In this case, the debtors’ Chapter 7 bankruptcy was dismissed due to debtors’ “substantial abuse” of the intent of the Bankruptcy Code.

Here, the debtors’ bankruptcy schedules for estimated monthly expenses disclosed that debtors had approximately $950 excess income each month after their monthly expenses were paid.

Chapter 7 cases may be dismissed by the court or on a motion by the Trustee for “substantial abuse” when there is evidence that the Chapter 7 filing was debtors’ first solution to the financial problems, coupled with evidence that other solutions were available, but not tried.

A Chapter 7 case may be dismissed for “substantial abuse” even though debtors are ineligible for relief under Chapter 13, if proof demonstrates that debtors could reasonably have paid their debts through some alternative mechanism, such as a consumer credit counseling service.

In this case, the court noted that the debtors had more than $40,000 of unsecured credit card obligations and a combined monthly income of $4,841. Although debtors may not qualify under a Chapter 13 repayment plan, they did have $950 excess income each month that could be utilized to repay their creditors.

The court dismissed this Chapter 7 bankruptcy due to the fact that these debtors were not entitled to the “last resort” relief which the Bankruptcy Code was designed to provide. In re William and Valerie Fitzgerald, 155 B.R. 711.

Author: Charles R. Harroun, Attorney at Law