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1 James A. Shepherd (DC#476306) Trial Attorney 2 Department of Justice Office of the United States Trustee 3 235 Pine Street, #700 San Francisco, CA 94104 4 phone: (415) 705-3333 fax: (415) 705-3379 5 email: [email protected] 6 Roberta A. DeAngelis Acting General Counsel 7 P. Matthew Sutko Knight Elsberry 8 Office of the General Counsel Executive Office for United States Trustees 9 Department of Justice 20 Massachusetts Avenue, NW 10 Washington, DC 20530 phone: (202) 307-1399 11 Counsel for Sara L. Kistler, 12 Acting United States Trustee 13 14 In re: 15 STEWART JAY WARREN, 16 Debtor. 17 18 STEWART JAY WARREN, 19 Debtor/Appellant, 20 v. 21 ANDREA A. WIRUM, TRUSTEE, 22 -and23 SARA L. KISTLER, ACTING UNITED STATES TRUSTEE FOR REGION 17, 24 Appellees. 25 26 27 28
OPENING BRIEF OF APPELLEE SARA L. KISTLER, ACTING UNITED STATES TRUSTEE CV 07-03244 CRB
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )
Bankruptcy Case No. 06-10697 AJ
Case No. CV 07-03244 CRB
Brief of the Appellee, Acting United States Trustee
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TABLE OF CONTENTS
3 STATEMENT OF JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 4 STATEMENT OF THE ISSUES PRESENTED FOR REVIEW. . . . . . . . . . . . . . . . . . . - 1 5 STATEMENT OF THE CASE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 6 7 8 I. Nature of the Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 II. Statutory Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 III. Statement of Facts and the Proceedings Below.. . . . . . . . . . . . . . . . . . . . . . . . . . - 5 -
9 SUMMARY OF ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 10 10 STANDARD OF REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 12 11 ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 13 12 13 14 15 16 17 18 19 20 21 22 III. II. I. The bankruptcy court acted within its express statutory authority under the circumstances when it waived the debtor's section 521(a)(1)(B) filing requirements, even after the 45-day period in section 521(i) had expired ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 13 The bankruptcy court properly declined to dismiss the debtor's case under section 521(i) for his failure to file information that he was not required to provide, because the court had excused filing under section 521(a)(1)(B). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 16 The bankruptcy court properly concluded that, under the circumstances, the debtor was judicially estopped to seek dismissal of his case under section 109(h) for failure to obtain or seek a waiver of pre-petition credit counseling.. . . . - 18 -
23 CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 22 24 25 26 27 28
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1 2 STATUTES
TABLE OF AUTHORITIES
3 11 U.S.C. 101.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 4 11 U.S.C. 109.. . . . . . . - 1 -, - 2 -, - 4 -, - 5 -, - 8 -, - 9 -, - 11 -, - 12 -, - 13 -, - 17 -, - 18 -, - 20 -, 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 21 -, - 22 6 11 U.S.C. 111.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 4 7 11 U.S.C. 301.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 8 11 U.S.C. 323, 541, 542, 544, 546.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3 9 11 U.S.C. 341(a); 343. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7 10 11 U.S.C. 349.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3 -, - 17 -, - 20 11 11 U.S.C. 362.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 14 -, - 19 -, - 20 12 11 U.S.C. 365.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 14 13 11 U.S.C. 507.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3 14 11 U.S.C. 521.. . . . . . . . . . . - 1 -, - 2 -, - 3 -, - 4 -, - 9 -, -10 -, - 11 -, - 12 -,- 13 -, - 14 -, - 15 -, 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 16 -, - 17 -, - 22 16 11 U.S.C. 524, 727.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3 17 11 U.S.C. 541.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 18 11 U.S.C. 544-551. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3 19 11 U.S.C. 549.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7 - , - 16 20 11 U.S.C. 550.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 7 21 11 U.S.C. 701.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2 22 11 U.S.C. 704.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3 23 11 U.S.C. 726.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3 24 28 U.S.C. 1334.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 25 28 U.S.C. 157.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 26 28 U.S.C. 158.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 27 28 U.S.C. 581-589a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 5 28
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1 RULES 2 Fed. R. Bankr. P. 2003(e).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 8 3 Fed. R. Bankr. P. 8001(a).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 4 Fed.R.Bankr.P. 1007 [Interim].. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3 5 CASES 6 In re Ackerman, __ B.R. __, 2007 WL 2471473 (Bankr. W.D.N.Y. Aug. 23, 2007) . . . . . - 14 7 In re Bonham, 229 F.3d 750, 761 (9th Cir. 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1 8 In re Castillo, 297 F.3d 940, 950 (9th Cir. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 5 9 In re Elder, 325 B.R. 292, 296 (N.D. Cal. 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 13 10 Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir. 2001)... . . . . - 13 -, - 18 11 12 Hawaiian Airlines Inc. v. U.S. (In re Hal, Inc.), 122 B.R. 851, 854 (9th Cir. 1997) . . . . . . - 12 13 In re Jackson, 348 B.R. 487, 499-500 (Bankr. S.D. Iowa 2006). . . . . . . . . . . . . . . . . . . . . . - 15 14 In re Lavato, 343 B.R. 268, 270 (Bankr. D.N.M. 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . - 15 15 16 Nichols v. Birdsell, 491 F.3d 987, 989 (9th Cir. 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 13 17 In re Ott, 343 B.R. 264, 268 (Bankr. D. Colo. 2006).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 15 18 In re Parker, 351 B.R. 790, 800-01 (Bankr. N.D. Ga. 2006) . . . . . . . . . . . . . . - 14 -, - 15 -, -16 19 In re Republic Trust & Savings Co., 59 B.R. 606, 609 n.1 (N.D. Okla. 1986) . . . . . . . . . . - 21 20 Wagner v. Prof. Engineers in Cal. Gov't., 354 F.3d 1036, 1044 (9th Cir. 2004) . . . . . . . . . - 18 21 In re Warren, Case No. 06-10697, 2007 WL 1079943 (Bankr. N.D. Cal. April 9, 2007). 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 9 23 In re Wenberg, 94 B.R. 631, 637 (9th Cir. BAP 1988). . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 21 24 In re Williams, 339 B.R. 794 (Bankr. M.D. Fla. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 15 25 In re Withers, Case No. 06-42098, 2007 WL 628078 (Bankr. N.D. Cal. Feb. 26, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 10 -,- 13 -, - 14 -, - 16 26 27 28
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Harbin v. IndyMac Bank FSB (In re Harbin), 486 F.3d 510, 517 (9th Cir. 2007) .. . . . . . . . - 12 -
In re Mendez, 367 B.R. 109, 116 (9th Cir. BAP 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 21 -
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STATEMENT OF JURISDICTION The bankruptcy court had jurisdiction over the debtor Stewart Jay Warren's chapter 7
3 bankruptcy case pursuant to 28 U.S.C. 1334 and 28 U.S.C. 157(b)(1), (b)(2)(A), and (O). In an 4 order entered in that case on April 13, 2007, the bankruptcy court waived the requirement that 5 the debtor file the documents specified in 11 U.S.C. 521(a)(1)(B). BD 34.1 On April 20, 2007, 6 the court entered its Order Denying Debtor's Motion to Dismiss Under 11 U.S.C. 109(h) and 7 Ex Parte Request for Dismissal Under 11 U.S.C. 521(i).2 BD 35. On April 23, 2007, the 8 debtor timely filed a notice of appeal of both orders. BD 36; see Fed. R. Bankr. P. 8001(a). On 9 May 14, 2007, the Acting United States Trustee timely filed an election to have the debtor's 10 appeal heard by this court under 28 U.S.C. 158(c)(1). BD 48. This court has jurisdiction over 11 this appeal under 28 U.S.C. 158(a)(1). The bankruptcy court's April 13 and April 20, 2007 12 orders are each "final" orders for purposes of this appeal, because each "resolves and seriously 13 affects substantive rights" of the debtor and "finally determines the discrete issue to which it is 14 addressed." In re Bonham, 229 F.3d 750, 761 (9th Cir. 2000) (internal citation omitted). 15 16 STATEMENT OF THE ISSUES PRESENTED FOR REVIEW 1. Whether the bankruptcy court abused its discretion, pursuant to its powers under 11
17 U.S.C. 521(a)(1)(B), by waiving the debtor's obligation to file certain documents? 18 2. Whether the bankruptcy court erred in declining to dismiss the debtor's case under
19 11 U.S.C. 521(i), when it had waived the debtor's obligation to file certain documents 20 under 11 U.S.C. 521(a)(1)(B)? 21 3. Whether the bankruptcy court erred in concluding that the debtor was judicially
22 estopped from seeking dismissal of his case under 11 U.S.C. 109(h)? 23 24 25 26
1
"BD___" refers to the applicable item contained in the bankruptcy court's docket.
Debtor makes certain statements in its opening brief that might be construed as questioning the bankruptcy court's jurisdiction to enter these two orders. The Acting United 27 States Trustee addresses these statements more fully in part III of the argument section of this brief. 28
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1 2 3 I. Nature of the Case
STATEMENT OF THE CASE
This appeal challenges two orders of the bankruptcy court declining to dismiss the
4 chapter 7 bankruptcy case of Stewart Jay Warren. Some five months after commencing his 5 voluntary chapter 7 case, after the chapter 7 trustee discovered valuable assets, the debtor 6 sought to dismiss his case under 11 U.S.C. 109(h), claiming he was not eligible to be a debtor 7 due to his failure to obtain pre-petition credit counseling or request a statutory waiver. He also 8 sought an "automatic" dismissal of his case under 11 U.S.C. 521(i) based on his own refusal to 9 file official court forms listing his assets, liabilities, income and expenses, and statement of 10 financial affairs, among other required documents. 11 The bankruptcy court did not allow dismissal in these circumstances. First, the court
12 exercised its express statutory authority under 11 U.S.C. 521(a)(1)(B) to waive the debtor's 13 obligation to file documents. Second, having waived the filing requirements, the court ruled 14 that dismissal under 11 U.S.C. 521(i) was not required or appropriate under the facts presented. 15 Third, the court recognized that 11 U.S.C. 109(h) is not a statutory prerequisite to its 16 jurisdiction and exercised its authority to bar the debtor from seeking to dismiss his case on the 17 principle of judicial estoppel. In so ruling, the court acted within its authority to prevent the 18 debtor from manipulating the bankruptcy process, and should be affirmed on all counts. 19 20 II. Statutory Background 1. An individual who seeks to discharge his debts may file a petition under chapter 7 of
21 the Bankruptcy Code.3 See 11 U.S.C. 701, et seq. By filing such a petition, an individual 22 "commences" a bankruptcy case and becomes a "debtor." See 11 U.S.C. 101(13), 301. When 23 a case is commenced, the debtor's property at that time becomes property of the bankruptcy 24 estate. See 11 U.S.C. 541(a)(1) (property of the estate includes "all legal or equitable interests 25 of the debtor in property as of the commencement of the case"). After a chapter 7 case is 26 27 28 11 U.S.C. 701, et seq. "Section" as used herein refers to the applicable section of the Bankruptcy Code.
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1 commenced, a chapter 7 trustee is appointed and becomes the estate's sole representative, with 2 control over all property of the estate. See 11 U.S.C. 323, 541, 542, 544, 546. In furtherance 3 of their official duties, trustees must investigate the financial affairs of debtors. See 11 U.S.C. 4 704(a)(4). A chapter 7 trustee is also required to take possession of all estate property and 5 liquidate it for distribution to the debtor's creditors pursuant to a statutory scheme of priorities. 6 See 11 U.S.C. 507, 704(a)(1), 726. The trustee is also empowered to avoid and recover for the 7 benefit of creditors certain pre- and post-petition transfers of the debtor's property, such as 8 preferences, fraudulent conveyances, and unauthorized post-petition transfers of property. See 9 11 U.S.C. 544-551. 10 Barring debtor misconduct or other special situations, an order will be entered
11 discharging most of the debtor's pre-petition financial obligations. See 11 U.S.C. 524, 727. 12 When a chapter 7 case is dismissed, either before of after the debtor's discharge is entered, any 13 property of the estate is revested "in the entity in which such property was vested immediately 14 before" the case was commenced, unless the court orders otherwise. See 11 U.S.C. 349(b). 15 2. Section 521(a) of the Bankruptcy Code sets forth certain duties of a debtor in a
16 bankruptcy case. Specifically, section 521(a)(1) requires the debtor to file a list of creditors 17 and, "unless the court orders otherwise," the following additional documents: a schedule of 18 assets and liabilities and of current income and current expenditures; a statement of the 19 debtor's financial affairs and the appropriate certificate if applicable; copies of all payment 20 advices or other evidence of payment received within 60 days before the date of the filing of 21 the petition, by the debtor from any employer; an itemized statement of monthly net income; 22 and a statement disclosing any reasonably anticipated increase in income of expenditures over 23 the 12-month period following the date of the filing of the petition, and certain other specified 24 documents. See 11 U.S.C. 521(a)(1)(A), (B); see also Fed.R.Bankr.P. 1007 [Interim] 25 (specifying the items for filing and referencing the corresponding Official Bankruptcy Forms). 26 Section 521(i) of the Bankruptcy Code provides for dismissal of a case when a debtor
27 fails to file timely the information required under section 521(a)(1): 28
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(i) (1) Subject to [11 U.S.C. 521(i)(2) and (4)] and notwithstanding [11 U.S.C. 707(a)], if an individual debtor in a voluntary case under chapter 7 or 13 fails to file all of the information required under subsection (a)(1) within 45 days after the date of the filing of the petition, the case shall be automatically dismissed effective on the 46th day after the date of the filing of the petition. (2) Subject to [11 U.S.C. 521(i)(4)] and with respect to a case described in [11 U.S.C. 521(i)(1)], any party in interest may request the court to enter an order dismissing the case. If requested, the court shall enter an order of dismissal not later than 5 days after such request. (3) Subject to [11 U.S.C. 521(i)(4)] and upon request of the debtor made within 45 days after the date of the filing of the petition described in [11 U.S.C. 521(i)(1)], the court may allow the debtor an additional period of not to exceed 45 days to file the information required under subsection [11 U.S.C. 521(a)(1)] if the court finds justification for extending the period for the filing. (4) Notwithstanding any other provision of this subsection, on the motion of the trustee filed before the expiration of the applicable period of time specified in [11 U.S.C. 521(i)(1)-(3)], and after notice and a hearing, the court may decline to dismiss the case if the court finds that the debtor attempted in good faith to file all the information required by subsection [11 U.S.C. 521(a)(1)(B)(iv)] and that the best interests of creditors would be served by administration of the case.
15 11 U.S.C. 521(i)(1)-(4). 16 3. Section 109(h) of the Bankruptcy Code requires that within 180 days prior to an
17 individual debtor's bankruptcy filing, the debtor shall have received, "from an approved 18 19 20 21 such individual in performing a related budget analysis." 11 U.S.C. 109(h)(1). Section 109(h) nonprofit budget and credit counseling agency described in [11 U.S.C. 111(a)] an individual or group briefing . . . that outlined the opportunities for available credit counseling and assisted
22 does not apply if no credit counseling provider approved by the United States trustee is 23 reasonably available to the debtor. See 11 U.S.C. 109(h)(2). If a debtor faces "exigent 24 circumstances," the debtor may obtain a post-petition extension of the period to receive credit 25 26 27 28 period beginning on the date on which the debtor made that request." 11 U.S.C. 109(h)(3)(B).
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counseling of up to thirty days, based upon a certification "satisfactory to the court," that the debtor requested, but could not obtain, the required credit counseling services "during the 5-day
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1 For "cause" shown, the debtor can obtain up to an additional fifteen days post-petition to 2 3 4 5 6 incapacity, disability, or active military duty in a military combat zone." 11 U.S.C. 109(h)(4). 4. United States Trustees, including Acting United States Trustees, are appointed by receive the required credit counseling. Id. Section 109(h)(4) sets forth exceptions to the credit counseling requirement for debtors who are unable to complete credit counseling "because of
7 the Attorney General to supervise the administration of bankruptcy cases and trustees in 8 regions comprising the vast majority of federal judicial districts. See 28 U.S.C. 581-589a. 9 10 11 12 see also Curry v. Castillo (In re Castillo), 297 F.3d 940, 950 (9th Cir. 2002) (discussing role of United States Trustees "serve as bankruptcy watchdogs to prevent fraud, dishonesty, and overreaching in the bankruptcy arena." H.R. Rep. No. 595, 95th Cong., 1st Sess. 88 (1977);
13 United States Trustees). The United States Trustee Program thus "acts in the public interest to 14 promote the efficiency and to protect and preserve the integrity of the bankruptcy system." 15 U.S. Dep't of Justice, United States Trustee program Strategic Plan FY 2005-2010, at 2 16 17 III. Statement of Facts and the Proceedings Below 18 19 Stewart Jay Warren filed a voluntary petition for relief under chapter 7 of the (visited Sept. 5, 2007) http://www.usdoj.gov/ust/eo/ust_org/mission.htm>.
20 Bankruptcy Code on October 11, 2006. BD 1. The debtor estimated that he had one to 49 21 creditors, assets of $100,000 to $1,000,000, and liabilities of $100,000 to $1,000,000. Id. at 1. 22 Just above the signature line on the debtor's petition is stated, "I declare under penalty of 23 24 accordance with the chapter of title 11, United States Code, specified in this petition." BD 1 at 25 26 3. The debtor signed the petition "Stewart Jay Warren" and dated it "10/11/06." Id. He debtor perjury that the information provided in this petition is true and correct. I request relief in
27 did not file any schedules of assets and liabilities; a statement of financial affairs; statement of 28
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1 current monthly income; recent payment advices; a certificate indicating that he had received 2 3 4 5 Required Documents and Notice Regarding Automatic Dismissal, which listed the documents pre-petition credit counseling; or certain other documents required of individual debtors. On October 12, 2006, the bankruptcy court issued an Order for Individuals to File
6 that the debtor had failed to file and warned that his case could be dismissed unless he filed the
4 7 required documents within fifteen days after entry of the Order. See BD 4. The debtor refused
8 to file any of the documents specified in the Order within the 15-day period. On October 30, 9 10 11 12 13 the required documents. See BD 9. On November 15, 2006, Andrea A. Wirum, the chapter 7 trustee in the debtor's case, 2006, the bankruptcy court entered its Order for Hearing re: Sanctions, which ordered the debtor to appear at a hearing on November 17, 2006 to face possible sanctions for failing to file
14 responded to the court's October 30 Order for Hearing re: Sanctions, urging the court not to 15 dismiss the debtor's case so that she could continue her investigation of his financial affairs and 16 17 discovered that the debtor's bank was holding in excess of $93,000 in an undisclosed account, 18 19 which was subject to a levy in that amount by the California Department of Child Support administer his estate for the benefit of creditors. See BD 10. The day before, Ms. Wirum had
20 Services for unpaid support obligations. BD 10 at 1-2; BD 27, Ex. 1 at 2. At the time of the 21 bankruptcy filing, the bank was prepared to honor the levy. See BD 10 at 1-2. Ms. Wirum also 22 discovered possible real property transfers by the debtor during the two- to three-year period 23 24 Item BD 4 is included on the bankruptcy court docket but was not designated for inclusion in the record on appeal. However, the debtor makes specific reference to it in his 26 opening brief and does not dispute its contents, effect, or manner of service. See Appellant's Brief at 3 ("On October 11, 2006, the Bankruptcy Court ordered the Appellant to file the 27 required information and ordered that the Court may dismiss the case absent filing within fifteen days."). 28 25
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prior to the debtor's petition date and references to a Warren Trust in public records. See BD
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1 10 at 2; BD 27, Ex. 1 at 2. She also noted that the debtor had failed to attend his mandatory 2 3 4 5 representative of the debtor's bank had contacted her that day. See BD 11 at 1. The meeting of creditors on November 8, 2007. See BD 10 at 1.5 Ms. Wirum submitted a sworn declaration on November 15, 2006, stating that a
6 representative advised that, before the debtor filed his chapter 7 petition, he had approximately 7 $180,000 on account with the bank. Id. After commencing his chapter 7 case, upon learning 8 that the bank intended to honor the California Department of Child Support Services' levy for 9 10 11 12 The debtor failed to appear at the November 17, 2006 hearing on the court's October 30 unpaid support obligations, the debtor directed the bank not to honor the levy and withdrew the remaining, un-levied balance, approximately $90,000. See id. at 1-2.6
13 Order for Hearing re: Sanctions. Counsel for the Acting United States Trustee appeared and 14 urged the Court not to dismiss the case so that Ms. Wirum could continue seeking to locate and 15 liquidate assets for the benefit of creditors. The court declined to dismiss the case at that time 16 17 calendar. See BD 11/17/2007 (text entry). 18 19 The debtor appeared and gave his sworn testimony at his continued meeting of creditors and following the hearing the court's Order for Hearing re: Sanctions was taken off the court's
7 20 on November 29, 2006. Ms. Wirum recalled reminding him at the meeting of creditors that he
The United States trustee is required to "convene and preside over at a meeting of creditors" in bankruptcy cases. See 11 U.S.C. 341(a). The meeting of creditors affords 22 creditors, the trustee, and other parties the opportunity to examine debtors with respect to their financial affairs. See 11 U.S.C. 341(a); 343. Debtors are required to "appear and submit to 23 examination" at their meeting of creditors. 11 U.S.C. 343. 21 24 In so doing, the debtor likely effected an unauthorized transfer of property of the estate in violation of section 549 the Bankruptcy Code. See 11 U.S.C. 549, 550 (the trustee 25 may avoid and recover unauthorized post-petition transfers of property of the estate). 26 7 The section 341 meeting of creditors "may be adjourned from time to time" by oral 27 announcement of the date and time of the continued meeting. The November 8, 2006 meeting of creditors was so adjourned by Ms. Wirum, to November 29, 2006. See Fed.R.Bankr.P. 28
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1 was obligated to file schedules and other documents. See BD 27, Ex. 1 at 2. She also recalled 2 3 4 5 6 (text entry). The debtor appeared for his continued meeting of creditors on March 7, 2007 but the debtor saying he would file the required documents and also that he had no creditors. See id.8 The meeting of creditors was continued again, to December 18, 2006. BD 11/30/2006
7 refused to testify under oath despite his statutory obligation to do so. See BD 27, Ex. 1 at 3. 8 Ms. Wirum continued the meeting of creditors again, to April 4, 2007. See BD 3/7/2007 (text 9 10 11 12 claiming that because he failed to obtain pre-petition credit counseling or to apply for a entry).9 On March 6, 2007, the debtor filed a motion to dismiss his case under 11 U.S.C. 109(h),
13 statutory waiver he was not eligible to be a debtor and, for that reason, the court was 14 constrained to dismiss his case under 11 U.S.C. 109(h). See BD 23. The Acting United States 15 Trustee objected to the motion, arguing that the court should bar the debtor from seeking to 16 17 months without fulfilling his debtor obligations, including the obligation to provide full and 18 19 honest disclosure of his financial affairs. The Acting United States Trustee opposed dismissal dismiss his case given that he had enjoyed the benefits of being a debtor in bankruptcy for five
20 2003(e). 21 22 23 24 25 26 A transcript of the debtor's November 29, 2006 meeting of creditors was generated. An excerpt of the transcript was attached to the debtor's opening brief in this court. See Appellant's Brief, Appx. at E.R. 39-43. However, the November 29 transcript was not filed on the bankruptcy court's docket, and was never introduced into evidence much less admitted. It was not designated for the record on appeal nor could it be included. The transcript of a session of the meeting of creditors, a non-judicial proceeding, never having been presented to the bankruptcy court in any proceeding, is extraneous and should not be considered in this appeal.
9 8
The meeting of creditors has been continued subsequently, most recently to October 27 10, 2007. Mr. Warren appeared at his continued meeting of creditors on August 8, 2007, and answered questions from Ms. Wirum and her attorney. 28
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1 as not warranted or required as a matter of law. See BD 27. Ms. Wirum also objected, arguing 2 3 4 5 required to disclose his financial affairs fully and honestly, and that the debtor was that the debtor, unhappy with his unsuccessful attempt to avoid a levy by the County of Los Angeles Bureau of Family Support Operations for past due child support obligations, should be
6 manipulating the bankruptcy process by seeking to dismiss his case after Ms. Wirum had 7 discovered and taken control of valuable assets for the benefit of creditors. See BD 30. 8 9 10 11 12 commenced, required an "automatic dismissal" of his case under section 521(i). BD 31.10 The On April 4, 2007, the debtor filed an ex parte Request for Entry of Order of Dismissal, contending that his failure to file schedules, a statement of financial affairs, payment advices, or other documents required under 11 U.S.C. 521(a) within the 45-day period after his case was
13 debtor did not dispute any of the facts cited by the Acting United States Trustee or Ms. Wirum 14 to support their respective objections. On April 6, 2007, the bankruptcy court held a hearing on 15 the debtor's 11 U.S.C. 109(h) motion to dismiss, as well as on section 521(i) issues. See BD 16 17 On April 9, 2007, the bankruptcy court issued its Memorandum on Motions to Dismiss, 18 19 addressing both the 11 U.S.C. 109(h) and 11 U.S.C. 521 issues. BD 33.12 In view of this 4/6/2007 (text entry).11
20 record of uncontested facts, the court characterized the debtor's efforts to obtain dismissal as 21 "want[ing] out of Chapter 7 based on his own failures and misconduct." Id. On that basis, the 22 court applied the doctrine of judicial estoppel to bar the debtor from seeking to dismiss his case 23 That same day, the bankruptcy court entered an order denying the debtor's request for dismissal, without prejudice to renewal upon a motion and hearing on five days' notice. 25 BD 32. 24 26 27 28 2007).
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A transcript of the April 6 hearing is included in the record on appeal. See BD 53. In re Warren, Case No. 06-10697, 2007 WL 1079943 (Bankr. N.D. Cal. April 9,
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1 2 under 11 U.S.C. 109(h), adopting the reasoning of the bankruptcy court in In re Withers. See id
13 3 at 2. Regarding the debtor's request for "automatic" dismissal under 11 U.S.C. 521(i), the
4 court deemed Ms. Wirum's November 15, 2006 request that the court refrain from dismissing 5 the debtor's case (BD 10) as a motion for waiver of the debtor's filing requirements under 11 6 7 8 9 10 2006. See BD 33 at 2. The court thus found that dismissal was neither legally required nor warranted under the U.S.C. 521(a). In the exercise of its statutory power under section 521(a)(1)(B), the court waived the debtor's obligation to file the documents at issue, nunc pro tunc to November 15,
11 circumstances. See id. In reaching its decision, the court took into account of Ms. Wirum's 12 discovery of $93,000 in an undisclosed bank account and noted that the debtor had "engaged in 13 14 15 16 17 18 2007. BD 34, 35. This appeal of those orders followed. SUMMARY OF ARGUMENT 1. The bankruptcy court did not abuse its discretion, pursuant to its powers under real estate transactions within the past few years and may be the beneficiary of a trust." See id. The bankruptcy court entered two orders effectuating its rulings, on April 13 and April 20,
19 11 U.S.C. 521(a)(1)(B), in waiving the debtor's obligation to file certain required financial 20 21 exercise of discretion enjoys substantial support from the record. 22 23 For nearly five months after filing his bankruptcy petition, the debtor failed to file his documents. The bankruptcy court's conclusion that the facts in the debtors' case permitted this
24 schedules of assets and liabilities and other documents required under the Bankruptcy Code 25 and otherwise neglected his duties as a debtor in chapter 7. He then sought an order 26 27 28 2007)
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1 2 compelling the dismissal of his case, finally, on the basis that his own refusal to file schedules
3 and other documents within 45 days after commencing his case triggered an unconditional right 4 to the "automatic dismissal" of his case under 11 U.S.C. 521(i). The bankruptcy court 5 exercised its express statutory power under section 521(a)(1)(B) to waive the debtor's filing 6 7 8 9 the court must "order otherwise" regarding a debtor's duty to file documents, the court did not obligations, thereby avoiding any necessary for an "automatic dismissal." 2. Because section 11 U.S.C. 521(a)(1)(B) does not specify a time period within which
10 abuse its discretion in waiving these duties after the 45-day period referenced in section 521(i). 11 Congress placed no temporal limits a court's exercise of discretion under section 521(a)(1)(B). 12 13 14 15 16 debtor argues that section 521(i) mandates that a court dismiss a case whenever all of the 3. The bankruptcy court properly concluded that dismissal under 11 U.S.C. 521(i) was not applicable in the debtor's case because the only documents the debtor did not file were ones that the court, acting under section 521(a)(1)(B), told him he did not need to file. Although the
17 documents listed in section 521(a)(1)(B) are not filed, his argument fails to appreciate that 18 section 521(i) only envisions dismissal when all of the information required under section 19 521(a)(1) is not provided. Legislative history and the public policy favoring the prevention of 20 21 4. The bankruptcy court acted within its discretion in applying judicial estoppel to bar 22 23 the debtor from raising his own eligibility under 11 U.S.C. 109(h) as grounds for dismissal of abuse of the bankruptcy process also support the bankruptcy court's decision.
24 his case. The debtor commenced a voluntary bankruptcy case in October 2006 and then 25 refused to make required disclosures of his financial condition while accepting the advantages 26 of bankruptcy protection for nearly five months. In seeking to carry out the orderly liquidation 27 28
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1 2 energy investigating his affairs, resulting in the trustee's discovery of a large bank account and
3 other indicia of possible assets for the distribution to creditors. Suddenly changing course in 4 March 2007, the debtor sought an abrupt dismissal of his case on grounds that he was not 5 eligible to be a debtor after all due to his failure to obtain or seek a waiver of the pre-petition 6 7 8 9 10 the debtor from pursuing his section 109(h) motion. In filing a voluntary chapter 7 petition, the debtor demonstrated his intent to become a credit counseling required under 11 U.S.C. 109(h). With all three elements of judicial estoppel well established in the record presented, the bankruptcy court acted within its discretion to bar
11 debtor in bankruptcy and to submit to the obligations of the process while reaping its benefits. 12 The chapter 7 trustee spent months investigating the debtor's financial affairs including 13 14 15 16 The court also rightly held with the great weight of authority that while section 109(h) undisclosed assets, in the face of which the debtor changed course and sought to dismiss his case. The court barred the debtor from taking this strategic action.
17 sets forth mandatory eligibility requirements, satisfying the credit counseling requirements is 18 not a prerequisite to the bankruptcy court's jurisdiction in a case. 19 20 21 U.S.C. 521(a)(1)(B) is reviewed for an abuse of discretion. See, e.g., Harbin v. IndyMac Bank 22 23 FSB (In re Harbin), 486 F.3d 510, 517 (9th Cir. 2007) (reviewing for abuse of discretion a STANDARD OF REVIEW The bankruptcy court's exercise of its discretion to excuse the filing requirements of 11
24 bankruptcy court's nunc pro tunc approval of debtor's refinancing transaction); Hawaiian 25 Airlines Inc. v. U.S. (In re Hal, Inc.), 122 B.R. 851, 854 (9th Cir. 1997) (bankruptcy court's 26 award of equitable remedy of setoff reviewed for abuse of discretion). Likewise, the 27 28
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1 2 dismiss his case under 11 U.S.C. 109(h) is reviewed for abuse of discretion. See Hamilton v.
3 State Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir. 2001). 4 Whether the bankruptcy court properly declined to dismiss the debtor's case when it
5 waived his requirement to file certain documents under 11 U.S.C. 521(a), and when it 6 7 8 9 by a bankruptcy court are reviewed de novo. Nichols v. Birdsell, 491 F.3d 987, 989 (9th Cir. prohibited the debtor from seeking to dismiss his own case under 11 U.S.C. 109(h), required the court to interpret those statutes, which presents questions of law. Questions of law decided
10 2007). The bankruptcy court's underlying factual findings are reviewed for clear error. Id. 11 Mixed questions of law and fact are reviewed de novo. In re Elder, 325 B.R. 292, 296 (N.D. 12 Cal. 2005). 13 14 15 16 17 I. The bankruptcy court acted within its express statutory authority under the circumstances when it waived the debtor's section 521(a)(1)(B) filing requirements, even after the 45-day period in section 521(i) had expired. 1. Refusing to condone the debtor's behavior, and taking into account the preliminary ARGUMENT
18 results of Ms. Wirum's investigation, which unearthed over $93,000 in undisclosed assets and 19 potentially avoidable real estate transfers, the court acted within its statutory power to avert a 20 21 court's decision to "order otherwise" under its express authority under 11 U.S.C. 521(a)(1)(B), 22 23 should be upheld as a matter within the court's proper exercise of discretion. See In re Withers, premature and unjust dismissal of the debtor's case. Faced with these circumstances, the
24 2007 WL 628078 at *4, n.4 (concluding that court could and should excuse the debtor's filing 25 of documents, when the debtor failed to disclose assets and sought his own section 521(i) 26 dismissal); In re Parker, 351 B.R. 790, 800-01 (Bankr. N.D. Ga. 2006) (excusing debtor's 27 28
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failure to file pre-petition payment advices, which are required under section 521(a)(1)(B)(iv)).
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1 2 2. Section 521(a)(1)(B) establishes no deadline by which the court must "order
3 otherwise" regarding a debtor's duty to file bankruptcy-related documents, and thus the court 4 did not abuse its discretion in excusing some of these duties after the 45-day period referenced 5 in 521(i)(1).14 In fact, the most logical time for a court to use its powers under section 6 7 8 9 bankruptcy court's exercise of discretion in other sections of the Bankruptcy Code. See, e.g., 521(a)(1)(B) to prevent an improper application of section 521(i) would be after the 45-day period runs, when an abusive motion by a debtor will occur. Congress set temporal limits on a
10 11 U.S.C. 362(c)(3)(B) (regarding extension of the automatic stay); section 362(c)(4)(B) 11 (regarding application of the automatic stay where the debtor had a prior case); section 12 365(d)(4)(B) (regarding time periods for a debtor's assumption or rejection of non-residential 13 14 15 16 under 11 U.S.C. 521(a)(1)(B) is not limited to the 45-day period referenced in section 521(i), or leases). Congress elected not to include a similar temporal element in section 521(a)(1)(B). Case law also supports the conclusion that the power of the court to "order otherwise"
17 any other time period. See In re Ackerman, __ B.R. __, 2007 WL 2471473 (Bankr. W.D.N.Y. 18 Aug. 23, 2007) (court declined to dismiss a case where trustee was administering valuable 19 assets for benefit of creditors; court waived the filing of payment advices after the 45-day 20 21 521(a)(1)(B)); Withers, 2007 WL 628078 at *4, n.4 (there is "no requirement that the order 22 23 excusing the debtor from filing the documents be entered prior to the expiration of the 45 day period, construing trustee's request under section 521(i)(4) as a motion for relief under section
24 period."); Parker, 351 B.R. at 800-01 ("Section 521 does not set forth the time period within 25 which the Court can `order otherwise,' as [the Bankruptcy Code] does in numerous other 26 Although the bankruptcy court waived the filing requirements nunc pro tunc, this 27 was not necessary because its statutory power under 11 U.S.C. 521(a)(1)(B) to "order otherwise" allows it to excuse the filing of documents at any time, without backdating. 28
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1 2 sections."); In re Jackson, 348 B.R. 487, 499-500 (Bankr. S.D. Iowa 2006) (court not
3 "prohibited from `ordering otherwise' once a case reaches the 46 (sic) day after the date of the 4 filing of the petition"; court "may `order otherwise' if it finds that entering an order of 5 dismissal under section 521(i) would foster rather than prevent an abuse of process in a 6 7 8 9 10 (same); In re Williams, 339 B.R. 794 (Bankr. M.D. Fla. 2006) (same). 3. Indeed, to blindly require without exception that all of the documents listed in 11 particular case."); but see In re Lavato, 343 B.R. 268, 270 (Bankr. D.N.M. 2006) (no discretion to extend 45-day period after expiration); In re Ott, 343 B.R. 264, 268 (Bankr. D. Colo. 2006)
11 U.S.C. 521(a)(1)(B) always be filed in a case would read the court's express statutory authority 12 to "order otherwise" out of section 521. Further, such a reading would aid abusive, scheming 13 14 15 16 except one, and therefore arming himself with an "out" of bankruptcy if the trustee were to debtors. For example, a dishonest person could claim the protections of chapter 7 while failing to disclose valuable assets, then file all of the documents required under section 521(a)(1)(B)
17 uncover and pursue the undisclosed assets for the benefit of creditors. Congress provided 18 courts the express authority to "order otherwise" under section 521(a)(1)(B), empowering them 19 to confront and curtail that abuse of that type. 20 21 documents listed in section 521(a)(1)(B) must be filed in every case, lest an "automatic 22 23 dismissal" occur under section 521(i). Creditors and other interested parties stand to be unfairly disadvantaged if each of the
24 /// 25 /// 26 /// 27 28
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1 2 3 4 II. The bankruptcy court properly declined to dismiss the debtor's case under section 521(i) for his failure to file information that he was not required to provide, because the court had excused filing under section 521(a)(1)(B). 1. The bankruptcy court did not err in denying the debtor's motion to dismiss his case
5 under 11 U.S.C. 521(i). Given the court's proper exercise of its discretion to waive the filing 6 7 8 9 10 information under 521(a)(1). See Withers, 2007 WL 628078 at *4; Parker, 351 B.R. at 800-01. If the case were dismissed under section 521(i), the debtor would receive the illogical of required documents under section 521(a)(1)(B), dismissal under section 521(i) was not required. Section 521(i)(1) only contemplates dismissal if a debtor fails to file the "required"
11 benefit of a dismissal based on his own failure to file documents that the court expressly 12 ordered waived while creditors and other interested parties could be harmed.15 13 14 15 16 only warranted if the case has qualified for automatic dismissal under section 521(i)(1), which 2. An addition consequence of the court's section 521(a)(1)(B) waiver is that the 5-day period referenced in section 521(i)(2) is inapplicable to this case. A section 521(i)(2) order is
17 this case does not. 18 3. To the extent that there is any ambiguity in section 521(i), the available legislative
19 history indicates that the statute was not intended as a tool for debtors to obtain automatic 20 21 it was intended to curtail bankruptcy abuse. Section 521(i) was enacted as section 316 of Title 22 23 III of Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, entitled dismissals when valuable assets are unearthed or pursued by the trustee in their cases. Instead,
16 24 "Discouraging Bankruptcy Abuse." See Pub. L. No. 109-8.
Refusing to dismiss this case preserves the trustee's and others rights to confront the debtor's misconduct in the case, including the possibility of recovering approximately $90,000 26 that he withdrew post-petition, apparently without court authority. See 11 U.S.C. 549. 25 27 28 See also Parker, 351 B.R. at 800 (noting that 11 U.S.C. 521(i) "was designed to prevent abuses by debtors who do not take their responsibilities seriously and fail to provide
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1 2 4. Dismissing the debtor's case under these circumstances pursuant to 11 U.S.C. 521(i)
3 would also encourage other bankruptcy abuses. It could, for example, deprive Ms. Wirum, 4 creditors, or the Acting United States Trustee of the opportunity to seek a dismissal with other 5 conditions, such as dismissal under section 349(a) that bars future discharge of certain debts. 6 7 8 9 debtor could unfairly evade the application of such provisions to this case and to his future Similarly, it could prevent a dismissal that would limit future eligibility for bankruptcy protection under section109(g)(1). By seeking his own dismissal under section 521(i), the
10 filings. 11 In electing to waive the debtor's obligation to file schedules of assets and liabilities and
12 other documents and decline to allow the dismissal of this case, the court enabled Ms. Wirum 13 14 15 16 that he himself had initiated some five months earlier. The alternative a potential to continue investigating the debtor's undisclosed assets and liabilities so that creditors might benefit from her efforts to oversee an orderly liquidation of the debtor's estate, the very process
17 "automatic" dismissal of the case would have terminated Ms. Wirum's investigation 18 prematurely, leaving creditors with their pre-bankruptcy, state law collection rights, as opposed 19 to the orderly process provided for under the Bankruptcy Code. The debtor's ongoing refusal 20 21 filing obligations, rather than to allow the case to be dismissed in the wake of the debtor's own 22 23 24 failures, to the potential detriment of creditors. This court should affirm the bankruptcy court's decision, as supported by its express to fulfill his other statutory obligations in effect left the court little choice but to waive the
25 statutory authority and case law, which prevented the debtor's improper attempt to use 11 26 27 the Court and interested parties with the information necessary to administer a bankruptcy case"). 28
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1 2 U.S.C. 521(i) as a weapon against creditors and the bankruptcy process rather than as a shield
3 against abusive conduct. 4 5 6 7 8 9 dismissal of his case. "Judicial estoppel is an equitable doctrine that precludes a party from III. The bankruptcy court properly concluded that, under the circumstances, the debtor was judicially estopped to seek dismissal of his case under section 109(h) for failure to obtain or seek a waiver of pre-petition credit counseling. 1. The bankruptcy court acted within its discretion when it concluded that judicial estoppel precluded the debtor from raising his eligibility under section 109(h) as grounds for
10 gaining an advantage by asserting one position, and then seeking an advantage by taking a 11 clearly inconsistent position." Hamilton v. State Farm Fire and Casualty Co., 270 F.3d 778, 12 782 (9th Cir. 2001). Courts also apply it out of concern for the "`orderly administration of 13 14 15 16 and there is no exhaustive formula for determining its applicability, but of the range of factors justice and regard for the dignity of judicial proceedings' and to `protect against a litigant playing fast and loose with the courts.'" Id. (internal citation omitted). The doctrine is flexible,
17 that courts may consider, three typically inform the decision. Id. at 782-83. One consideration 18 is whether the party's later-taken position is clearly inconsistent with its earlier position. Id. at 19 782. This factor "applies to a party's stated position, regardless of whether it is an expression 20 21 Gov't., 354 F.3d 1036, 1044 (9th Cir. 2004) (internal citations and quotation marks omitted). 22 23 A second consideration is whether the party has succeeded in persuading a court to accept that of intention, a statement of fact, or a legal assertion." Wagner v. Prof. Engineers in Cal.
24 party's earlier position. Id. A third consideration is whether the party seeking to assert an 25 inconsistent position would derive an unfair advantage or impose an unfair detriment on the 26 opposing party if not estopped. Id. at 783. 27 28
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1 2 support the bankruptcy court's conclusion that the debtor should not be able to use his lately 3 changed position to obtain dismissal. First, by voluntarily commencing his chapter 7 4 bankruptcy case, the debtor effectively represented to the court, his creditors, the Acting United 5 6 the bankruptcy court (including the automatic stay pursuant to 11 U.S.C. 362) for the purpose 7 8 9 of securing the orderly administering his assets for the benefit of his creditors. Second, this position was accepted by those parties and encouraged by the debtor. No States Trustee, and the chapter 7 trustee, that he wanted, and was entitled to, the protections of
10 one sought to dismiss the case or to lift the automatic stay. Ms. Wirum began to administer the 11 debtor's estate, by among other things investigating the debtor's financial affairs and collecting 12 13 of assets and liabilities and other information regarding his financial affairs or by timely 14 15 submitting to examination at the meeting of creditors, he did not deny those obligations. He assets. Although the debtor did not embrace his debtor obligations by timely filing schedules
16 appeared at a session of the meeting of creditors and, according to the chapter 7 trustee, 17 testified that he would file his schedules of assets and liabilities. At no time during the first 18 five months of the case while the forgoing occurred did the debtor inform the court or any of 19 20 Third, five months into the administration of the debtor's estate and after the chapter 7 21 22 trustee had assumed control of the debtor's bank account, the debtor first took the position that the parties that he was ineligible to be a debtor or that he desired to dismiss his case.
23 he was ineligible to be a debtor and therefore his case had to be dismissed. This change of 24 position, if accepted, would (a) discharge the chapter 7 trustee (thereby ending her investigation 25 and collection of the debtor's assets, including causes of action belonging to the estate, such as 26 27 estate from the supervision, restrictions, and protection of the court and returning it to the 28
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actions to avoid fraudulent transfers), (b) terminate the bankruptcy estate (thereby removing the
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1 2 debtor), and (c) leave creditors to their non-bankruptcy remedies to collect their claims. See 11 3 U.S.C. 349(b)(3) (revesting of estate in debtor) and 362(c) (termination of automatic stay). 4 5 6 admitted.17 Therefore, it is not surprising that the bankruptcy court did not extensively recite 7 8 the facts in its Memorandum on Motion to Dismiss. The court simply noted that Ms. Wirum's None of the forgoing facts relevant to the bankruptcy court's application of judicial estoppel were contested in the proceedings below, and some appear to have been expressly
9 investigation caused her "to believe that there may be significant assets of the estate, in that 10 [the debtor] had $93,000 in a bank account on the day he filed his petition, engaged in real 11 estate transactions within the past few years, and may be the beneficiary of a trust." 12 13 might not be appropriate if this case were "a situation where the debtor is unhappy with the 14 15 way the bankruptcy is going" and that "it's wrong for the debtor to purposefully not do Memorandum at 1.18 At the hearing on dismissal, the court expressed its concern that dismissal
16 something so the debtor has an out just in case the Trustee tries to sell his house, or something 17 like that." Transcript at 5. The court confirmed its finding that the debtor was seeking to take 18 advantage of 11 U.S.C. 109(h) to the prejudice of creditors by reciting that element in 19 20 The debtor's change of position, five months into the case, is the type of "fast and 21 22 23 24 25 26 27 28 E.g.: MR. CHANDLER (counsel for debtor): "I understand the judicial estoppel arguments that are being made about this credit-counseling issue . . . And in some way that makes some sense, because the debtor does make a representation that he's eligible." April 6, 2007 Transcript at 4. THE COURT: "And I think it's wrong for the debtor to purposefully not do something so the debtor has an out just in case the Trustee tries to sell his house, or something like that. MR. CHANDLER: "Well, that may be the sort of the case here. I really don't know that the debtor filed pro per, on advice of counsel, not our office, and never filed schedules." Transcript at 5. These facts were set forth in Ms. Wirum's sworn declaration presented to the bankruptcy court in support of her opposition to dismissal and were uncontested.
OPENING BRIEF OF APPELLEE SARA L. KISTLER, ACTING UNITED STATES TRUSTEE CV 07-03244 CRB
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conjunction with its holding that dismissal was not mandated and judicial estoppel applied.
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1 2 loose" manipulation of the courts that judicial estoppel is supposed to address. The court's 3 refusal to dismiss the case on the grounds of estoppel was an appropriate response within its 4 discretion and equitable power to ensure the integrity of the bankruptcy process. 5 6 addressing a question "whether the requirements of section 109(h) are procedural or 7 8 jurisdictional" (Appellant's Opening Brief at 5) and whether a petition filed by an ineligible 2. The debtor cites in his opening brief numerous cases that he characterizes as
9 debtor must be dismissed or stricken (id. at 6). It is not clear what the purpose of these 10 references is, as the debtor never endorses any of the positions taken by these cases. The 11 debtor does not question this court's or the bankruptcy court's jurisdiction in his statement of 12 13 court's jurisdiction to determine the eligibility or dismissal issues. 14 15 But in any event, a challenge to jurisdiction would be misguided, because the vast appellate jurisdiction, so it does not appear that the cites are meant to challenge the bankruptcy
16 majority of courts to address the issue conclude that satisfying the requirements of section 109 17 is not a predicate to a court's exercise of bankruptcy jurisdiction. See, e.g., FDIC v. Wenberg 18 (In re Wenberg), 94 B.R. 631, 637 (9th Cir. BAP 1988) ("[Section] 109 eligibility is not 19 20 BAP 2007) ("[B]ecause the bankruptcy court retains the authority to determine the debtor's 21 22 eligibility, the court must have jurisdiction over a case commenced by an ineligible debtor. jurisdictional"), aff'd 902 F.2d 768 (9th Cir. 1990), In re Mendez, 367 B.R. 109, 116 (9th Cir.
23 Determining eligibility is certainly a matter which `arises in a case under title 11.'"), In re 24 Republic Trust & Savings Co., 59 B.R. 606, 609 n.1 (N.D. Okla. 1986) (internal citation 25 omitted). 26 27 /// 28
OPENING BRIEF OF APPELLEE SARA L. KISTLER, ACTING UNITED STATES TRUSTEE CV 07-03244 CRB
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1 2 3 CONCLUSION For these reasons, the Acting United States Trustee respectfully asks that this court
4 affirm the bankruptcy court's orders denying the debtor's ex parte request to dismiss his case 5 under 11 U.S.C. 521(i) and his motion to dismiss under 11 U.S.C. 109(h). 6 Dated: September 6, 2007 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
OPENING BRIEF OF APPELLEE SARA L. KISTLER, ACTING UNITED STATES TRUSTEE CV 07-03244 CRB
Respectfully submitted, Sara L. Kistler, Acting United States Trustee By: /s/ James A. Shepherd (DC#476306) Trial Attorney
Roberta A. DeAngelis Acting General Counsel P. Matthew Sutko Knight Elsberry Office of the General Counsel Executive Office for United States Trustees Department of Justice 20 Massachusetts Avenue, NW Room 8100 Washington, DC 20530
Department of Justice Office of the United States Trustee 235 Pine Street, #700 San Francisco, CA 94104 phone: (415) 705-3333 fax: (415) 705-3379 email: [email protected]
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