In re Romero, 557 B.R. 875

Peter Romero, a retired U.S. Ambassador, served ~8 years on Stanford International’s advisory board and received ~$700,000 in fees; Receiver sued and obtained a judgment of approximately $1,275,000, which the Fifth Circuit affirmed.
Romero filed Chapter 7 on Sept. 30, 2015. The Receiver moved to dismiss under 11 U.S.C. § 707(a) for alleged bad faith.
Romero holds substantial assets largely claimed as exempt: tenancy-by-the-entireties real property (equity ~ $2 million), IRAs (~$700,000), and a defined benefit plan (~$1.5 million).
Romero surrendered nonexempt assets (vehicles, two boats) to the trustee; trustee sold those assets and Romero cooperated with discovery and a Rule 2004 exam.
Romero’s wife suffers a severe, disabling brain infection; disability payments were terminating, household medical expenses were high, and Romero began IRA withdrawals for living/care expenses.
Receiver asserts Romero filed to avoid the single large judgment and to protect exempt assets; court held an evidentiary record and denied the Receiver’s motion to dismiss.

Issue	Plaintiff's Argument (Receiver)	Defendant's Argument (Romero)	Held
Whether bad faith can constitute “cause” under § 707(a)	§707(a) “for cause” includes bad faith and justifies dismissal	Even if bad faith can be cause, Romero acted in good faith	Court: Bad faith may be cause (citing precedent) but must be shown on totality of circumstances
Whether Romero concealed or misrepresented assets/income	Romero filed to protect large exempt assets and avoid judgment; factual concealment/misrepresentation implied	Romero fully disclosed assets, produced documents, answered Rule 2004, no transfers to hide assets	Court: No concealment or misrepresentation found
Whether Romero’s filing was motivated solely to shield exempt assets / overutilize the Code	Filing primarily to avoid single creditor judgment and retain substantial exempt wealth	Filing motivated by multiple factors: wife’s illness and loss of disability income, inability to work, punitive litigation tactics by Receiver; Romero surrendered nonexempt assets	Court: Protecting exempt assets alone insufficient here; Romero’s circumstances show good faith
Whether dismissal for bad faith is warranted on McDow factors and totality of circumstances	Factors (single-judgment avoidance, resources, motive) support dismissal	Romero did not engage in procedural gymnastics, made settlements efforts, surrendered nonexempt assets, and disclosed fully	Court: Applying McDow factors, dismissal denied — no bad faith shown

Janvey v. Romero, 817 F.3d 184 (5th Cir. 2016) (affirming Receiver’s judgment on fraudulent transfer claim against Romero)
In re Piazza, 719 F.3d 1253 (11th Cir. 2013) (holding § 707(a) “cause” can encompass bad faith)
In re Padilla, 222 F.3d 1184 (9th Cir. 2000) (reading: bad faith alone generally does not provide cause to dismiss Chapter 7)
In re Huckfeldt, 39 F.3d 829 (8th Cir. 1994) (adopting narrow approach: extreme misconduct required for bad-faith dismissal)
In re Krueger, 812 F.3d 365 (5th Cir. 2016) (recognizing good-faith standard in Chapter 7 and that cause may include bad faith)
In re Schwartz, 799 F.3d 760 (7th Cir. 2015) (upholding § 707(a) dismissal where conduct showed bad faith)
In re Tamecki, 229 F.3d 205 (3d Cir. 2000) (allowing dismissal under § 707(a) when petitioning party fails to show good faith)
In re Zick, 931 F.2d 1124 (6th Cir. 1991) (lack of good faith is valid basis for dismissal)
Carolin Corp. v. Miller, 886 F.2d 693 (4th Cir. 1989) (recognizing implicit good-faith requirement for filing Chapter 11 petitions)