In re Bryant
| Decision Date | 06 December 1984 |
| Docket Number | Bankruptcy No. C-B-84-00636. |
| Citation | 47 BR 21 |
| Court | U.S. Bankruptcy Court — Western District of North Carolina |
| Parties | In re Mitchell W. BRYANT, Debtor. |
Joseph Henninger, Jr., Charlotte, N.C. for debtor.
Keith Johnson, Esq., Trustee.
This matter came before the Court on its own Order to the Debtor to appear and show cause, if there by any, why this proceeding should not be dismissed pursuant to the substantial abuse provisions of 11 U.S.C. § 707(b). The Debtor appeared by Joseph Henninger, Jr., Esq. Keith Johnson, Esq., appeared as Trustee and Attorney for the Trustee.
The Debtor, Mitchell W. Bryant, on October 24, 1984 filed a Voluntary Petition with this Court under Chapter 7 of the Bankruptcy Code. In the Schedule A-3, Creditors Having Unsecured Claims Without Priority, section of his petition, the Debtor listed the following claims owed to creditors:
Berry, Hogewood, Edwards &
Freeman, P.A. $ 512.82
Custom Printers & Design
Graphix, Inc. 10,000.00
First Citizens Bank & Trust
Company (MasterCard
Division) 1,038.10
First Citizens Bank & Trust
(VISA Division) 1,034.05
Ford Motor Credit Co. 9,248.00
Namaco Industries 21,000,00
__________
Total unsecured, non-priority
claims $42,832.97
The Debtor also listed two secured claims totaling $42,260.00. There were no unsecured priority claims listed.
This matter came to the Court's attention after an initial examination of the Debtor's petition, wherein he listed the six obligations set forth above. This examination showed the Debtor's monthly income to exceed his estimated monthly expenses, $3,420.00 to $3,252.00, respectively, and left some $200.00 per month which could have been paid under a Chapter 13 plan to his creditors. Further examination of the Debtor's schedules indicated almost all of his monthly expenses to be greatly inflated. Moreover these expenses included some $400.00 per month of credit card payments which could have been reduced by including them in a Chapter 13 plan. Taken together, these facts indicated that the Debtor could, with only a modicum of restraint, have made payments of at least $800.00 per month under a Chapter 13 plan (totalling $28,000.00 over 3 years or 67% of his unsecured obligations).
Since the Debtor in his petition had failed to denote any of his obligations as being business debts (as required by Bankruptcy Rule 1007(b), Forms 8 and 10, and Local Rule 10(C)), and because the Debtor was seeking Chapter 7 relief where there were indications of a substantial ability to pay his debts, the Court felt a § 707(b) hearing was appropriate.
At hearing the Debtor ignored his secured obligations and reasserted he owed only six debts. He further testified that three of these (to Custom Printers, Ford Motor Credit Company, and Namaco; totalling $40,248.00) were personally guaranteed business debts. He argued that inasmuch as these were not "primarily consumer debts" as contemplated by § 707(b) with respect to amount, the Court could not dismiss his case under § 707(b).
The Court at hearing, however, determined the Debtor's home mortgages to be consumer obligations and included them with his other consumer debts. These are as follows:
Cameron-Brown Company
(First Mortgage on
Residence) $32,260.00
AVCO (Second Mortgage on
Residence) 12,000.00
Berry, Hogewood, Edwards &
Freeman, P.A. 512.82
First Citizens Bank & Trust
(MasterCard Div.) 1,038.10
First Citizens Bank & Trust
(VISA Division) 1,034.05
__________
Total Listed Consumer Debts $46,844.97
Additionally, the Debtor's testimony acknowledged that he had intentionally omitted in his petition a credit line with Wachovia Bank and balances he owed on at least seven to eight credit cards which he possessed at the time of filing. The Court found these to be consumer debts of substantial amount but the Debtor was unable, or at least unwilling, to identify these or give their amounts. It is therefore impossible to determine with any precision what amounts were owed on these unlisted debts and to whom.
The Court found the Debtor to have non-consumer debts in the following amounts:
Custom Printers & Design
Graphix, Inc. $10,000.00
Ford Motor Credit Company 9,248.00
Namaco Industries 21,000.00
__________
Total Listed Non-Consumer
Debts $40,248.00
Debtor's Statement of Monthly Expenses estimated the average future monthly expenses for his family of four as follows:
Rent/Mortgage payments 671.00
Utilities 245.00
Food 500.00
Credit card payments 400.00
Car Payments (1984 Buick) 381.00
Transportation 250.00
Clothing 500.00
Medical/Drug expenses 200.00
Laundry 100.00
Recreation 100.00
Cable Television 65.00
Car Rental 50.00
Automobile Insurance 50.00
Newspapers 25.00
_________
Total Estimated Monthly
Expenses $3,537.00
The record discloses that the Debtor and his wife own a home located in Mathews, North Carolina with an estimated fair market value of $52,500.00. The property is encumbered by the secured claims of Cameron-Brown Company and AVCO. There is some $8,000.00 of equity in the property, which would be totally offset by the Debtor and his wife's exemptions under N.C. law. The Debtor is employed by Mathews Home Furnishings, Inc; a closely-held business which is owned by his wife. His testimony indicates his family's annual income exceeds $38,000.00; his petition disclosed a monthly income of $3,420.00 or $41,400.00 annually.
Under § 707(b) of the Code, Bankruptcy Judges are authorized to dismiss, sua sponte, cases filed by individual debtors having "primarily consumer debts", where the Court finds that to allow the case to proceed would be a "substantial abuse" of the provisions of Chapter 7. The Bankruptcy Amendments and Federal Judgeship Act () failed to define the phrases "primarily consumer debts" and "substantial abuse". The section is of such recent vintage that no published cases have construed the terms.
The Debtor has not suggested that the words "substantial abuse" should be given anything other than their ordinary, plain meaning and the court so construes them. By this definition, it is readily apparent that this case is one in which allowing the Debtor relief would constitute a substantial abuse of Chapter 7.
It was the philosophy of the constitutional authors and the intent of Congress in establishing the Bankruptcy Code, that this relief was to provide a fresh start for financially troubled persons. Bankruptcy was not intended to provide a means for the unscrupulous to avoid their creditors, but was designed to provide a second chance for persons who for reasons of calamity, sickness, unemployment, and the like were unable to meet their obligations. The case before the Court is not such a case.
First, this case was brought, not because of the Debtor's unemployment or an inability to pay on his part, but because he simply desired to shuck a couple of his debts. His testimony was that he had previously guaranteed a number of business debts and he filed this bankruptcy in order to "get rid" of the same. The Debtor claims he intended to pay his non-business-related debts; however, he seeks relief which would discharge both these guaranteed debts and his personal obligations.
Secondly, the Court finds on the part of the Debtor an utter disregard of his duties under the § 522 of the Code to truthfully list all of his obligations, his monthly expenses, and to disclose his general financial position to the Court. The Debtor in his petition cited only two credit card debts, one for a MasterCard, the other for a VISA card. However, at hearing, the Debtor stated that he had intentionally failed to list another seven or eight cards, claiming he didn't think them to be of significant amounts (The cards listed for MasterCard and VISA were stated to have balances owed of $1,038.00 and $1,034.05...
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