Court Says Chapter 7 Debtor May Not Have Two Cases Pending at Same Time

12 Dec Court Says Chapter 7 Debtor May Not Have Two Cases Pending at Same Time

Despite a lengthy delay in her chapter 7 proceeding, amounting to nearly two years, the fact that her chapter 7 case was still open prevented a West Virginia woman from filing a chapter 13 case.  In re Lynch, Nos. 5:14-bk-50001, 5:16-bk-50272 (S.D.W.Va. Dec. 2, 2016) (Volk, J.).

The debtor filed a chapter 7 case on January 7, 2014.  The trustee had filed a no-asset report on June 25, 2015, but the case remained open and no discharge of debts had been granted.

On November 3, 2016, the debtor filed a chapter 13 case, and was not represented by a lawyer.  The court had to decide whether it was permissable for the debtor to have two bankruptcy cases pending at the same time.

The court observed that under the “Single Estate Rule,” the debtor “cannot maintain simultaneous bankruptcy cases because a debtor possesses only one estate for purposes of trusteeship.”  The court recognized the existence of a minority rule, but it did not appear applicable in the circumstances of this case.

The court noted “nearly universal agreement” that where a debtor files for chapter 7 relief, and then files chapter 13 before a discharge is granted in the chapter 7, the chapter 13 is a nullity.  This was because “the filing of simultaneous petitions is contrary to the obvious contemplated function of the Bankruptcy Code to resolve a debtor’s financial affairs by administration of a debtor’s property as a single estate under a single chapter within the code.”

However, the court was moved by the debtor’s lack of legal counsel.  It held that she would be given ten days to consult with a lawyer, after which she would be required to choose which of the two cases would be dismissed.  If she failed to make such an election, the court would order that the second case, the chapter 13 proceeding, would be dismissed.

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Craig W. Andresen is a consumer bankruptcy lawyer in Bloomington, Minnesota, with 22 years’ experience in consumer and small business bankruptcy cases. He is the Minnesota chair of the National Association of Consumer Bankruptcy Attorneys, and is a member of the Minnesota State Bar Association’s Bankruptcy Section. Mr. Andresen lectures often on the topic of consumer bankruptcy at local and national legal seminars.
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