Sunday, January 18, 2015

Eligibility for Chapter 13 Bankruptcy 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.

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.