Ralph Janvey v. Peter Romero, 883 F.3d 406

Background

Peter Romero, a former U.S. diplomat, consulted for Stanford Financial and received about $700,000 in fees; Stanford operated a multibillion-dollar Ponzi scheme. Janvey was appointed receiver and sued Romero, obtaining a $1.275 million judgment that Romero unsuccessfully appealed to the Fifth Circuit.
The day after the Texas judgment was certified in California, Romero filed a Chapter 7 petition in Maryland. At filing he listed over $5.3 million in assets, but most were statutorily exempt (including tenancy-by-the-entirety real property and retirement plans); nonexempt assets (a car and two boats) were surrendered and partially sold.
Romero’s unsecured debt was dominated (~90%) by Janvey’s judgment; remaining unsecured obligations included about $150,000 in unpaid legal fees.
Romero and his wife were unemployed; his wife suffered a debilitating brain infection requiring daily care and substantial medical costs, and two of her disability policies were terminating around the time of filing. Monthly expenses exceeded income by roughly $350.
Janvey moved to dismiss Romero’s Chapter 7 petition under 11 U.S.C. § 707(a) for bad-faith filing; the bankruptcy court denied the motion after applying the McDow multi-factor bad-faith test, the district court affirmed, and the Fourth Circuit affirmed on appeal.

Issues

Issue	Plaintiff's Argument (Janvey)	Defendant's Argument (Romero)	Held
Whether bad faith can constitute "cause" to dismiss under § 707(a)	Bad faith filings should be dismissible as "cause" to prevent abuse of bankruptcy	Bankruptcy balance permits dismissal for bad faith but standard is high; courts should apply totality of circumstances	Court: Bad faith can be "cause," but dismissal reserved for egregious abuse; apply totality of circumstances (affirmed denial)
Whether filing to avoid a single large judgment is per se bad faith	Romero filed solely to avoid Janvey’s judgment; that alone warrants dismissal	Filing in response to a single large debt is common and not per se bad faith absent fraud/misconduct	Court: Not per se bad faith; single-debt motive relevant but insufficient without more (affirmed denial)
Whether Romero’s settlement offers indicate bad faith/blackmail	Romero used settlement attempts plus bankruptcy threat to pressure a low recovery — evidence of bad faith	Settlement attempts are encouraged; failure to settle does not strip bankruptcy rights	Court: Settlement attempts do not show bad faith; settlement efforts weigh neutrally or favorably to debtor (affirmed denial)
Whether Romero’s substantial (mostly exempt) assets and ability to pay mandate dismissal	Romero’s sizeable assets (even if exempt) mean he can pay and should not get discharge	Exempt assets are protected by statute to afford a fresh start; ability to pay alone is not "cause" to dismiss	Court: Ability to pay is not per se cause; exempt assets cannot be commandeered to defeat exemption scheme (affirmed denial)

Key Cases Cited

Janvey v. Romero, 817 F.3d 184 (5th Cir. 2016) (underlying appeal of judgment against Romero)
Kokoszka v. Belford, 417 U.S. 642 (1974) (Bankruptcy Code balances creditor collection and debtor fresh start)
Grogan v. Garner, 498 U.S. 279 (1991) (fresh-start policy and discharge principles)
Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007) (bankruptcy fresh-start for honest debtors)
In re Piazza, 719 F.3d 1253 (11th Cir. 2013) (prepetition bad faith may support dismissal under § 707(a))
In re Krueger, 812 F.3d 365 (5th Cir. 2016) (debtor bad faith can be basis to dismiss under § 707(a))
In re Schwartz, 799 F.3d 760 (7th Cir. 2015) (unjustified refusal to pay debt may support denial/dismissal)
In re Tamecki, 229 F.3d 205 (3d Cir. 2000) (§ 707(a) allows dismissal for lack of filing good faith)
In re Zick, 931 F.2d 1124 (6th Cir. 1991) (bad faith dismissal appropriate in egregious cases involving fraud or concealment)
Schwab v. Reilly, 560 U.S. 770 (2010) (discussion of exemption scheme and its purpose)