aAbusea Under Section 707(B) Of The Bankruptcy Code – An Explanation
Much has been written about the ‘abuse’ section of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. That secti on, 707(b), is the one that might well be referred to as the ‘teeth’ in that new bankruptcy law. Practitioners and debtors who have run afoul of the revised section 707(b) will likely conclude that the BAPCPA is a lot more ‘abuse prevention’ than ‘consumer protection’.
To get a handle on the revised section 707(b), it is helpful to look at the different subsections individually, and to compare them with what section 707(b) used to look like, that is, before the sweeping changes that went into effect in 2005.
Prior to the revision, section 707(b)(1) was fairly innocuous; that is, its proscription was pretty narrow, and thus easy to avoid running afoul of: “The court, on its own motion or on a motion by the United States trustee, may dismiss a case filed by an individual if it finds that the granting of relief would be a substantial abuse of the provisions of this chapter”.
This was interpreted to mean that the debtor had to have income well in excess of his expenses – generally a couple hundred dollars or so – before he was considered to be in “substantial abuse”. That all changed, unfortunately, with the BAPCPA, which took out the key word “substantial”. The result was that trustees faced much less of a burden in order to sustain a motion or complaint against a debtor; that is, they now needed merely to demonstrate any abuse under section 707(b)(1).
