Bankruptcy Court Discusses the Four Way Case Law Split of Interpretations of Section 109(g)(2) Affecting the Eligibility to be a Debtor Within Six Months of Voluntary Dismissal

Bankruptcy Court Discusses the Four Way Case Law Split of Interpretations of Section 109(g)(2) Affecting the Eligibility to be a Debtor Within Six Months of Voluntary Dismissal

The Debtor and his spouse were indebted to Standard Mortgage Corporation (“SMC”) which was secured by a mortgage on the Debtor’s real estate. The Debtor became delinquent on his mortgage payments and SMC instituted a foreclosure. Two days before sale, the Debtor filed his first chapter 12 bankruptcy. Approximately six months later, SMC moved from relief from stay which was resolved with an order for certain payments and included a “drop dead” order which allowed SMC to move ex parte for a default and obtain an order granting relief from stay.

Later, SMC filed the ex party motion and obtained the order lifting the stay. SMC resumed the foreclosure proceeding. The Debtor then filed a motion to dismiss the bankruptcy which was granted. Three days after the first case was dismissed, the Debtor refiled a second bankruptcy.

SMC filed a motion to dismiss the second case arguing in part that the Debtor was barred from refiling bankruptcy under any chapter pursuant to Section 109(g)(2). 11 U.S.C. § 109(g)(2). The Debtor argued that since SMC’s motion for relief was not pending at the time the first case was dismissed and therefore the Court should not disqualify the Debtor.

The Court began by explaining the burden of proof and legal standard to prove eligibility as a debtor.

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