4th Circuit: McDow v. Dudley- Denial of Motion to Dismiss Pursuant to 11 U.S.C. § 707(b) is an Appealable Final Order

Summary: The Debtors filed a Chapter 13 bankruptcy in 2008.  Following a Motion to convert or dismiss the case filed by the Chapter 13 Trustee, the Debtors voluntarily converted to Chapter 7.  The U.S. Trustee sought dismissal of the case pursuant to 11 U.S.C. § 707(b) asserting that the Debtors had over $2,000.00 of disposable monthly income.  The Debtors asserted that § 707(b) was applicable only in a "case filed by an individual debtor under this chapter" and since their bankruptcy was filed under Chapter 13 it did not apply.  The Bankruptcy Court agreed with the Debtors and denied the motion to dismiss under  § 707(b). The U.S. Trustee appealed and the District Court, acting sua sponte, dismissed the appeal for lack of subject matter jurisdiction, finding that the denial of dismissal was not a "final" order within the meaning of 28 U.S.C. § 158(a)(1). The U.S. Trustee appealed to the 4^th Circuit and while that appeal was pending the Bankruptcy Court granted the Debtors a discharge.   The U.S. Trustee also then appealed the discharge. The Court of Appeals held that in interpreting 28 U.S.C. § 158(a)(1)  "the concept of finality in bankruptcy cases ‘has traditionally been applied in a more pragmatic and less technical way . . . than in other situations.’" In re Computer Learning Ctrs., Inc., 407 F.3d 656, 660 (4th Cir. 2005) (quoting A.H. Robins Co. v. Piccinin, 788 F.2d 994, 1009 (4^th Cir. 1986) (alteration in original.))  As bankruptcy cases often involve multiple parties, claims and proceedings, orders in bankruptcy cases "may be immediately appealed if they finally dispose of discrete disputes within the larger case." The Circuit Court then found that BAPCPA had made the Mean Test review under  § 707(b) a "mandatory threshold question," subject to strict deadlines for the U.S. Trustee.  Delaying appellate consideration of abuse could "frustrate both principles of judicial economy and Congress’s goal of ensuring that debtors allocate as much of their resources as possible toward repaying their debts." In re Rudler, 576 F.3d 37, 43 (1^st Cir.  2009). Comments: It is important to note that this opinion does not address  whether the Means Test of  § 707(b)  applies to a case that was initially filed under Chapter 13 (or Chapters 11 or 12) and subsequently converted. It the Debttors did have a real ability to pay,  it is not clear why the U.S. Trustee proceeded under the § 707(b)(2) Means Test and not the "totality of the circumstances" test of § 707(b)(3). This case should also clarify that the denial of confirmation in a Chapter 13 case is also an appealable final order.       McDow v Dudley- Denial of Motion to Dismiss Pursuant to 11 U.S.C. § 707b is an Appealable Final Order.PDF