Texas residents may be interested in a bankruptcy case in which the trustee accused the debtor of abusing the process in order to alleviate his debt. The court ultimately decided in favor of the debtor, claiming that paying the expenses of two homes did not constitute abuse.
The trustee in this case did not presume that the debtor filed in bad faith, or that his abuse of the law was intentional. Instead, the trustee argued that the debtor could have repaid his creditors if he sold one of his residences and instead filed for Chapter 13. Income in this case was not the issue, but the trustee attempted to argue that the totality of the debtor’s financial circumstances, including his assets, violated the spirit of the law.
In deciding in favor of the debtor, the court provided a few statements clarifying its position on the law. The court held that the debtor’s lifestyle wasn’t lavish.The expenses of the two homes were the primary reason his finances were strained to the point of bankruptcy, and it was appropriate for him to seek relief. It was not an abuse for him to favor Chapter 7.
The choice of which chapter to file under is an important one when it is available because Chapter 13 and Chapter 7 bankruptcies have different requirements and work very differently. Chapter 7 cases primarily involve the liquidation of non-exempt assets in order to repay creditors as much as possible, with most of the remaining unsecured debt being discharged. A client may wish to consult with a bankruptcy attorney to determine what the eligibility requirements are.