Michael A. Withers

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	No. 06-42098 TM
Chapter 7
MICHAEL A. WITHERS,
Debtor.
___________________________/
MEMORANDUM OF DECISION RE APPLICATION FOR
ORDER TO SHOW CAUSE AND RELATED ISSUES
On January 31, 2007, Paul Mansdorf, the duly appointed chapter
7 	trustee 	in 	the 	above-captioned 	case, 	(the 	“Trustee”) 	filed 	an 	ex
parte motion (the “Motion”) for an order to show cause why the above-
captioned 	debtor 	(the 	“Debtor”) 	should 	not 	be 	held 	in 	contempt 	and
directing 	the 	United 	States 	Marshals 	(the 	“Marshals”) 	to 	apprehend
the Debtor and bring him to the hearing to be examined. 	The Motion
represented 	that 	the 	Trustee 	had 	discovered 	that 	the 	Debtor 	owns
three pieces of real property, two of which appear to be generating
rents. 	It represented further that on January 19, 2007 the Trustee
had 	obtained 	an 	order 	directing 	the 	Debtor 	to 	turn 	over 	to 	the
Trustee 	and 	account 	for 	the 	rents 	collected 	and 	had 	also 	obtained
Court approval for the employment of a real estate broker to sell one
Signed: February 26, 2007
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
February 26, 2007
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 06-42098 Doc# 61 Filed: 02/26/07 Entered: 02/26/07 16:09:55 Page 1 of 9

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of 	the 	pieces 	of 	real 	property 	which 	is 	subject 	to 	an 	imminent
foreclosure sale. 	The Trustee represented that the Debtor has failed
to comply with the court order and has threatened the Trustee and his
counsel 	with 	physical 	harm 	if 	they 	did 	not 	cease 	their 	efforts 	to
collect and/or sell the property in question. 	He asked the Court to
issue 	an 	order 	to 	show 	cause 	why 	the 	Debtor 	should 	not 	be 	held 	in
contempt 	as 	a 	result 	of 	this 	conduct, 	scheduling 	a 	hearing 	on 	the
order, and to direct the Marshals to seize the Debtor and bring him
to the hearing to be examined. 	The Court denied the Motion without
prejudice on January 31, 2007, having concluded that it should first
decide the threshold issues of whether the case had to be dismissed
or already had been automatically dismissed.
Those issues have now been fully briefed. 	As discussed below,
the 	Court 	concludes 	that 	the 	Debtor’s 	failure 	to 	obtain 	credit
counseling does not give him the right to dismissal of the case and
that, by excusing the Debtor from filing the documents required by 11
U.S.C. § 521(a)(1)(B), the Court may prevent the automatic dismissal
of 	the 	case. 	The 	Trustee 	is 	directed 	to 	submit 	a 	proposed 	form 	of
order to this effect. 	The Court will schedule a hearing on the order
to 	show 	cause 	for 	May 	7, 	2007 	at 	10:30 	a.m. 	and 	will 	direct 	the
Marshals 	to 	apprehend 	the 	Debtor 	and 	bring 	him 	to 	the 	hearing 	for
examination. 	The 	Court 	directs 	the 	Trustee 	to 	ask 	the 	Marshals 	to
review 	the 	proposed 	order 	as 	to 	form 	before 	submitting 	it 	to 	the
Court 	to 	ensure 	that 	it 	is 	sufficiently 	specific 	to 	permit 	them 	to
discharge their duties. 	The continued hearing previously scheduled
for March 8, 2007 at 3:00 p.m. is hereby vacated.
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SUMMARY OF FACTS AND PROCEDURAL HISTORY
Michael 	A. 	Withers 	(the 	“Debtor”) 	filed 	a 	petition 	seeking
relief under chapter 7 of the Bankruptcy Code and a list of creditors
on November 6, 2006. 	To date, more than 45 days after the petition
date, 	he 	has 	not 	filed 	a 	schedule 	of 	assets 	and 	liabilities 	or 	a
statement of financial affairs (collectively referred to hereinafter
as the “Schedules”) or a certificate of pre- or post-petition credit
counseling nor has he attended a meeting of creditors.
In 	his 	application 	for 	a 	temporary 	waiver 	of 	the 	pre-petition
credit 	counseling 	requirement, 	the 	Debtor 	represented 	to 	the 	Court
that he filed the bankruptcy petition to stop an imminent foreclosure
on his real property. 	At a later date, he apparently decided that he
did 	not 	wish 	to 	be 	in 	chapter 	7. 	In 	late 	December 	2006 	or 	early
January 2007, he sent a letter to the Court, requesting that his case
be dismissed. 	He was informed by letter that his request was denied
without 	prejudice 	for 	lack 	of 	notice 	to 	creditors. 	He 	has 	never
renewed the request.
The 	Trustee 	urges 	the 	Court 	not 	to 	dismiss 	the 	case. 	He
represents 	that 	the 	Debtor 	owns 	real 	property 	with 	unencumbered
nonexempt 	equity 	of 	approximately 	$200,000. 	He 	contends 	that 	the
requirement that a chapter 7 debtor obtain credit counseling is not
jurisdictional and thus may be waived. 	He contend that, by filing a
voluntary petition, the Debtor waived any right to require dismissal
of 	the 	case 	based 	on 	his 	failure 	to 	comply 	with 	this 	eligibility
requirement. 	He also contends that the Court has the discretion to
decline to dismiss a chapter 7 case in which documents required by 11
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26 	1Sections 109(h)(2), (3), and (4) provide exceptions to this
general rule not applicable here.
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U.S.C. § 521(a)(1) have not been filed within 45 days of the petition
date, 	notwithstanding 	the 	statutory 	provision 	making 	dismissal
automatic under these circumstances.
DISCUSSION
A. 	CREDIT COUNSELING REQUIREMENT
Section 	109(h)(1) 	provides 	that, 	as 	a 	general 	rule, 	an
individual may not be a bankruptcy debtor unless the individual has
received 	credit 	counseling 	from 	an 	approved 	agency 	within 	180 	days
before filing the petition. 1 	The question presented in this case is
whether a debtor whose failure to obtain credit counseling may under
all 	circumstances 	insist 	that 	his 	case 	be 	dismissed. 	The 	Trustee
contends that he may not, and the Court agrees.
The 	Trustee 	relies 	principally 	on 	In 	re 	Parker, 	351 	B.R. 	790
(Bankr. N.D. Ga. 2006). 	In Parker, the debtor received pre-petition
counseling 	but 	not 	from 	an 	approved 	agency. 	He 	filed 	a 	motion 	to
extend the time to receive post-petition counseling from an approved
agency 	but 	then 	failed 	to 	obtain 	the 	counseling. 	When 	the 	trustee
attempted 	to 	sell 	an 	asset 	the 	debtor 	wished 	to 	retain, 	the 	debtor
demanded 	that 	his 	case 	be 	dismissed. 	The 	Parker 	court 	declined 	to
dismiss it.
The 	Parker 	court 	began 	by 	observing 	that 	the 	eligibility
requirements 	set 	forth 	in 	11 	U.S.C. 	§ 	109 	are 	not 	jurisdictional.
The bankruptcy court’s jurisdiction is governed by 28 U.S.C. §§ 1334
and 	157. 	Id. 	at 	796. 	It 	then 	concluded 	that, 	by 	accepting 	the
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2Some courts have gone further by concluding that, because 11
U.S.C. § 109(h) does not specify a remedy for lack of eligibility,
dismissal of the case of an ineligible debtor is in the court’s
discretion. 	See, e.g., In re Manalad, ___ B.R. ___, 2007 WL 247181
(Bankr. C.D. Cal.)
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benefits 	of 	his 	bankruptcy 	until 	it 	no 	longer 	suited 	his 	purposes,
the debtor waived the right to insist on dismissal based on lack of
eligibility. 	Alternatively, 	it 	concluded, 	he 	should 	be 	judicially
estopped from seeking dismissal on this ground. 	Id. at 797-99. 2
Among other things, the Parker court relied on In re Marlar, 432
F.3d 	813 	(8 th 	Cir. 	2005). 	In 	Marlar, 	a 	bankruptcy 	was 	commenced
improperly 	by 	the 	filing 	of 	an 	involuntary 	petition 	against 	an
individual who met the statutory definition of a farmer. 	Five years
later, the debtor attempted to use this defect to compel dismissal of
the case. 	The court concluded that the debtor’s status as a farmer
was 	an 	affirmative 	defense 	to 	the 	involuntary 	petition 	which 	the
debtor 	waived 	by 	failing 	to 	raise 	it 	at 	the 	time 	the 	petition 	was
filed. 	Id. at 815.
The Trustee also cites in support of his position In re Benny,
842 	F.2d 	1147 	(9 th 	Cir. 	1988). 	In 	Benny, 	creditors 	filed 	an
involuntary 	joint 	chapter 	7 	petition 	against 	Mr. 	and 	Mrs. 	Benny
despite the fact that involuntary petitions may only be filed against
a 	single 	person. 	Years 	later, 	Mrs. 	Benny 	attempted 	to 	use 	this
defect to compel dismissal of the case. 	Unlike the Parker court, the
Benny court held that the defect was jurisdictional and could not be
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3However, the Benny court concluded that, by filing a joint
motion to convert the chapter 7 case to chapter 11, the Bennys
cured the jurisdictional defect, turning it into a voluntary
proceeding.
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waived nor could the debtor be judicially estopped from raising the
defect years later. 3
The Court does not find Benny helpful to the Trustee’s position.
However, it also concludes that Benny is distinguishable since it did
not involve an eligibility defect. 	The Court agrees with the Parker
court that the eligibility requirement of 11 U.S.C. § 109(h) is not
jurisdictional 	and 	thus 	is 	subject 	to 	the 	doctrine 	of 	waiver 	and
estoppel. 	The Court finds somewhat strained the application of the
waiver 	doctrine 	to 	facts 	such 	as 	these. 	However, 	the 	Court 	agrees
with 	the 	Parker 	court 	that 	a 	debtor 	who 	files 	a 	voluntary 	petition
and seeks the protections of a bankruptcy case is judicially estopped
from 	requiring 	his 	case 	to 	be 	dismissed 	based 	on 	a 	lack 	of
eligibility under 11 U.S.C. § 109(h). 	Any other result would impugn
the integrity of the judicial process, permitting a dishonest debtor
to manipulate the system.
B. 	AUTOMATIC DISMISSAL
Section 521(a)(1)(B) provides that a debtor is required to file
certain documents, including the Schedules, unless otherwise ordered
by the Court. 	Section 521(i)(1) states that, subject to paragraphs
(2) 	and 	(4), 	if 	a 	debtor 	fails 	to 	file 	all 	of 	the 	information
required 	by 	section 	521(a)(1), 	“the 	case 	shall 	be 	automatically
dismissed effective on the 46 th day after the filing of the petition.”
Paragraph 	(2) 	requires 	the 	Court 	to 	enter 	an 	order 	dismissing 	the
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case upon the request of a party in interest within five days of the
request.
Paragraph 	(4) 	provides 	the 	Court 	with 	a 	basis 	to 	decline 	to
dismiss 	the 	case 	for 	failure 	to 	file 	the 	required 	documents 	under
certain 	circumstances. 	However, 	the 	facts 	of 	this 	case 	do 	not
provide 	the 	Court 	will 	a 	basis 	to 	decline 	to 	dismiss 	the 	case.
Section 523(i)(4) provides, in pertinent part, that:
...on the motion of the trustee filed before the
expiration of the applicable period of time...,
after 	notice 	and 	a 	hearing, 	the 	court 	may
decline 	to 	dismiss 	the 	case 	if 	the 	court 	finds
that the debtor attempted in good faith to file
all 	the 	information 	required 	by 	subsection
(a)(1)(B)(iv)[i.e., 	payment 	advices 	for 	the 	60
days 	preceding 	the 	bankruptcy 	filing] 	and 	that
the best interests of creditors would be served
by administration of the case.
11 	U.S.C. 	§ 	521(i). 	The 	Court 	is 	unable 	to 	find 	that 	the 	Debtor
attempted in good faith to file his payment advices.
An individual who files a chapter 13 petition has the right to
dismiss the case at any time. 	However, traditionally, an individual
who files a chapter 7 petition must file a noticed motion to dismiss
the 	case, 	and 	his 	motion 	may 	be 	denied. 	Construing 	11 	U.S.C. 	§
521(a)(1)(B) and (i) to give a chapter 7 debtor the absolute right to
cause the automatic dismissal of the case 45 days after it is filed
would represent a dramatic change in the law and would open the door
to abuse.
The 	Parker 	court 	was 	also 	confronted 	with 	this 	issue. 	It
concluded 	that 	the 	automatic 	dismissal 	could 	be 	avoided 	simply 	by
excusing 	the 	debtor 	from 	filing 	the 	required 	documents. 	As 	noted
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4As noted by the Parker court, there is no requirement that
the order excusing the debtor from filing the documents be entered
prior to the expiration of the 45 day period.
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above, 11 U.S.C. § 521(a)(1)(B) provides that a debtor must file the
enumerated documents unless otherwise ordered by the court. 	The only
document that the court may not excuse the debtor from filing is the
list 	of 	creditors. 	However, 	the 	Debtor 	has 	filed 	a 	list 	of
creditors. 	Therefore, the Court will excuse the Debtor from filing
the documents listed in 11 U.S.C. § 521(a)(1)(B). 	As a result, the
case will not be automatically dismissed. 4 	If the Debtor wishes the
Court to consider dismissing the case, he may file a noticed motion
seeking such relief.
CONCLUSION
The 	Court 	concludes 	that 	the 	eligibility 	requirement 	of 	11
U.S.C. 	§ 	109(h) 	is 	not 	jurisdictional 	and 	that 	the 	Debtor 	is
judicially estopped from demanding that the case be dismissed based
on his failure to obtain credit counseling. 	The Court also concludes
that it has the power to excuse the Debtor from filing the documents
specified 	by 	11 	U.S.C. 	§ 	521(a)(1)(B) 	and 	will 	do 	so 	in 	order 	that
the 	case 	not 	be 	deemed 	automatically 	dismissed 	as 	of 	the 	46 th 	day
after the filing date. 	Finally, as noted above, the Court will sign
a proposed order to show cause submitted by the Trustee after it is
approved as to form by the Marshals.
END OF DOCUMENT
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COURT SERVICE LIST
Michael A. Withers
2 Moss Ave
Oakland, CA 94610
Reidun Stromsheim
Law Offices of Stromsheim and Assoc.
201 California St. #350
San Francisco, CA 94111
Paul Mansdorf
1563 Solano Ave. #703
Berkeley, CA 94707
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