ARTICLE: CHAPTER 7 BANKRUPTCY ABUSE: MEANS TESTING IS PRESUMPTIVE, BUT "TOTALITY" IS DETERMINATIVE Skip over navigation
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Copyright (c) 2008 Houston Law Review
Houston Law Review

ARTICLE: CHAPTER 7 BANKRUPTCY ABUSE: MEANS TESTING IS PRESUMPTIVE, BUT "TOTALITY" IS DETERMINATIVE

Summer, 2008

Houston Law Review

45 Hous. L. Rev. 901

Author

Ned W. Waxman* and Justin H. Rucki**

Excerpt



I. Introduction
 
One of the principal goals of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 1 was to prevent abuse of the Bankruptcy Code 2 in Chapter 7 liquidation cases. In some instances, debtors who had the actual ability to repay creditors under a plan in Chapter 13 chose, instead, to have their debts discharged in a Chapter 7 case. 3 Congress viewed this practice as abusive, and it "intended to ensure that debtors repay creditors the maximum they can afford." 4 To accomplish this purpose, Congress created a presumption of abuse called the means test, 5 as well as two new grounds for dismissal of a Chapter 7 case in situations where the debtor either passed the means test or successfully rebutted the presumption generated by it. One of these alternate bases for dismissal arises when the granting of relief under Chapter 7 would be an abuse considering the "totality of the circumstances ... of the debtor's financial situation." 6

In interpreting "totality of the circumstances," 7 authorities on bankruptcy law throughout the nation are divided on the following four critical issues. First, in considering the debtor's financial situation under totality, may the court take into account any relevant changes (such as in income or expenses) that occurred shortly before the bankruptcy petition was filed, as well as those occurring after the bankruptcy petition was filed? Second, in dismissing the case under totality, is the court bound by the dollar ...
 
 
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