June 22, 2009
9th Circuit Rules that Ch 7 Case Automatically Dismissed under Section 521(i)(a) is not Automatically Dismissed if the Bankruptcy Court Waives the Duty to File Schedules Even After the Automatic Dismissal
Wirum v. Warren (In re Warren), ---- F. 3d ----, 2009 WL 1694188 (9th Cir. June, 2009)
Issue: May the bankruptcy court waive the duty of the debtor to file schedules thus preventing the chapter 7 case from being automatically dismissed under 521(i)(1) even though the 45 days set forth in 521(i)(1) has elapsed and the case presumably therefore has been “automatically dismissed”?
Appeal from the district court.
Judge T.G. Nelson
The debtor filed chapter 7 as a response to the state of California attempting to collect past due child support. The debtor apparently filed only the emergency forms and not the remainder. The court warned the debtor and set a hearing to consider dismissal and sanctions. Immediately before the hearing, the chapter 7 trustee advised the court there may be assets to administer and asked the court not to dismiss the case and the court agreed. Later, the debtor filed a motion to dismiss arguing that the 45 days to file the remainder of the schedules under Section 521(i)(1) had run and therefore the court was required to dismiss. Section 521(i)(1) says that if the debtor does not file the required schedules within 45 days, the case “’shall be automatically dismissed effective on the’ forty-sixth day.” The trustee argued that the schedules required to be filed under 521(a)(1) were subject to the proviso “unless otherwise ordered by the court.” The bankruptcy court denied the motion to dismiss, ordered that the remainder of the schedules need not be filed, and the debtor appealed. The district court reversed saying that the dismissal was mandatory.
The 9th Circuit Court of Appeals reversed the district court and upheld the refusal to dismiss the case. The Court noted that there is no deadline in 521(a)(1) to “order otherwise.” It said that the language of 521(i)(1) is ambiguous with respect to whether, under 521(a)(1), the court may “order otherwise” after the 45 days has elapsed. “Given the ambiguity in the statutory language, we must ‘evaluate the alternative readings in light of the purpose of the statute.’” The Court pointed out that the “order otherwise” language predated BAPCPA. Congress did not limit the power of the court to “order otherwise” when it provided in BAPCPA that the case would be automatically dismissed. Plus “Congress’s core purpose in enacting BAPCPA was to prevent abusive bankruptcy filings.” The court acknowledged that its ruling was in the minority but said that its reading of the code was necessary to prevent debtors from “manipulating the system.”
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