UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

COVINGTON DIVISION

 

 

IN RE:

JAMES C. SHIRES

DEBTOR CASE NO. 91-00890

 

MEMORANDUM OPINION

 

This matter is before the Court on the Motion to Dismiss with Prejudice for Cause filed on September 10, 1991, by Farmers Deposit Bank ("FDB"), a creditor of the debtor. FDB has moved pursuant to 11 U.S.C. '707(a), arguing lack of good faith on the part of the debtor. The debtor filed an Objection to the Motion to Dismiss on September 30, 1991, and a hearing was conducted on the Motion on October 1, 1991.

The record in this case indicates that the debtor filed his Chapter 7 petition in this Court on May 30, 1991. His schedules of assets and liabilities showed claims against him totalling $280,002.00, including a $164,831.00 debt to FDB and almost $40,000.00 in credit card and department store charge card debt; an interest in real property totalling $44,250.00; and personal property totalling $262,750.00. He claimed exemptions totalling $264,378.00, including a $250,000.00 TIAA-CREF Retirement and Annuity from the University of Kentucky. The debtor cites KRS 161.700 as the basis for his claim of exemption in regard to the annuity.

The debtor's schedule of current income lists his monthly gross pay as $5167.00, and his monthly net pay as $3171.00. His schedule of current expenditures lists a $911.00 home loan payment and a total of $493.00 per month for utilities, including a $190.00 per month telephone bill. His other monthly expenses include a $241.00 life insurance premium payment, a $340.00 car payment, a $398.00 payment for his daughter's car, $95.00 for education, $175.00 for recreation, clubs, and entertainment, and $300.00 for his daughter's rent.

At a Rule 2004 examination conducted on July 25, 1991, the debtor testified that he is president of Maysville Community College. (Depo., p. 10) His wife is employed as an instructor at Morehead State University, earning between $25,000.00 and $30,000.00 per year. (Depo., p. 12) The debtor testified that the $340.00 per month car payment is for his wife's vehicle, which will be paid off within the year, and that the $398.00 payment is for the lease of a 1990 Mercedes for his daughter. (Depo., pp. 16-18) He has the use of a state vehicle, and his monthly transportation expense is around $50.00 per month. (Depo., pp. 19-20).

The debtor further testified that the $95.00 per month education expense was for his daughter's tuition at the University of Kentucky, but that she was to graduate in August 1991, and he had actually made the last tuition payment before he filed his bankruptcy petition. (Depo., p. 20) The $175.00 entertainment expense is for his membership at the Maysville Country Club. (Depo., p. 21) The debtor did not list his transferrable country club stock as an asset. (Depo., pp. 21-22) He also failed to list his interest in funds on hand in a Cumberland Federal savings account. (Depo., pp. 57-58)

FDB contends, based on the record in the case and the testimony given by the debtor, that the debtor's bankruptcy petition was not filed in good faith and that it ought to be dismissed pursuant to 11 U.S.C. '707(a). It cites In re Zick, 931 F.2d 1124 (6th Cir. 1991), and In re Jones, 114 B.R. 917 (Bkrtcy. N.D.Ohio 1990), in support of this contention.

These cases hold that lack of good faith constitutes "cause" for purposes of '707(a). However, both of these cases involve debtors who engaged in misconduct. In Zick the debtor filed a Chapter 7 petition shortly after his former employer was awarded $600,000.00 for the debtor's malicious breach of a noncompetition agreement. The Jones case involved a debtor whose own fraud and misconduct created the debt he sought to discharge.

While the debtor herein failed to schedule some assets, he does not appear to have engaged in the sort of dishonesty and misconduct that was an essential element of both the Zick and Jones cases. In addition, Zick sets out elements to be considered the bases for a finding of lack of good faith, i.e., (1) the debtor's manipulations which reduced the creditors to one; (2) the debtor's failure to make significant lifestyle adjustments or efforts to repay; (3) the fact that the petition was filed clearly in response to the sole creditor's obtaining a mediation award; and (4) the unfairness of the debtor's use of Chapter 7 under the circumstances of the case. Zick, p. 1128. These are not all present in the instant case.

It is the opinion of this Court that a dismissal pursuant to 11 U.S.C. '707(a) is not appropriate under the circumstances of this case. Therefore, the Motion to Dismiss with Prejudice for Cause filed herein by Farmers Deposit Bank should be overruled.

Dated:

By the Court -

 

 

______________________________

Judge

 

Copies to:

Tracey N. Wise, Esq.

Michael W. Troutman, Esq.

 

 

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