In re Acosta-Rivera

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), a debtor must make detailed financial disclosures to the bankruptcy court, “unless the court orders otherwise.” Iván Acosta-Rivera and his wife (debtors) filed a joint Chapter 13 bankruptcy petition that they later converted to a Chapter 7 petition. The Acosta-Riveras’ bankruptcy estate included an unresolved employment-discrimination action brought by Acosta-Rivera against his employer to seek reinstatement, backpay, and compensatory damages. The Acosta-Riveras valued their potential right to payment in the lawsuit (i.e., a chose in action) at $2.7 million. However, the Chapter 7 trustee asked for the court’s permission to settle the lawsuit for $200,000, which would have been enough to pay off all the allowed claims against the Acosta-Riveras in the bankruptcy. The Acosta-Riveras objected and moved for dismissal of their bankruptcy petition under 11 U.S.C. § 521(i)(2) so that they could continue litigating the employment-discrimination action themselves. Section 521(i)(2) allowed for dismissal if a debtor failed to satisfy BAPCPA’s financial-disclosure requirements within 45 days of filing for bankruptcy. The Acosta-Riveras asserted that they had not timely complied with BAPCPA’s requirements. However, the bankruptcy court denied the motion to dismiss, finding that the Acosta-Riveras wanted dismissal because they disagreed with the trustee’s proposed settlement. The court reasoned that because the settlement amount would have satisfied all creditors’ allowed claims, neither the creditors nor the trustee needed the missing financial information. Accordingly, the bankruptcy court entered an order excusing the Acosta-Riveras from filing the financial information, which the court treated as “ordering otherwise” for BAPCPA-satisfaction purposes. The district court reversed, holding that the bankruptcy court did not have authority to excuse compliance with the disclosure requirements more than 45 days after the debtor’s bankruptcy filing. The trustee appealed.