FW: [CLBS] abuse of chapter 7

Thu May 3 16:37:14 MDT 2012

-----Original Message-----
From: Randal French 
Sent: Thursday, May 03, 2012 4:37 PM
To: 'Ford Elsaesser'
Subject: RE: [CLBS] abuse of chapter 7

I do not agree that 707(b)(3) would apply to a debtor whose debts are in fact not primarily consumer debts.  707(b)(3) provides a factor for "considering under paragraph (1) whether the granting of relief would be an abuse.  I think "paragraph 1" means 707(b)(1), not 707(a)(1).  

Having said that, 707(a)(1) allows a dismissal of any ch 7 for cause.  It is not limited under 707(a), although 707(a) has three specific examples.  It would seem inappropriate to me to take relief that is specifically provided for debtors having primarily consumer debt and apply it to debtors who do not have primarily consumer debt.  But, "cause" in 707(a) is not limited, so there may be an analysis to be had.  I would think it is a stretch, given how means testing and bad faith which is used by U S Trustee to get to a schedule I and J analysis both fall under 707(b).  

If the debtor is in fact a debtor whose debts are not primarily consumer debts, then I would argue that none of 707(b) applies.  I think you have the right to challenge the characterization of debts - the U. S. trustee certainly engages in that review.  But, if the facts do not support your position, I think that the debtor has the absolute right to file a ch 7, no matter what the schedule I and J may show.  The bk code has always been favorable to debtors whose debt was the result of following the American Dream of starting a Microsoft, Facebook, etc.  

My comments are made without having encountered any recent decisions, so if there are about to be a windfall of disclosures of decisions that make my analysis incorrect, well I am happy to help spur an outpouring of good legal analysis.

Randy French
www.bauerandfrench.com

Bauer & French
Attorneys at Law
1501 Tyrell Lane 1P.O. Box 2730 PBoise, ID 83701-2730
(208) 383-0090 ( Fax: (208) 383-0412
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-----Original Message-----
From: clbs-bounces at admws.idaho.gov [mailto:clbs-bounces at admws.idaho.gov] On Behalf Of Ford Elsaesser
Sent: Thursday, May 03, 2012 4:12 PM
To: Loren K. Messerly; clbs at admws.idaho.gov
Subject: Re: [CLBS] abuse of chapter 7

they still have exposure under 707 under a totality of circumstances -i think high income non-consumers bear much more risk than in the past for a bad faith argument regardless of means test applicability-ford
----- Original Message -----
From: "Loren K. Messerly" <lmesserly at greenerlaw.com>
To: <clbs at admws.idaho.gov>
Sent: Friday, April 13, 2012 11:32 AM
Subject: [CLBS] abuse of chapter 7

Looking for an update on the state of the law, at least with Idaho's bankruptcy judges, regarding bad faith chapter 7 filings.  In other words, we have a debtor who filed a "non-consumer" chapter 7.  Thus he did not fill out the means test.  Assuming we cannot challenge that characterization, what are decisions currently saying about still trying to force them into a chapter 13 because they are very well-employed and will make significant income going forward? Are we stuck with a chapter
7 or do we have an argument for pushing a high-income debtor with a majority of business debt into a chapter 13? If you could point me to the controlling case for Idaho judges, that would be much appreciated.

Regards,

Loren

Loren K. Messerly | attorney

GB+S greener burke shoemaker p.a.

950 w. bannock street, suite 950|boise|idaho 83702-6138
o: 208.319.2600|f: 208.319.2601|e: lmesserly at greenerlaw.com

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