Jorge Alberto Lucero and Margarita Aguirre

OCR transcription for search; preserved printed pages are authoritative

Case 2:09-bk-14427-PC Doc17 Filed 07/16/09 Entered 07/16/09 18:32:37 Desc

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ENTERED
JUL 16 2009

CLERK U.S BANK

CENTRAL DISTRIC TOF ey COURT

TOF CALIFORNIA
Deputy Clerk

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UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA

In re:

Jorge Lucero et al.

Debtors.

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l. Introduction

This case raises the issue of whether the
court may cure the misjoinder of two
unmarried debtors in a joint bankruptcy
petition by dismissing one of the petitioners
and permitting the remaining case to proceed.
The court finds that dismissing a single
codebtor and allowing the other debtor to
proceed as a single petitioner is appropriate in
light of relevant case law and pursuant to the
court's inherent powers and authority under §
105(a)."

’ Unless otherwise indicated, all chapter, section
and rule references are to the Bankruptcy Code,
11 U.S.C.A. §§ 101-1532 (West 2008) and to

AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

Case No.: LA09-14427SB
Chapter 7

OPINION ON DISMISSAL OF
UNMARRIED CO-DEBTOR

Date: June 2, 2009
Time: 11:00 a.m.
Ctrm: 1575

The court further holds that this case does
not count as a dismissed case for the purpose
of limiting the automatic stay that may
otherwise apply under § 362({c})(3) in a
subsequent case filed within the next year by
the codebtor. The court finds that this is a
core proceeding pursuant to 28 U.S.C. §
157(b)(2).

li. Facts
Jorge Lucero and Margarita Aguirre filed a

joint chapter 7 case on February 27, 2009.
They have been living together in a

the Federal Rules of Bankruptcy Procedure,
Rules 1001-9036.

Case 2:09-bk-14427-PC Doc17 Filed 07/16/09 Entered 07/16/09 18:32:37 Desc

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relationship for such an extended period of
time that they consider themselves married,
although they never took the steps to legalize
their marriage. Before filing the case, the
debtors told their attorney that they were
married. However, at the meeting of creditors
they disclosed to the chapter 7 trustee that
they were not in fact legally married and did
not realize that they were ineligible to file a
joint case at the time they initially met with
their attorney and filed the case.

in light of this information, the trustee
moved to dismiss the entire case. In
response, Ms. Aguirre requested that only she
be dismissed from the case so that she could
file a separate case.

lil. Analysis

Non-married cohabitants may not file a
joint petition pursuant to § 302(a), which
provides in part: “A joint case under a chapter
of this title is commenced by the filing with the
bankruptcy court of a single petition under
such chapter by an incividual that may be a
debtor under such chapter and = such
individual's spouse.”

Courts interpret § 302(a)’s “individual and
individual’s spouse” as applicable only to
those couples that are legally married. See,
6.g., Bone v. Allen (in re Allen}, 186 B.R. 769,
774, (Bankr. N.D. Ga. 1995) (finding that “in
order to qualify to file a joint petition under §
302... the two parties must be legally
married”).

In this case, debtors do not contend that
they were legally married.” As a result, they
were ineligible to file a joint bankruptcy petition
pursuant to the statutory requirements of §
302(a). Therefore, the court must determine
the appropriate remedy where a joint case
was erroneously filed in good faith by non-
spouses. The trustee argues that the case
should be dismissed in its entirety, while
debtors, acknowledging their error in filing the

* While California does not recognize a

“common law marriage” without compliance with
state formalities, some other states do. The
debtors do not contend that they ever qualified
as common law spouses under the laws of any
other state.

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joint petition, request that only Ms. Aguirre be
dismissed as a joint codebtors and that Mr.
Lucero be permitted to continue with his
chapter 7 case.

Prior courts addressing erroneous joint
petitions by non-spouses have given debtors
the option of dismissing one party in the joint
petition or facing dismissal of the entire case.
Allen, 186 B.R. at 774 (homosexual! couple);
In re Lam, 98 B.R. 965, 966 (Bankr. W.D. Mo.
1988) (mother and daughter); in re Malone),
59 B.R. 2, 3 (E.D. Mich, 1985). In Allen, a
same sex couple that was not legally married
filed a joint petition. See 186 B.R. at 774. The
court found that the debtors were ineligible to
file a joint petition, but allowed them 20 days
to dismiss one of the codebtors from the case
or face dismissal of the entire case. /d. The
court in Lam similarly allowed a mother and
daughter filing a joint petition time 30 days to
remove one party from the case before it
would order dismissal of the whole case.
Lam, 98 B.R. at 966. In Malone, the court
gave the debtors 10 days to amend their
chapter 13 petition to cure the defect.

Here, upon recognizing the error in
debtors’ petition, Ms. Aguirre voluntarily
requested her dismissal from the case.
Granting such a dismissal is consistent with
prior case law protecting the interests of
debtors’ in light of their procedural mistakes
when filing joint petitions. See Allen, 186 B.R.
at 774; Lam, 98 B.R. at 966.

Furthermore, the court has broad
statutory authority under 11 U.S.C. § 105 to
fashion suitable relief consistent with
bankruptcy’s principles of fairness and equity
favoring debtors. See, e.g., In Ae Saxman,
325 F. 3d 1168, 1174 (3th Cir. 2003)
{authorizing a partial discharge of a student
loan pursuant to the court’s § 105 powers
where the debtor's circumstances satisfied the
statutory requirements for an undue hardship
in repaying the loan).

Dismissing only Ms. Aguirre from the case
and permitting Mr. Lucero’s case to proceed
based on the court’s § 105 power would save
the debtors from the consequences of filing an
entirely new chapter 7 petition. Such
consequences may include the preservation of
preference or fraudulent transfer claims that
could have expired in the interim, as well as
saving the expense of filing a new case for Mr.
Lucero. In addition, this resolution would save

Case 2:09-bk-14427-PC Doc17 Filed 07/16/09 Entered 07/16/09 18:32:37 Desc

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valuable judicial resources that would
otherwise have to be expended on two new
cases rather than only one new case. Thus,
the court’s holding is based on underlying
principles of fairness and equity that may be
applied in these circumstances.

Finally, the court holds that dismissal of
Ms. Aguirre from the case will not operate as a
dismissal of a bankruptcy case for the purpose
of § 362(c)(3)'s limitation on the automatic
stay in Ms. Aguirre’s subsequent case.
Section 362(c)(3) provides that, if a debtor had
a prior case that was pending and dismissed
within a year of the filing of the new case, the
automatic stay in the subsequent case
automatically terminates after 30 days
following the filing, unless extended by the
court on the motion of a party in interest.
Section 362(c}(3) does not apply because the
court is not dismissing the existing case, but
rather it is only removing Ms. Aguirre as a
debtor herein. Therefore, Ms. Aguirre’s
subsequent individual case will not be subject
to the § 362(c}{3) limitation on the automatic
stay.

IV. Conclusion
The court finds that dismissing only Ms.

Aguirre from this case is an appropriate
remedy in light of policies favoring debtors

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drawn from relevant case law and the court’s
statutory authority and its discretion pursuant
to 11 U.S.C. § 105 (a). Dismissal of the entire
case in these circumstances would be
inconsistent with bankruptcy courts’ practice of
permitting joint petitioners in error to amend
their petitions. it would also inconvenience
both the debtors and the court by expending
further judicial resources on the basis of a
procedural error.

Finally, because this case is not
dismissed, the 30-day limit on automatic stay
under § 362(c)(3) will not apply in Ms.
Aguirre's subsequent individual case, if it is
filed within a year hereafter.

Dated: July 16, 2009.

, ae Byfford
Unt d States Bankruptcy Judge

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NOTE TO USERS OF THIS FORM:

1) Attach this form to the last page of a proposed Order or Judgment. Do not file as a separate document.

2) The title of the judgment or order and all service information must be filled in by the party lodging the order.
3) Category I. below: The United States trustee and case trustee (if any) will always be in this category.

4) Category II. below: List ONLY addresses for debtor (and attorney), movant (or attomey) and person/entity
(or attorney) who filed an opposition to the requested relief. DO NOT list an address if person/entity is listed in
category |.

NOTICE OF ENTERED ORDER AND SERVICE LIST

Notice is given by the court that a judgment or order entitled (specify) OPINION ON DISMISSAL ON
CO-DEBTOR was entered on the date indicated as “Entered” on the first page of this judgment or
order and will be served in the manner indicated below:

l SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (“NEF”) - Pursuant to
controlling General Order(s) and Local Bankruptcy Rule(s), the foregoing document was served on
the following person(s) by the court via NEF and hyperlink to the judgment or order. As of June 26,
2009, the following person(s} are currently on the Electronic Mail Notice List for this bankruptcy case
or adversary proceeding to receive NEF transmission at the email address(es) indicated below.

Shannon Doyle, Esq. sdoyle @ biclaw.com
John P. Pringle, Trustee jpringle @ ecf.epiqsystems.com
United States Trustee ustpregion16.la.ecf @ usdoj.gov
im Service information continued on attached page

ll. SERVED BY THE COURT VIA U.S. MAIL: A copy of this notice and a true copy of this judgment
or order was sent by United States Mail, first class, postage prepaid, to the following person(s) and/or
entity(ies) at the address(es) indicated below:

Jorge Alberto Lucero
1412 East “L” Street
Wilmington, California 90744

Margarita Aguiree
1412 East “L” Street
Wilmington, California 90744

oO Service information continued on attached page

lll. TO BE SERVED BY THE LODGING PARTY: Within 72 hours after receipt of a copy of this
judgment or order which bears an “Entered” stamp, the party lodging the judgment or order will serve
a complete copy bearing an “Entered” stamp by U.S. Mail, overnight mail, facsimile transmission or
email and file a proof of service of the entered order on the following person(s) and/or entity(ies) at
the address(es), facsimile transmission number(s), and/or email address(es) indicated below:

oO Service information continued on attached page

ADDITIONAL SERVICE INFORMATION (if needed):