Solvent Debtors’ Bankruptcy Case Dismissed as Bad Faith

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By Daniel Gill

A couple’s Chapter 7 case could be dismissed as a bad faith filing, a Florida federal judge ruled. Their assets far exceeded their debts, and the case was filed merely to thwart a state court complaint to make them sell their house as they had agreed ( Mirzataheri v. Dunn , 2017 BL 215352, S.D. Fla., No. 15-cv-22414-WILLIAMS, 6/20/17 ).

Considering the totality of the circumstances around the filing, the bankruptcy court properly dismissed the case and sanctioned the debtors in the amount of the trustee’s fees, according to the opinion of Judge Kathleen M. Williams of the U.S. District Court for the Southern District of Florida.

On April 14, 2014, FM East Developers LLC entered a contract with Ali Ashgar Mirzataheri and Soledad Mirzataheri for the sale of the Mirzataheris’ residence. When the Mirzataheris failed to close, FM East brought suit in a Florida court to compel them to perform under the sale contract.

Only four days after they were served with the state court suit, the Mirzataheris filed for Chapter 7 on Aug. 22, 2014. They listed assets of more than $850,000 and liabilities of just over $30,000, the court said.

In affirming the bankruptcy court decision, Williams said the Mirzataheris’ debts “constituted a small fraction of their assets and income, and they had more than sufficient assets to satisfy their debts.” In fact, the debtors even admitted to the bankruptcy court that the only reason they filed bankruptcy was to avoid the sale of their residence to FM East.

The district court also affirmed the bankruptcy court’s order that the Mirzataheris be sanctioned for their bad faith by paying the trustee about $16,000 for attorneys fees and costs she incurred in the case.

The Mirzataheris were represented by Rex E. Russo, Coral Gables, Fla. FM East Developers LLC was represented by Eric J. Silver, Miami, and Jessika A. Graham, Miami, represented Marcia T. Dunn, the Chapter 7 trustee.

To contact the reporter on this story: Daniel Gill in Washington at dgill@bna.com

To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com

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