On January 30, 2014, in the In re Stancil case from the Raleigh Division of the Eastern District of North Carolina, Judge Stephani Humrickhouse issued an opinion on a dismissal based on 707(a) of the Bankruptcy Code. A dismissal under 707(a) can occur regardless of whether or not the debts are consumer in nature or non-consumer in nature. The following non-exclusive factors can be considered in a 707(a) analysis:
- The debtor reduces creditors to a single creditor in the months prior to the filing of the petition;
- The debtor failed to make lifestyle adjustments or continued living an expansive or lavish lifestyle;
- The debtor filed the case in response to a Judgment pending litigation;
- The debtor made no efforts to repay his debts;
- The unfairness of the use of Chapter 7;
- The debtor has sufficient resources to pay his debts;
- The debtor is paying debts to insiders;
- The schedules inflate expenses to disguise financial well-being;
- The debtor transferred assets;
- The debtor overly utilizing the protections of the Bankruptcy Code to the unconscionable detriment of creditors;
- The debtor employed a deliberate and persistent plan of evading a single major creditor;
- The debtor failed to make candid and full disclosure;
- The debts are modest in relation to assets and income; and
- There are multiple bankruptcies or other procedural gymnastics.
Typically, the presence of only one factor is not sufficient for a finding of cause for dismissal, however, the presence of multiple factors, when considered together, may suffice.
In the Stancil case the debtor’s case was dismissed primarily because of factor #12– namely failure to disclose certain entities that had value or generated income for the debtor and also failure to amend the documents throughout the case. 707(a) is one of several laws that reinforce how important a full and accurate disclosure of financial affairs is in the bankruptcy process.