In Re: William Ingram V. ( 2011 )

ELECTRONIC CITATION: 2011 FED App. 0017P (6th Cir.)File Name: 11b0017p.06
BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT
In re: WILLIAM WARREN INGRAM, )
) No. 11-8013
Debtor. )
__________________________________________)
Appeal from the United States Bankruptcy Court
for the Northern District of Ohio
Case No. 10-21313
Decided and Filed: December 16, 2011
Before: BOSWELL, FULTON, and McIVOR, Bankruptcy Appellate Panel Judges.
____________________
COUNSEL
ON BRIEF: Dean P. Wyman, DEPARTMENT OF JUSTICE, OFFICE OF THE UNITED
STATES TRUSTEE, Cleveland, Ohio, Noah M. Schottenstein, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, D.C., for Appellee. William W. Ingram, Cleveland, Ohio, for Appellant.
____________________
OPINION
____________________
THOMAS H. FULTON, Bankruptcy Appellate Panel Judge. William Warren Ingram (the
“Debtor”) appeals an order of the bankruptcy court dismissing his chapter 13 bankruptcy case
pursuant to 11 U.S.C. § 1307 for failure to complete mandatory prepetition credit counseling prior
to filing his petition as required by 11 U.S.C. § 109(h)(1), and the denial of his motion seeking
reconsideration of that order. For the reasons that follow, the Panel AFFIRMS the bankruptcy court.
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I. ISSUE ON APPEAL
Did the bankruptcy court abuse its discretion in dismissing the Debtor’s chapter 13
bankruptcy case pursuant to 11 U.S.C. § 1307 for failure to complete mandatory prepetition credit
counseling prior to filing his petition as required by 11 U.S.C. § 109(h)(1)?
II. JURISDICTION AND STANDARD OF REVIEW
The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal.
The United States District Court for the Northern District of Ohio has authorized appeals to the
Panel, and neither party has timely elected to have this appeal heard by the district court. 28 U.S.C.
§ 158(b)(6), (c)(1). A final order of the bankruptcy court may be appealed as of right pursuant to
28 U.S.C. § 158(a)(1). For purposes of appeal, an order is final if it “ends the litigation on the merits
and leaves nothing for the court to do but execute the judgment.” Midland Asphalt Corp. v. United
States, 489 U.S. 794, 798, 109 S. Ct. 1494, 1497 (1989) (citations omitted). An order dismissing
a debtor’s chapter 13 case is a final, appealable order. Raynard v. Rogers (In re Raynard), 354 B.R.
834, 836 (B.A.P. 6th Cir. 2006).
The bankruptcy court’s dismissal of the Debtor’s case is reviewed for an abuse of discretion.
In re Anderson, 397 B.R. 363 (B.A.P. 6th Cir. 2008). “An abuse of discretion occurs only when the
[trial] court relies upon clearly erroneous findings of fact or when it improperly applies the law or
uses an erroneous legal standard.” Kaye v. Agripool, SRL (In re Murray, Inc.), 392 B.R. 288, 296
(B.A.P. 6th Cir. 2008).
An abuse of discretion is defined as a definite and firm conviction
that the court below committed a clear error of judgment. The
question is not how the reviewing court would have ruled, but rather
whether a reasonable person could agree with the bankruptcy court’s
decision; if reasonable persons could differ as to the issue, then there
is no abuse of discretion.
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Mayor of Balt., Md. v. W. Va. (In re Eagle-Picher Indus., Inc.), 285 F.3d 522, 529 (6th Cir. 2002)
(internal quotation marks and citations omitted).
The bankruptcy court’s findings of fact are reviewed under the clearly erroneous standard.
Riverview Trenton R.R. Co. v. DSC, Ltd. (In re DSC, Ltd.), 486 F.3d 940, 944 (6th Cir. 2007). “A
finding of fact is clearly erroneous ‘when although there is evidence to support it, the reviewing court
on the entire evidence is left with the definite and firm conviction that a mistake has been
committed.’ ” Id. (quoting Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573, 105 S. Ct.
1504 (1985)).
The bankruptcy court’s legal conclusions are reviewed de novo. Solis v. Laurelbrook
Sanitarium and School, Inc., 642 F.3d 518, 522 (6th Cir. 2011). “De novo means that the appellate
court determines the law independently of the trial court’s determination.” Treinish v. Norwest Bank
Minn., N.A. (In re Periandri), 266 B.R. 651, 653 (B.A.P. 6th Cir. 2001) (citations omitted).
III. FACTS
On November 17, 2010, the Debtor filed a petition for relief under Chapter 13 of the
Bankruptcy Code. On November 18, 2010, he filed a “Certificate of Credit Counseling” that
indicated that the counseling session was completed on November 18, 2010, i.e., postpetition. At
a hearing on a creditor’s motion for relief from stay held on December 16, 2010, the Debtor
represented to the bankruptcy court that the certificate was incorrect and that he actually completed
the counseling session before he filed his bankruptcy petition at 4:00 p.m. on November 17, 2010.
On December 17, 2010, the bankruptcy court issued an order for the Debtor to show cause why his
case should not be dismissed pursuant to 11 U.S.C. § 109(h) and an order inviting the UnitedStates
Trustee’s (“Trustee”) office to make inquiries to the credit counseling agency to ascertain the actual
status of the Debtor’s credit counseling progress as of the date of filing of the petition.
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Following investigation of the matter, the Trustee filed a motion to dismiss the Debtor’s case
pursuant to 11 U.S.C. §§ 1307(c) and 109(h). The bankruptcy court held a hearing on the motion
to dismiss on January 20, 2011, at which the Trustee represented to the bankruptcy court that,
although the Debtor completed the online portion of his counseling on November 17, 2010, he did
not complete the telephone component until November 18, 2010. Following the Trustee’s
representations at the hearing and providing the Debtor an opportunity to respond, the bankruptcy
court orally dismissed the Debtor’s case on the Trustee’s motion. The bankrtptcy court found that
the Debtor’s briefing session for which he registered required both internet and phone portions1 and,
having not completed both prepetition, the Debtor was ineligible under § 109(h). The court
explained to the Debtor on the record:
I’m going to grant the Trustee’s motion to dismiss. That doesn’t
mean that the case can’t be refiled or a new case can’t be filed again.
But the language of 109(h) is straightforward and the provision that
says that the service can be either by telephone or by internet, it
doesn’t mean that if the service is some of both - - it could be all on
the phone, it could be all in person and it could be all on the internet,
but you need to complete whatever the briefing session is. So if the
briefing session that you signed up for says that you need to do two
parts, then you have to do both parts and finish both parts before the
case is filed in order to qualify, unless you fall within the exigent
circumstances exception. And the problem with the exigent
circumstances exception, while I certainly appreciate the fact that
losing your house or your - - the place that you’re staying is an
important matter to address and in a quick way, the problem is that
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Prior to filing his petition, the Debtor had registered with the Consumer Credit Counseling
Service of Apprisen Financial Associates. The registration materials included the following
statement:
When you have completed the internet portion of your pre-filing
counseling, a Certified Credit Counselor will contact you and set up
your phone session within 3 business days. At that time they will
review your budget and financial net worth statement that you
completed and printed. After your telephone session is complete, the
Certificate of Counseling will be issued.
(Bankr. Ct. Doc. #42, Ex. 1, at 3.) (emphasis in original).
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when you filled out your original Exhibit D to the petition, you
checked the second box, which says you completed the briefing
session, and although you had marked the exigent circumstances, you
initialed that and said entered in error or that it was wrong. And you
have to make that request when you file the case. And that’s
something that’s filed under penalty of perjury. And I appreciate your
- - your sort of unchecking the box for exigent circumstances, but I
don’t think you can then raise that issue again after the fact.
So this, unfortunately, has been - - it’s been around now for a little
over five years and it’s sort of a trap for the unwary and people that
represent themselves are the most likely to fall into this. But I don’t
have any other option. I read this as literally and I’ve tried to apply
it uniformly. And in your circumstances, Mr. Ingram, you’re simply
not eligible under 109(h).
(Bankr. Ct. Doc. #98, Transcript of Jan. 20, 2011 hearing, at 4-6.) On January 21, 2011, the
bankruptcy court entered a written order dismissing the Debtor’s case without prejudice.
On January 21, 2011, the Debtor filed a motion to reconsider and the Trustee objected. On
February 3, 2011, the bankruptcy court held a hearing on the motion to reconsider. The Debtor
appeared at the hearing and asserted that the credit counseling agency led him to believe he had
completed the course with the internet session and that the follow-up session by phone was “just for
the certificate.” The court explained that if the credit counseling agency misled the Debtor into
believing he had completed the class timely, the agency might be required to reimburse the debtor’s
costs, but that would not change the Debtor’s failure to comply with 11 U.S.C. § 109(h). The court,
therefore, denied the motion to reconsider dismissal. The Debtor’s timely appeal followed on
February 4, 2011.
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IV. DISCUSSION
11 U.S.C. § 109(h) mandates that:
an individual may not be a debtor under this title unless such
individual has, during the 180-day period preceding the date of filing
of the petition by such individual, received from an approved
nonprofit budget and credit counseling agency described in section
111(a) an individual or group briefing (including a briefing conducted
by telephone or on the Internet) that outlined the opportunities for
available credit counseling and assisted such individual in performing
a related budget analysis.
11 U.S.C. § 109(h)(1). 11 U.S.C. § 109(h)(3)(A) provides for a deferment of this requirement only
where a debtor establishes that: (1) exigent circumstances merit a waiver of the Section 109(h)(1)
requirement; (2) the debtor requested credit counseling services from an approved agency, but was
unable to obtain the services within seven days of making the request; and (3) the certification is
satisfactory to the court. See 11 U.S.C. § 109(h)(3)(A).
The Bankruptcy Code does not expressly state whether dismissal of a case is mandated where
a debtor fails to satisfy the requirement of § 109(h). Courts that have addressed this issue are divided
as to whether dismissal is mandated. The Sixth Circuit Court of Appeals has not addressed the issue
of § 109(h) as it relates to eligibility for bankruptcy relief. The Sixth Circuit BAP has recently
explained:
Some courts have held that a court has the discretion to waive a
debtor’s non-compliance with § 109(h). These decisions are based
largely on the conclusion that failure to satisfy § 109(h) is an
eligibility question as opposed to a jurisdictional issue and that strict
compliance with the credit counseling requirements of § 109(h) can
be waived. These courts also hold that a court has the discretion to
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determine whether declining to exercise jurisdiction based on the
failure to comply with § 109(h) would result in manifest injustice.
Other courts have held that strict compliance with the credit
counseling requirement is mandatory and a court simply lacks
jurisdiction over a debtor’s case where the debtor fails to comply with
§ 109(h). These courts have held that if a debtor does not comply
with § 109(h), a court has no discretion but to dismiss the case.
These decisions are based largely on the conclusion that the plain
meaning of § 109's statutory language is clear and the sole function
of the courts is to enforce it according to its terms. These cases hold
that dismissal is mandatory even if it leads to harsh or inequitable
results.
Simon v. Amir (In re Amir), 436 B.R. 1, 20-21 (B.A.P. 6th Cir. 2010) (internal citations and
quotations omitted.)
In Amir, the debtor sought dismissal of his own case for failure to comply with § 109(h). The
bankruptcy court concluded that the debtor had waived his right to move for such a dismissal and
denied his motion to dismiss. Because the debtor moved for dismissal only after he appeared in the
bankruptcy court on numerous occasions and filed several pleadings with the court, and only after
the bankruptcy court avoided a lien on the debtor’s property and found it was property of the estate,
the BAP found no abuse of discretion in the bankruptcy court’s decision to deny the debtor’s motion
to dismiss. Id. at 22. In so finding, the BAP further explained:
In cases where debtors have attempted to use their own non-
compliance strategically in order to have their cases dismissed when
further proceedings were not to their benefit, most courts have held
that a court has the discretion to waive the § 109(h) requirement.
Oftentimes courts faced with these types of debtors find them to be
unsympathetic and disingenuous movants. This is especially true
when the debtor does not move for dismissal under § 109(h) until
after a court has found significant assets that can be sold for the
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benefit of the estate. These decisions are based largely on issues of
statutory interpretation and the doctrine of judicial estoppel.
Id. at 21 (internal citations and quotations omitted.)
Here, the record is clear that the Debtor did not complete the required credit counseling until
after he filed his petition. The record shows that the Debtor did not complete the telephone portion
of the briefing or receive his individual budget analysis, a mandatory portion of the counseling
under § 109(h), until November 18, 2010, the day after his petition was filed. The certificate of
counseling that the Debtor filed on November 18, 2010, also states that the Debtor received the
individual briefing in compliance with § 109(h) on November 18, 2010, the day after his petition
was filed. Additionally, as the bankruptcy court explained, the Debtor did not submit a certification
at the time of his filing that exigent circumstances merited a waiver of the requirements of
§ 109(h)(1).
The bankruptcy court applied the proper legal standard in dismissing the Debtor’s petition
and therefore, it did not abuse its discretion. “When ‘the statute’s language is plain, the sole
function of the courts’—at least where the disposition required by the text is not absurd—‘is to
enforce it according to its terms.’” Hildebrand v. Petro (In re Petro), 395 B.R. 369, 374 (B.A.P. 6th
Cir. 2008) (quoting Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6,
120 S. Ct. 1942, 1947 (2000)); see also INS v. Pangilinan, 4486 U.S. 875, 883, 108 S. Ct. 2210(1988) (“Courts of equity can no more disregard statutory and constitutional requirements than can
courts of law.”); cf., I.R.S. v. Levy (In re Landbank Equity Corp.), 973 F.2d 265, 271 (4th Cir. 1992)
(recognizing that a bankruptcy court’s status as a court of equity “does not confer on the court
unlimited authority to ignore plain statutory requirements” but that “[t]here do exist equitable
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doctrines available for use in those extraordinary cases in which manifest injustice would result if
established legal principles were to be applied.”)2
The requirements of § 109(h) are clear and unambiguous. As such, the bankruptcy court,
except in the limited circumstances set forth in § 109(h)(2), (3), and (4) which were not present
here, did not have discretion to ignore, modify, or defer the requirements of § 109(h)(1).
Compliance with § 109(h) is a prerequisite to obtaining relief under the Bankruptcy Code. By
definition, an individual may not be a debtor who is eligible for bankruptcy relief unless he has
complied with § 109(h). See 11 U.S.C. § 109(h); 11 U.S.C. § 301(a) (“A voluntary case under a
chapter of this title is commenced by the filing with the bankruptcy court of a petition under such
chapter by an entity that may be a debtor under such chapter.”); see also H.R. Rep. No. 109-31
(2005) (the Report of the Committee on the Judiciary for the House of Representatives noted that
the purpose of § 109(h) is to “require[] debtors to receive credit counseling before they can be
eligible for bankruptcy relief so that they will make an informed choice about bankruptcy, its
alternatives, and consequences.”); In re Cole, 347 B.R. 70, 73 (Bankr. E.D. Tenn. 2006)
(concluding that a debtor who obtained credit counseling on the same day he filed for bankruptcy
relief “does not comply with § 109(h) and is not eligible to be a debtor under title 11.”)
Because the Debtor did not comply with the requirements of § 109(h), or qualify for a
deferral of the credit counseling requirement, he is not eligible to be a debtor. Therefore, the
bankruptcy court properly dismissed the Debtor’s case.
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This case does not require the Panel to determine the issue of whether such equitable
doctrines may be invoked in “extraordinary cases” to excuse a failure to comply with § 109(h) under
the doctrine of “manifest injustice.” The circumstances surrounding the Debtor’s failure to comply
do not make this an extraordinary case. The Debtor began, but simply did not complete, his
counseling session prepetition. The information provided upon his registration clearly stated that
the phone portion was a requirement. Moreover, the Debtor was not precluded from refiling his
petition as the order of dismissal was without prejudice. In fact, had the Debtor immediately re-filed,
he could have utilized the credit counseling certificate dated November 18, 2010. However, now
that the Debtor has allowed more than 180 days to lapse, he will have to obtain a new certificate.
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V. CONCLUSION
For the foregoing reasons, the Panel AFFIRMS the bankruptcy court orders dismissing the
Debtor’s Chapter 13 bankruptcy case and denying Debtor’s motion to reconsider the dismissal.
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