Chapter 7 Bankruptcy Dismissed for substantial abuse. In this case, the issue was whether debtor’s Chapter 7 bankruptcy should be dismissed since debtor appeared to have the ability to repay his obligations.

Debtor was employed as a sportscaster earning about $170,000 per year; debtor had unsecured debts of more than $108,000, which included a loan owing to a credit union. Debtor owed another $188,000 on secured debts, which included payments on at least two condominiums.

Section 707(b) of the Bankruptcy Code provides for the dismissal of a Chapter 7 case based upon substantial abuse. Specifically, it allows for dismissal of a case filed by a debtor if the court finds that the granting of relief would be a substantial abuse of the spirit of the Bankruptcy Code.

The court noted that debtor’s initial proposed monthly budget included:

1. $200 for recreation/entertainment;
2. $200 for clothing;
3. $50 charitable contributions;
4. $100 for cleaning expenses;

as well as more than $12,000 per month of other living expenses.

The court noted that the debtor would not be eligible for relief under Chapter 13 of the Bankruptcy Code because of the amount of his unsecured debts, and that debtor had a stable income which could be utilized to make substantial payments to his creditors.

The bankruptcy courts across the country have not adopted a uniform policy defining what constitutes “substantial abuse.” The three main approaches are: 1) whether the debtor’s financial condition discloses an ability to fund a Chapter 13 Plan; 2) a totality of debtor’s circumstances; and 3) a hybrid review which examines the ability to pay and mitigating factors.

This court determines substantial abuse by considering the following factors:

A. Whether the bankruptcy petition was filed because of illness, calamity, disability or unemployment;

B. Whether the debtor incurred cash advances and made consumer purchases far in excess of his/her/their ability to repay;

C. Whether the debtor’s proposed family budget is excessive or unreasonable;

D. Whether the debtor’s schedules and statement of current income and expenses reasonably and accurately reflect debtor’s true financial condition;

E. Whether the bankruptcy petition was filed in good faith.

This court was persuaded that the first consideration is the debtor’s ability to repay creditors, not whether the debtor qualifies for a repayment plan under a Chapter 13 Plan.

In this case, the court found that debtor is able to substantially repay his creditors even though he would not be eligible for relief under Chapter 13 of the Bankruptcy Code.

Hence, debtor’s Chapter 7 Bankruptcy was dismissed by the court for debtor’s attempt to substantially abuse the purpose of the Bankruptcy Code. In re: R. Michael Nolan, 140 B.R. 797 (1993).