UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
MATTHEW ALAN LEA
DEBTOR CASE NO. 20608
This matter is before the Court on the Amended Motion to Dismiss of Patsy Shelton, a creditor in this case. The Amended Motion was filed herein on October 12, 1993. A Motion to Dismiss or Alternatively to Permit the Debtor to Convert to Chapter 13 had been filed by Patsy Shelton and Tommy Collins on July 28, 1993. This Court directed the amendment of the July 28 Motion at a hearing conducted on October 5, 1993. Both the debtor and the movant have filed memoranda. A hearing on the Amended Motion to Dismiss was conducted on November 2, 1993, and the Motion was taken under consideration.
The record in this case indicates that the debtor filed his Chapter 7 petition in this Court on May 26, 1993. The debtor's Statement of Financial Affairs listed a March 1993 judgment debt to Patsy Shelton in the amount of $4,050.00, an unsecured nonpriority claim. This is the only debt listed in the petition. Schedule I of the petition listed $300.00 in monthly gross wages from a part-time job. Schedule J listed a total of $340.00 in monthly expenses. Upon hearing this matter, it appeared through statements of counsel that the debtor's net income was $130 per week and his monthly expenses had increased to $430 per month.
The movant seeks dismissal of this case pursuant to 11 U.S.C.'707(a) which provides that the court may dismiss a Chapter 7 case "only for cause". The movant contends that "cause" includes the absence of good faith, and that the debtor did not file his petition in good faith. She cites in support of her contention In re Hammonds, 139 B.R. 535 (Bkrtcy.D.Colo. 1992), a case in which the court dismissed a Chapter 7 case as having been filed in bad faith.
According to the movant, the Hammonds case stands for the proposition that the presence of certain characteristics can render a Chapter 7 case susceptible to dismissal on bad faith grounds. The Hammonds court cited In re Zick, 931 F.2d 1124, 1129 (6th Cir. 1991), the definitive case in this Circuit on this subject, and quoted from that opinion as follows:
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. It was not abuse of discretion to conclude that the factors found in this case amounted to a lack of good faith...(emphasis added).
The principle being enunciated here is that consideration of dismissal based upon lack of good faith must be undertaken on an ad hoc basis.
This Court has previously ruled in In re Bridges, 135 B.R. 36 (Bkrtcy.E.D.Ky. 1991), that where a creditor did not allege fraud or misconduct and presented no evidence of a lavish lifestyle or excessive spending habits on the part of the debtor, a Chapter 7 case would not be dismissed for having been filed in bad faith. The instant case is similar in that no such egregious conduct has been alleged, nor has there been an allegation of lavish lifestyle or excessive spending habits. The movant believes that the debtor has enough income to pay the debt he owes her and that this is sufficient evidence of lack of good faith. Case law does not support this belief.
In consideration of the foregoing, it is therefore the opinion of this Court that the Amended Motion to Dismiss of creditor Patsy Shelton should be overruled. An order in conformity with this opinion will be entered separately.
By the Court -
Robert E. Bathalter, Esq.
Richard A. Sadoff, Esq.