Eligibility for Chapter 13 Relief - Debt Limitations and Waiver

In the case of General Lending Corp. v. Jesus Cancio, et al., Case No. 13-21030-CIV-Marra (SD Fla. 2014), the court reviewed a ruling by the Bankruptcy Court dealing with the issue of the eligibility amounts allowed for filing under chapter 13 and whether these eligibility amounts restrictions may be waived.

In an appeal to the district court from the bankruptcy court's ruling, the district court must accept the bankruptcy court's factual findings unless they are "clearly erroneous" but review the bankruptcy court's legal conclusions de novo.  The bankruptcy court's findings of fact, whether based on oral or documentary evidence are not to be set aside unless "clearly erroneous" and with "due regard" given to the opportunity of the bankruptcy court to judge the "credibility of witnesses."  The United States Supreme Court in U.S. v. U.Su Gypsum Co., 333 U.S. 364, 395 (1948) held that  a finding is "clearly erroneous" when although there is evidence to support it, the reviewing court upon examining the entire evidence is left with the definite and firm conviction that a mistake has been committed.

Under de novo review, the district court "independently examines the law and draws its own conclusions after applying the law to the facts of the case, without regard to decisions made by the Bankruptcy Court." In re Piper Aircraft Corp., 224 F.3d 1289, 1295 (11th Cir. 2001).  Mixed questions of law and facts are also reviewed de novo. 

The District Court reviewed the bankruptcy code's provision for eligibility to be a debtor under chapter 13 as set forth in 11 USC § 109 (e) which limits chapter 13 relief to individuals with "regular income" owing secured debts of less than $1,081,400. and unsecured debts less than $360,475.00. Only "noncontingent" and "liquidated" debts are included in making this calculation.  The Court noted that this eligibility determination is to be made as of the petition date. In re De La Hoz, 451 B.R. 192, 194 (Bankr. M.D. Fla. 2011). The Court noted that normally these restrictions are "strictly construed".

The Court further noted that the 11th Circuit Court of Appeals has not yet addressed the issue of whether this "eligibility" limitation is "jurisdictional" but that the majority of the courts that have addressed the issue have found this it is not jurisdictional in nature.  The Court adopted the majority view of the courts that the eligibility limitations may be waived if a creditor fails to raise an objection to the debtor's eligibility in a timely manner. Rudd v. Laughlin, 866 F.2d 1040 (8th Cir. 1989).

The District Court upheld the Bankruptcy Court's ruling rejecting the creditor's argument that its objections were not barred by laches.  The Court explained that laches arises after an "unreasonable and inexcusable delay."  The Court noted that laches is a doctrine whereby one side's inaction and the other side's legitimate reliance may bar claims for equitable relief.

The District Court unheld the Bankruptcy Court's ruling finding no error under the applicable standards of review.
(305) 891-4055 - Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankrkuptcy Cases.