In re Schultz

627 B.R. 172

IN RE: Christopher Michael SCHULTZ and Alyssa Schultz, Debtors.

Case No. 18-01804-WLH7

United States Bankruptcy Court, E.D. Washington.

Signed March 29, 2021

William L. Hames, John W. O'Leary, Gravis Law, Kennewick, WA, for Joint Debtors.

MEMORANDUM DECISION

Whitman L. Holt, Bankruptcy Judge

As this court has explained elsewhere, access to bankruptcy relief is a privilege not a right.¹ Congress imposed several conditions debtors must satisfy to obtain relief under the Bankruptcy Code. In some instances, Congress gave bankruptcy courts power to waive or reduce certain of these conditions. Congress has not, however, extended this power in all instances.

In this case, joint debtor Christopher Michael Schultz asks the court to relieve him of two statutory requirements: completion of an instructional course and attendance at a meeting of creditors. These requests require the court to determine whether it has the authority to grant the relief and, if so, whether Mr. Schultz has satisfied the necessary criteria. For the reasons set forth below, the court answers both questions in the negative and, therefore, denies Mr. Schultz's requests.

BACKGROUND AND PROCEDURAL POSTURE

The joint debtors initially filed a voluntary chapter 13 petition to initiate this bankruptcy case. Among other requirements, both debtors participated in a prepetition credit counseling course and both apparently attended the "meeting of creditors" as required by Bankruptcy Code sections 109(h)(1) and 341(a) respectively. After several plan modifications, the court confirmed the debtors' plan. Following the chapter 13 trustee's motion to dismiss the case based on the debtors' failure to submit required plan payments, the court granted the debtors' motion to convert their case to one under chapter 7 of the Bankruptcy Code.

After conversion, the new meeting of creditors was scheduled to be conducted via telephone on December 15, 2020, and the court notified the debtors of their obligation to file a certificate evidencing completion of a postpetition personal financial management course. A few months later, the court notified the debtors of their failure to provide the required certificate and indicated that the court would close the case without discharge if the debtors did not do so within approximately thirty days. Three days later, joint debtor Alyssa Schultz filed the required certificate.

Shortly thereafter, debtors' counsel filed the motion at issue here. In the motion, Mr. Schultz seeks an order "waiving the requirements for the Debtor to attend a 341 Meeting of Creditors and to complete an instructional course in personal financial management."² In support of the requests, counsel submitted a declaration stating that Mr. Schultz "has been incarcerated since July 20, 2020 and will not be released in the foreseeable future."³ The declaration provides no additional facts.

DISCUSSION

Relief From the Instructional Course Is Not Warranted on the Present Record

In bankruptcy cases filed by individuals, the Bankruptcy Code requires petitioners to complete two instructional courses in sequence. First, to be eligible as a debtor under the Code, a petitioner must certify that he or she completed a credit counseling course within a certain timeframe before filing the petition.⁴ Second, to receive a discharge, the debtor must complete a financial management course after filing the petition – the deadlines for doing so vary depending on the chapter.⁵

Recognizing that a strict application of these requirements could prevent relief for individuals who are unable to comply for reasons beyond their control, Congress provided certain exceptions. The Bankruptcy Code provisions setting forth exceptions to the required postpetition financial management course simply refer to a subset of the statute's broader exceptions to the required prepetition credit counseling course.⁶ Under this provision, a debtor need not complete the required course if "the court determines [that the debtor] is unable to complete those requirements because of incapacity, disability, or active military duty in a military combat zone."⁷ The statute puts further meat on the bones of two of these criteria – "incapacity" is defined to mean "that the debtor is impaired by reason of mental illness or mental deficiency so that he is incapable of realizing and making rational decisions with respect to his financial responsibilities" and "disability" is defined to mean "that the debtor is so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone, or Internet briefing."⁸

As other courts applying this language have observed, Congress used clear, unambiguous language in delineating the exceptions.⁹ And, of course, long established canons of statutory interpretation require courts to apply statutes as written when possible.¹⁰

Applying the exceptions to Mr. Schultz's request, there is no evidence or allegation that he is currently engaged in military service,¹¹ that he suffers from mental incapacitation, or that he is physically impaired. While some creative bankrupt inmates have argued that the extreme restrictions in a prison functionally equate to the limitations of a disability, this creativity has largely been rejected, including because one cannot conflate a generalized inability with a physical disability – let alone a disability rising to the severity contemplated in the exception here.¹² Due to this unavoidable distinction, the clear majority of courts to address the issue hold that involuntary confinement does not amount to a physical impairment qualifying a debtor for an exception under the statute.¹³ Holding otherwise is simply adding to the list of existing exceptions.¹⁴

Because the record contains no facts supporting Mr. Schultz's request to relieve him of the obligation at issue, the court will deny the request. If actually applicable based on his circumstances, Mr. Schultz may supplement the record to provide evidence consistent with one of the three qualifying exceptions.¹⁵

Bankruptcy Courts Lack Authority to Waive Attendance at the 341(a) Meeting

Section 341(a) imposes an obligation on the United States trustee to conduct a meeting of creditors after the filing of a bankruptcy petition.¹⁶ Section 343 imposes a corresponding obligation on a debtor to attend this meeting.¹⁷ Similar to the statutory provision discussed earlier, section 343 is subject to a plain reading.¹⁸ In contrast, Congress omitted language permitting bankruptcy courts to relieve debtors of the obligation to attend the meeting. This omission is noteworthy. Another established canon of statutory construction requires courts to infer that Congress acted intentionally when including language in one part of a statute but omitting such language in another.¹⁹ This maxim indicates that section 343's omission resulted from Congress's conscious decision rather than oversight.

To dispose of any reservations about Congress's resolve, one need only look to a key shift in the bankruptcy court's role codified in the 1978 Bankruptcy Code. As part of the changes, Congress deliberately removed bankruptcy courts from the day-to-day involvement in the administration of bankruptcy cases.²⁰ Of particular import here, Congress reversed prior practice and prohibited bankruptcy courts from presiding over or attending the meeting of creditors²¹ and assigned the task of conducting these meetings to the United States trustee.²² Consistent with its statutory mandate, the trustee in this region has published procedures for rescheduling meetings of creditors and allowing debtors to appear in alternative manners.²³ Congress's affirmative act and objective to extract bankruptcy courts from involvement in the meetings of creditors and the availability of relief from the United States trustee undermine any contention that the absence of statutory authority for bankruptcy judges to waive the mandates of section 343 was inadvertent. Rather, these considerations support the opposite conclusion.

An even more definitive consideration is the fact that Congress provided a single and narrow exception to the United State trustee's obligation to conduct the meeting of creditors. Section 341(e) provides that "a court ... for cause may order that the United States trustee not convene a meeting of creditors ... if the debtor has filed a plan as to which the debtor solicited acceptances prior to the commencement of the case."²⁴ This exception implicates the canon of construction requiring the court to give meaning to the omission of similar exceptions in section 343 – especially since sections 341 and 343 must be read in tandem.²⁵ Furthermore, another equally established canon of statutory construction requires courts to avoid interpreting statutory provisions in a manner that renders others superfluous.²⁶ Construing section 343 to give bankruptcy courts the general power to relieve debtors of their obligation to attend the meeting of creditors strips section 341(e) of significance. Instead, construing sister sections 341 and 343 as written gives distinct purpose to Congress's choice to confer power on bankruptcy courts solely under the narrow circumstance set forth in section 341(e). Such an interpretation not only eliminates superfluity but is consistent with other provisions generally as well as Congress's efforts to remove bankruptcy courts from involvement with the meeting of creditors.

A final consideration weighing against creating an exception that is at odds with the statutory mandate is the Supreme Court's repeated reminder that bankruptcy courts' equitable powers cannot override express provisions of the Bankruptcy Code.²⁷ In the end, "[t]his court's duty is to apply the law as it exists today, even if that law is questionable from a policy perspective."²⁸ For all of these reasons, the court agrees with those courts that conclude they lack authority to eliminate the requirements imposed on debtors...