In Re: Jason Powell v. William Van Meter
119 F.4th 597
9th Cir.2024Background
- Jason Powell filed for Chapter 13 bankruptcy in 2021; his largest creditor was former employer TICO Construction, to whom he owed a significant judgment from prior state court litigation.
- Powell certified on his petition that he met Chapter 13 eligibility requirements and later moved to voluntarily dismiss his case under 11 U.S.C. § 1307(b).
- TICO objected, arguing Powell was ineligible for Chapter 13 (because his unsecured debts exceeded the statutory threshold) and that the court should convert, not dismiss, the case—asserting also that Powell acted in bad faith.
- The bankruptcy court dismissed Powell's case, reasoning that § 1307(b) gave him an absolute right to voluntary dismissal; TICO’s motion to convert or impose sanctions was denied.
- The Ninth Circuit Bankruptcy Appellate Panel (BAP) affirmed the dismissal; TICO appealed further to the Ninth Circuit.
- The Ninth Circuit affirmed, holding the bankruptcy court was not required to resolve Powell’s eligibility before granting the voluntary dismissal.
Issues
| Issue | Powell's Argument | TICO's Argument | Held |
|---|---|---|---|
| Does § 1307(b) give a debtor an absolute right to voluntary dismissal of a Chapter 13 case? | Yes, regardless of eligibility disputes, once a debtor files and certifies eligibility, the court must grant dismissal. | No, only debtors actually eligible for Chapter 13 have the right; eligibility must be conclusively resolved first. | Yes, the debtor’s certification presumptively commences the case, and the court need not resolve eligibility before dismissal. |
| Must the bankruptcy court conclusively determine Chapter 13 eligibility before granting § 1307(b) dismissal? | No, eligibility determination is not required prior to dismissal when petition is facially valid. | Yes, the court must resolve eligibility before granting dismissal rights under Chapter 13. | No, filing a certified petition suffices to commence a case and entitle the debtor to dismissal. |
| Does bad faith or inaccuracy in schedules negate the right to dismiss under § 1307(b)? | No, issues of bad faith may be addressed separately; dismissal right remains. | Yes, bad faith or falsity should negate dismissal right and require a hearing and possible conversion. | No, even assuming bad faith, the right to dismissal stands (though sanctions or other remedies may be available). |
| Are bankruptcy court's remedies for alleged abuse limited by § 1307(b)? | Yes, the main tool is dismissal; other sanctions may be sought separately. | No, court should deny dismissal or convert for cause if abuse/fraud is shown. | Other remedies (sanctions, bars on refiling) are available, but not converting instead of dismissing in this context. |
Key Cases Cited
- Scovis v. Henrichsen, 249 F.3d 975 (9th Cir. 2001) (Chapter 13 eligibility normally determined by originally filed schedules, barring obvious or bad faith defects)
- HSBC Bank USA, N.A. v. Blendheim, 803 F.3d 477 (9th Cir. 2015) (explains automatic stay and Chapter 13 mechanisms)
- Nichols v. Marana Stockyard & Livestock Mkt., Inc., 10 F.4th 956 (9th Cir. 2021) (interprets § 1307(b) as granting an absolute dismissal right, subject only to statutory exceptions)
- Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007) (discusses bankruptcy court’s discretion to address bad faith under “for cause” provisions)