509 B.R. 945
Bankr. D.N.M.2014Background
- Debtor filed a voluntary Chapter 7 petition on August 16, 2013; Movant sought dismissal or conversion for lack of good faith.
- Movant is Physician Groups, L.C. d/b/a Medical Group of Missouri; Debtor previously worked as an obstetrician under Movant’s employment.
- Movant terminated Debtor in December 2010; Debtor disputes termination and consequences on his practice and finances.
- Debtor relocated to New Mexico in 2011 and continued practice; Movant pursued recovery of the tail policy cost of $145,254 when Debtor did not purchase it.
- Missouri default judgment against Debtor for $170,854.09 was entered in 2013, later domesticated in New Mexico; writ of garnishment prompted bankruptcy filing.
- Debtor’s assets are minimal (no real estate; two secured car loans reaffirmed; wife’s jewelry disputed as non-estate property); Debtor’s income ~ $290,000/year with about $5,000/month disposable funds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether bad faith constitutes cause to dismiss under § 707(a) | Movant argues bad faith exists based on Debtor’s actions and financial conduct | Debtor argues lack of egregious conduct; high income alone is not bad faith | Bad faith may be a § 707(a) cause, but only in extreme cases; court finds no bad faith here |
Key Cases Cited
- In re Zick, 931 F.2d 1124 (6th Cir.1991) (bad faith can be a valid cause for dismissal under § 707(a))
- In re Huckfeldt, 39 F.3d 829 (8th Cir.1994) (advocates a narrow, 'for cause' approach to § 707(a) dismissal)
- In re Piazza, 719 F.3d 1253 (11th Cir.2013) (totality of circumstances test for § 707(a) bad faith)
- In re Padilla, 222 F.3d 1184 (9th Cir.2000) (bad faith per se not required for Chapter 7; context matters)
- In re Lobera, 454 B.R. 824 (Bankr.D.N.M.2011) (discusses limitations on using § 706(b) when no additional grounds exist)
- In re Quinn, 490 B.R. 607 (Bankr.D.N.M.2012) (conversion not compelled when evidence mirrors § 707(a) grounds)
- In re Hardigan, 490 B.R. 437 (Bankr.S.D.Ga.2013) (denial of conversion where no independent grounds exist)
- In re Mosley, 501 B.R. 736 (Bankr.D.N.M.2013) (liberal Bankruptcy Code policy; supports stay of discharge not here)