In this case, the bankruptcy court found the debtor was attempting to abuse the bankruptcy system, and the court ordered debtor’s Chapter 7 bankruptcy case be dismissed unless he agreed to convert the case to a Chapter 13 and repay his creditors.

Here, the 71 year old debtor filed financial schedules with the bankruptcy court indicating that his monthly income was $3,153. This figure included his wife’s income, although she did not join in filing for bankruptcy. His monthly expenses totalled $2,672 and included $168.00 for entertainment each month, $66.00 for newspapers, periodicals and books, $167.00 for charitable contributions and $424.00 for miscellaneous items and gifts each month.

Debtor’s financial obligations totalled $23,000, of which some $17,609 had been incurred on credit cards for “dabbling” in the stock market.

The court noted that section 707(b) of the Bankruptcy Code was enacted by Congress as a means of combating what Congress viewed as an abuse of Chapter 7 by consumers who had the ability to pay their debts. The debtor’s credit card obligations, incurred for investment in the stock market, were also found to be “consumer debts”, as opposed to “business debts.”

The bankruptcy court noted that debtor would have at least $905.00 each month in excess income if the entertainment, charitable contributions, newspapers et. al. and miscellaneous expenses for gifts were eliminated, thereby providing the debtor with sufficient funds to repay his creditors over a period of time. The court gave little or no consideration to the debtor regarding his recent quadruple heart by-pass surgery.

The debtor had an ability to repay his obligations, either through normal payments or through a Chapter 13 proceeding. The court ruled that the debtor was abusing the purpose of the Bankruptcy Code and ordered that debtor’s Chapter 7 case either be dismissed or converted to a Chapter 13 repayment plan. In re Raymond Berndt, 127 B.R. 222.

Author: Charles R. Harroun, Attorney at Law