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Respondents Divided over Whether Courts May Refuse To Enforce Automatic Dismissal to Allow Trustee to Liquidate Undisclosed Asset

Contact: John Hartgen
             703-739-0800
             jhartgen@abiworld.org

 

RESPONDENTS DIVIDED OVER WHETHER COURTS MAY REFUSE TO ENFORCE AUTOMATIC DISMISSAL TO ALLOW TRUSTEE TO LIQUIDATE UNDISCLOSED ASSET

 

February 12, 2008, Alexandria, Va. — Respondents to the latest ABI Quick Poll were divided over whether a court could refuse to enforce the automatic dismissal of a chapter 7 case when the debtor did not file complete evidence of payments from employers but did disclose a previously undisclosed valuable asset after the 45-day deadline for automatic dismissal expired. Forty-two percent of respondents agreed that a court cannot excuse a debtor from filing complete evidence of employer payments after the 45-day window for automatic dismissal has expired. Twenty-two percent “somewhat agreed” and 20 percent “strongly agreed.”

Thirty-four percent of respondents, however, thought that a court can prevent automatic dismissal of a chapter 7 case after the 45-day period by excusing a debtor who did not file complete evidence of employer payments. Twenty-seven percent “strongly disagreed” and 7 percent “somewhat disagreed.”  Twenty-one percent of respondents did not know or had no opinion on the issue.

In the case of In re Ivan Acosta Rivera and Ana A. Balseiro Chacon v. Wilfredo Segarra Miranda and Nancy Pujals, the debtors did not disclose a significant asset of the estate, a lawsuit, until after the passing of the 45-day period for “automatic dismissal” under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (11 U.S.C. §521(i)(1)).  Upon learning that the case trustee was going to settle the lawsuit for less than the debtors had expected, the debtors moved to dismiss their own case for having failed to file complete evidence of payments from employers as required by 11 U.S.C. §521(a).  The U.S. Trustee argued that the court could “order otherwise” under §521(a)(1)(B) and excuse the filing of complete evidence of payments.

ABI members and members of the public were welcome to submit their response to the statement: “If chapter 7 debtors amend their schedules to list a valuable cause of action after the 45-day period for automatic dismissal expires, the bankruptcy court may not “order…otherwise” to excuse compliance with the requirement of filing payment advices and deny debtors’ motion to dismiss, which debtors filed after the trustee settled the cause of action (Ivan Acosta Rivera and Ana A. Balseiro Chacon v. Wilfredo Segarra Miranda and Nancy Pujals, D. Puerto Rico, Civil No. 07-1301, 10/12/07).”

ABI’s Quick Poll is posted on ABI’s home page, www.abiworld.org. ABI members and the public are invited to respond to a question on a timely bankruptcy or insolvency issue. Visit http://www.abiworld.net/quickpoll/ to access the results of previous ABI Quick Polls.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,600 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.