Opinion ID: 547481
Heading Depth: 1
Heading Rank: 2

Heading: Dismissal of the Bankruptcy Petition

Text: 17 If the bankruptcy court and district court erred in refusing to dismiss the bankruptcy proceeding in its entirety, the issue of contract-rejection would be moot. We therefore first address the dismissal question. 18 In affirming the bankruptcy court's refusal to dismiss the petition, the district court found that the debtor's current financial condition justifies the filing of a voluntary petition in bankruptcy. Taylor, 103 B.R. at 521. The court noted that the bankruptcy petition lists liabilities totaling $4,518,701.50 ($2,530,730 secured, $1,987,969.50 unsecured), and assets totaling only $734,215. The court further concluded that appellant had not established that the petition was filed in bad faith. We review the factual component of these findings under the clearly erroneous standard, and the legal component de novo. 19 Appellant contends that, if the personal liabilities of the debtor had not been improperly confused with the debts of the various Group entities, and if the debtor's personal liabilities had been properly evaluated to reflect their contingent nature, the debtor's financial picture would not be nearly bleak enough to warrant filing for bankruptcy; in addition, appellant argues, inter alia, that many of the listed liabilities are not enforceable against the debtor for various reasons: that the debtor was merely an accommodation-maker, whose liability was extinguished by the acts of the other parties; and that the debtor's obligations had been canceled by virtue of novations or settlement agreements. We reject these arguments. 20 Even if debtor's contingent liabilities (approximately $1.2 million in amount) were disregarded, his debts would greatly exceed his assets. 2 Moreover, appellant's argument rests upon an unduly optimistic view as to the remoteness of the contingency. The district court expressly found that the debtor was not a mere accommodation party--he was, after all, personally guaranteeing repayment of loans to Group entities (owned by The Group members) for the direct benefit of the members of The Group, himself included. Whether a novation occurred as to certain of these guaranty transactions depends upon the intent of the parties. This is a factual question, and the findings set forth in the record are not clearly erroneous. 3 21 In short, we conclude that the order appealed from, to the extent appellant's motion to dismiss the bankruptcy proceeding was denied, must be affirmed. 22