Some creditors will accuse Florida residents of purposely attempting to avoid paying a debt. When the individual owing the debt files for Chapter 7 bankruptcy, a creditor could ask the court to dismiss the filing based on U.S. Bankruptcy Code section 707(a). This section requires that cause be determined for the filing to be dismissed, but it does not define that term, so the presiding judge has the discretion to determine what it means on a case-by-case basis.
For example, a creditor alleged bad faith and asked the court to dismiss a dentist’s bankruptcy based on Bankruptcy Code section 707(a). The creditor was awarded a judgment against the dentist for medical malpractice. The creditor claimed that the only reason the dentist filed was that he was attempting to avoid collection efforts on a medical malpractice judgment valued at $267,700.
Bad faith could be considered cause under the code section. However, the courts only use bad faith as a cause for dismissal in extreme cases. When there is no sign of abuse of the system, simply filing for bankruptcy does not fulfill the requirements of section 707(a). Therefore, the New York dentist did not act in bad faith when he filed for bankruptcy — even if he was doing so to avoid paying the judgment.
Every day, Florida residents consider filing for Chapter 7 bankruptcy in order to avoid foreclosure, lawsuits and other collection efforts from creditors. So long as there is no evidence of misrepresentation or concealment of assets and a lavish lifestyle, bankruptcy courts are not likely to dismiss the filing. However, potential filers should consult with an attorney before attempting to file on their own to ensure that all of the requirements of the Bankruptcy Code are met in order to avoid the possibility of having the case dismissed.
Source: bna.com, “Dentist Sued for Malpractice Didn’t File Ch. 7 in Bad Faith”, Diane Davis, Oct. 20, 2016