2009 Consumer Law Recent Developments (Part II)

(Bankr. N.D. Ohio Jan. 30, 2009) (Debtor budgeting for college expenses for adult child had ability to repay 50% of unsecured debt and Chapter 7 would be abuse under totality of circumstances.); In re Booker, ___ B.R. ___, 2009 WL 160252 (Bankr. W.D. Mo. Jan. 23, 2009) (Debtors' ability to pay may be considered under totality of circumstances; although Social Security income is excluded from means test, it may be considered in ability to pay test. If unnecessary and unreasonable expenses are eliminated, debtors are able to pay significant dividend to unsecured creditors.).

Dismissal by debtor

Debtors' motion to dismiss for their failure to comply with § 521 requirements is denied. In the Chapter 13 phase of case, debtors failed to comply with § 521(a)(1)(B) filing requirements, and after conversion to Chapter 7, the trustee sought approval of settlement of discrimination cause of action for sufficient amount to pay all claims and return money to debtors. The debtors, who had not scheduled the cause of action originally, were unhappy with settlement and moved to dismiss, arguing that their failure to comply with § 521(a) within 45 days required automatic dismissal pursuant to § 521(i). The bankruptcy court exercised authority to deny dismissal based on waiver of the § 521(a) requirement. The First Circuit agreed, holding that the bankruptcy court had discretionary authority to waive the § 521(a) requirements after the fact, since § 521(a)(1)(B) begins with "the debtor shall file...unless the court orders otherwise." However, the ruling is not unlimited: "We do not decide today whether bankruptcy courts possess unfettered discretion to waive the disclosure requirements ex post. Where, however, there is no continuing need for the information or a waiver is needed to prevent automatic dismissal from furthering a debtor's abusive conduct, the court has discretion to take such an action....To sum up, the great divide in section 521 is between information that is required and information that is not. The Act allows courts to do the sifting suggested by that divide without rigid adherence to the forty-five-day deadline." Segarra-Miranda v. Acosta-Rivera (In re Acosta-Rivera), 557 F.3d 8 (1st Cir. 2009).

7. Discharge and Reaffirmation

7.1. Discharge exceptions

Bankruptcy Rule 4007(c) permits more than one extension. Holding that deadline in Rule 4007(c) for filing dischargeability complaints is not jurisdictional, the Rule does not limit a creditor to only one extension. United States v. Horras (In re Horras), 399 B.R. 885 (Bankr. S.D. Iowa 2009).

Reckless disregard for truth of financial statements supports § 523(a)(2)(B) exception and bankruptcy court may enter monetary judgment. The bankruptcy judge may look at totality of circumstances to infer debtor's intent to deceive when there is evidence of reckless disregard for truth and the "sheer

©2009 Hon. William Houston Brown