The Supreme Court hinted upon whether the right to dismiss is absolute in a recent case, Marrama v. Citizens Bank. The issue in Marrama was whether a debtor had an absolute right to convert from Chapter 7 to Chapter 13. The debtor in this case concealed assets which exposed him to turnover of those assets to the Chapter 7 trustee. When the Debtor moved to convert to Chapter 13, the Chapter 7 Trustee and creditors objected and sought to deny conversion based on bad faith.
The Supreme Court rejected the bad faith argument put forth by the objectors to Bankruptcy Code section 706 (conversion), but ultimately found in favor of the trustee and creditor. The Court referenced the broad powers provided by § 105 as clearly giving the bankruptcy court the authority to deny the debtor the relief requested, despite the language of § 706, when doing so would only prolong an inevitable later dismissal.
The Supreme Court rejected this expansion of powers in light of the explicit provision in the Bankruptcy Code providing for exemptions. At 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. Marrama most certainly did not endorse, even in dictum, the view that equitable considerations permit a bankruptcy court to contravene express provisions of the Code.
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Do You Have An Absolute Right To Dismiss Your Chapter 13 Bankruptcy
The Supreme Court hinted upon whether the right to dismiss is absolute in a recent case, Marrama v. Citizens Bank. The issue in Marrama was
March 5, 2021
