Leavitt v. Finney (In re Finney)

Citation:
In re Finney, No. NV-12-1032-DJuKi (9th Cir. B.A.P. Feb. 6, 2013).
Tag(s):
Ruling:
Because the chapter 13 debtor received a chapter 7 discharge in a prior case commenced during the four-year period before the current petition date, she was not entitled to a discharge in the current chapter 13 case, even though the first case was commenced under chapter 13 and converted to chapter 7 before discharge.
Procedural context:
The BAP acted on the appeal by the trustee from the bankruptcy court’s order confirming the debtor’s chapter 13 plan.
Facts:
The debtor filed her first case under chapter 13 on July 25, 2008. In March 2009, she sought and obtained conversion of the first case to chapter 7, and she received a chapter 7 discharge. On March 10, 2011, she filed her second petition, also under chapter 13. The Nevada chapter 13 plan form requires the debtor to state whether the debtor will be entitled to a discharge upon completion of all plan obligations. Here, the debtor marked her plan to state that she would be entitled to a discharge. The trustee disagreed and opposed plan confirmation. The bankruptcy court agreed with the debtor and confirmed the plan. The trustee appealed to the Bankruptcy Appellate Panel. Under section 1328(f), the court may not grant a chapter 13 discharge if the debtor has received a discharge either (1) in a case “filed under chapter 7, 11, or 12” within four years before the current petition date or (2) in a case “filed under chapter 13” within two years before the current petition date. The debtor argued that she was entitled to a discharge in her second case because her first case was commenced by filing a petition under chapter 13 more than two years before her current petition. The trustee argued that (1) section 1328(f) must be read with section 348(a), under which conversion of a case constitutes an order for relief under the new chapter; (2) a literal application of the words “filed under” to treat the first case as having been filed under chapter 13, despite conversion, “would be contrary to Congress’s intent to create more stringent chapter 13 discharge rules”; (3) the effect of conversion of the first case to chapter 7 is that the first case is deemed to have been filed under chapter 7; and (4) section 1328(f)(1) disqualifies the debtor from receiving a chapter 13 discharge in her second case because the first case was commenced within four years before the second case and is deemed to have been filed under chapter 7. Following decisions of “the vast majority of courts that have considered the issue,” the BAP agreed with the trustee, reversed the bankruptcy court’s order confirming the plan and remanded for further consistent proceedings. In a footnote, the BAP stated that, if the second case is dismissed, the debtor will be eligible for a discharge in any new chapter 13 case that she might file, because the four-year period of section 1328(f)(1) expired during the appeal.
Judge(s):
BAP Judges Dunn, Jury, and Kirscher; opinion by Judge Dunn.

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