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Bankruptcy

: Georgia Bankruptcy Blog

U.S. Trustee Has Until Conclusion Of First Meeting Of Creditors To File Presumption Of Abuse Statement; But, Failed To Show Cause To Extend Deadlines For Motion To Dismiss Or Objection To Discharge

By Scott Riddle

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 In re Molitor,  --- B.R. ----, 2008 WL 4155283 (Bkrtcy.S.D.Ga. Sep. 5, 2008) (J. Barrett).

The first issue was whether the United States Trustee (“UST”) was required to file the § 704(b) presumption of abuse statement within 10 days of the “Commencement” or “conclusion” of the § 341 meeting of creditors.

Debtor argues § 704(b)(1) requires the UST to file his statement of abuse within 10 days of the beginning, or “first” meeting of creditors. Conversely, the UST argues the 10-day period runs from the “conclusion” of the meeting of creditors. Resolving such disputes begins with the language of the statute... Debtor argues the language of § 704(b)(1)(A) means the UST's statement must be filed within 10 days after the actual “first” date of the meeting of creditors, namely September 19, 2007. In support of this position, Debtor cites In re Close, 384 B.R. 856 (D.Kan.2008) which provides:

[T]he statutory language of § 704(b)(1)(A) supports a plain language interpretation that “first” means “first.” In other words, the plain meaning of the phrase “date of the first meeting of creditors” refers to the first meeting date and not some later date. The language is not vague or ambiguous and does not need extraneous verbiage to clarify its meaning.

Close, 384 B.R. at 866.

Conversely, the UST argues the 10-day period runs from the “conclusion” of the first meeting of creditors. The UST argues “first meeting of creditors” is a term of art and does not mean the date the meeting of creditors is “first” convened. I agree.

After a 28-year hiatus, BAPCPA reintroduced the term “first meeting of creditors” into the Code. “When Congress amends the bankruptcy laws, it does not write ‘on a clean slate.’ ... Reviewing the historical usage of the term “first meeting of creditors” reflects it designates the type of creditors' meeting, not the first convening of such meeting. Specifically, “first” designates the initial “meeting of creditors,” as opposed to the “final” meeting, or a “special” meeting. However, the “first meeting” need not conclude in one session. The Rules provide “[t]he meeting [of creditors] may be adjourned from time to time by announcement at the meeting of the adjourned date and time without further written notice.” Interim Fed. R. Bankr.P.2003(e) ...Additional textual support is found in BAPCPA. For example, debt relief agencies are required to inform all debtors they must attend the “required first meeting of creditors.” 11 U.S.C. § 527(b). This requirement is not satisfied merely by showing up to only the first session of the meeting of creditors. Instead, the debtor must attend all sessions of the “first meeting of creditors.”

 When viewed in this context, I find the 10-day deadline in § 704(b)(1)(A) runs from the conclusion of the meeting of creditors.

The second issue was whether sufficient “cause” existed to extend the deadlines for the UST to file a § 707(b)(3) motion to dismiss and/or a § 727 objection to discharge. The timeliness of a § 707(b)(3) motion to dismiss is governed by Interim Bankruptcy Rule 1017(e)(1), which states in relevant part:

(1) Except as otherwise provided in § 704(b)(2), a motion to dismiss a case for abuse under § 707(b) or (c) may be filed only within 60 days after the first date set for the meeting of creditors under § 341(a), unless, on request filed before the time has expired, the court for cause extends the time for filing the motion to dismiss.

The UST requested the Court extend the time to file a motion to dismiss “for cause.” The UST has the burden of proof to show “cause,” which is not defined in the Code. 
 

[The] UST argues “cause” exists because he exercised diligence and because Debtor's assertion that her income and expenses would change significantly required the UST to wait until the anticipated changes were realized. I disagree... I find cause to extend the deadline does not exist. Debtor's counsel provided documentation to the UST .. more than 50 days before the deadline. The UST's October 12th email recognizes the presumption of abuse, and states the UST's intent to file a 10-day statement of abuse. The UST's email fails to request any additional documentation from Debtor. The closing line of the email notes “[i]f there is further information or documentation which you would like for our office to review ... please submit immediately and we will review.”

The UST argues he exercised diligence by pursuing information from the Debtor through informal means; however, no formal discovery requests were filed until after the deadline had expired. While the mere failure to attend the § 341 meeting of creditors or request a 2004 examination is not fatal, given the facts of this case, I find the UST has failed to carry his burden to show cause exists to extend the deadline. The UST had the necessary information on October 12th and waited until November 16th, the day before the deadline, to request an extension. The issues presented are not complex. There is no allegation Debtor has acted in bad faith. The UST points to the fact that his office has limited resources. While the Court is sympathetic to this position, Debtor and Debtor's counsel are in similar situations...  The Bankruptcy Rules strike a balance between these competing interests by providing the UST 60 days from the first date set for the § 341 meeting of creditors to review Debtor's filings, investigate, and if necessary, file a motion to dismiss. Interim Bankruptcy Rule 1017(e)(1). The UST may obtain additional time with a showing of “cause.” Allowing the UST additional time when he has failed to diligently investigate would ignore the mandated deadlines and diminish Debtor's legitimate interest in a prompt and speedy resolution of her bankruptcy case.... Thus, the UST's motion to extend time to file a § 707(b)(3) motion to dismiss is denied.
 

The Court also denied the UST's motion to extend the time to file a §727 complain on similar grounds.

Full post as published by Georgia Bankruptcy Blog on September 12, 2008 (boomark / email).

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