Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-01307/USCOURTS-caed-2_06-cv-01307-3/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:1334 Bankruptcy Appeal

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 United States Trustees are officials of The Department of 1

Justice, appointed by the Attorney General to supervise the

administration of bankruptcy cases. See 28 U.S.C. §§ 561-589.

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

In re: No. 2:06cv1307-MCE

MONIQUE D. MEZA,

Debtor 

___________________________/

SARA L. KISTLER, Bk. No. 06-20291-C-7

ACTING UNITED STATES

TRUSTEE, REGION 17,

Appellant,

v. MEMORANDUM AND ORDER

MONIQUE D. MEZA,

Appellee.

___________________________/

The United States Trustee (“Trustee”) appeals the 1

bankruptcy court’s denial of its Motion to Dismiss Debtor Monique

Meza’s (“Meza”) bankruptcy petition pursuant to 11 U.S.C.

§ 109(h) (hereinafter § 109(h)). 

Case 2:06-cv-01307-MCE Document 25 Filed 06/25/07 Page 1 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 Because oral argument will not be of material assistance, 2

the Court orders this matter submitted on the briefs. E.D. Cal.

Local Rule 78-230(h). 

2

Specifically, Trustee moved to dismiss due to Meza’s failure

to obtain pre-petition credit counseling and properly file a

certificate regarding the same, as required by § 109(h). The

bankruptcy court declared Trustee’s Motion untimely in light of

the prior meeting of creditors and specific circumstances

surrounding Meza’s petition. For the reasons set forth below,

the bankruptcy court’s decision is affirmed.2

BACKGROUND

Meza contracted with Debt Free Credit Counseling Service

(“Debt Free”), a consumer debt consolidation service, in November

of 2004. Meza made approximately one year’s worth of payments to

her creditors under Debt Free’s plan. Meza terminated the

program around January of 2006, resulting in a confirmation

letter from Debt Free dated February 2, 2006. Meanwhile, on

October 17, 2005, the Bankruptcy Abuse Protection and Consumer

Protection Act of 2005 (“BAPCPA”), Pub. L. No. 109-8, 119 Stat.

23 (2005) was enacted. BAPCPA contains provisions which provide

that an individual is not eligible to apply for bankruptcy

protection unless he or she has obtained credit counseling from

an approved provider no more than 180 days prior to filing the

bankruptcy petition. 11 U.S.C. § 109(h). 

///

/// 

Case 2:06-cv-01307-MCE Document 25 Filed 06/25/07 Page 2 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

Meza filed a petition for bankruptcy under 11 U.S.C. Chapter

7 on February 9, 2006, less than four months after the new BAPCPA

credit counseling provisions went into effect. Meza filed

documents required by 11 U.S.C. § 521(a), but failed to include a

certificate of debt counseling as required by § 521(b). However,

Meza indicated that she had obtained such counseling on page 2 of

Form B1. Excerpts of Record Of Appellant (“EOR”) A6. 

The bankruptcy court clerk issued a notice of incomplete

filing on February 9, 2006. The notice indicated that the

missing Certificate of Credit Counseling was to be received by

February 24, 2006. 

The clerk noticed all scheduled creditors of the March 10,

2006 meeting of the creditors on February 10, 2006. 

Meza applied to extend the deadline to submit her

certificate of credit counseling on February 28, 2006. The

bankruptcy court granted the extension notwithstanding the fourday gap between the expiration of the period set by the clerk and

the date of the application.

Meza filed the missing certificate on March 7, 2006. Meza

certified that she was in compliance with § 109(h) because she

had received debt counseling prior to the enactment of BAPCPA,

thereby qualifying under a waiver provided by 11 U.S.C.

§ 109(h)(3)(A). Three days later, the creditor meeting was

completed.

///

///

///

///

Case 2:06-cv-01307-MCE Document 25 Filed 06/25/07 Page 3 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

Trustee filed the Motion to Dismiss pursuant to § 109(h) on

March 17, 2006. The bankruptcy court denied the Motion, holding

it untimely in light of the circumstances, including a finding

that Meza had substantially complied with § 109(h) requirements. 

Trustee now appeals this denial. 

STANDARD

An appellant may petition the district court for review of a

bankruptcy court’s decision. Fed. R. Bankr. P. 8013. The

applicable standard of review is identical to that employed by

circuit courts of appeal in reviewing district court decisions. 

See Heritage Ford v. Baroff (In re Baroff), 105 F.3d 439, 441

(9th Cir. 1997). Legal conclusions are renewed on a de novo

basis, and factual determinations are assessed pursuant to a

“clearly erroneous” standard. Murray v. Bammer (In re Bammer),

131 F.3d 788, 792 (9th Cir. 1997) (en banc).

Findings of fact are “clearly erroneous” only if the

reviewer of fact is “left with the definite and firm conviction

that a mistake has been committed.” In re Marquam Inv. Corp.,

942 F.2d 1462, 1466 (9th Cir. 1991) (quoting United States v.

United States Gypsum Co., 333 U.S. 364, 395 (1948)). The

appellant has the burden of proof in convincing the reviewing

court that such error has been committed, and the reviewing court

should not reverse simply because another decision could have

been reached. In re Windsor Indus., Inc., 459 F. Supp. 270, 275

(N.D. Tex. 1978).

///

Case 2:06-cv-01307-MCE Document 25 Filed 06/25/07 Page 4 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

ANALYSIS

1. Meza’s Eligibility to File for Bankruptcy

 

In the Motion to Dismiss, Trustee argued that Meza was

ineligible to petition for bankruptcy because she did not satisfy

eligibility requirements set out in § 109(h). Trustee viewed the

requirements as a jurisdictional barrier to a bankruptcy court

hearing a petition. The bankruptcy court disagreed, instead

construing § 109(h) as an element of a federal claim. 

The bankruptcy court compared the instant case to Arbaugh v.

Y&H Corp., 546 U.S. 500 (2006), in which the Supreme Court

examined the nature of claims brought under Title VII. There,

the Supreme Court found the 15-employee threshold to be an

ingredient of a claim for relief, rather than a jurisdictional

element. This Court agrees that the Arbaugh holding can properly

be analogized to the initial question confronted by the

bankruptcy court herein: namely, whether or not compliance with

§ 109(h) constitutes a jurisdictional prerequisite or instead

simply amounts to a factual element that must be satisfied in

order to assert a cognizable claim in bankruptcy. 

Examining the eligibility requirements of § 109(h), the

bankruptcy court explicitly found that it did “not relate to

subject-matter jurisdiction, period.” EOR A137-38. Given the

non-jurisdictional nature of the eligibility requirements, the

bankruptcy court properly found that any opposition to a

bankruptcy petition on § 109(h) grounds would be waived unless

raised in a timely manner. 

Case 2:06-cv-01307-MCE Document 25 Filed 06/25/07 Page 5 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

The bankruptcy court proceeded to address the timeliness of

the Trustee’s Motion to Dismiss under the particular

circumstances of this case. Those findings will be discussed

below. 

2. Findings of the Bankruptcy Court

The bankruptcy judge made a mixed finding of law and fact in

denying Trustee’s Motion to Dismiss. The court declared

Trustee’s Motion to be untimely in part because it was filed

subsequent to the meeting of creditors, and in part due to Meza’s

substantial compliance with § 109(h). While the finding of law

that a motion to dismiss filed subsequent to a meeting of

creditors is unsupported, the findings of fact of substantial

compliance are not clearly erroneous, and must be upheld.

A. Findings of Law

Nothing in the Federal Rules of Bankruptcy Procedure or

Title 11 of the United States Code specifies timeliness

requirements for a motion to dismiss for failure to satisfy

§ 109(h). The picture becomes even more clouded in the instant

case, where Meza obtained credit counseling services prior to

enforcement of the BAPCPA provision mandating counseling within

180 days of filing her petition in bankruptcy. 

///

///

///

Case 2:06-cv-01307-MCE Document 25 Filed 06/25/07 Page 6 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

11 U.S.C. § 707 provides some assistance in determining the

ability of the court to dismiss Chapter 7 petitions. Courts may on

their own motion dismiss for cause petitions that are accompanied

by unreasonable delay by the debtor or lack the appropriate

filing fee. 11 U.S.C. § 707(a). On a motion by the United States

Trustee, the court may dismiss petitions that lack documents

required by 11 U.S.C. § 521(a). 11 U.S.C. § 707(a)(3). Significantly,

no time limits are placed upon such motions to dismiss.

The court may also dismiss a petition for substantial abuse

under 11 U.S.C. § 707(b) on motion by the court or the United

States Trustee. Such a motion must be filed within 60 days after

the first date set for the meeting of creditors. Fed. R. Bankr.

P. 1017(e).

These allowances for filing motions to dismiss would seem to

allay the concerns of the bankruptcy court regarding deleterious

effects on creditors and debtors of a petition’s dismissal. 

Specifically, the court postulated that dismissals might

disadvantage creditors who abide by the automatic stay afforded by

11 U.S.C. § 362. EOR A140. A dismissal would result in a race to

a debtor’s assets, potentially harming creditors who refrained

from pursuing the debtor’s estate in reliance on § 362. Given the

statutory allowance for dismissals after a creditors’ meeting,

however, a finding of untimeliness for a motion filed a week after

the meeting of creditors is unwarranted. That finding is

nonetheless not dispositive of the Court’s inquiry herein, since

the bankruptcy court’s ultimate decision rested on factual

findings above and beyond the timing of the Trustee’s actual

Motion to Dismiss itself.

Case 2:06-cv-01307-MCE Document 25 Filed 06/25/07 Page 7 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

 Both Trustee and Debtor raise the issue of Debtor’s 3

qualification for a waiver of the eligibility requirements as

provided by 11 U.S.C. § 109(h)(3)(A). The bankruptcy court’s

declaration of substantial compliance with § 109(h) renders such

waiver analysis unnecessary.

8

B. Findings of Fact 

The bankruptcy court found Meza’s petition to substantially

comply with the eligibility requirements of § 109(h). While the

counseling was provided by an un-approved service and was

received more than 180 days prior to filing, the court found Meza

eligible to file for bankruptcy. 

Meza initiated credit counseling in November of 2004,

roughly five months prior to enactment of BAPCPA. At that time,

there was no requirement for the petitioner to obtain prepetition counseling from an approved provider within 180 days

prior to filing for bankruptcy. While Meza’s actual petition was

filed after enforcement of BAPCPA, the counseling resulted in the

type of debt repayment contemplated by Congress in writing the

statute. EOR A134. The court construed Meza’s debt repayments,

which continued until November of 2005, as “briefings” within the

meaning of § 109(h). Id. In light of the exceptional

circumstances regarding Meza’s actions and the intervening

enactment of BAPCPA, the court found the “constellation of facts”

to weigh in favor of a finding that Meza substantially complied

with § 109(h). EOR A147. 3

The bankruptcy court additionally found Meza’s petition

satisfactory in general. The court declared payment of the

filing fee and completion of post-petition counseling to weigh

Case 2:06-cv-01307-MCE Document 25 Filed 06/25/07 Page 8 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

heavily in comparison with pre-petition credit counseling. 

The court thought debtors were “...in a much better position to

benefit from the [post-petition] training,” due to completion of

creditor schedules filed with their petition. EOR A150. This

determination, coupled with Meza’s substantial compliance with

§ 109(h), led the court to the conclusion that requiring Meza to

undergo a second course of counseling before filing for

bankruptcy is unnecessary. 

This Court cannot determine, as it must to warrant reversal

on appeal, that the bankruptcy court’s finding of substantial

compliance with eligibility requirements constituted clear error. 

The record supports the bankruptcy court’s conclusion that Meza’s

conduct was sufficient to satisfy § 109(h) eligibility

requirements and petition for voluntary Chapter 7 bankruptcy.

CONCLUSION

Based on all the foregoing, the decision of the bankruptcy

court is hereby AFFIRMED.

Dated: June 22, 2007

_____________________________

MORRISON C. ENGLAND, JR.

UNITED STATES DISTRICT JUDGE

Case 2:06-cv-01307-MCE Document 25 Filed 06/25/07 Page 9 of 9