06 Jun Octomomâ€™s Chapter 7 Bankruptcy Dismissed – Why and What Does it Mean?
You may have read news reports that Nadya Suleman, otherwise known as â€œOctomom,â€ recently filed Chapter 7 bankruptcy, only to have her case dismissed because she failed to file the required financial disclosure schedules. Ms. Suleman, as you may recall, made headlines in 2009 for giving birth to 8 children following fertility treatments, and adding to her existing family of 6 kids. Octomom is both unmarried and without any regular source of income.
Ms. Suleman has been living in a four bedroom, three bath home she had purchased in 2009 from a gentleman named Amer Haddadin. Ms. Sulemanâ€™s purchase agreement was with Mr. Haddadin – he remained the sole borrower on the mortgage note, and she agreed to pay him $3,000 per month, which he would, in turn, use to pay the mortgage company.
When Ms. Suleman failed to make her mortgage payments to Haddadin for 11 months, the mortgage lender initiated foreclosure proceedings. This pending foreclosure apparantly prompted Ms. Suleman to file Chapter 7 and thus stop the foreclosure.
When Ms. Suleman filed Chapter 7 in April of this year, she apparently filed only a â€œskeleton petitionâ€ that did not include required documents such as a detailed budget, a detailed finanical history called a â€œStatement of Financial Affairsâ€ or details about her debts. Under federal bankruptcy law, a debtor who files an incomplete petition must submit all required documents within 15 days of filing, or face automatic dismissal processed by the Clerk of Bankruptcy Court. Ms. Sulemanâ€™s Chapter 7 was dismissed in this fashion.
Letâ€™s look a little closer at the bankruptcy elements of this story. First, it appears that Ms. Suleman would not have any means test issues. Under the current median income tables, a family of 4 in California can show household income of $77,167 annually and qualify for Chapter 7 without even needing to complete a means test. For each additional member of the household, $7,500 is added to this median income figure. Ms. Suleman maintains a household of 15 – herself and 14 children. Thus, she could earn up to $159,667 annually and still qualify for Chapter 7, or, perhaps more importantly, qualify for a 3 year Chapter 13 plan.
From all reports in the news, Ms. Sulemanâ€™s household income using the 6 month means test look back, does not approach the $159,667 figure.
Secondly, it seems unlikely that Ms. Suleman would have benefited much from Chapter 7 had she gone ahead and filed her required financial disclosure schedules. At best, Chapter 7 stops a foreclosure temporarily. There is no repayment mechanism like there is in Chapter 13, so after filing, the mortgage lender would only need to go before the bankruptcy judge with a Motion for Relief from Stay and an argument that a Chapter 7 does not offer the lender any level of adequate protection. The automatic stay would be lifted and Ms. Suleman would once again be looking at a foreclosure.
Chapter 13 might have been a better option but without any regular source of income, Octomom does not qualify. Another option – Ms. Suleman might have called a foreclosure defense lawyer to review the foreclosure paperwork for a possible remedy there.
The dismissal of Ms. Sulemanâ€™s Chapter 7 case also means that if she decides to refile, the automatic stay of any future Chapter 7, 11 or 13 would only last 30 days, and she would need to file a motion and get into court to ask the judge to extend the stay. She would need to show changed circumstances and possibly overcome creditor objections.
Ms. Suleman used her â€œbankruptcy optionâ€ to stop an immediate crisis but her filing did not solve her long term problem of supporting a family she cannot afford, nor did she even derive the benefit of discharging her debts. This was not a good use of the bankruptcy process and any future bankruptcy filing will be more difficult.
by Jonathan Ginsberg, Atlanta bankruptcy attorney
Jonathan Ginsberg, Esq.
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