The United States Bankruptcy Court at Harrisonburg, Virginia, in the case of In Re: Rodriguez, dismissed a debtor’s Chapter 7 petition for “substantial abuse” pursuant to Bankruptcy Code §707(b) where the debtor’s voluntary monthly contribution of $286 to his 401(k), as well as his post-petition purchase of a Ford pickup truck, clearly indicated that the had the ability to fully fund a Chapter 13 plan without incurring undue hardship.
The Bankruptcy Court found that the debtors’ post-petition purchase of the new truck resulted in a net increase in monthly transportation-related expenses of $220. This voluntary increase indicated that the debtor felt that he had the ability to pay at least that amount to his creditors. The increase in transportation-related expenses and the contribution to the 401(k) alone total over $500 per month that the debtor could have used to pay his creditors. In doing so, the debtor could have paid his creditors 100 percent in less than 10 months. Conversely, if the debtor remained in Chapter 7, the majority of his creditors would receive nothing.
The debtor’s Schedule I indicated that he enjoyed steady employment with the same employer for eight years, and expected to earn $38,000 in that current year. Nothing in the other schedules filed with the debtor’s petition indicated a sudden illness or calamity which might have necessitated filing for Chapter 7 protection.
The Bankruptcy Court found that the debtor’s post-petition truck purchase, made with the knowledge that a short-term 100 percent Chapter 13 plan was feasible, constituted the kind of egregious abuse that Bankruptcy Code §707(b) was intended to prevent.
The lesson of Rodriguez - review Chapter 7 schedules for the ability to pay.
The Bankruptcy Court found that the debtors’ post-petition purchase of the new truck resulted in a net increase in monthly transportation-related expenses of $220. This voluntary increase indicated that the debtor felt that he had the ability to pay at least that amount to his creditors. The increase in transportation-related expenses and the contribution to the 401(k) alone total over $500 per month that the debtor could have used to pay his creditors. In doing so, the debtor could have paid his creditors 100 percent in less than 10 months. Conversely, if the debtor remained in Chapter 7, the majority of his creditors would receive nothing.
The debtor’s Schedule I indicated that he enjoyed steady employment with the same employer for eight years, and expected to earn $38,000 in that current year. Nothing in the other schedules filed with the debtor’s petition indicated a sudden illness or calamity which might have necessitated filing for Chapter 7 protection.
The Bankruptcy Court found that the debtor’s post-petition truck purchase, made with the knowledge that a short-term 100 percent Chapter 13 plan was feasible, constituted the kind of egregious abuse that Bankruptcy Code §707(b) was intended to prevent.
The lesson of Rodriguez - review Chapter 7 schedules for the ability to pay.
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