Lead Opinion
The United States of America, on behalf of its agency, the Internal Revenue Service (the “IRS”) appeals from an order of the bankruptcy court denying its motion to dismiss the chapter 13 petition of Joanne M. Cushing (the “Debtor”). The IRS sought dismissal or conversion on the grounds that the Debtor had failed to file her tax return before the first meeting of creditors in violation of 11 U.S.C. § 1308(a).
On June 7, 2007, the Debtor filed for relief under chapter 13 and the first meeting of creditors was scheduled for July 24, 2007. In an unnumbered virtual entry dated July 25, 2007, the docket reflects: “Meeting of Creditors Held and Examination of Debtor as scheduled.” On August 2, 2007, the IRS filed “United States of America’s Motion to Dismiss” (“Dismissal Motion”). In that motion, the IRS explained that because the Debtor had not filed a federal tax return for the year 2006 as of the date of the first meeting of creditors, in violation of 11 U.S.C. § 1308(a), the bankruptcy court was required to dismiss or convert the case under 11 U.S.C. § 1307(e). In her response, the Debtor explained that she had obtained from the IRS, an extension until October 15, 2007 to file her tax return.
On September 20, 2007, the bankruptcy court held a non-evidentiary hearing on the Dismissal Motion and response, took the matter under advisement, and ordered the parties to file briefs. On October 4, 2007, the IRS and the Debtor submitted memoranda of law. In its memorandum, the IRS argued that any outstanding tax returns must be filed before the first date set for the meeting of creditors, even if that date is before the filing deadline, unless the chapter 13 trustee has “held open” the meeting. In her memorandum, the Debtor argued that because the IRS had granted the Debtor an extension to file her return, the Dismissal Motion was premature and the IRS was estopped from seeking dismissal.
On December 14, 2007, the bankruptcy court issued an order denying the Dismissal Motion. The bankruptcy court issued a corresponding Memorandum in which it stated that the chapter 13 trustee had not held open the meeting of creditors, and concluded that the Debtor had not violated the filing deadline because she had obtained an extension of time to file her return. In re Cushing,
On January 3, 2008, the bankruptcy court ordered the parties, including the chapter 13 trustee, to file briefs addressing five discrete issues relating to 11 U.S.C. §§ 341, 1307, and 1308.
The Trustee has listened to the electronic recording of the § 341 meeting in the present case. The Trustee did not state on the record that the meeting was concluded nor did the Trustee continue the meeting to a specific date.... A review of the [case law discussing when a meeting is concluded] establishes that the meeting of creditors in the instant case was never ‘concluded.’ It is the Trustee’s position that unless the Trustee specifically states on the record that a*531 meeting is concluded or the Court orders that the meeting is concluded, for the purposes of § 1308 the meeting was held open and the debtor has up to an additional 120 days from the meeting date to file all outstanding tax returns.3
On February 22, 2008, the bankruptcy court issued an order addressing the foregoing pleadings and making the following findings and conclusions. In re Cushing,
Because the language employed by Congress in section 1308, “the trustee may hold open that meeting ...” was added by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and is arguably ambiguous in view of [sic] of the provisions of Fed. R. Bankr.P. 4003, which permits parties in interest to object to a debtor’s claim of exemptions within 30 days after the “meeting of creditors held under § 341(a) has been concluded ...,” the Court finds, for purposes of this decision only, that the Chapter 13 Trustee held open the meeting of creditors in accordance with 11 U.S.C. § 1308(b)(1). To hold otherwise would unduly prejudice the Debtor who relied upon her automatic extension and timely filed her outstanding tax return within the time allotted by that extension....
Because the Chapter 13 Trustee has stated that she, in effect, held open the meeting of creditors, and because the Debtor filed her tax return for which she obtained an automatic extension, the Court concludes that the United States has not satisfied its burden under 11 U.S.C. § 1307(e) in this case. Moreover, the Court concludes that a determination of the other issues raised in the January 3, 2008 order is unwarranted, particularly as the provisions of 11 U.S.C. § 521(j) are not implicated.
The Court is not unmindful of the positions advanced by the parties, particularly with respect to the split within this district as to the [sic] when the meeting of creditors is concluded, see In re Koss,319 B.R. 317 (Bankr.D.Mass.2005), and cases cited therein, and the concomitant need for certainty and predictability in the conduct of section 341 meetings with respect to the provisions of sections 1308(a) and (b) and 1307(e). Because this Court’s [earlier decision] was based on a misapprehension of fact, namely that the Chapter 13 Trustee had concluded the section 341(a) meeting of creditors, and because of the absence of established procedures as to the party responsible for establishing that the meeting be held open, the Debtor or the Chapter 13 Trustee, the Court withdraws its December 14, 2007 decision and reserves for another day the issue framed therein. The Court further observes that should a debtor wish to take advantage of the provision of section 1308(b), he or she should request the Chapter 13 Trustee to hold the meeting open for a specific period of time to avoid the conundrum outlined in Cushing. Similarly, if the United States or any other party in interest wishes to withhold the relief afforded to debtors by section 1308(b), a request should be made to the Chapter 13 Trustee to conclude the meeting, with the understanding that the Court is available to resolve disputes before the relief provided by the statute is lost.
The IRS filed a timely notice of appeal and explained that the issues on appeal are
JURISDICTION
A bankruptcy appellate panel may hear appeals from “final judgments, orders and decrees [pursuant to 28 U.S.C. § 158(a)(1)] or with leave of the court, from interlocutory orders and decrees [pursuant to 28 U.S.C. § 158(a)(3)].” Fleet Data Processing Corp. v. Branch (In re Bank of New England Corp.),
STANDARD OF REVIEW
Appellate courts reviewing an appeal from the bankruptcy court generally apply the “clearly erroneous” standard to findings of fact and de novo review to conclusions of law. See TI Fed. Credit Union v. DelBonis,
In Cushing II, the bankruptcy court referred to the determination regarding whether the chapter 13 trustee “held open” the meeting twice as a finding and once as a conclusion. The bankruptcy court did not hold an evidentiary hearing and was not required to engage in a fact finding process. The bankruptcy court’s determination that the meeting was “held open” is more akin to “the application of a legal standard used in bankruptcy law to the facts of a particular case....” Arch Wireless, Inc. v. Nationwide Paging, Inc. (In re Arch Wireless, Inc.),
DISCUSSION
BAPCPA added to the Bankruptcy-Code 11 U.S.C. §§ 1307(e) and 1308. Section 1307(e) provides:
Upon the failure of the debtor to file a tax return under section 1308, on request of a party in interest or the United States trustee and after notice and a hearing, the court shall dismiss a case or convert a case under this chapter to a case under chapter 7 of this title, whichever is in the best interest of the creditors and the estate.
Section 1308 provides:
(a) Not later than the day before the date on which the meeting of the creditors is first scheduled to be held under section 341(a), if the debtor was required to file a tax return under applicable nonbankruptcy law, the debtor shall file with appropriate tax authorities all tax returns for all taxable periods ending during the 4-year period ending on the date of the filing of the petition.
(b)(1) Subject to paragraph (2), if the tax returns required by subsections (a) have not been filed by the date on which the meeting of creditors is first scheduled to be held under section 341(a), the trustee may hold open that meeting for a reasonable period of time to allow the debtor an additional period of time to file any unfiled returns, but such additional period of time shall not extend beyond—
(A) for any return that is past due as of the date of the filing of the petition, the date that is 120 days after the date of that meeting; or
(B) for any return that is not past due as of the date of the filing of the petition, the later of—
(1) the date that is 120 days after the date of that meeting; or
(ii) the date on which the return is due under the last automatic extension of time for filing that return to which the debtor is entitled, and for which request is timely made, in accordance with applicable nonbankruptcy law.
(2) After notice and a hearing, an order entered before the tolling of any applicable filing period determined under this subsection, if the debtor demonstrates by a preponderance of the evidence that the failure to file a return as required under this subsection is attributable to circumstances beyond the control of the debtor, the court may extend the filing period established by the trustee under this subsection for — •
(A) a period of not more than 30 days for returns described in paragraph (1); and
(B) a period not to extend after the applicable extended due date for a return described in paragraph (2).
Fed. R. Bankr.P. 2003 provides the mechanism for, inter alia, calling, recording, and adjourning the meeting of creditors. Specifically, subsection (e) provides that a “meeting may be adjourned from time to time by announcement at the meeting of the adjourned date and time without further written notice.” There is no rule that addresses how a trustee may “hold open” a meeting.
In order to determine whether the bankruptcy court properly decided the Dismissal Motion, the Panel must determine whether the Debtor timely filed the outstanding return. That question hinges, on whether the chapter 13 trustee “held open” the meeting under § 1308(b).
In reviewing the legislative history behind §§ 1307 and 1308, one court explained that Congress enacted the statutes first,
In one case, the court had to consider whether the meeting could be “held open” even though the docket provided that the meeting was held and concluded. In re Kuhar,
I agree. One of the central purposes of BAPCPA’s tax return requirement is to “help states identify potential claims in bankruptcy cases where they may be owed delinquent taxes.... ” Section 502(b)(9) and Interim Bankruptcy Rule 3002(1) require a governmental unit to file its proof of claim 180 days following the petition date. However, they recognize that absent filed tax returns, a meaningful proof of claim cannot be prepared. Thus in a Chapter 13 case, where returns have not been filed, the government’s bar date is 60 days after a tax return is filed “under § 1308.” Since the permissible time for filing of returns under § 1308 is keyed to the status of the § 341 meeting, there must be an unambiguous docket entry or some other means of determining if the debtor is in compliance with § 1308 if the dismissal remedy provided to taxing authorities as parties in interest under § 1307(e) is to have meaning.
Id. at 737-38 (determining that docket entry reflecting “meeting held and concluded” could not mean that the meeting was held open).
In Cushing II, the bankruptcy court determined that the meeting was “held open” essentially because (1) it was neither concluded nor continued to a specific date based upon those cases in this circuit that have addressed the issue of how to determine when a trustee adjourned or concluded a meeting of creditors, see, e.g., Premier Capital, Inc. v. DeCarolis (In re DeCarolis),
On appeal, the IRS asserts that the first determination was in error as cases such as DeCarolis are inapplicable. Those cases reflect a split in this circuit with respect to the determination of when a meeting of creditors concluded after the meeting had been continued generally, for purposes of ascertaining the objection to exemption deadline. See, e.g., In re Friedlander,
In DeCarolis, the Panel recognized three different approaches to considering the effect of a continuance without a specific date. Compare In re Levitt,
The IRS contends that these cases are inapplicable as they analyze a rule of bankruptcy procedure and a circumstance whereby the trustee had continued the meeting generally. In this case, the bankruptcy court was called upon to address a statute with a different purpose and nomenclature. The facts are distinctly different because the chapter 13 trustee did not continue the meeting generally but rather was silent at the meeting and caused to be entered on the docket an entry containing verbs written in the past tense. Because the cases are inapplicable, the IRS argues that it was an error for the bankruptcy court to adopt the trustee’s statement that unless the trustee states on the record or the court orders that the meeting is concluded, the meeting is held open. It was error because the phrase “held open” must require an affirmative act. Conversely, the Debtor urges that the DeCarolis line of cases does apply and a bankruptcy court should make a determination regarding whether a meeting was held open on a case-by-case basis.
The IRS finds fault with the second determination that the statute is ambiguous in light of the language in Fed. R. Bankr.P. 4003.
In reading the phrase, “the trustee may hold open,” the Panel agrees that this language requires the trustee to exercise discretion and take an affirmative step to hold the meeting open for a finite period of time.
With respect to the third determination, the Panel is similarly unconvinced that the meeting was held open because the trustee opined she held it open. In a nod to the holding in Flynn, the trustee asserted that the meeting had not concluded because she had not so announced and the court had not so ordered. The Panel has described why those cases are inapplicable to this case. The trustee gave no indication that she had affirmatively exercised any discretion with respect to the meeting or that she had taken any steps to hold the meeting open.
Pursuant to § 1308(a), a debtor must file not later than the first date the § 341 meeting of creditors is scheduled “all tax returns for all taxable periods ending during the 4-year period ending on the date of the filing of the petition.” The taxable period for 2006 ended on December 31, 2006. The tax return was due, without extensions, on April 15, 2007. In this case the Debtor had received an extension until October 15, 2007 to file the tax returns. Irrespective of the date when the tax returns were due to be filed, § 1308(a) states that the same must be filed on or before the date of the § 341 meeting.
Since the date of the § 341 meeting may come before the date the filing of the tax returns is due, § 1308(b)(1) allows the trustee discretion “to hold open that meeting for a reasonable period of time to allow the debtor an additional period of time to file any unfiled returns, ...” The trustee’s discretion is limited to 120 days after the date of that meeting of creditors for any return that is past due; and for any return that is not past due, the later of 120 days after the date of that meeting of creditors, or the date on which the return is due under the last extension timely requested. 11 U.S.C. § 1308(b)(l)(A, B). The time periods within which a trustee may hold open the § 341 meeting of creditors to allow the debtor the time to file any un-filed tax return that is not due by the date of the § 341 meeting are sufficient for the debtor to file the tax returns on the due
Clearly, the trustee is given discretion in § 1308 to hold open the § 341 meeting for a period of time to allow the debtor to file the tax returns. The period of time is constrained to the maximum limits in the same. If the trustee opts to hold open the § 341 meeting of creditors pursuant to § 1308, a clear statement must be made for the record. The statement was not made. The virtual docket entry reflects that the meeting was held and the Debtor examined.
In summary, the Debtor failed to file the tax returns within the time specified in § 1308; the IRS moved to dismiss the petition for that reason; the Debtor was given notice of the motion to dismiss and argued the same in a non evidentiary hearing. Consequently, § 1307 mandates the dismissal or conversion of the case.
CONCLUSION
Having come to a different conclusion with respect to both the facts and the legal principles upon which the bankruptcy court relied in determining that the trustee held open the meeting of creditors, the Panel concludes that a mistake has been made. Accordingly, the Panel REVERSES Cushing II and remands the matter for the bankruptcy court to determine the next step under § 1307.
Notes
. References to sections in the Bankruptcy Code shall be to the Bankruptcy Reform Act of 1978, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA”), Pub.L. No. 109-8, 119 Stat. 23, 11 U.S.C. §§ 101, et seq.
. For the second issue, the bankruptcy court asked the parties to address:
What the language of section 1308(b) — "the trustee may hold open that meeting ..."— means under the circumstances of this case and in view of Fed. R. Bankr.P.2003(a) where the Debtor’s Chapter 13 plan has not yet been confirmed and the docket merely states "Meeting of Creditors Held and Examination of Debtor as scheduled," and the United States did not submit an affidavit of the Chapter 13 Trustee or other evidence that the section 341 meeting was concluded or closed; ...
. In its brief, the IRS vigorously disputed the chapter 13 trustee's conclusion that she held open the meeting for purposes of the statute. In her brief, the Debtor argued that if a meeting was never "concluded,” it must have been "held open.”
. The parties agree that if the trustee "held open” the meeting, the Debtor timely filed her return and do not consider when the Debtor filed the return to warrant further consideration.
. At oral argument, the IRS suggested that it would not be opposed to the Panel affirming Cushing II so long as the case were not applicable prospectively. While the Panel will reverse Cushing II, it leaves for the bankruptcy court to consider whether the parties have reached a settlement in this case.
. Since DeCarolis, additional decisions within the circuit have addressed the issue. In In re Friedlander,
. Neither the Debtor nor the IRS explored the issue of statutory ambiguity in their briefs.
. That the statute provides for a finite period of time is further support for the conclusion that the DeCarolis line of cases does not apply. In those cases, the trustee had held open the hearings generally. Under § 1308, the trustee cannot hold the meeting open generally for tax returns. Moreover, the statute provides that the court can further continue the deadline but in order to do so, the Panel presumes that the court must be able to ascertain the date to which the meeting was held open. See 11 U.S.C. § 1308(b)(2).
. There is no indication that the Debtor requested that the meeting be held open in order for her to make use of the extension granted by the IRS or that the matter of the missing tax returns was even discussed at the § 341 meeting.
. As the bankruptcy court appropriately noted in Cushing II, similar to the court in Kuhar, the more prudent approach to ensure that a trustee has held open a meeting would be for a debtor or creditor affirmatively to ask the trustee at the meeting for the requested relief and for the trustee to ensure an unambiguous docket entry.
Dissenting Opinion
dissenting.
I begin with a synopsis of the salient undisputed facts. Joanne M. Cushing is a single mother caring for three children. She encountered financial difficulties. After obtaining the automatic extension for filing her 2006 federal tax return, she sought bankruptcy protection under chapter 13 of the Code. During the § 341(a) meeting, Ms. Cushing was examined on matters other than any tax troubles and the filing of the mentioned federal tax return. The Trustee made no pronouncement that would show she left the meeting open, adjourned or concluded it. Thereafter, the Internal Revenue Service filed a motion to dismiss the case pursuant to 11 U.S.C. § 1307(e), even though it did not object to the confirmation of the Debtor’s plan, the Debtor filed her 2006 federal tax return within the extended time afforded by the Tax Code, but, as the agency claims, outside the parameters set by § 1308(b)(1), and she is complying with the confirmed plan.
I respectfully disagree with the majority opinion reversing the bankruptcy court’s finding, “that the Chapter 13 Trustee neither concluded the section 341(a) meeting nor continued it to a specific date ... [and] for purposes of this decision only, the Chapter 13 Trustee held open the meeting of creditors in accordance with 11 U.S.C. § 1308(b)(1).”
The circumstances here provide good and deliberate reasons justifying the bankruptcy court’s choice. First, the bankruptcy court’s Order dealt with an “aspect of the statute’s application on which the statute itself is silent”. Petit v. Fessenden (In re Petit),
In my view, the bankruptcy court’s Order balanced Ms. Cushing’s interest and those of her creditors, including the Internal Revenue Service. It also promoted the efficient administration of Debtor’s financial reorganization. Therefore, I would affirm.
. Section 1307(e) mandates the dismissal or conversion of a bankruptcy case (whichever is in the best interest of creditors), when a debt- or does not file required tax returns in the manner set forth in its § 1308. See n. 4 at p. 3 of the bankruptcy court's Order, Appellee's Appendix.
. The bankruptcy court's Order states: “The Court further observes that should a debtor wish to take advantage of the provisions of § 1308(b), he or she should request from the Chapter 13 Trustee to old the meeting open for a specific period of time.... Similarly, if the United States or any other party in interest wishes to withhold the relief afforded to debtors by § 1308(b), a request should be made to the Chapter 13 Trustee to conclude the meeting ...”.
. During oral argument, the Internal Revenue Service wanted us to “[a]nnounce ... and encourage all of the other judges, to basically announce that in the future, in all cases, unless the docket entry says it's held open, you are going to deem it not held open for tax purposes.”