CHAPTER 2, A. Only a Causal Connection Should Trigger the 180-Day Bar Necessary to Prevent Abusive Repeat Filings

• Jurisdiction: United States

A. Only a Causal Connection Should Trigger the 180-Day Bar Necessary to Prevent Abusive Repeat Filings

ABI Journal

August 2019

David Cox

Cox Law Group, PLLC

Lynchburg, Va.

Debtors seeking the protection of the Bankruptcy Code must first pass through the gateway of § 109, defining who may be a debtor. Fortunately for those seeking relief under title 11, the limitations on an individual's ability to file for protection under the Code are generally limited in scope. A distinct hurdle does exist in § 109(g)(2), however, for any debtor seeking to file a new case after first voluntarily dismissing a prior case.¹ As with much of the Code, § 109(g)(2) is open to multiple interpretations and requires thoughtful examination.

Section 109(g)(2) prohibits an individual from being a debtor in a new case if, within the preceding 180 days, "the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief from the automatic stay provided by § 362." Courts are not unified in their interpretations of this subsection impacting debtors with repeat filings.² Despite the brevity of the controlling language, courts have developed differing interpretations of when the 180-day bar to filing a new case applies, with the two most prevalent approaches known as the "strict interpretation" and the "causal connection" views.³ For the reasons discussed herein, the causal-connection approach strikes the best balance for curbing the abuses of bad-faith, serial filings without impacting the rights of debtors who might otherwise unjustifiably find themselves in the potential crosshairs of the statute.

Overview of Approaches

Those courts following a strict application of § 109(g)(2) form the majority view and hold that the 180-day bar against refiling a new bankruptcy is triggered anytime a debtor requests and obtains a voluntary dismissal after the filing of a motion for relief.⁴ In contrast, courts following the causal-connection approach condition the application of the 180-day bar of § 109(g)(2) upon finding a nexus between the motion for relief from the automatic stay and the debtor's voluntary dismissal of the case.⁵ In other words, courts adopting this view determine whether there is a causal connection between the debtor's voluntary dismissal and the motion for relief before limiting that debtor's eligibility to file a subsequent case.⁶ Such an interpretation is not only true to the language of the statute but also makes good sense, since without some link between the debtor's dismissal and the creditor's request for relief, "there is no abuse to curb and no purpose to be served by keeping the former debtor out [of] bankruptcy for 180 days."⁷

"Following" Should Not Be Interpreted to Mean "After"

Although advocates for the strict view explain that the plain language of the statute mandates that any dismissal that happens after a motion for relief triggers the 180-day bar of § 109(g)(2), a more careful examination of that seemingly plain language is appropriate, particularly when nothing less than a person's eligibility for any bankruptcy relief is at stake. To be clear, the word "after" does not appear in § 109(g)(2).

The triggering language of the statute is the word "following" — as in, the 180-day bar applies when there is a "voluntary dismissal of the case following the filing of a request for relief." The distinction does make a difference, because "following" does not mean exactly the same thing as "after" in the context of the statute.

"After" clearly distinguishes two points in time. As carefully explained by Hon. Eugene R. Wedoff (ret.) in In re Payton, "following" has several meanings and is not limited to establishing a time sequence.⁸ In fact, "following" often indicates a causal relationship, and in the context of § 109(g)(2), the most reasonable meaning of "following" is "as a result of."⁹

Congress could...