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Man has Chapter 7 bankruptcy dismissed for bad faith

Those that petition for bankruptcy protection are usually attempting to obtain relief from some type of debt or monetary obligation. Usually as long as one follows the proper process and procedure while also filling out the numerous required forms, the bankruptcy will go as planned in Texas or in any other state. However, there are various reasons the court could use to dismiss a bankruptcy petition and many of these reasons are not clear and straightforward. One man found this out when he had his Chapter 7 bankruptcy petition dismissed.

The man had filed for bankruptcy partially to avoid paying a recent court judgment which ordered him to pay approximately $320,000 to Neuterra Healthcare Physical Therapy LLC. However, Neuterra asked the court to dismiss the man's bankruptcy filing by arguing that the man's petition was filed under bad faith. The man responded by arguing that filing in order to avoid garnishment is a common practice and does not constitute bad faith.

The case law surrounding the question is contradictory. Some courts have found that bad faith is a legitimate cause to dismiss, while other circuit courts disagree. Unfortunately for the man, the court did not agree with his argument and sided with Nueterra on the issue. The company's motion to dismiss the bankruptcy was granted by the court.

This case illustrates how unpredictable the Chapter 7 bankruptcy process can be in Texas or in any other state. Therefore, petitioners looking to discharge debt should do as much research on applicable statutes and case law as possible. In some cases, petitioners may have to provide a solid legal argument in court in order to avoid having their petition dismissed.

Source: bloomberglaw.com, "Prepetition Bad Faith Is Sufficient 'Cause' To Dismiss Chapter 7 Bankruptcy Petition," Bernard J. Pazanowski, July 10, 2013

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