptcy court decision refused to change venue for a Chapter 13 petition filed in the wrong district; instead, the court dismissed the case with prejudice. In In re Pickeral,19 the debtor signed the Chapter 13 petition at 9:50 a.m. on the day of a foreclosure sale set for 10:12 a.m. The bankruptcy court clerk’s office for the district in which the debtor resided was located in Greenbelt, Maryland. The debtor’s counsel’s office was in the District of Columbia. As stated by the bankruptcy court, counsel “did not want to take the risk of attempting to drive to Greenbelt, Maryland, and possibly being too late to file the petition before the foreclosure sale was completed. . . . So her counsel filed the petition in [the District of Columbia] at 10:01 a.m.”20 The bankruptcy court held that transfer of venue was not appropriate because the case was intentionally filed in the wrong district:
Because this filing was deliberately filed in a wrong venue, not just recklessly filed in the wrong venue, denying a transfer is . . . in the interest of justice. . . . Although generally a dismissal of a civil action for lack of proper venue is without prejudice, this bankruptcy case is different. . . . But for the deliberate filing of this case in a wrong venue, the foreclosure sale would likely have been completed. To prevent foreclosure she had an obligation to file her petition before the scheduled time of the foreclosure sale and in a district in which she in good faith believed venue existed. This she failed to do. Cause therefore exists to dismiss this case with prejudice for 180 days.21
Pickeral—and the Sixth Circuit’s view that dismissal or transfer is mandatory when there is a timely objection to improper venue—serve as a caution to debtor’s counsel that intentionally filing a case in the wrong venue carries some risk.
Pickeral involved adjoining judicial districts and venue problems raised by filing in the wrong district. Venue problems should not arise with respect to multiple divisions within a judicial district. It has been held that divisions within a single judicial district are not subject to the venue provisions in 28 U.S.C. § 1408, and a filing in any division within a proper district is a filing in the proper venue for the Chapter 13 case.22
1 28 U.S.C. § 1334(a).
2 See 28 U.S.C. § 156; Fed. R. Bankr. P. 1002, 5001, 5005.
3 28 U.S.C. § 1408. See In re Jones, 174 B.R. 8, 12 (Bankr. D.N.H. 1994) (On U.S. trustee’s motion to dismiss, venue under 28 U.S.C. § 1408 was properly in New Hampshire, not Massachusetts, because debtor “spent the longer portion of the 180 days preceding the filing of his Chapter 13 case in New Hampshire.”), aff’d per curiam, 77 F.3d 460 (1st Cir. 1996).
4 In re Arispe, 289 B.R. 245, 247 (Bankr. S.D. Fla. 2002) (“Both parties stipulate that the Debtor is eligible to be a debtor in bankruptcy even though he is not a United States citizen and does not have his domicile in the United States or the State of Florida. Pursuant to 11 U.S.C. § 109(a), a person who resides or has property in the United States may be a debtor. Venue is proper in the Southern District of Florida since this is where the Debtor resides and this district is the location of his principal assets.”). Compare In re Head, 223 B.R. 648, 651 (Bankr. W.D.N.Y. 1998) (Canadian residents filing Chapter 13 cases in the United States to manage litigation with Lloyd’s of London concerning their liability as “names” were ineligible because debtors could not establish anything more than “a facade of eligibility by obtaining U.S. mailing addresses and opening small bank accounts in U.S. banks.” Doing business in the United States is not equivalent to “property” in the United States for purposes of § 109. Possible liability to Lloyd’s and inchoate interests in funds in the United States were not sufficient to establish eligibility.).
5 219 B.R. 804 (Bankr. W.D. Tenn. 1998), aff’d 507 F.3d 416 (6th Cir. 2008).
6 219 B.R. at 805.
7 Thompson v. Greenwood, 507 F.3d 416, 424 (6th Cir. 2008).
8 See Fed. R. Bankr. P. 1014(a)(2).
9 28 U.S.C. § 1412. See, e.g., In re McDonald, 219 B.R. 804 (Bankr. W.D. Tenn. 1998) (Venue for Chapter 13 debtor who lives in Arkansas but works in Memphis, Tennessee, is in Arkansas; court transfers venue to the Eastern District of Arkansas.).
10 See §§ 38.2 [ Time for Filing Schedules, Statement of Financial Affairs, Plan and Other Documents ] § 37.4 Time for Filing Schedules, Statement of Financial Affairs, Plan and Other Documents and 216.1 [ Timing of Hearing on Confirmation ] § 115.1 Timing of Hearing on Confirmation before BAPCPA.
11 In re Rash, No. 08-80438, 2008 WL 2519825, at *3 (Bankr. M.D. Ala. June 19, 2008) (unpublished) (Sawyer) (Transfer of venue to Middle District of Georgia is denied even when debtors would have to travel 25 miles further to court in Alabama and debtors’ counsel practiced in Georgia. “In the case at bar, transfer of venue would only marginally benefit the Debtors, while imposing unnecessary administrative costs, inconveniencing creditors and both Trustees, and increasing the possibility of an actual injustice due to unfamiliarity of interested persons in Georgia with Alabama law and property values.”).
12 See, e.g., Abbott v. Hyman (In re Abbott), Nos. 07-33454, 3:08CV086-HEH, 2008 WL 782859 (E.D. Va. Mar. 25, 2008) (unpublished) (Hudson) (Voluntary petition submitted debtor to jurisdiction of bankruptcy court.).
13 328 B.R. 192, 203 (B.A.P. 9th Cir. 2005) (Order transferring case from Central District of California to Northern District of Georgia was proper, when trustee raised venue in objection to confirmation; it was unnecessary for trustee to file separate motion. Court has authority to sua sponte transfer case under § 105(a). Debtor’s domicile was in Georgia, and, even if bankruptcy court was wrong in so finding, “such an error would be harmless because a discretionary change of venue was permitted under 28 U.S.C. § 1412.”).
14 297 B.R. 922 (Bankr. S.D. Ga. 2003).
15 Fed. R. Bankr. P. 1014(b) reads in part:
If petitions commencing cases under the Code are filed in different districts by or against (1) the same debtor . . . on motion filed in the district in which the petition filed first is pending . . . the court may determine, in the interest of justice or for the convenience of the parties, the district or districts in which the case or cases should proceed.
16 297 B.R. at 924–26.
17 Fed. R. Bankr. P. 1014(a).
18 See, e.g., Bryan v. Land (In re Land), 215 B.R. 398 (B.A.P. 8th Cir. 1997) (Although counsel confessed that venue was improper, creditor’s motion to change venue filed after confirmation was untimely and properly rejected by the bankruptcy court.).
19 267 B.R. 1 (Bankr. D.D.C. 2001).
20 267 B.R. at 2.
21 267 B.R. at 5–6.
22 In re Perry, No. 02-13366, 2002 WL 31160132 (Bankr. W.D. Tenn. Sept. 26, 2002) (unpublished) (Bankruptcy court has discretion described in 28 U.S.C. 1404(a) to transfer a bankruptcy case from one division to another within a district. No provision of the Bankruptcy or Judicial Code requires that a bankruptcy case be filed in the division of the debtor’s residence. Based on the usual convenience factors, bankruptcy court can order intra-district transfer consistent with local bankruptcy rules.).