North Carolina Lawyers Weekly
The Eastern District of Virginia’s Local Bankruptcy Rule 3070-1(C), which allows for dismissal without hearing, conflicts with the requirements of 11 U.S.C. § 1307.
Background
In January 2017, the Eastern District’s bankruptcy trustee certified under Local Bankruptcy Rule 3070-1(C) that Debtor-Appellant Sarah No had failed to commence timely payments under her bankruptcy plan as required by 11 U.S.C. § 1326. The Local Rule provides that, upon receipt of such certification, the clerk “shall enter an order dismissing the case.”
Separately, the trustee moved to dismiss, and the bankruptcy court notified the parties that the matter was set for hearing on February 9, 2017, with responses to be filed at least five days prior. But then, pursuant to Local Rule 3070-1(C), the bankruptcy court dismissed the case on January 17, 2017. The district court affirmed dismissal, citing the Local Rule. No appealed.
Hearing requirement
Local Rule 3070-1(C)’s procedure for dismissal of a voluntary bankruptcy case conflicts with the notice and hearing requirement of 11 U.S.C. § 1307. Under § 1307, a bankruptcy court may, “on request of a party in interest or the United States trustee and after notice and a hearing, … dismiss a case under this chapter….” The plain text of this provision permits the dismissal for failure to commence payments only after opportunity for a hearing.
Here, the bankruptcy court dismissed No’s case without the required hearing. This court views Gorman’s certification under the Local Rule as constituting a “request” for dismissal, as described in § 1307.
Simply put, Local Rule 3070-1(C) allows dismissal pursuant to 11 U.S.C. § 1326 without the hearing that 11 U.S.C. § 1307 requires. The tension between the Bankruptcy Code and the Local Rule is manifest in the circumstances presented here. No was notified of a hearing on the motion to dismiss scheduled for February 9, 2017, upon which she had every reason to rely. But then the bankruptcy court dismissed the case before the scheduled hearing could even occur. A local bankruptcy rule cannot be inconsistent with the Bankruptcy Code. Therefore, we hold that Local Bankruptcy Rule 3070-1(C) is invalid to the extent that it is inconsistent with 11 U.S.C. § 1307’s hearing requirement.
Reversed and remanded.
No v. Gorman (Lawyers Weekly No. 001-091-18, 7 pp.) (Duncan, J.) No. 17-1679; May 24, 2018; from EDVA at Alexandria (Lee, J.) Paula Steinhilber Beran for Appellant; Thomas Patrick Gorman for Appellee. 4th Cir.
