In re Fiorillo

455 B.R. 297

In re Nicholas J. FIORILLO, Debtor.

Civil Action No. 4:10–cv–40238.

Bankruptcy No. 10–44179.

United States District Court, D. Massachusetts.

June 24, 2011.

James P. Ehrhard, Worcester, MA, for Debtor.Jonathan R. Goldmith, Springfield, MA,for the Chapter 7 Trustee/Appellee.

MEMORANDUM AND ORDER

DOUGLAS P. WOODLOCK, District Judge.

Facing imminent foreclosure, Appellant–Debtor Nicholas Fiorillo filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Massachusetts. He sought to forestall the foreclosure through the automatic stay provisions of the Bankruptcy Code. After the Bankruptcy Court converted his case to a Chapter 7 liquidation proceeding, Fiorillo moved the Bankruptcy Court to dismiss the case. He based that motion upon his noncompliance with 11 U.S.C. § 109(h), the Bankruptcy Code's credit-counseling requirement. Because he had not complied with § 109(h), he argued, he was ineligible to be a “Debtor” under the statute and, consequently, the Bankruptcy Court lacked jurisdiction over his bankruptcy proceeding. The Trustee objected, and the Bankruptcy Court denied the motion. Finding Fiorillo estopped from belatedly arguing that he had not complied with the credit-counseling requirement, I affirm.

I. BACKGROUND

A. Factual and Procedural Background

Nicholas Fiorillo filed his pro se petition for Chapter 11 bankruptcy as an individual on August 23, 2010. As part of his bankruptcy petition, Fiorillo included an “Exhibit D”—signed under penalty of perjury—certifying compliance with the Bankruptcy Code's credit counseling requirement, 11 U.S.C. § 109(h). The form includes four numbered options with accompanying check boxes: (1) certifying that the debtor has taken such a course within 180 days and attaching a certificate of completion; (2) certifying that the debtor has taken such a course within 180 days but has yet to obtain certification; (3) certifying that the debtor requested counseling but could not receive said counseling due to exigent circumstances and requesting a temporary waiver; or (4) certifying that the debtor is exempt from the credit counseling requirement.

Fiorillo checked the second box, indicating that he had received approved credit counseling but had yet to obtain certification. However, he also stated, under the third (unchecked) option, that he “had an agreed upon arrangement with [his] main creditor to except [ sic ] good funds to pay off existing obligation. At the last minute Creditor did not accept agreed upon payment and now is trying to auction of [ sic ] an asset today.” He did not then submit any certification within fifteen days, as required by 11 U.S.C. § 521(b)(1), and did not file the necessary certification and motion required by 11 U.S.C. § 109(h)(3) to obtain the temporary waiver. He did, however, take advantage of the Bankruptcy Code's automatic-stay provision, 11 U.S.C. § 362(a), to stay the foreclosure sale referred to in his petition.

On September 15, 2010, Fiorillo filed a motion to dismiss his petition, and a hearing on the motion was scheduled for October 21, 2010. And, on October 5, 2010, Fiorillo moved the Bankruptcy Court for leave to amend his Exhibit D filing, stating that “[t]he debtor erred in checking the correct explanation of his credit counseling status.” The motion represented that Fiorillo had mistakenly checked the box for the second option, but that “[t]he debtor had not taken the course before his filing and as stated below in box 3 of his initial filing, an explanation of his exigent circumstance was provided.” On October 25, 2010, the Bankruptcy Court granted the motion to amend Fiorillo's Exhibit D to reflect that he had not taken the course but was requesting a temporary waiver due to the stated exigent circumstances.

Meanwhile, Fiorillo's bankruptcy action proceeded. On September 7 and 21, 2010, Fiorillo moved for additional time to file his schedules; the first motion was granted and the second denied. Fiorillo failed to file the required documents by the date ordered by the court and did not attend the scheduled Section 341 meeting on September 28, 2010. Consequently, the Bankruptcy Trustee moved on October 4, 2010, to convert the petition to a Chapter 7 liquidation action due to Fiorillo's noncooperation in the Chapter 11 proceedings. The Bankruptcy Court granted the Trustee's motion on October 7, 2010. Fiorillo's pending motion to dismiss was subsequently denied on October 20, 2010, on the grounds that the proceedings had been converted to Chapter 7, under which a debtor has no right to voluntary dismissal.

Accordingly, the Chapter 7 proceeding marched forward. On October 25, 2010, the Bankruptcy Court allowed Fiorillo's most recent motion (of several) seeking to postpone filing his schedules and financial statements and stated that “no further extensions will be granted.” A court order issued stating that disclosures were due on November 1, 2010, and giving notice of a second Section 341 meeting on November 2, 2010.

Having again failed to postpone filing his financial disclosures, Fiorillo filed an “Emergency Motion to Dismiss Chapter 7 Bankruptcy Case” on October 29, 2010. The motion came just three days after the Bankruptcy Judge allowed Fiorillo's motion to amend Exhibit D and four days before the schedules were due. In his motion, Fiorillo sought dismissal of his action on the ground that he was ineligible for relief under the Bankruptcy Code because he had not taken the required credit-counseling course prior to filing for bankruptcy. Fiorillo also argued that the exigent circumstances that he (twice) certified as truthful under penalty of perjury were actually insufficient to constitute exigent circumstances under the statute and, therefore, he could not have been granted a temporary waiver of the § 109(h) requirement. Fiorillo maintained that his motion was an “emergency” motion because his schedules were due on November 1, 2010, and “[t]he Debtor should not have to provide schedules to the public and be questioned under oath in an adversarial setting when there is no jurisdictional basis for doing so.”

The Bankruptcy Court promptly denied Fiorillo's emergency motion. The endorsement read: “Denied. The debtor is estopped from claiming the lack of credit counseling based on his certification under the penalty of perjury that he completed the requisite credit counseling. The debtor is ordered to file a certificate of credit counseling within 14 days of the date of this order.” Fiorillo now appeals the Bankruptcy Court's denial of his emergency motion.

Following the initiation of the appellate proceedings in this court, the parties continued to dispute Fiorillo's credit-counseling compliance in the Bankruptcy Court.¹ Fiorillo did not file a credit-counseling certificate within fourteen days as required by the Bankruptcy Court's October 28, 2010, order. Consequently, the Trustee filed a motion seeking to compel Fiorillo to file such a certification, and, over objection and following a second court order, Fiorillo filed the certification on January 31, 2011. The certification states that Fiorillo completed the required credit-counseling course on September 7, 2010, prior to filing his motion to amend Exhibit D and prior to filing both motions to dismiss the case.²

B. Statutory Background

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), Pub. Law No. 109–8, 119 Stat. 23, ushered in the most extensive reform of the Bankruptcy Code in decades. In enacting BAPCPA, Congress aimed to limit “the recent escalation of consumer bankruptcy filings,” H.R.Rep. No. 109–31, at 3, 2005 U.S.C.C.A.N. at 90. In particular, as the title of the bill indicates, “[t]he purpose of [BAPCPA] is to improve bankruptcy law and practice by restoring personal responsibility and integrity to the bankruptcy system and ensure that the system is fair for both debtors and creditors.” Id. at 1, 2005 U.S.C.C.A.N. at 89; see also Wirum v. Warren (In re Warren), 568 F.3d 1113, 1118 (9th Cir.2009) (citing legislative history and observing that the “core purpose [of BAPCPA] was to prevent abusive bankruptcy filings”); Segarra–Miranda v. Acosta–Rivera (In re Acosta–Rivera), 557 F.3d 8, 13 (1st Cir.2009).

To that end, BAPCPA imposed a number of new eligibility and disclosure obligations on would-be debtors, including § 109(h), which requires debtors to receive credit counseling before filing for bankruptcy. See BAPCPA §§ 106, 107. The additional eligibility obligations established by BAPCPA, and § 109(h) in particular, have led to a wave of litigation regarding the effect of BAPCPA on the Bankruptcy Court's discretion in bankruptcy proceedings. See, e.g., In re Amir, 436 B.R. 1, 8 (6th Cir. BAP 2010) (“Both 11 U.S.C. § 109(h) and § 521(i) were added to the Bankruptcy Code by [BAPCPA]. Since their enactment, courts have strongly disagreed over the meaning of both sections.” (citations omitted)).

Section 109(h) “requires debtors to receive credit counseling before they can be eligible for bankruptcy relief so that they will make an informed choice about bankruptcy, its alternatives, and consequences.” ³ H.R. Rep. NO. 109–31, at 2 (2005), reprinted in 2005 U.S.C.C.A.N. at 89. At the time Fiorillo filed his petition in the Bankruptcy Court, 11 U.S.C. § 109(h)(1) stated:

Subject to paragraphs (2) and (3), and notwithstanding any other provision of this section, an individual may not be a debtor under this title unless such individual has, during the 180–day period preceding the date of filing of the petition by such individual, received from an approved nonprofit budget and credit counseling agency described in section 111(a) an individual or group briefing (including a briefing conducted by telephone or on the Internet) that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis.11 U.S.C. § 109(h)(1) (emphases...