Court Dismisses Bankrutpcy Cases for Substantial Abuse.

Here, the debtor initially filed a Chapter 13 Bankruptcy that was dismissed. Thereafter, debtor filed a Chapter 7 Bankruptcy in an attempt to cause substantial delay to a creditor who sought to collect a valid debt against this debtor.

A Chapter 7 Bankruptcy can be dismissed by the court if the debtor is found to have filed the proceeding in “bad faith.” Although the Bankruptcy Code does not define all the possible situations that constitute “bad faith,” the court found numerous characteristics of bad faith here, including:

… (1) multiple case filings invoking extraordinary procedural gymnastics; (2) improper or unexplained transfer of prepetition assets; (3) modest debts relative to assets and income; and (4) lack of completeness in debtor’s statements and schedules.

The court dismissed debtor’s Chapter 7 case and found that the debtor was primarily intending to thwart creditors from collecting their valid debts.

The court also noted that the debtor’s financial lifestyle was not consistent with an individual seeking the protection of the Bankruptcy Code. Debtor’s case was, therefore, dismissed by the court so the creditors could continue collection from the debtor. In re James Hammonds, 139 B.R. 535.

Similarly, in the case of In re Chachra, 138 B.R. 397, the court dismissed debtors’ Chapter 7 Bankruptcy when the court found that the debtors failed to explain satisfactorily the loss of assets listed in their financial statement submitted to the court, and failed to produce books and records relative to their finances.

Lastly, in In re Maricamp Square Associates, 139 B.R. 554, the court dismissed a debtor’s Chapter 11 Bankruptcy as a bad faith filing when there was no reasonable prospect for reorganization.

EDITOR’S COMMENT

If debtors file repetitive Bankruptcy petitions, or debtors really do have the ability to repay their obligations, cannot explain the transfer of assets or cannot design a feasible repayment plan, the creditor’s attorney will want to engage all available means under the Bankruptcy Code to facilitate possible dismissal of debtor’s bankruptcy case.

Author: Charles R. Harroun, Attorney at Law