KSB

Judge Somers

08-21487 Rogers (Doc. # 52) - Document Text

Dale L. Somers
Case: 08-21487 Doc #: 52 Filed: 01/14/2009

SO ORDERED.
SIGNED this 14 day of January, 2009.


Page 1 of 5

UNITED STATES BANKRUPTCY JUDGE

Opinion Designated for Electronic Use, But Not for Print Publication
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS


In re:
RANDALL JAMES ROGERS, CASE NO. 08-21487-13
KIMBERLY ANN ROGERS, CHAPTER 13
DEBTORS.

OPINION DETERMINING DEBTORS ARE ELIGIBLE TO BE CHAPTER 7
DEBTORS EVEN THOUGH THEY ARE NOT ELIGIBLE TO RECEIVE
CHAPTER 7 DISCHARGES, AND DIRECTING THE CLERK’S OFFICE TO
SCHEDULE AN EVIDENTIARY HEARING ON THE MOTION TO CONVERT


This matter is before the Court for resolution of a preliminary issue regarding the
Chapter 13 Trustee’s motion to convert this case to Chapter 7. Trustee W.H. Griffin
appears pro se. The Debtors appear by counsel G. Addam Fera. The Court has reviewed
the relevant materials and is now ready to rule.
FACTS


Case: 08-21487 Doc #: 52 Filed: 01/14/2009 Page 2 of 5


The Debtors commenced this case on June 25, 2008, by filing a Chapter 13


petition. They reported having previously filed a case in the Western District of Missouri
in March 2001, less than eight years before they filed their new petition. The Debtors
allege they received a discharge in that 2001 case. A search of the electronic U.S. Party/
Case Index maintained by the Federal Judiciary’s PACER Service Center confirms that a
discharge order was entered in that case. Consequently, the Debtors are barred by
§ 727(a)(8) of the Bankruptcy Code from receiving a Chapter 7 discharge in their current
case. The prior discharge does not make them ineligible to receive a Chapter 13
discharge under § 1328.

The Debtors filed a plan along with their Chapter 13 petition and filed an amended
one in November, but their plan has not yet been confirmed. On October 27, the Trustee
filed a motion to convert the case to Chapter 7, suggesting the Debtors might have
business inventory that could be liquidated and may be trying to use Chapter 13
improperly to avoid obligations to certain prepetition customers of their business. In
response, the Debtors asserted, among other things, that because of their discharge in the
Missouri case, they are not eligible for Chapter 7. At a non-evidentiary hearing on
December 19, the Court took under advisement the question whether the previous
discharge prevents converting this case to Chapter 7 even if the Trustee can establish
under § 1307(c) that “cause” for conversion exists and conversion rather than dismissal
would be in the best interests of creditors and the bankruptcy estate.

DISCUSSION

2



Case: 08-21487 Doc #: 52 Filed: 01/14/2009 Page 3 of 5


The Court has found no opinion addressing the Debtors’ argument that their prior
discharges make them ineligible not only to receive Chapter 7 discharges in this case, but
even to become Chapter 7 debtors at all. Section 1307(g) provides that a Chapter 13 case
can only be converted to a chapter under which the debtor qualifies to be a debtor, so this
case could not be converted to Chapter 7 if the Debtors’ argument were correct.
Consideration of several other Bankruptcy Code provisions, however, indicates the
argument is wrong.

Section 109 contains the general rules specifying who may be debtors in cases
under Chapters 7, 11, 12, and 13 of the Bankruptcy Code.1 It identifies potential debtors
by categories such as “person,” “entity,” and “individual with regular income.”
Subsection (a) states the broadest qualification: to be a debtor under any of those
chapters, a “person” (defined in § 101(41) to include individuals like these Debtors) must
reside or have a domicile, place of business, or property in the United States. Subsection

(b) then specifies certain types of persons that may not be debtors in Chapter 7 cases, but
the exclusions do not include individuals. Subsection (g) makes an individual ineligible
to be a debtor for 180 days after a prior case in which certain things occurred, and
subsection (h) generally requires an individual to receive a credit counseling briefing to
become eligible to file a bankruptcy case, but neither subsection makes eligibility to
1A “municipality” may also be a debtor, but § 101(40) defines that term to mean a political
subdivision or public agency or instrumentality of a State. Obviously, no individual meets that definition.
Section 109(c) provides only a municipality can be a debtor under Chapter 9, so that chapter has nothing
to do with individuals.

3


Case: 08-21487 Doc #: 52 Filed: 01/14/2009 Page 4 of 5


receive a discharge a requirement. In short, nothing in § 109 supports the Debtors’
argument that they are not eligible to be Chapter 7 debtors.

The discharge eligibility provision the Debtors are relying on appears in § 727,
which applies only to Chapter 7 cases. Subsection (a) of § 727 generally directs the
bankruptcy court to grant “the debtor” a discharge unless any of a number of things is
true. The fact the relevant person under this subsection is referred to as “the debtor”
indicates it is not intended to specify who qualifies to be a debtor. Notably, the first thing
listed in subsection (a) that makes a debtor ineligible to receive a Chapter 7 discharge is
not being an individual.2 If the Debtors’ argument were correct, this would mean that
corporations, for example, would not be eligible to file Chapter 7 cases. Yet Chapter 7
cases are routinely filed by corporate debtors. The provision that makes these Debtors
ineligible to receive a Chapter 7 discharge is the eighth thing listed in § 727(a): “the
debtor has been granted a discharge under this section . . . in a case commenced within 8
years before the date of the filing of the petition” in the current case.3 Nothing in the
provision suggests it is intended to preclude such a debtor from becoming a debtor under
Chapter 7. Instead, if an individual’s eligibility to receive a Chapter 7 discharge had been
intended to be a prerequisite to being a Chapter 7 debtor, the restriction would have been
placed in § 109 instead of § 727, which becomes applicable only after the individual has
already become a Chapter 7 debtor.

2§ 727(a)(1).
3§ 727(a)(8).


4



Case: 08-21487 Doc #: 52 Filed: 01/14/2009 Page 5 of 5


The Court has found assertions in Collier on Bankruptcy, a leading bankruptcy
treatise, that indicates the authors would reject the Debtors’ argument. The treatise
suggests a person must owe at least one debt to qualify to be a Chapter 7 debtor, even
though no Code provision explicitly requires it, but adds that the person need not have
any dischargeable debts, since some bankruptcy benefits do not depend on a discharge.4
This authority convinces the Court it has not overlooked any implicit Bankruptcy Code
requirement that an individual must qualify for a Chapter 7 discharge in order to become
a Chapter 7 debtor.
CONCLUSION

For these reasons, the Court rejects the Debtors’ argument that this case cannot be
converted to Chapter 7. If the Trustee can establish under § 1307(c) that “cause” for
conversion exists and that conversion, rather than dismissal, is in the best interests of
creditors and the estate, the case will be converted to Chapter 7. The Clerk’s Office is
directed to schedule an evidentiary hearing on the Trustee’s motion to convert as the state
of the docket permits.

42 Collier on Bankruptcy, ¶ 109.03[2] at p. 109-16 and n. 11 (Resnick & Sommer, eds.-in-chief,
15th ed. rev. 2008). Note 11 adds that case law before adoption of the 1978 Code disagreed whether a
person had to have at least one dischargeable debt to file a bankruptcy case, but the majority view said no.
Id. (citing 1 Collier on Bankruptcy, ¶ 4.03 (Matthew Bender 14th ed. 1974)).

5

 

You are here: Home Opinions Judge Somers 08-21487 Rogers (Doc. # 52)