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Court rules in favor of Chapter 7 debtor

A recent bankruptcy court decision may mark a significant step forward in the flexibility that debtors have when filing Chapter 7 bankruptcy. The court ruled that it was not an abuse of Chapter 7 for the man to claim expenses for maintaining two separate homes.

The trustee overseeing the bankruptcy petitioned the court to recognize the man's claim as an abuse of the guidelines, claiming that by maintaining two homes, he was denying creditors potential repayment of debts. However, after carefully reviewing the details of the case, the court ruled that it was not an abuse for a number of reasons.

The court noted specifically that a Chapter 7 abuse could occur if a debtor has disposable income, but that the circumstances under which the man had gained the second home precluded him from having legitimate disposable income.

Furthermore, the court noted, the man could have possibly repaid his creditors more fully if he had filed for a scheduled repayment plan under Chapter 13 rather than using a Chapter 7 liquidation of assets. However, the court ruled that there was no abuse presented by the man simply choosing to employ Chapter 7 instead of Chapter 13.

This ruling directly illustrates just how important it is to have proper experienced guidance when considering a bankruptcy. The guidelines are very complex, and failing to fully understand the intricacies of those guidelines could mean the difference between a court ruling in your favor or declaring that you have abused the system. In these matters, as in may parts of life, there is simply no substitute for proper, experienced legal guidance that understands how to use the law to fight for your rights.

Source: Bloomberg Business News, "Debtor Maintaining Expenses for Two Houses Not Abuse of Ch. 7," Diane Davis, July 05, 2017

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