McDow v. Dudley, No. 10-1732

Decided Nov. 30, 2011

David and Anne Dudley filed for Chapter 13 bankruptcy. Upon motion by the trustee, however, it was converted to a Chapter 7. The trustee later moved to the dismiss the action as abusive under 11 U.S.C. § 707(b), citing that after removing the amounts necessary for living expenses, the Dudley’s had enough money to make payments to creditors each month. The Dudley’s moved for summary judgment arguing that this provision did not apply since the action was initially filed under Chapter 13. The bankruptcy court agreed and refused to dismiss the action. The trustee appealed to the district court, but that court dismissed for lack of subject matter. It held that the bankruptcy judge’s decision was a “final order” within the meaning of 28 U.S.C. § 158(a)(1).

The Fourth Circuit disagreed. The court noted that appealability of bankruptcy decisions was based more on pragmatism than technicalities due to the nature of bankruptcy with prolonged proceedings often involving many parties. Citing the Congress’s desire to root out abusive bankruptcies and promote a policy toward repaying debts, along with the Judiciary’s desire to maintain judicial economy, the court held that an order denying a 707(b) motion was a final order on a discreet issue and therefore subject to immediate appeal to the district court.

Full Opinion

-C. Alexander Cable

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