Bad Faith Constitutes "Cause" For Dismissal Under Section 707(a)

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Until recently, the creditor of a chapter 7 debtor whose debts were not primarily consumer in nature was unable to rely on Eleventh Circuit precedent to support its position that its debtor's chapter 7 bankruptcy case should be dismissed for bad faith. While the plain language of Section 707(b)(3)(A) of the Bankruptcy Code provides that a debtor's chapter 7 bankruptcy case may be dismissed if "the debtor filed [its] petition in bad faith," Section 707(b) of the Bankruptcy Code is focused upon debtors with debts that are primarily consumer in nature.1 Accordingly, Section 707(b) is of no use to the creditor whose debtor's debts are primarily commercial debts.

Bankruptcy Code Section 707(a) provides that a bankruptcy court may dismiss a bankruptcy case under this chapter only after notice and a hearing and only for cause, including...

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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