In 2013, the Debtor filed a chapter 13 case and the Court confirmed a plan that required the Debtor to pay his monthly disposable income of $4,857 over 60 months to his creditors. When he still had fifteen months to pay under his 2013 plan, and without dismissing his 2013 case, the Debtor filed another chapter 13 case in 2017. In the 2017 case, the Debtor’s plan proposed to pay $500 per month for sixty months on three unsecured debts that arose after the Debtor filed his 2013 case. The Court dismissed the 2017 case because his 2013 case was still pending. The Debtor filed a motion to reinstate the 2017 case. He argued that one of his new debts was an award issued by the Financial Industry Regulatory Authority, Inc. (FINRA) and that he needed to treat that debt in his 2017 bankruptcy case in order to maintain his FINRA license.
The Court noted that no section of the Bankruptcy Code expressly prohibits simultaneous cases and there is no prohibition in the Bankruptcy Rules either. Though Fed. R. Bankr. P. 1015 contemplates there may be more than one pending case by or against the same debtor at the same time, the rule’s intended scope is limited to certain narrow circumstances very different from the Debtor’s situation. The Court reviewed a long line of case law, beginning with the Supreme Court’s decision in Freshman v. Atkins, 269 U.S. 121 (1925), that has established a general rule that a debtor may not have two pending bankruptcy cases at the same time. In addition, many courts bar simultaneous cases based on the “single estate rule” that states that the same property cannot simultaneously be property of two different bankruptcy estates. The Court recognized that a growing number of courts permit the filing of simultaneous “chapter 20” cases when a debtor files a chapter 13 case after receiving a chapter 7 discharge. The Court found very few reported decisions involving two pending chapter 13 cases, and most involved a very brief period of overlap between the two cases.
From all the reported decisions, the Court distilled and adopted the general rule that a debtor should have only one bankruptcy case pending, with a limited exception for simultaneous chapter 20 cases, provided that the chapter 7 case is essentially a “no-asset” case and the debtor has already received a discharge. The Court noted many problems with simultaneous reorganization cases. First, allowing debtors to split their debts between two different cases effectively allows debtors to do an end run around the eligibility requirements of 11 U.S.C.
§ 109(e). Additionally, simultaneous reorganization cases poses the danger of discriminatory treatment of like claims. Finally, simultaneous reorganization cases are administratively untenable because, among other things, the debtor must commit his entire disposable income to plan payments. The Court concluded that these statutory and administrative concerns outweigh the debtor’s need for two pending reorganization cases, other than for a very brief period. Therefore, the Court denied the debtor’s motion to reinstate his second chapter 13 case.