Florida Court Dismisses Chapter 7 Bankruptcy As Filed in “Bad Faith.”

A bankruptcy court can dismiss a Chapter 7 bankruptcy filing for “bad faith” even if the debtor passes the means test or is exempt from the means test because his debts are primarily non-consumer debts. A Florida bankruptcy court dismissed a Chapter 7 filing because the court found that the bankruptcy filing was not appropriate and was not consistent with the purpose of the bankruptcy code.

In the particular Florida bankruptcy case, a married debtor owed most of his debt to a single creditor from a business transaction. The creditor moved to dismiss the debtor’s Chapter 7 bankruptcy petition as being filed in bad faith. The court considered fifteen facts to evaluate the appropriateness of the Chapter 7 bankruptcy. The court noted that the debtor continued to transfer thousands of dollar per month to his wife and lease a lucury car after the bankruptcy. Both the debtor and his wife were employed. The court noted that the family had encountered no financial or medical crises. The bankruptcy filing was timed to stay the large creditor’s collection efforts.

Upon consideration of relevant circumstances the court dismissed the Chapter 7 bankruptcy as filed in bad faith. Regardless of whether a debtor passes the technical Chapter 7 filing requirements a U.S. Trustee and bankruptcy court reserve the right to dismiss the petition if the debtor appears to be abusing the bankruptcy system.