Sixth Circuit Upholds Chapter 13 Debtor’s Right to Request and Receive Dismissal of Bankruptcy Case
LIT Commentary: This is an example of where Federal Courts commit Judicial Fraud via ochlocracy. Hat tip to the Sixth Circuit Court in this case, especially when the bankruptcy appellate panel includes high profile judges from around the country. That said, what’s missing is the lack of independent oversight of judicial bias and corrupt judge(s). In this case, these are outlaws in dirty black robes who colluded at the various stages of proceedings to deny a debtor proper relief because they could not set aside their own personal bias. They should be impeached and removed from the bench. There is no excuse for fraud BY the court in such a simple rule. Certainly, one cannot say the judges at the Bankruptcy Appellate Panel and/or District Court didn’t know such a simple mandatory law.
OCT 27, 2021 | REPUBLISHED BY LIT: OCT 30, 2021
See: Smith v. U.S. Bank (In re Smith), No. 19-8021 (B.A.P. 6th Cir. Sep. 10, 2019)
BETH A. BUCHANAN, Bankruptcy Appellate Panel Judge
Smith v. U.S. Bank (In re Smith), 999 F.3d 452, 454 (6th Cir. 2021) (“Among the several requirements for the rule of law is that the law be reasonably certain. Certainty in the law is what allows citizens to plan their actions knowing that neither the state nor other individuals will interfere with them. That same certainty is what constrains government officials to exercise their coercive powers according to rules—rather than according to their own will, which is what the Founding generation called arbitrary action, or a “government … of men.” John Adams, “The Constitution of Massachusetts,” in The Political Writings of John Adams 98 (George A. Peek, Jr. ed. 1954). And when those rules take statutory form, the courts must apply them, regardless of whether a court likes the results of that application in a particular case. Otherwise all statutory law becomes discretionary, and the law itself is rendered uncertain.”)
A statute must be interpreted and enforced as written, regardless, according to the U.S. Court of Appeals for the Sixth Circuit, “of whether a court likes the results of that application in a particular case.” That legal maxim guided the Sixth Circuit’s reasoning in a recent decision[1] in a case involving a Chapter 13 debtor’s repeated filings and requests for dismissal of his bankruptcy cases in order to avoid foreclosure of his home.
In short, the Sixth Circuit held that if a Chapter 13 debtor moves to have his/her case dismissed, and no exception applies, a bankruptcy court must dismiss it.
The Underlying Facts
The case involves a Chapter 13 debtor, Ronald Smith, who obtained a loan to purchase a home. Smith defaulted on the loan, was sued by the mortgage holder and in 2007 a state court scheduled a foreclosure sale.
Four days before the sale, Smith filed for bankruptcy, resulting in the automatic stay of the sale. After the sale date passed, Smith filed a motion to dismiss the case, which the bankruptcy court granted. Smith did the same thing in 2017 when another foreclosure sale of his home was scheduled, and again the bankruptcy court dismissed his case after the foreclosure sale was cancelled.
In 2019, U.S. Bank purchased the mortgage for Smith’s home, and a foreclosure sale was scheduled. On the day the sale was scheduled to take place, Smith filed for bankruptcy, and six days later he filed a motion to dismiss the case, which the bankruptcy court granted.
Subsequently, U.S. Bank filed a motion under Federal Rule of Civil Procedure 60(b) (as incorporated by Bankruptcy Rule 9024) requesting that the bankruptcy court vacate its order dismissing the case. The bankruptcy granted the motion and also lifted the automatic stay in Smith’s case for a period of two years.
Smith appealed to the District Court and sought a stay of the bankruptcy court’s order reinstating his case. The District Court denied the motion but certified for interlocutory appeal the question of whether reinstatement of Smith’s case was contrary to the law. Smith then appealed to the Sixth Circuit. The specific issue appealed was whether the District Court abused its discretion when it held that the bankruptcy court could reinstate Smith’s Chapter 13 case.
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The Sixth Circuit’s Decision
The case hinged on what the Sixth Circuit described as a “straightforward statutory rule,” the requirement (subject to one exception not applicable in this case) in 11 U.S.C. §1307(b) that if a debtor in a Chapter 13 case moves to dismiss their case, “the court shall dismiss” it.
The Sixth Circuit, in ruling in favor of the debtor, stated that, by its plain terms, the right to dismiss in 11 U.S.C. §1307(b) is mandatory. It explained that U.S. Bank failed to provide any support for its argument that §1307(b) is discretionary in cases where the debtor filed its bankruptcy petition in bad faith.
The Sixth Circuit rejected U.S. Bank’s argument that the U.S. Supreme Court case of Marrama v. Citizens Bank of Massachusetts provides grounds to uphold the District Court’s decision. In that case, the Supreme Court stated in dictum that a bankruptcy court, in considering whether to grant a debtor’s motion to convert a debtor’s Chapter 7 case to a case under Chapter 13, could have denied the motion by invoking 11 U.S.C. §105(a), which provides bankruptcy courts with the equitable power to take any action “that is necessary or appropriate to carry out the provisions of this title” or “to prevent an abuse of process.”
The Sixth Circuit noted that two other U.S. Court of Appeals Circuits have cited that dictum in holding that a bankruptcy court may deny a debtor’s motion to dismiss a Chapter 13 case if the debtor filed their petition in bad faith. However, the Sixth Circuit explained that the Supreme Court itself largely rejected that dictum in the case of Law v. Siegel, which was decided in 2014.
In Law v. Siegel, the Supreme Court stated that “[a]t most, Marrama’s dictum suggests that in some circumstances a bankruptcy court may be authorized to dispense with futile procedural niceties in order to reach more expeditiously an end result required by the Code.” Accordingly, the Sixth Circuit rejected U.S. Bank’s argument, finding that the command of 11 U.S.C. §1307(b) is “no mere procedural nicety.”
The Sixth Circuit also rejected U.S. Bank’s argument that Federal Rule of Civil Procedure 60(b)(3), which allows a court to “relieve a party” from a final order due to fraud, “misrepresentation or misconduct by an opposing party,” authorized the bankruptcy court to vacate its dismissal of Smith’s bankruptcy case.
However, as the Sixth Circuit explained, when there is a conflict between the Bankruptcy Code (in this case 11 U.S.C. §1307(b)) and the Bankruptcy Rules, such conflict must be settled in favor of the Bankruptcy Code. The Bankruptcy Code directs the Court to dismiss a Chapter 13 upon a debtor’s motion.
Therefore, the Sixth Circuit ruled in favor of the debtor and remanded the case with instructions for the bankruptcy court to dismiss Smith’s Chapter 13 bankruptcy case.
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Raymond M. Kethledge is a circuit judge on the U.S. Court of Appeals for the Sixth Circuit, to which he was appointed on July 8, 2008. Judge Kethledge is also a lecturer at Michigan Law School, where he has taught Federal Courts and Fundamentals of Appellate Advocacy. He received his B.A. in history from the University of Michigan in 1989 and his J.D. from Michigan Law School in 1993. He clerked for Justice Anthony Kennedy of the U.S. Supreme Court and Judge Ralph B. Guy Jr. of the U.S. Court of Appeals for the Sixth Circuit. He also worked in the U.S. Senate and later, with two partners, founded a boutique litigation firm, now known as Bush Seyferth & Paige PLLC, in Troy, Michigan. His practice there included a broad mix of trial-court, appellate, and class-action litigation. Judge Kethledge is also the co-author, with Mike Erwin, of Lead Yourself First: Inspiring Leadership Through Solitude, published in 2017 by Bloomsbury.
U.S. Bankruptcy Court, E.D. Kentucky
Bankruptcy Judge
Tracey N. Wise was appointed United States Bankruptcy Judge for the Eastern District of Kentucky on March 31, 2010 and elevated to Chief Judge on October 1, 2011. Effective January 1, 2016, Judge Wise was appointed to the Sixth Circuit Bankruptcy Appellate Panel for a three year term.
Judge Wise is a 1980 graduate of Indiana University (B.A., Phi Beta Kappa, Magna Cum Laude) and a 1983 graduate of the Indiana University School of Law (J.D., Order of the Coif) where she served as a Note Editor for the Indiana Law Journal (1982-1983).
Judge Wise is a Fellow in the American College of Bankruptcy (12th Class – 2001), a member of the National Conference of Bankruptcy Judges and has served as the bankruptcy representative on various U.S. District Court (EDKY) and Sixth Circuit Committees.
Prior to her appointment, Judge Wise practiced in the areas of bankruptcy and debt restructuring, served on numerous court-appointed committees, chaired the Bankruptcy Sections of the Fayette County and Kentucky Bar Associations, served as a Trustee of the Kentucky Bar Association Client’s Security Fund and was a member of the Board of Directors of the Lexington Affiliate of the Susan G. Komen for the Cure Breast Cancer Foundation.
Hon. Daniel S. Opperman has served as a bankruptcy judge in Flint and Bay City for the U.S. Bankruptcy Court for the Eastern District of Michigan since 2006. Prior to taking the bench, he practiced with Braun Kendrick Finkbeiner, PLC, concentrating in litigation, bankruptcy, and real estate. Judge Opperman is a magna cum laude graduate of Wayne State University Law School, where he was a member of the Wayne Law Review and served as note and comment editor.
Tracey N. Wise was appointed United States Bankruptcy Judge for the Eastern District of Kentucky on March 31, 2010 and elevated to Chief Judge on October 1, 2011. Effective January 1, 2016, Judge Wise was appointed to the Sixth Circuit Bankruptcy Appellate Panel for a three year term.
David is one of Ohio’s best-known lawyers, by virtue of his many years of highly visible work in the political arena.
David Leland is currently a member of the Ohio House of Representatives, representing HD #22 in northern Columbus…a position he also held in the 115th Ohio General assembly. He was elected to four (4) terms as chair of the Ohio Democratic Party, and was appointed to the Federal Services Impasse Panel by President William J. Clinton in 2000.
David Leland chaired the Ohio Delegations to the 1996 and 2000 Democratic National Conventions.
He also served as Finance Chair to the successful 2006 campaign of Ohio Governor Ted Strickland. The campaign raised a then-record $17 million under his direction.
David has been named one of the “Best Lawyers” in Central Ohio (2010 to present) by Columbus Business First.
David Leland also serves on the Board of Trustees of The Columbus Clippers—the Cleveland Indians Triple-A baseball franchise. During his 11 year tenure on the Board, the Clippers have won back-to-back National Minor League Championships and completed construction of their $70 million award-winning, baseball stadium; Huntington Park.
