In re Deaton, Bankruptcy No. 1-86-01461

• Decision Date: 08 October 1986
• Docket Number: Bankruptcy No. 1-86-01461,1-86-01471.
• Citation: 65 BR 663
• Parties: In re Mark E. DEATON and Nancy A. Deaton, Debtors. In re Carolyn A. ABRAHAM, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

65 B.R. 663 (1986)

In re Mark E. DEATON and Nancy A. Deaton, Debtors In re Carolyn A. ABRAHAM, Debtor.

Bankruptcy Nos. 1-86-01461, 1-86-01471.

United States Bankruptcy Court, S.D. Ohio, W.D.

October 8, 1986.

Harry B. Zornow, Hamilton, Ohio, for Mark and Nancy Deaton.

John W. Rose, Cincinnati, Ohio, for Carolyn Abraham.

Marc L. Shimberg, Cincinnati, Ohio, Estate Administrator.

Eileen K. Field, Cincinnati, Ohio, trustee.

DECISION AND ORDER

BURTON PERLMAN, Bankruptcy Judge.

The two cases identified in the caption are Chapter 7 cases. The Estate Administrator has called our attention to them, suggesting that we "may want to think about converting these cases to Chapter 13 proceedings." The basis for the suggestion is 11 U.S.C. § 707(b) which provides:

§ 707. Dismissal

* * * * * *

(b) After notice and a hearing, the court, on its own motion and not at the request or suggestion of any party in interest, may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts if it finds that the granting of relief would be a substantial abuse of the provisions of this chapter. There shall be a presumption in favor of granting the relief requested by the debtor.

As an initial matter, we hold that the origin of the suggestion is consistent with the statutory enactment, for it does not originate with "any party in interest".

The Estate Administrator has analyzed the captioned cases, particularly as to their disclosures regarding the disposable income of the respective debtors after expenses, and has called our attention to the fact that these debtors could both comfortably support a Chapter 13 payout plan. There is thus presented to us a question of whether the granting of a discharge in a Chapter 7 case to such a debtor constitutes "a substantial abuse of the provisions of this chapter." We are disinclined to find that "substantial abuse" arises merely from the fact that a debtor has the capability of funding a Chapter 13 plan.

Nor do we find that the authorities which have discussed the question require such a conclusion. A leading one of those authorities is In re Grant, 51 B.R. 385 (Bankr. N.D. Ohio 1985). In that case, Bankruptcy Judge White meticulously explores the legislative background of the 1984 Bankruptcy Amendments to the extent that they deal with consumer debtor provisions. While at p. 394 he says, in interpreting "substantial abuse", that it is key in analyzing that question whether the debtor can realistically fund a Chapter 13 plan which would pay his creditors a substantial portion of their claims, that is not all that he says. In Grant, the outcome was that the case was dismissed, but in reaching the conclusion that this was correct, the court felt it necessary to examine the background of the case for indicia of bad faith.

Such indicia are not part of the picture presented to us. All that is being suggested to us is that we find that a "substantial abuse" within the meaning of § 707(b) exists because these debtors could fund a Chapter 13 plan. One finds statements in the literature concluding that this ability is very important in the interpretation of § 707(b), based upon various statements which are to be found in the legislative record.

The reference here is particularly to comments by members of the House, indicating their perception that there had been abuses in utilization of the bankruptcy system in securing the discharge of what they viewed as an excessive amount of consumer debt, after the ...