Advanced Control Solutions, Inc. v. Justice

Summarized by Karim Guirguis , American Bankruptcy Institute
14 years 10 months ago

Citation:

Advanced Control Solutions, Inc. v. Justice, No. 10-3168 (8th Cir. May 17, 2011).

Tag(s):

8th Circuit

Ruling:

Although a debtor has already converted his bankruptcy case from one under a Chapter 13 to one under Chapter 7, the bankruptcy court may use its discretion under § 707(b)(1) to reconvert the debtor's case to a Chapter 13 proceeding where the debtor consents to the reconversion.

Procedural context:

Appeal from the district court's decision affirming a bankruptcy court's order granting debtor's motion to convert case to Chapter 13.

Facts:

The Debtor, who had originally filed for bankruptcy protection under Chapter 13, subsequently, converted his case to Chapter 7 after a creditor, Advanced Controls Solutions, filed objections to the debtor’s Chapter 13 Plan. Following the debtor's failure to rebut a presumption of abuse arising from the means test, the bankruptcy court ordered him to convert his case back to a Chapter 13 proceeding or face dismissal of his case. The Debtor, therefore, moved to convert his case to a Chapter 13 proceeding, over Advanced Control Solutions' objection. The bankruptcy court granted the debtor’s motion and his case was reconverted to a Chapter 13 proceeding. Advanced Control Solutions appealed the order to the district court, which affirmed the bankruptcy court's decision. Advanced Control Systems then appealed to the Court of Appeals for the Eighth Circuit. On appeal Advanced Control Systems argued that §706(a), which provides that a "debtor may convert a case under [Chapter 7] to a case under [C]hapter 11, 12, or 13 of this title at any time, if the case has not been converted," prevents the debtor from reconverting his Chapter 7 proceeding to a Chapter 13. The Eighth Circuit disagreed, noting that §706(a) and 707(b) speak to two different situations. Section 707(b), provides the bankruptcy courts with clear authority to either dismiss a Chapter 7 case or, with the consent of the debtor, convert it into proceedings under another Chapter, including Chapter 13, if granting relief under Chapter 7 would constitute an abuse of the Bankruptcy Code. Section 706(a) does not coopt this authority. Thus, the Eighth Circuit found that the bankruptcy court acted within its discretion pursuant to § 707(b)(1) by forcing the debtor to either consent to a reconversion or face dismissal because of the un-rebutted presumption of abuse that arose in the debtor's case.

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