The Sixth Circuit Court of Appeals recently released a decision that affirmed the dismissal of a bankruptcy debtor’s case and denied the attempted discharge of all of his debts. The Court of Appeals agreed with the bankruptcy court’s decision that the debtor’s behavior and spending habits throughout the bankruptcy, without attempting to repay any of his debts, justified the dismissal of the bankruptcy. With the appellate court decision, the debtor will be unable to discharge any of his substantial debts.
The debtor who filed for bankruptcy in the case, Schwartz v. Barclays Capital, Inc., found himself saddled with over $500,000 in debt after his employment with Barclay’s fell through, and a large loan that was to be forgiven after seven years of employment became immediately due. The debtor had little other debt and filed a bankruptcy petition almost exclusively to discharge the debt to Barclay’s. Barclay’s challenged the attempted discharge, arguing that the debtor had the ability to repay the loan but was trying to avoid responsibility using the bankruptcy code.
Reasons a Bankruptcy Court May Dismiss a Petition
Bankruptcy laws are designed to protect consumers from the devastating effects of uncontrollable debt. However, a bankruptcy court is not required to grant every bankruptcy petition that is filed. Bankruptcy judges are allowed considerable discretion, and the court in Schwartz found that the debtor’s continued spending on nonessential expenses (a family trip to Disney World and an $800/month car payment are two examples) after he filed for bankruptcy, when looked at alongside his failure to even attempt to repay his debts, would make granting the bankruptcy petition and discharging the debtor’s debts an abuse of the bankruptcy code. On appeal, the Sixth Circuit agreed with the bankruptcy court, noting that the debtor was maintaining a high standard of living and probably had the ability to repay his debts if he tried.
Ways to Avoid Dismissal of a Bankruptcy
To avoid a similar fate to the debtor in Schwartz, debtors attempting to file bankruptcy and have their debts discharged should consult an experienced bankruptcy attorney before filing. Although the Schwartz petition was dismissed, many other bankruptcy petitions have been granted that involve similar spending patterns. Debtors are not required to start living a life of poverty upon filing for bankruptcy, but they should still carefully plan their spending with the advice of skilled bankruptcy counsel to avoid having their petitions dismissed.
Are You Overwhelmed in Debt?
If you or a loved one is struggling with debt and considering bankruptcy, a competent attorney on your side can increase the chances of successfully discharging your debts. The Louisville and Southern Indiana bankruptcy attorneys at the Schwartz Bankruptcy Law Center can take control of your case and advise you of the best way to get your plan confirmed. We advise and represent clients in various bankruptcy proceedings, and with our experience you can decide which course of action works best for you. We can help you get back on your feet. Call 866-366-3328 today to schedule a risk-free consultation, or contact us through our website.
More Blog Posts:
Seventh Circuit Court of Appeals Affirms Lower Rulings Denying Discharge of Student Loan Debt, Kentucky Bankruptcy Lawyers Blog, published August 1, 2015.
Ninth Circuit Affirms Dismissal of Pro-Se Debtor’s Bankruptcy Petition for Failure to Meet Deadline, Kentucky Bankruptcy Lawyers Blog, published August 17, 2015.