§ 55.3     Conversion or Dismissal
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 55.3, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Creditors can move for conversion or dismissal for cause prior to confirmation as provided in 11 U.S.C. § 1307(c).1 Prior to confirmation, the grounds most often asserted for conversion or dismissal are failure of the debtor to file the Chapter 13 plan,2 failure of the debtor to commence making timely payments under § 1326,3 failure of the debtor to confirm a plan within a reasonable time4 and bad faith.5 Creditors probably lack standing to seek conversion or dismissal based on the debtor’s failure to file the creditor list, statement or schedules required by 11 U.S.C. § 521(1).6 However, a creditor might encourage the U.S. trustee to move for conversion or dismissal if the debtor has not filed all the documents necessary to administer the Chapter 13 case.7

[2]

There are many reported decisions in which creditors have successfully stopped a Chapter 13 case before confirmation by proving that the filing is abusive or in bad faith.8 Bad faith is an elusive standard for threshold dismissal of a Chapter 13 case because of the good-faith requirement for confirmation in § 1325(a)(3).9 The abusive or bad-faith attack has been particularly successful when the debtor is a repeat filer, and when the debtor has been less than completely honest in the current case.10


 

1  See § 152.2  Cause for Dismissal—In General, § 152.3  Cause for Dismissal Added or Changed by BAPCPA§ 152.4  Cause for Dismissal, Including Bad-Faith, Multiple and Abusive Filings and § 152.6  Strategic Considerations.

 

2  See § 55.1 [ Debtor Must File a Plan ] § 51.2  Debtor Must File a Plan.

 

3  See § 44.1  First Test of Debtor’s Good Intentions and § 44.4  Consequences of Failure to Commence Payments.

 

4  11 U.S.C. § 1307(c)(5).

 

5  See § 334.1 [ Cause for Dismissal, Including Bad-Faith, Multiple and Abusive Filings ] § 152.4  Cause for Dismissal, Including Bad-Faith, Multiple and Abusive Filings.

 

6  See §§ 41.2 [ Duty to File Statements and Schedules ] § 41.1  Duty to File Statements and Schedules, 311.2 [ Conversion on Request of Creditor or Trustee ] § 141.2  Conversion on Request of Creditor or Trustee, 332.1 [ Procedure, Timing and Form ] § 152.1  Procedure, Timing and Form and 333.1 [ Cause for Dismissal—In General ] § 152.2  Cause for Dismissal—In General.

 

7  There is no bar to a “suggestion” or to a “request” by a creditor to the U.S. trustee that a Chapter 13 debtor has not satisfied the duty in § 521(1); thus, a U.S. trustee’s motion to convert or dismiss for failure of the debtor to file necessary documents under § 1307(c)(9) could be prompted by a creditor. Contrast the prohibition of a request or suggestion in 11 U.S.C. § 707(b).

 

8  See § 334.1 [ Cause for Dismissal, Including Bad-Faith, Multiple and Abusive Filings ] § 152.4  Cause for Dismissal, Including Bad-Faith, Multiple and Abusive Filings.

 

9  See discussion of good faith at a confirmation under 11 U.S.C. § 1325(a)(3) beginning at § 103.1  In General.

 

10  See §§ 19.2 [ Eligibility of a Serial Filer: “Chapter 20” and Beyond ] § 23.1  Eligibility of a Serial Filer: “Chapter 20” and Beyond, 179.1 [ Frequency of Filing Bankruptcy—Chapter 20 and Beyond ] § 104.2  Frequency of Filing Bankruptcy—Chapter 20 and Beyond, 179.2 [ Accuracy of Petition, Schedules, Statement and Testimony ] § 104.3  Accuracy of Petition, Schedules, Statement and Testimony and 334.1 [ Cause for Dismissal, Including Bad-Faith, Multiple and Abusive Filings ] § 152.4  Cause for Dismissal, Including Bad-Faith, Multiple and Abusive Filings.