Spencer Nelson

Document Type

Research Memorandum

Publication Date




Luxurious lifestyles implicate a debtor’s good faith when applying for the protections provided under title 11 of the United States Code (the “Bankruptcy Code”). Typically, bankruptcy courts avoid making the debtor’s luxurious lifestyle, on its own, a determinative factor because the good faith (or bad faith) analysis is determined under a totality of the circumstances approach. A debtor with continuing expenses typically indicative of bad faith can maintain such expenses if the debtor has made other concerted efforts to repay creditors or can otherwise justify those expenses. What is required depends on whether the debtor is applying for protections under Chapter 7 or under Chapters 11 or 13. This memorandum examines the good faith standard under section 707 of the Bankruptcy Code, the standard used for confirmation of reorganization plans under Chapters 11 and 13, and the implications of both standards for debtors with lavish lifestyles.


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