The Debtor’s Absolute Right to Dismiss a Chapter 13 Case

By: Jared Brady

St. John’s University School of Law

American Bankruptcy Institute Law Review Staff


            In In re Fulayter, a bankruptcy court in Michigan held that a debtor has an absolute right to dismiss a case under chapter 13 of title 11 of the United States Code (the “Bankruptcy Code”).[1] Prior to filing a voluntary petition for relief under chapter 13 of the Bankruptcy Code, the debtor was a party in a divorce action that was eventually resolved by judgement.[2] One provision in the judgment of divorce awarded Louie (the “Debtor”) the martial home and granted Holly a lien on said home in which she was to secure $285,000.00.[3] The divorce court thereafter appointed a receiver, who was authorized to take control of the home, to sell the home and distribute the proceeds in accordance with the divorce award subject to further court order.[4]

          Prior to the divorce court ruling on the receiver’s motion for the authority to disburse the sale proceeds, the Debtor filed his Chapter 13 petition.[5] His spouse (Holly) filed a motion to convert the case to a Chapter 7, alleging that the Debtor had filed in bad faith.[6] In response, the Debtor moved to dismiss the Chapter 13 case.[7] Holly objected to the dismissal arguing that conversion and not dismissal was in the best interest of creditors and the estate. Moreover, according to Holly, the Debtor had acted “in bad faith in numerous respects throughout this case including failing to disclose ownership interest in the Pike Farm . . . and failing in numerous other respects to file accurate schedules.”[8] Ultimately, the bankruptcy court granted the motion to dismiss.[9]

            Pursuant to 11 U.S.C.S §1307(b) “On request of the debtor at any time, if the case has not been converted under section 706, 1112, or 1208 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable.”[10] According to the court, the plain language found in §1307(b) states a debtor has an absolute right to dismiss a case at any time.[11] Furthermore, it does not require a debtor seeking dismissal to give any reasons, explain any motive, or show any facts.[12] The court was not persuaded by Holly’s argument that the Debtor is subject to a bad actor exception.[13] Instead the court found the Debtor no longer wanted to be in a bankruptcy case at all.[14] And “his eligibility for relief under some other chapter of the Bankruptcy Code is irrelevant since he does not want relief under any other chapter.”[15]

            The Supreme Court concluded that a bankruptcy court is authorized to punish a debtors misconduct in a Chapter 13 case.[16] However, a bankruptcy court is not authorized to punish a Chapter 13 debtor for misconduct by denying their motion to dismiss under §1307(b).[17]  Under the plain language of §1307(b), according to the court, a debtor can dismiss a Chapter 13 case notwithstanding a pending motion to convert.[18]


[1] In re Fulayter., 615 B.R. 808, 808 (E.D. Mich. LBR 2020).

[2] In re Fulayter 615 B.R. at 810.

[3] In re Fulayter 615 B.R. at 811 (Louie was given 60 days to make the payment, at which time, if not completed the State court would order the sale of the Marital Home).

[4] Id (On August 26, 2019 the receiver sold the home for $475,000.00, placing the proceeds in a separate account and filing a motion in State Court for approval of his final report and the authority to disburse the remaining proceeds).

[5] Id.

[6] Id (As opposed to a Chapter 13 case in which the individual may keep their assets after the proceeding, a Chapter 7 cases liquidates the assets).

[7] Id (The court stated that it would “construe Louie’s written response to GBF’s motion as a motion for dismissal even though it was not styled as a motion, because Louie had filed it pro se, and in it specifically requested that his case be dropped”). Id.

[8] In re Fulayter 615 B.R. at 814 (Holly argues Louie failed to disclose the transfer of the Pike Farm to the Trust for no consideration, failed to properly disclose his interest in Loui’s Tree Service, failed to disclose transfers of machinery, equipment and other property, and failed to list the Bank, the IRS and other creditors).

[9] Id (“Holly and the trustee counter that a debtor’s right to dismiss under §1307(b) is not absolute and can be lost based on the debtor’s conduct during the Chapter 13 case). In re Fulayter 615 B.R. at 814.

[10] 11 U.S.C.S §1307(b) (2010).

[11] In re Fulayter 615 B.R. at 814.

[12] In re Fulayter 615 B.R. at 815.

[13] Id. at 818 (Explaining the court disagrees with Jacobsen and those other decisions relying on Marrama to hold that a Chapter 13 debtor’s right to dismiss under §1307(b) is somehow subject to a bad actor exception”).

[14] Id. (Marrama dealt with whom is entitled to enjoy rights of the Bankruptcy Code in dealing with their creditors)

[15] Id. at 819 (Explaining that because Louie does not want to be in Bankruptcy court at all anymore his relief under any other chapter is completely irrelevant”).

[16] See Id. at 821 (Explaining that a bankruptcy court has many tools to do so).

[17] See Id.

[18] See In re Fulayter 615 B.R. at 810.