Title
Determining When the Granting of Relief is Deemed Abuse of the Bankruptcy Code under Section 707
Document Type
Research Memorandum
Publication Date
2019
Abstract
(Excerpt)
There is no constitutional right for an individual to have their debts discharged. A discharge is a privilege offered to the honest but unfortunate debtor pursuant to title 11 of the United States Code (the “Bankruptcy Code”). A bankruptcy court considers different standards and/or tests to determine when a debtor may be abusing the relief provided under the Bankruptcy Code. The specific provision that restricts relief because of abuse was originally enacted in 1984, and then amended in 2005 under the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”). A main purpose of the BAPCPA was to deter abuses within the bankruptcy process, specifically targeting individual debtors with consumer debts. Under the Bankruptcy Code, after a hearing and notice, the bankruptcy court, the United States Trustee (“UST”), or any interested party may dismiss a case filed under chapter 7 of the Bankruptcy Code by an individual debtor “whose debts are primarily consumer debts”. “Primarily consumer debts” are defined as debts for personal, family or household purposes.
This memorandum examines the application of 11 U.S.C. §707(a) and (b) (1)-(3), and the evaluation a court makes before finding that granting relief would be an abuse of provisions of chapter 7. Part I analyzes the application of the “for cause” dismissal under 11 U.S.C. §707(a). Part II examines section 707(b)(1)-(3) and the different tests or standards that apply when presumption of abuse arises vs. when it does not, or when it is rebutted by the debtor.