556 B.R. 691
Bankr. E.D. Pa.2016Background
- Debtor previously represented ownership of a Minuteman Press (MP) franchise in a 2012 Baystone Chapter 7 case; that case closed with no assets administered.
- Debtor filed a pro se Chapter 7 petition in 2014 (dismissed for lack of timely credit counseling) and reopened; he then filed the instant Chapter 7 on November 24, 2015.
- Trustee sought documents and information showing the Debtor’s ownership/interest in Minuteman Press Conshohocken LLC (MPC) and the MP franchise; Court ordered production by Feb 6, 2016 (Production Order).
- Debtor repeatedly refused to answer Trustee’s questions at §341 meetings, gave conflicting testimony about ownership of the franchise and MPC, and produced only limited records until the night before the final hearing.
- Trustee and U.S. Trustee moved to dismiss under 11 U.S.C. § 707(a) for bad faith and sought a two-year bar to refiling; Trustee also moved for contempt for failure to comply with the Production Order.
- Court found persistent inconsistencies in bills of sale, tax returns, 1099s, corporate/franchise records, Debtor’s schedules/SOFA, refusal to cooperate, and near-total noncompliance with the Production Order — concluding bad faith dismissal with a two-year refiling bar.
Issues
| Issue | Plaintiff's Argument (UST/Trustee) | Defendant's Argument (Debtor) | Held |
|---|---|---|---|
| Whether §707(a) allows dismissal for bad faith | Debtor concealed/misrepresented assets, refused to cooperate, filed inconsistent schedules — warrants dismissal for cause | Debtor claimed he provided documents in possession and denied concealment; asserted need for counsel at hearings | Court: §707(a) permits dismissal for bad faith; Debtor failed to show good faith — case dismissed for cause |
| Whether a refiling bar is appropriate and length | UST: two-year bar justified by egregious and repeated abuse of process | Debtor: no persuasive rebuttal; belated production and explanations not credible | Court: imposed two-year bar to refiling under its authority to curb abuse |
| Whether Debtor’s refusal to answer §341 questions constitutes cause | Refusal hindered Trustee’s fiduciary duties and investigation; failure to cooperate evidences bad faith | Debtor said he needed counsel and later claimed he answered to best ability | Court: refusal to answer after prior court instruction showed deliberate obstruction and supported bad faith finding |
| Whether Debtor’s failure to comply with Production Order warrants contempt or supports dismissal | Trustee sought contempt and turnover; UST relied on noncompliance as evidence of concealment | Debtor claimed he produced all documents he possessed and later produced voluminous materials shortly before hearing | Court: declined to reach contempt merits; long delay and near-nonproduction supported bad faith dismissal and refiling bar |
Key Cases Cited
- In re Smith, 507 F.3d 64 (2d Cir. 2007) (§707(a) "for cause" list not exclusive; bad faith dismissal recognized)
- In re Tamecki, 229 F.3d 205 (3d Cir. 2000) (debtor must demonstrate good faith; dismissal appropriate where filing lacks honest intention)
- Perlin v. Hitachi Capital Am. Corp., 497 F.3d 364 (3d Cir. 2007) (good-faith inquiry considers all facts and circumstances)
- In re Integrated Telecom Express, 384 F.3d 108 (3d Cir. 2004) (good-faith standard and totality-of-circumstances approach)
- In re Zick, 931 F.2d 1124 (6th Cir. 1991) (bad-faith dismissal appropriate in egregious concealment/misrepresentation cases)
- In re Casse, 198 F.3d 327 (2d Cir. 1999) (bankruptcy courts may restrict future filings to prevent abuse)