Can My Chapter 7 Bankruptcy Be Dismissed?

28 Jun Can My Chapter 7 Bankruptcy Be Dismissed?

11th CircuitThere is no shortage of articles on the Bankruptcy Law Network about Chapter 7 bankruptcy. However, a recent case out of the 11th Circuit Court of Appeal made me a bit queasy when I read it. Everyone who works within the bankruptcy world in Southwest Florida understands that Chapter 7 is not an easy road to a fresh start. We have three Chapter 7 Trustees who take their jobs very seriously and work relentlessly on each and every bankruptcy case. We, as Debtors Counsel, balance the playing field and make things fair by protecting our clients from the dangers and pitfalls of Chapter 7. Often we counsel people not to file bankruptcy at all because it would not be in their best interest.

In Re Piazza discusses whether pre-petition bad faith can constitute cause to dismiss a Chapter 7 filing under 11 U.S.C. 707(a). The reason it made me a bit queasy is because the bankruptcy court looked at a fifteen (15) part test to determine whether a debtor had filed the case in bad faith, and some of the factors are extremely subjective in my opinion. This case should be required reading for all Debtor’s counsel. If you have a client with this type of facts, you may want to decline representation.

Several of the subjective factors that bankruptcy courts will look to in determining bad faith include: the debtor filed the case in response to a judgment, pending litigation, or collection action; or, there is an intent to avoid a large, single debt; or, the debtor made no effort to repay his debts; and, on and on. So, now I will be asking each and every individual who comes into my office even more intrusive and sometimes offensive questions before they agree to hire me, and I agree to represent them. However, it is absolutely necessary to ask these probing questions before I agree to represent someone in a Chapter 7 because these same questions could be asked later by a party less friendly than I.

Other factors that the Court will consider make more sense like: the debtor has sufficient resources to pay his debts; or, the debtor is paying off insiders; and the debtor failed to make candid and full disclosure. These factors are clearly reasonable. If a Debtor is not candid on his or her petition and schedules, then they should be denied relief.

My true concern is that many people who seek bankruptcy protection do so because of one big debt or they may not have made an effort to repay a debt because they lost a job. Now, I realize that I am looking at extreme examples; however, after practicing law for a long time you realize that bad facts make bad case law. So, how much is enough. Should a debtor offer to repay debts when they have absolutely no way to do so, just so they can pass this test?

After reading the Piazza case, you start to realize that Mr. Piazza didn’t come to the bankruptcy court “squeeky clean”, and I’m sure that didn’t really help him during his case. He was less than candid with his creditors, lived a lavish lifestyle and spent money in other areas when he could have attempted to pay his creditors. So, it is safe to say that Mr. Piazza either knew or should have known that his bankruptcy case would or could be challenged.



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Carmen Dellutri is a proud member of the Florida Bar, and he is a Board Certified Consumer Bankruptcy Attorney, Certified by the American Board of Certification. He practices in the areas of Consumer Bankruptcy and Plaintiff's Personal Injury. He is the principal attorney at The Dellutri Law Group, P.A. The firm supports many charitable and civic causes by donating time and much needed capital to our community. Mr. Dellutri and the other attorneys in the firm routinely speak to students of all ages about various legal and societal issues.
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