Source: https://law.justia.com/cases/federal/appellate-courts/F3/153/1/619622/
Timestamp: 2020-08-09 01:48:01
Document Index: 673823737

Matched Legal Cases: ['§ 707', '§ 707', '§ 101', '§ 1325', '§ 707', '§ 707', '§ 105', '§ 707']

In Re Richard Lamanna, Debtor.first Usa, et al., Appellees, v. Richard Lamanna, Appellant, 153 F.3d 1 (1st Cir. 1998) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › First Circuit › 1998 › In Re Richard Lamanna, Debtor.first Usa, et al., Appellees, v. Richard Lamanna, Appellant
In Re Richard Lamanna, Debtor.first Usa, et al., Appellees, v. Richard Lamanna, Appellant, 153 F.3d 1 (1st Cir. 1998)
U.S. Court of Appeals for the First Circuit - 153 F.3d 1 (1st Cir. 1998) Heard July 27, 1998. Decided Aug. 25, 1998
The question of whether allowing Lamanna's bankruptcy petition would constitute "substantial abuse" of Chapter 7 under § 707(b) contains two components: first, the proper test by which "substantial abuse" is measured; second, whether, applying that test, the BAP correctly decided the issue. The facts are undisputed, and we review de novo the BAP's conclusions of law. See In re Healthco Int'l, Inc., 132 F.3d 104, 107 (1st Cir. 1997).
Although "substantial abuse" is not self-defining, the history and policies underlying § 707(b) give content to its meaning and purpose. That history is well set out in previous opinions. See In re Green, 934 F.2d 568, 570 (4th Cir. 1991); In re Krohn, 886 F.2d 123, 125-26 (6th Cir. 1989); In re Walton, 866 F.2d 981, 983 (8th Cir. 1989); In re Kelly, 841 F.2d 908, 914 (9th Cir. 1988). We summarize the pertinent points.
Section 707(b) was added to the Bankruptcy Code as part of the Bankruptcy Amendments and Federal Judgeship Act of 1984. See Pub. L. 98-353, 98 Stat. 333, 355 (1984) (codified in various sections of 11 U.S.C. and 28 U.S.C.) (the "1984 Act"). It authorizes a bankruptcy court, either sua sponte or on the motion of the United States Trustee, to dismiss the Chapter 7 petition of an individual debtor who owes primarily consumer debts where allowing the petition would be a "substantial abuse" of Chapter 7. Congress chose neither to define "substantial abuse" in the 1984 Act nor to leave specific guidance in legislative history.6 Congress thus left a flexible standard enabling courts to address each petition on its own merit.
The Bankruptcy Code defines "consumer debt" as "debt incurred by an individual primarily for a personal, family, or household purpose." 11 U.S.C. § 101(8). The term "primarily" refers to "an overall ratio of consumer to nonconsumer debts of over fifty percent," and "the consumer debts should be evaluated not only by amount, but by their relative number." In re Booth, 858 F.2d 1051, 1055 (5th Cir. 1988)
"Disposable income" is defined as income "not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor." 11 U.S.C. § 1325(b) (2)
The "totality of the circumstances" test has been adopted by several bankruptcy courts within this circuit. See, e.g., In re Haffner, 198 B.R. 646, 648 (Bankr.D.R.I. 1996); In re Mastromarino, 197 B.R. 171, 176-77 (Bankr.D. Me. 1996); In re Snow, 185 B.R. 397, 401-03 (Bankr.D. Mass. 1995). These courts share the Krohn view that a debtor's ability to fund a Chapter 13 plan out of future disposable income is the primary, but not conclusive, factor to be considered in determining whether granting relief would constitute "substantial abuse."
Lamanna cites to a case from the bankruptcy court for the District of New Hampshire, In re Keniston, 85 B.R. 202 (Bankr.D.N.H. 1988), for the proposition that "substantial abuse" refers strictly to bad faith acts. There is no evidence of bad faith in this case, he says, hence there is no "substantial abuse" warranting dismissal. In Keniston, the court sought to avoid an analysis of the constitutionality of § 707(b) under the Equal Protection Clause by interpreting § 707(b) to provide an additional check on "bad faith" filings under § 105(a). This interpretation of § 707(b) was specifically rejected in Snow and Haffner, and is not followed by any bankruptcy court in this circuit. We also reject Keniston 's analysis. As stated above, we regard bad faith as part of, but by no means the entirety of, the "substantial abuse" calculation