Summary:
In In re Rice, the Bankruptcy Court for the Western District of North Carolina dismissed a Chapter 13 case filed by Mr. Rice and barred him from refiling another bankruptcy for 180 days due to serial filings and intentional abuse of the bankruptcy system. This was Rice’s third Chapter 13 in six years, during which he had been continuously under the protection of the court—though never successfully completing a plan.
The case’s fatal flaw arose when Rice filed his third petition while his second case was still pending. That second case was subject to dismissal for missed payments, and had already seen two creditors granted relief from stay. Filing a new case while another is pending violates the “single estate rule,” which prohibits maintaining two simultaneous bankruptcy estates. Rice and his attorney deliberately filed the new petition before the previous case’s dismissal to avoid the 180-day filing bar in § 109(g)(2), which would have applied had he voluntarily dismissed after creditors obtained stay relief.
The court found that this tactic, though perhaps “clever,” constituted bad faith, especially when paired with his history of non-payment, repeated unsuccessful filings, and an attempt to stretch a nine-year-old car loan into a 14-year repayment. Despite the debtor’s attorney claiming the strategy aimed to help rather than evade, the court saw it as a willful manipulation of the Code, not merely a technical error.
Importantly, the court emphasized that it would have imposed the very same 180-day bar under § 109(g)(2) had Rice followed the normal course, and refused to allow intentional circumvention of that statutory outcome. The court acknowledged the emphasis in Sugar v. Burnett on considering the role of counsel but concluded that even if Rice’s attorney concocted the plan, the debtor bore responsibility and dismissal with a 180-day bar was both warranted and equitable.
Commentary:
The decision reads as a warning to both debtors and particularly attorneys: even in the absence of outright dishonesty, intentional procedural end-runs—particularly ones meant to dodge statutory sanctions—may be met with (fairly) strict scrutiny despite Sugar' . While not cited, the 4th Circuit's even more recent affirmation of a 10-year bar to refiling in Purdy v. Burnett seems to also echo in this case.
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