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February 17, 2008

4th Circuit Rules on Chapter 13 Discharge Issue

Branigan v. Bateman (In re Bateman)  ---- F.3d ----, 2008 WL 283001  (4th Cir. Feb. 2008)

Issue:   1)  Does the two-year rule in Section 1328(f) run from the date of filing the previous case or the date of entry of the discharge in the previous case?   2)  May a debtor file a chapter 13 case even though the debtor does not qualify for a discharge in the case because of a prior discharge?   

Holding:      1)  The time in Section 1328(f) runs from filing date to filing date.  2)  Yes

Appeal from Bankruptcy Court

The chapter 13 trustee moved to dismiss two pre-BAPCPA chapter 13 cases on the grounds that the debtors did not qualify for chapter 13 because they had received a discharge in previous cases and therefore did not qualify for a new discharge.  The bankruptcy court denied the motion in both cases.  Under Section 1328(f), a chapter 13 debtor cannot receive a discharge if he has received a discharge in a chapter 7 or 11 “during the 4-year period preceding the date of the order for relief under this chapter,” or if he has received a discharge in a chapter 13 “during the 2-year period preceding the date of such order.” 

As to the first debtor, Bateman, he received a discharge in a chapter 7 several months before filing a new chapter 13.  He proposed a 100% plan which was confirmed.  He agreed that he did not qualify for a discharge.   As to the second debtor, Graves, he had filed a chapter 13 in 1999 and received a discharge five years later in 2004.  Within two years after that, he filed a new chapter 13 to stop a pending foreclosure sale.  The trustee argued that Graves received a discharge within two years after the previous discharge which was within two years “preceding the date of such order,” i.e., the discharge order.  The bankruptcy court ruled that Graves was entitled to a discharge and confirmed his plan as well. 

The Court of Appeals permitted a direct appeal of both cases and affirmed the bankruptcy court in both cases.  They ruled that, as to Graves, the plain language of the statute, two years “preceding the date of the order” refers to the order for relief as stated in the previous subsection of Section 1328(f).  The court says this makes sense because it promotes chapter 13s and Graves could have received a chapter 7 discharge had he filed a chapter 7 instead of the second chapter 13.  As to Bateman, Section 1328(f) is not an eligibility provision.         

February 17, 2008 in Other Circuit Briefs | Permalink

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