Here, debtors’ bankruptcy schedules identified their residence as valued at $80,000, with two mortgages totalling $77,000. Debtors also listed two vehicles valued at $40,000, with secured liens of approximately $46,000 against the vehicles.

Debtors’ original schedules listed current gross monthly income of more than $4,800 and net monthly income of more than $2,900; debtors’ monthly expenses, however, only amounted to $2,255, which resulted in an excess of monthly income over expenses of at least $700.

Section 707(b) of the Bankruptcy Code contains a provision for dismissal of a Chapter 7 case for “substantial abuse” of the provisions of the Code if the court finds that the debtors are not needy and the debtors have the ability to repay their debts.

In this case, the Trustee noted that debtors could apply their excess monthly income to their unsecured obligations and satisfy those debts over a twenty-six month period.

After the Trustee filed a motion to dismiss debtors’ case, debtors filed amended schedules that increased their monthly expenses to exceed their monthly income.

The court dismissed debtors’ bankruptcy, finding that debtors’ initial bankruptcy filing was in “bad faith” and constituted a “substantial abuse” under the Bankruptcy Code. In re Barnes, 158 B.R. 105.

Author: Charles R. Harroun, Attorney at Law