bad faith

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Mandatory Discharge Trumps Discretionary Dismissal for Bad Faith

The debtors were entitled to discharge despite their failure to disclose an asset where the trustee moved for dismissal for bad faith after the debtors completed all their plan payments but before they had received their discharge. In re Frank, No. 18-12812 (Bankr. D. Colo. March 30, 2022).

Less than one year after one of the debtors was injured in a car accident, the below-median debtors filed for chapter 13 bankruptcy. The debtors did not inform the trustee of the car accident or list the potential cause of action in their bankruptcy schedules. The debtors’ confirmed 39-month plan committed them to paying a priority tax debt, a small secured debt, trustee fees and their own attorney fees. The plan paid nothing to unsecured creditors. About one year after their plan was confirmed, the debtors received a $67,000 settlement in the personal injury case. They did not amend their schedules or inform the trustee of the settlement. One month before the final payment was due on the debtors’ plan, the trustee asked them whether they had received any payment on a separate wrongful discharge claim that they had listed in their schedules. They then informed the Trustee of the $67,000 payment on the personal injury claim. The debtors made their final plan payment the following month and the trustee then moved to dismiss on the grounds of bad faith for nondisclosure of the personal injury claim. The debtors claimed inadvertence based on their belief that the settlement proceeds were exempt. [Read more…] about Mandatory Discharge Trumps Discretionary Dismissal for Bad Faith

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Fourth Circuit Looks at Multiple Factors in Bad Faith Analysis

Filing bankruptcy for the primary purpose of discharging one debt is not, in itself, bad faith, and the bankruptcy court did not abuse its discretion when weighing several factors in denying the creditor’s motion to dismiss for cause under section 707(a). Janvey v. Romero (In re Romero), No. 17-1197 (4th Cir. Feb. 21, 2018).

Peter Romero was found liable to victims of a Ponzi scheme in which he was involved. Pursuant to that judgment, he owed $1.275 million to Ralph Janvey, the court-appointed Receiver in the Ponzi litigation. Mr. Janvey rejected without counteroffers Mr. Romero’s attempts to settle and Mr. Romero filed for chapter 7 bankruptcy. The bankruptcy court denied Mr. Janvey’s motion to dismiss and granted Mr. Romero’s discharge. In re Romero, 557 B.R. 875 (Bankr. D. Md. 2016). The district court affirmed. [Read more…] about Fourth Circuit Looks at Multiple Factors in Bad Faith Analysis

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Contributions to 401(k) One Factor in Abuse Analysis

401(k) contributions may be considered when determining whether the debtors’ chapter 7 case should be dismissed for abuse pursuant to section 707(b)(3)(B). In re Nunna, No. 13-5679 (Bankr. M.D. Fla. May 13, 2014). In Nunna, the Acting U.S. Trustee filed a motion to dismiss the debtors’ chapter 7 case as abusive. The bankruptcy court granted the trustee’s motion. [Read more…] about Contributions to 401(k) One Factor in Abuse Analysis