In re Acosta-Rivera

• Citation: 557 F.3d 8
• Decision Date: 19 February 2009
• Docket Number: No. 07-2736.,07-2736.
• Court: U.S. Court of Appeals — First Circuit
• Parties: In re Iván ACOSTA-RIVERA and Aña A. Balseiro-Chacón, Debtors, Wilfredo Segarra-Miranda, Chapter 7 Trustee, Appellant, v. Iván Acosta-Rivera et al., Appellees.

557 F.3d 8

In re Iván ACOSTA-RIVERA and Aña A. Balseiro-Chacón, Debtors Wilfredo Segarra-Miranda, Chapter 7 Trustee, Appellant, v. Iván Acosta-Rivera et al., Appellees.

No. 07-2736.

United States Court of Appeals, First Circuit.

Submitted August 28, 2008.

Decided February 19, 2009.

Noemi Landrau Rivera and Landrau Rivera & Associates on brief for appellant.

Iván Acosta-Rivera and Aña A. Balseiro-Chacón on brief pro se.

Before LIPEZ, SELYA, and HOWARD, Circuit Judges.

SELYA, Circuit Judge.

This appeal, which requires us to decide an issue of first impression at the federal appellate level, turns on the construction of a provision of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA or the Act), Pub.L. 109-8, 119 Stat. 23 (2005). Writ large, the provision in question expands the debtor's duties of financial disclosure to the extent that he or she must now file with the bankruptcy court, "unless the court orders otherwise," six traunches of financial information (including payment advices and an itemized statement of monthly net income). 11 U.S.C. § 521(a)(1)(B)(iv),(v). The issue centers on whether the bankruptcy court may enter an order excusing non-disclosure after the time for filing the required information has expired. The bankruptcy court thought that it had the authority to enter such an order. It proceeded to exercise that power, thus avoiding dismissal of the debtors' petition under section 521(i)(1) (BAPCPA's so-called "automatic dismissal" provision). The district court construed the "orders otherwise" provision differently. Consequently, it determined that the order excusing the failure to file was beyond the scope of the bankruptcy court's authority. See Rivera v. Miranda, 376 B.R. 382, 386 (D.P.R.2007).

We conclude that the bankruptcy court acted in consonance with the statutory scheme and within the realm of its discretion. Accordingly, we reverse the district court's order and remand for further proceedings.

The procedural background is uncomplicated. The debtors, Iván Acosta-Rivera and Aña Balseiro-Chacón, are married to each other. They originally filed a joint Chapter 13 petition and later converted that filing to a Chapter 7 petition.¹ The debtors' estate included an unresolved employment discrimination suit brought by Acosta-Rivera against his quondam employer. In that suit, which had been pending for roughly eight years and had twice been appealed to the Supreme Court of Puerto Rico, Acosta-Rivera sought reinstatement, backpay, and compensatory damages.

At this point, the plot thickens. Although this chose in action was plainly an asset of the debtors' estate, it did not appear on their original bankruptcy schedules, their first amended schedules, or their second amended schedules.

Six months after the filing of the bankruptcy petition, the debtors revealed the existence of the chose in action, listing its value as "unknown," in their third amended set of schedules. Even then, they failed to disclose that the suit demanded pecuniary relief (e.g., backpay and money damages). After several further amendments (not material here), the debtors valued the chose in action at $2,700,000 and claimed an exemption of $350,000.

Eventually, the Chapter 7 trustee moved for leave to settle the suit for $200,000 (a sum that would have generated enough cash to pay all allowed claims and produce some surplus funds for the debtors). Balking at this proposal, the debtors moved under the automatic dismissal provision, 11 U.S.C. § 521(i)(2), to confirm the dismissal of their petition. In support of their motion, they claimed not to have filed or otherwise provided the payment advices and statement of monthly net income required by BAPCPA. As their attorney acknowledged, the debtors wanted to dismiss the bankruptcy case so that they could "continue prosecuting the state court action" for damages.

We pause at this juncture to discuss the Act's "automatic dismissal" provision. When a debtor fails to file all the information required by section 521(a)(1)(B) within the prescribed period — that is, within forty-five days of the filing date of the bankruptcy petition — BAPCPA provides that "the case shall be automatically dismissed."² 11 U.S.C. § 521(i)(1). The term "automatic dismissal" is something of a misnomer. Typically, dismissal under this provision takes place at the instance of a "party in interest." Id. § 521(i)(2); see, e.g., In re Spencer, 388 B.R. 418, 421 (Bankr.D.D.C.2008). Dismissal is, therefore, hardly "automatic."³

We return to what transpired below. In due season, the bankruptcy court denied the debtors' motion to dismiss, finding that "facts peculiar to this case do not require dismissal under section 521." In support, the court noted that the debtors' motion stemmed from their "disagreement with the proposed settlement." That was significant because the putative settlement would have satisfied all allowed claims; thus, neither the creditors nor the trustee needed the missing (undisclosed) information. Based on that reasoning, the court entered "an order nunc pro tunc ... excusing the debtors from filing the payment advices mentioned in section 521(a)(1)(B)(iv)."⁴ In short, the court excused the detailed disclosure by ordering the debtors to do "otherwise" under section 521(a)(1)(B).

In a subsequent order, the court approved the trustee's revised recommendation to settle the discrimination case for $600,000, citing the likelihood of delay from further litigation, uncertainties surrounding collection, and the fact that Acosta-Rivera stood to receive nearly $400,000, less mortgage arrearages, after the allowed claims were paid.

The debtors appealed the denial of their motion to dismiss to the district court. The district judge ruled that the bankruptcy court lacked authority to excuse compliance with the disclosure requirement more than forty-five days after the debtors filed their bankruptcy petition. See Rivera, 376 B.R. at 386. In the judge's view, the strictures of the Act left the bankruptcy judge "with no discretion to fashion any reasonable or equitable solution." Id. at 386-87. The judge stated: "`After the expiration of the specified period set forth in 11 U.S.C. § 521(i)(1), there are no exceptions, no excuses, only dismissal and the consequences that flow therefrom.'" Id. at 386 (quoting In re Ott, 343 B.R. 264, 268 (Bankr.D.Colo.2006)). This timely appeal followed.⁵

Some preliminary pruning is in order. The Chapter 7 trustee devotes much of his brief to General Order 05-06 of the bankruptcy court, which directs debtors not to file the payment advices required by section 521(a)(1)(B)(iv), but, rather, to provide them to the trustee and interested creditors. The general order further provides that "[f]ailure of debtor to comply with the requirements of 11 U.S.C. § 521(a)(1)(B)(iv)" — presumably as adjusted by the general order — "will result in automatic dismissal under section 521(i)(1)." This general order is standard fare: bankruptcy courts in numerous districts have adopted comparable orders. See In re Brickey, 363 B.R. 59, 64 & n. 4 (Bankr. N.D.N.Y. 2007).

Neither the bankruptcy court nor the district court mentioned General Order 05-06. Moreover, even if the debtors had complied with this general order — a circumstance that the record does not document and that the debtors deny — the statutory issue would persist. By its terms, the general order is limited to the payment advices required by section 521(a)(1)(B)(iv); it does not mitigate the debtors' duty to file the statement of monthly net income required by section 521(a)(1)(B)(v).

The trustee has yet another new argument. For the first time, he suggests that the debtors filed the functional equivalent of a monthly net income statement in the form of Schedule J. This is too little and too late.

Schedule J deals with a debtor's current expenditures. In the process, it responds to a different filing requirement, contained in 11 U.S.C. § 521(a)(1)(B)(ii). Although line 20 of Schedule J is called a "Statement of Monthly Net Income" and the advisory committee note to the official bankruptcy forms states that this line was added to Schedule J in 2005 "as required by § 521(a)(1)(B)(v)," there is no reason to think that Schedule J is a proxy for the statement of current monthly income required by section 521(a)(1)(B)(v). In fact, the case law suggests the opposite conclusion. See, e.g., In re Turner, 384 B.R. 852, 856 (Bankr. D.Colo.2008) (holding that a Chapter 7 debtor's duty to file a section 521(a)(1)(B)(v) statement of monthly net income "can only be fulfilled by filing" Form B22A).

We need not probe this point too deeply. Whether Schedule J can ever serve double duty in a given case is not before us. Suffice it to say that, in this instance, we will not entertain the trustee's forfeited argument. See Teamsters Union Local No. 59 v. Superline Transp. Co., 953 F.2d 17, 21 (1st Cir.1992) ("If any principle is settled in this circuit, it is that, absent the most extraordinary circumstances, legal theories not squarely raised in the lower court cannot be broached for the first time on appeal.").

Having cleared away the underbrush, what remains is the question of the bankruptcy court's authority to waive the disclosure requirement after the expiration of the filing deadline. The statute provides that the debtor "shall ... file" the required disclosures "unless the court orders otherwise." 11 U.S.C. § 521(a)(1)(B). The grant of judicial power to "order[] otherwise" predated BAPCPA.⁶ In overhauling section 521, Congress left this familiar language intact. We do not regard that as a mere fortuity. Nor do we think that a slip of the pen accounts for the fact that the provision does not now contain an explicit deadline for ordering otherwise. In this context, we have a high regard for congressional silence.

Sharing this regard, a few courts have held that the bankruptcy court possesses...