Bloomberg Law’s® Bankruptcy Law News publishes case summaries of the most recent important bankruptcy law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy...
By Daniel Gill
The fact that Chapter 7 debtors had the ability to repay their debts was not a legitimate basis to dismiss their bankruptcy case, an Oklahoma federal judge ruled April 28 ( Crocker v. Bushyhead (In re Bushyhead) , 2017 BL 141812, N.D. Okla., No. 15-CV-90-JED-FHM, 4/28/17 ).
The debtors had exempt property worth nearly $790,000, income of more than $350,000 a year, a somewhat extravagant lifestyle and debts of only about $332,000, the court said. But that wasn’t cause to dismiss their bankruptcy case, Judge John E. Dowdell, of U.S. District Court for the Northern District of Oklahoma, held.
Bow and D. Lynn Bushyhead filed a Chapter 7 case in 2013. In Chapter 7, a debtor’s nonexempt assets, those he cannot keep, are liquidated by a trustee, and the proceeds are distributed to creditors. Subject to certain exceptions, the debtor is awarded a discharge, effectively wiping out his debts.
Eligibility rules for filing Chapter 7 are different when the debtors’ obligations are primarily consumer or if they arose in business. Here, about 80% of the debt was related to a failed spa that the Bushyheads owned. For that reason the court doesn’t have to look at whether the debtor is able to pay the debts over time.
Although no creditors objected to the bankruptcy or discharge, the U.S. Trustee, a branch of the U.S. Department of Justice charged with overseeing the bankruptcy process, objected to the case and sought to have it dismissed.
The debtors could pay off their debts over time, as in a Chapter 13 case, the Trustee argued. The Chapter 7 case was therefore filed in bad faith, which is grounds for dismissal.
But such a dismissal should happen where the debtor has taken advantage of the court’s jurisdiction in a manner abhorrent to the purposes of Chapter 7, the court said.
An extravagant lifestyle and apparent ability to repay debts over time was not among the enumerated grounds for dismissal in the statute, and wasn’t “egregious, unusual or abhorrent” to the purpose of the bankruptcy.
Timothy T. Trump, Conner & Winters, LLP, Tulsa, Okla., represented the Bushyheads. Samuel K. Crocker, the region’s U.S. Trustee, was represented by Paul R. Thomas, Tulsa, Okla.
To contact the reporter on this story: Daniel Gill in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)