Can the Chapter 7 Debtor’s Bad Faith Constitutes “Cause” to dismiss the case under Code § 707(a).

Yes.

As reported by Robin Miller of CBAR, the Debtor’s bad faith is cause for dismissal of Chapter 7 case under Code § 707(a).

The debtor exhibited bad faith in filing her Chapter 7 case, warranting the dismissal of the case for cause under Code § 707(a), where (1) there were deficiencies in the debtor’s initial schedules, in that a significant amount of debt was missing, with the debtor’s amended schedules showing a dramatic increase of unsecured debt from $267,006 to $1,132,497 and the addition of the now-largest creditors; (2) while the debtor now claimed that she did not review the original schedules filed in her case, she stated otherwise at the meeting of creditors, so that either she did in fact approve her initial schedules, or she provided false testimony at the meeting of creditors, but in either case the debtor was responsible for her actions; (3) the debtor’s Schedule J was materially inaccurate for nearly a year, as it reflected a monthly mortgage expense of $3,800, whereas she had stopped making mortgage payments five years prior to filing for bankruptcy; and (4) the debtor failed to disclose her prepetition repayment of two personal loans from family members in the amounts of $2,000 and $2,500.

Dismissal of the case was also warranted under Code § 707(a)(1) for cause based upon a finding of unreasonable delay by the debtor that was prejudicial to creditors, as (1) the debtor’s delay was unreasonable, where the debtor made material amendments to her initial petition and schedules six months or more after they were filed, and only after a creditor filed a motion to dismiss the case; and (2) this unreasonable delay was prejudicial to creditors, as the amendments at issue were made well after the Chapter 7 trustee had concluded the meeting of creditors and issued a no-asset report, thereby denying both the trustee and creditors a full and fair opportunity to examine the debtor, other than on disclosures that the debtor now claimed were false.

In re Jakovljevic-Ostojic, 517 B.R. 119 (Bankr. N.D. Ill., Sept. 17, 2014)

(case no. 1:13-bk-27271) (Bankruptcy Judge Timothy A. Barnes)

Related Posts