The Seventh Circuit in Bastani v. Wells Fargo Bank, N.A., No. 20-1373 (June 8, 2020) was presented with an question on appeal from a Chapter 13 bankruptcy case where the debtor did not pay the appellate fee, but sought leave to proceed on appeal in forma pauperis. It denied the debtor’s motion because the debtor’s claim that she could not afford the filing fee contradicted her Chapter 13 filing, which requires the debtor to have a regular income.
After filing a Chapter 13 bankruptcy petition, the debtor asked the judge to stay her foreclosure pending in state court. The debtor’s previous bankruptcy filing had been dismissed less than a year earlier, creating a statutory presumption that the new filing was not in good faith. This meant that the automatic stay preventing foreclosure would end 30 days after the new proceeding began. During the 30-day period, the debtor’s requests for a further stay of foreclosure were denied by both the bankruptcy judge and a district judge.
The debtor appealed but she did not pay the filing fee. She sought leave to proceed in forma pauperis. The foreclosing mortgage lender opposed the motion, contending that 28 U.S.C. §1930 forbids in forma pauperis status in Chapter 13 appeals. The Seventh Circuit agreed.
Section 1930(f) limits the circumstances where the Court may excuse the payment of appellate fees for Chapter 7 debtors. The foreclosing lender contended that, by not mentioning Chapter 13, 1930(f) implicitly requires all Chapter 13 appellate fees to be prepaid in full. The Appellate Court rejected this argument, noting that courts do not treat one statute as repealing another by silence.
Rather, the Appellate Court found that Chapter 13 is designed for people who can pay most if not all of their debts. As the heading to the Chapter provides, it covers “adjustment of debts of an individual with regular income”. To qualify for relief under Chapter 13, therefore, a person must have an income that enables the payment of most debts within five years and something left for living expenses. A person who tells the bankruptcy court that she qualifies under Chapter 13 cannot persuade a court of appeals that she lacks money for filing fees.
The appellate court also found the debtor’s Chapter 13 filing to be not just in presumptive bad faith, but in actual bad faith. For although she told the bankruptcy court she qualified under Chapter 13, she told the appellate court she was destitute. Someone without income may seek relief under Chapter 7 but they must surrender their non-exempt assets and be content with the fresh start provided by the discharge of their debts. By trying to achieve a principal benefit of Chapter 13 (keeping her home) without the detriment (paying her debts), this debtor demonstrated she was not entitled to the relief sought. Therefore, the appellate court not only denied the debtor’s motion to proceed in forma pauperis, but also affirmed the lower court’s denial of the debtor’s request for a further stay of foreclosure.Download Related Document