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01
Oct
2019

Chapter 13 Dismissed – Substantial Abuse

In this case, debtor filed a Chapter 7 bankruptcy seeking to discharge his unsecured obligations. The debtor listed over $55,000 of unsecured debts on his bankruptcy schedules, including a $9,500 loan from a credit union.

The bankruptcy Trustee reviewed debtor’s monthly budget and found that debtor could afford to repay some of his obligations (such as through a Chapter 13 repayment plan).

The Trustee filed a motion to dismiss debtor’s bankruptcy, and debtor thereafter amended his budget to include another large credit union debt of some $6,700. The amended schedules also indicated that debtor expended some $250 per month for recreation. Debtor testified the entertainment expense was spent because the debtor frequents a lot of night clubs and bars.

The court found that debtor’s proposed budget allocated excessive amounts to entertainment, and too much for food (50% more than the average consumer expenditure reported by the U.S. Bureau of Census). Debtor’s failure to originally file accurate schedules with the court resulted in the court finding that the debtor did not file a “good faith bankruptcy”.

Debtor’s Chapter 7 case was not converted to a Chapter 13 repayment plan, rather the court dismissed debtor’s case, finding that it constituted a substantial abuse of the bankruptcy system. In re Thomas Smurthwaite, 149 B.R. 409.

Author: Charles R. Harroun, Attorney at Law.



This entry was posted on Tuesday, October 1st, 2019 at 4:33 am and is filed under Bankruptcy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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