Here, we are ultimately concerned here with automatic stay and discharge injunction issues, and those things which might have an effect on them.
In a case of first impression both for the United States Court of Appeals, 6th Circuit, and really a case of first impression by any court of appeals nationally, the 6th Circuit found that a debtor who received a bankruptcy discharge in less than four years before he filed a Chapter 13 bankruptcy was eligible for a discharge in the Chapter 13 bankruptcy as well.
The opinion was issued in In re Sanders, which was issued on December 29, 2008. Judge Jeffrey S. Sutton issued the opinion for a unanimous panel.
The case involved a debtor named Jason Sanders who had filed a Chapter 13 bankruptcy petition more than four years after he filed an earlier Chapter 7 case, but less than less than four years after the bankruptcy court issued his Chapter 7 discharge. This would not necessarily be an extraordinary situation because debtors often find themselves in need of Chapter 13 protection on an emergency basis, such as to stop of foreclosure or repossession regardless of the filing of a prior bankruptcy.
When Congress overhauled the Bankruptcy Code in 2005, it adopted 11 U.S.C. § 1328(f), which limited a debtor’s ability to obtain multiple discharges by filing one bankruptcy proceeding after another. Section 1328(f) provides: "(f) Notwithstanding [chapter 13’s provisions authorizing discharges], the court shall not grant a discharge of all debts provided for in the plan . . . if the debtor has received a discharge -- (1) in a case filed under chapter 7, 11, or 12 of this title during the 4-year period preceding the date of the order for relief under [chapter 13], or (2) in a case filed under chapter 13 of this title during the 2-year period preceding the date of such order." (Emphasis added).
The Court had to decide two questions -- when does the clock begin to running in this regard, and when does it stop?
As to when the clock stops running, the Court decided it ended upon the filing of the new Chapter 13 petition because § 1328(f)(1) makes clear that the time limit ends on the date the chapter 13 petition was filed, and also § 301(a) provides that the “commencement of a voluntary case . . . constitutes an order for relief.
The harder question was when does the clock start, or when does the § 1328(f)'s "four-year forbidden window begin?" The choices were either the date of the filing of the prior Chapter 7 bankruptcy filing or its discharge date.
Based upon the plain meaning of § 1328(f) and a point of grammar, the 6th Circuit decided that the four year prohibition begins when a debtor files his first petition, and not when the debtor receives his first discharge. To do otherwise would require the Court to read the word "filed" out of the statute.
(Picture is of 6th Circuit Justice Jeffrey S. Sutton, who issued the opinion).
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