VS: ADV. NO. 93-6026





This matter is before the Court upon cross Motions for Summary Judgment filed herein. Gary Wayne Bays and Lena Mae Bays ("debtors") filed their Petition under Chapter 7 of the Bankruptcy Code on February 16, 1993. The schedules attached to the Petition list creditors holding security with claims in the amount of $18,777.24 and creditors holding unsecured non-priority claims in the amount of $25,849.45. The assets listed include $1,000 in household furniture and furnishings, $1,000 in clothing and ornaments of the person, a 1984 Dodge Ram pickup truck and a 1988 Toyota Tercel automobile, with the total value of $2,500. These assets total $4,500 in accordance with the debtors' schedules. While not listed as an asset, Schedule D lists an indebtedness secured by a 1985 Darlington Mobile Home with the lien held by Springhill Savings & Loan. The Court is not aware of why the indebtedness is listed as a secured debt without a corresponding asset being scheduled but assumes this was an omission or oversight on the part of debtors' counsel. Debtors have reaffirmed the indebtedness to Springhill Savings & Loan and the Trustee has abandoned any interest in the assets listed by the debtors in their schedules and the mobile home. Apparently, the debtors have one or more children since child care is listed as an item of expense in their budget filed with this Petition.

The present question before the Court arose upon the filing of a Motion to Dismiss pursuant to 11 U.S.C. '707(a) filed herein on May 28, 1993 by creditor, Central Financial Services, Inc. ("Central"). Central is listed as an unsecured non-priority creditor in the debtors' schedules with amounts due of $1,037.34 and $2,090. Pursuant to motion filed by Central, the Motion to Dismiss was treated as an adversary proceeding herein. Pursuant to an Order of February 18, 1994, the parties agreed to submit the matter to the Court upon an agreed statement of facts. Those Stipulations were filed with the Court on February 18, 1994. The Court notes that Stipulation No. 16 should be deleted therein.

The thrust of Central's Motion is that the debtors lacked good faith in filing their Petition herein because they incurred significant indebtednesses shortly prior to filing, ceased paying their installment accounts several months before filing and, allegedly, under advice from counsel delayed filing of their proceeding approximately 30 days in order to be outside of the 40 day period set forth in Bankruptcy Code '523(a)(2)(C). Central also alleges that the debtors further planned their bankruptcy proceeding in order that Gary Wayne Bays be unemployed at the time of filing. Apparently, and as conceded by Central, Mr. Bays was employed as a Deputy Sheriff and desired to declare himself as a candidate for Knox County (Kentucky) Jailer, but could not do so while a Deputy Sheriff. He then resigned his position as Deputy Sheriff and ran in and lost the race for Jailer, whereupon, after filing the Petition, he was rehired at his old position as a Deputy Sheriff.

The parties have stipulated that the debtors had two accounts with Central and the last payments on those accounts were made in November, 1992. They further stipulated various other accounts owed by the debtors and that, effectively, payments on these accounts ceased no later than mid-November 1992. Additionally, it is stipulated that charges were made by the debtors on their Chase Visa card and their J C Penney account in November and December, 1992. It is further stipulated that, prior to resigning his job as Deputy Sheriff, debtor, Gary Wayne Bays, had gross pay of $1,148.44 and net pay of $970.27 monthly, and debtor, Lena Mae Bays, has net income of $606.81 per month. Thus, the debtors' total net monthly income is approximately $1,577.

Central relies primarily upon In re Zick, 931 F.2d 1124 (6th Cir. 1991). That case clearly holds that good faith is an implicit requirement of Bankruptcy Code '707(a) and holds that motions to dismiss must be considered on an ad hoc basis. The substance of the Zick case, as regards the present proceeding appears at page 1129 where the Court says:

It should be confined carefully and is generally utilized only in those egregious cases that entail concealed or misrepresented assets and/or sources of income, and excessive and continued expenditures, lavish lifestyle, and intention to avoid a large single debt based on conduct akin to fraud, misconduct, or gross negligence.

In applying this standard under the facts as stipulated by the parties, the Court cannot find concealed or misrepresented assets. It appears that the omission from the assets schedules of the mobile home was an oversight of counsel, and the Court concludes from its disclosure in the liabilities schedules that the debtors had no intention to conceal this asset. The only evidence bearing upon lavish lifestyle relates to charges made at J C Penney in the amount of $865 for clothing in November and December, 1992 and another purchase, the specifics of which are not listed using the Chase Visa card in December of 1992. While the amount of purchased clothing at one time is fairly large, since the debtors have children and in the absence of specific detail, the Court cannot conclude that this expenditure demonstrates a lavish lifestyle. Further, the Court cannot find any intention to avoid a large single debt based on conduct akin to fraud, misconduct or gross negligence. The indebtednesses of the debtors herein, as regards unsecured, non-priority debts, are to 14 different creditors with amounts ranging from $142.46 to $8,360. While the debtors apparently have reaffirmed some of their secured debt, it does not appear that any one particular creditor bears the brunt of this proceeding more than the others. Additionally, while it may have been imprudent for Mr. Bays to quit his job to run for public office, it appears that the financial situation of the parties was already in dire straits. The Court concludes this from the simple fact that essentially all of the creditors predated Mr. Bays' resignation from his job.

In certain circumstances,"bankruptcy planning" can evidence a lack of good faith on the part of the debtors which will warrant denial of relief under the Bankruptcy Code. In the present case, the allegation is that the debtors consulted counsel who advised them to wait for a period of time, apparently one month before filing. The Court can offer no criticism under the present circumstances of such advice in this case.

In summary, the Court concludes that the Motion to Dismiss herein for lack of good faith should be overruled, which will be done by a separate Order herein.

Dated this _______ day of March, 1994.







Robert L. Stafford, Esq.

Samuel E. Begley, Esq.

U.S. Trustee

Maxie E. Higgason, Esq.