Chapter 18-9 Dismissal

18-9 Dismissal

An automatic stay imposed as a result of bankruptcy is lifted by operation of law if the bankruptcy case is dismissed.⁸⁴ Among other reasons, bankruptcies may be dismissed by the bankruptcy court if they were filed in bad faith,⁸⁵ if the mortgagor fails to appear at the 341 Meeting or if they have failed to filed required pleadings,⁸⁶ or if the mortgagor is found to have unreasonably delayed the proceedings.⁸⁷ The bankruptcy court may dismiss a case filed under Chapter 11 or 13 as having been filed in bad faith if the filing evidences an intent to abuse the judicial process, particularly when there is no realistic possibility of an effective reorganization and it is evident that the mortgagor seeks merely to delay or frustrate the legitimate efforts of secured creditors to enforce their rights.⁸⁸ Courts can also dismiss a case where assets are transferred to a new entity on the eve of a bankruptcy filing so that the new entity can obtain the benefit of the automatic stay and other aspects of bankruptcy, commonly referred to as the new debtor syndrome.⁸⁹ Similarly, a case filed under Chapter 7 may be dismissed for pre-petition bad faith, too.⁹⁰

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Notes:

^[84] 11 U.S.C. 362(c)(2); In re Hill, 305 B.R. 100, 104 (Bankr. M.D. Fla. 2003) ("Although a case may remain open after dismissal, the automatic stay of § 362 of the Bankruptcy Code terminates when the case is dismissed.").

^[85] In re Piazza, 719 F.3d 1253 (11th Cir. 2013); In re Kollar, 357 B.R. 657 (M.D. Fla. 2006) (dismissal for filing bankruptcy solely to thwart creditor's enforcement of lien rights).

^[86] In re Steinmetz Group, Ltd., 85 B.R. 633 (S.D. Fla. 1988). However, in practice, the bankruptcy case is rarely, if ever dismissed for failure to attend the first scheduled 341 Meeting.

^[87] In re Clark, 107 B.R. 376 (S.D. Fla. 1988); 11 U.S.C. § 1112(b).

^[88] In re Albany Partners, Ltd., 749 F.2d 670, 674 (11th Cir. 1984).

^[89] In re Yukon Enters., Inc., 39 B.R. 919, 921 (Bankr. C.D. Cal. 1984) ("Indicia of the new debtor syndrome include: (1) transfer of distressed property into a newly created corporation; (2) transfer occurring within a close proximity to the bankruptcy filing; (3) transfer for no consideration; (4) the debtor has no assets other than the recently transferred property; (5) the debtor has no or minimal unsecured debt; (6) the debtor has no employees and no ongoing business; and (7) the debtor has no means, other than the transferred property, to service the debt on the...