A Critical Analysis of Bankruptcy Code Section 707(b)

In response to criticism by the credit industry and the dramatic rise in the amount of consumer bankruptcy filings, a number of provisions relating to consumer credit, often referred to as the Consumer Credit Amendments, were included in the Bankruptcy Amendments and Federal Judgeship Act of 1984....Section 707(b)9 is one of the most significant changes included in the Consumer Credit Amendments. This entirely new provision allows bankruptcy courts to dismiss a Chapter 7 petition for substantial abuse when the case is filed by an individual debtor whose debts are primarily consumer debts. The purpose of the Consumer Credit Amendments is clearly expressed. However, the language of section 707(b) and the sparse and conflicting statements of legislative intent behind section 707(b) have given rise to four difficult issues that have not been resolved consistently by the courts: (1) What is the effect of a party in interest raising the issue of substantial abuse? (2) What is the appropriate definition of the phrase primarily consumer debts ? (3) What circumstances would constitute substantial abuse? (4) What is the effect of the presumption in favor of relief? The ultimate resolution of these issues will determine if the legislation will create an improved bankruptcy system or dramatically alter the traditional fresh start approach to individual bankruptcy. This Article reviews various court decisions and attempts to provide a workable framework for the application of the concepts embodied in section 707(b)

The Implementation of Bankruptcy Code Section 707(b): The Law and the Reality

The introduction of section 707(b) to the bankruptcy code has raised many difficult interpretational issues. This article focuses on those issues concerning the implementation of section 707(b). Under the law, only the courts and the U.S. Trustees are permitted to raise the issue of substantial abuse. Therefore, to determine how section 707(b) is actually being administered, a survey was distributed to the U.S. Bankruptcy Courts and the U.S. Trustees. The results of the survey are integrated into a discussion of the current status of the law and presented in this article. This analysis identifies serious shortcomings with the law that can only be remedied through congressional action. The article concludes with a proposal for solving the problems created by section 707(b)

A Critical Analysis of Bankruptcy Code Section 707(b)

In response to criticism by the credit industry and the dramatic rise in the amount of consumer bankruptcy filings, a number of provisions relating to consumer credit, often referred to as the Consumer Credit Amendments, were included in the Bankruptcy Amendments and Federal Judgeship Act of 1984....Section 707(b)9 is one of the most significant changes included in the Consumer Credit Amendments. This entirely new provision allows bankruptcy courts to dismiss a Chapter 7 petition for substantial abuse when the case is filed by an individual debtor whose debts are primarily consumer debts. The purpose of the Consumer Credit Amendments is clearly expressed. However, the language of section 707(b) and the sparse and conflicting statements of legislative intent behind section 707(b) have given rise to four difficult issues that have not been resolved consistently by the courts: (1) What is the effect of a party in interest raising the issue of substantial abuse? (2) What is the appropriate definition of the phrase primarily consumer debts ? (3) What circumstances would constitute substantial abuse? (4) What is the effect of the presumption in favor of relief? The ultimate resolution of these issues will determine if the legislation will create an improved bankruptcy system or dramatically alter the traditional fresh start approach to individual bankruptcy. This Article reviews various court decisions and attempts to provide a workable framework for the application of the concepts embodied in section 707(b)