How the the court decides to Dismiss or Convert your chapter seven.
Posted here by Flint Bankruptcy Attorney Terry Bankert 235-1970. See Http://www.attorneybankert.com
YOU MUST FILE YOUR DOCUMENTS
In general, a case may be dismissed or converted for cause under 11 USC 707(a), which may include failure to file documents in a timely manner, undue delay that is prejudicial to creditors, failure to pay statutory fees, or for abuse. See In re Zick, 931 F2d 1124 (6th Cir 1991).
IF YOU ABUSE THE SYSTEM YOUR BANKRUPTCY COULD BE DISMISSED.
The court may also dismiss a bankruptcy case under 11 USC 707(b) if the case would be “an abuse of the provisions” of Chapter 7 and if the debtor’s obligations are primarily consumer debts.
THE BANKRUPTCY COURTY WILL TEST TO SEE IF YOU HAVE THE MEANS TO PAY YOURS BILLS.
The Bankruptcy Code contains an elaborate formula to determine whether a case is presumptively abusive, brought in by the Bankruptcy Reform Act of 2005, called the means test. 11 USC 707(b). The test is applied only if the debtor’s current monthly income, as defined in 11 USC 101, is above the safe harbor provision set forth in 11 USC 707(b)(7).
USING THEIR FORMULA IF YOUR NET INCOME IS TOO HIGH THE COURT WILL PRESUME YOUR FILING IS AN ABUSE OF DISCRETION.
If it is, the debtor must perform a complicated set of calculations to determine whether the debtor’s income, minus certain standardized expense deductions, is above a certain threshold. If so, the case is presumed to be an abuse.
THE BANKRUPTCY TRUSTEE IS LOOKING TO MAKE SURE YOUR NET INCOME IS BELOW THE MEDIAN AMOUNT FOR A FAMILY YOUR SIZE.
However, if the debtor’s income is less than the median income for a family the size of the debtor’s, the debtor meets the safe harbor provision and does not need to perform the means test calculations. Similarly, if the debtor’s debts are primarily business debts, the debtor need not perform the means test calculations.
HIGH INCOME WILL FORCE YOU FROM CHAPTER 7 INTO CHAPTER 13
This test is designed to keep filers with higher incomes from filing Chapter 7 and instead force them into Chapter 13. The idea was to restrict access to Chapter 7 liquidations to those who are truly unable to pay their debts and to require people who have the ability to repay their debts to do so.
11 USC 707(b)(3) may be used to dismiss a case even if a debtor is found to be eligible for relief under 11 USC 707(b)(2)—the means test. In essence, if the court believes that it would be an abuse of the Bankruptcy Code to grant the debtor relief under Chapter 7, it may deny such relief under this provision.
Michigan Family Law ch 17 (Hon. Marilyn J. Kelly et al eds, ICLE 7th ed 2011), at
(last updated 12/16/2011).