Chapter 7 Liquidations. In 1987, Bank South repossessed and sold ...

[LCritchfi]

Chapter 7 Liquidations. In 1987, Bank South repossessed and sold Jamie Lee Busbin's 1979 Ford LTD automobile. The price that the automobile brought at the sale was 1,450 short of the amount Busbin owed Bank South. Bank South obtained a deficiency judgment for the 1,450 and garnished Busbin's wages, collecting 896.46. Busbin filed a voluntary petition for a Chapter 7 bankruptcy discharge, listing Bank South's claim for 1,450 as his sole debt. Busbin told the court that he intended to file a complaint to recover the 896.46 Bank South had already collected on the ground that the sale had not been conducted so as to obtain the highest price for the car, but he offered no evidence to support his contention. Busbin showed that he had a monthly net income of 1,150, expenses of 970, and disposable income of 130 and that he expected an income tax refund of 500. A motion to dismiss Busbin's petition was filed, alleging that he had a present ability to pay his outstanding debts and that granting a discharge would be a substantial abuse of the provisions of Chapter 7. Will the court dismiss Busbin's petition? Explain.

Question 2

Emile owns Emile's Used Car Emporium. Several people work for him at the Emporium. When Emile is gone, he leaves one of his best salespersons, Meg, in charge. Over the years, Emile has given Meg the authority to contract with vendors, negotiate sales, and conclude car sales contracts in his name. One August, Emile takes a long vacation, leaving Meg in charge. While he is gone a hurricane hits Florida where the Emporium is located, causing severe damage. Because Emile is floating down the Amazon, Meg cannot reach him for instructions. She decides that rather than leave the place in shambles, she will hire people to repair the Emporium. Meg hires a carpenter to rebuild a wall that was blown down by the storm. Phil, the carpenter, is busy at work on his scaffold when Meg's Scottish terrier Adam, who she keeps with her at work, plows into the scaffolding while chasing a cat. Phil is knocked off the scaffold and falls ten feet to the ground, suffering a broken leg. When Meg acts to repair the Emporium after the hurricane, she is acting as an agent:
 a. through operation of law b. through estoppel
  c. through ratification
  d. pursuant to federal law
  e. none of the other choices

[patma1981]

Answer to Question 1

Chapter 7 liquidations
The court dismissed Busbin's petition. The court concluded that the primary purpose for the substantial abuse provision of Chapter 7 was to provide for the dismissal of cases of debtors who can pay their debts from their excess disposable income. The court discussed a long line of cases which uniformly hold that a debtor's ability to pay his debts defines substantial abuse. The court noted that Busbin's excess disposable income would allow him to pay off the entire remaining balance due to Bank South in less than five months. He could pay the entire debt of 1,450 in less than twelve months. The court pointed out, however, that while courts have focused on the debtor's ability to pay as the principal factor in determining substantial abuse, the courts have by no means focused on ability to pay as the sole factor. As in nonbankruptcy cases, a court can dismiss a petition . . . that is filed with a lack of good faith or as an abuse of process. The court explained that while it does not appear Busbin's statement of his monthly expenses is excessive, it likewise does not appear to be understated. He has offered no evidence of any recent calamity which would affect his ability to pay. . . . Thus, it does not appear that he is inflicted with crushing debt burdens and severe financial problems' or even with debts he cannot pay. It is apparent he filed his Chapter 7 petition for the sole purpose of discharging a single debt which he does not wish to pay. This case was decided before the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which provided a means test and other specific grounds to determine whether a petition constitutes substantial abuse. Under that act, however, the result in this case would likely have been the same.

Answer to Question 2

a

[LCritchfi]

TYSM

[dreamfighter72]

Gracias!