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Consumer Bankruptcy Law and Practice: 16.7.2.1 Costs and Attorney Fees for Successful Section 707(b) Motions—§ 707(b)(4)(A)

Under section 707(b)(4)(A) of the Bankruptcy Code, costs and attorney fees incurred in prosecuting a successful section 707(b) motion to dismiss the case may be assessed against the debtor’s attorney, but only in certain circumstances. Fees and costs may be awarded only if a debtor’s attorney violates Rule 9011 of the Federal Rules of Bankruptcy Procedure in filing the bankruptcy case itself.256 Moreover, the procedures contained in Bankruptcy Rule 9011 for awarding costs and fees must be followed.

Consumer Bankruptcy Law and Practice: 16.7.2.4 Attorney Certification As to Schedules—§ 707(b)(4)(D)

Section 707(b)(4)(D) provides that the signature of an attorney for the debtor also certifies that the attorney has no knowledge, after an inquiry, that the schedules are incorrect.269 This standard is a pretty low one, requiring actual knowledge, not just a belief or suspicion, that the schedules are inaccurate. It requires an inquiry, which should be no greater than for other pleadings, perhaps less, because it does not use the word “reasonable.”

Consumer Bankruptcy Law and Practice: 16.8.2 Restrictions on Debt Relief Agencies

Mostly, the debt relief agency restrictions prohibit practices already considered improper, such as failing to perform services as promised, making untrue or misleading statements, or advising clients to make statements that an agency should know are misleading.280 Although the latter restriction, by itself, might appear to be a strict liability provision for any untrue or misleading statements, the section’s remedy provisions speak of negligence or intentional misconduct,281 for which remedies

Consumer Bankruptcy Law and Practice: 16.8.3.3 Required Statement About Bankruptcy Assistance Services

A debt relief agency must also provide the assisted person with a statement about “bankruptcy assistance services.”297 This statement must be provided at the time the notice under section 527(a)(1) is given, but no time requirement is set in section 527(a)(1), which refers to the clerk’s notice under section 342(b)(1). The clerk is required to give this notice before commencement of the case.

Consumer Bankruptcy Law and Practice: 16.8.3.4 Disclosures Required of Non-Attorney Agencies That Prepare Bankruptcy Documents

Debt relief agencies, but not attorneys who prepare bankruptcy petitions, schedules, and statements for debtors, are required to provide clear and conspicuous written notice to an assisted person giving “reasonably sufficient information” on how to provide the information required to file for bankruptcy.300 To the extent that the debt relief agency does not provide the required information itself, the notice must explain such unsettled questions of law as:

Consumer Bankruptcy Law and Practice: 16.8.4 Written Contract Under Section 528(a)

A debt relief agency must execute a written contract with an assisted person within five days after the date the agency first provides bankruptcy assistance to the assisted person, and prior to filing a petition.302 Fulfilling this obligation may be impossible because the assisted person may not wish to sign a contract, and obviously there is no way to force the assisted person to sign. In such cases, the debt relief agency’s obligation should be satisfied by tendering the contract.

Consumer Bankruptcy Law and Practice: 16.8.5 Advertising Requirements Under Section 528(a)

If a debt relief agency advertises bankruptcy assistance services or the benefits of bankruptcy it must disclose that the services or benefits are with respect to bankruptcy relief under title 11.309 The agency must also clearly and conspicuously use the following statement, or a substantially similar statement, in such advertisements: “We are a debt relief agency. We help people file for relief under the Bankruptcy Code.”310

Consumer Bankruptcy Law and Practice: 13.1 Introduction

For most consumer debtors, the decision to file bankruptcy and the selection of which chapter to utilize comes after careful thought and consideration of the advantages and disadvantages of that choice. However, in certain emergency situations, such as a pending foreclosure, the decision may be made in haste. Due to a variety of factors, either unknown at the time of filing or arising after the filing, the debtor may wish to voluntarily dismiss the bankruptcy case or to convert it to another chapter.

Consumer Bankruptcy Law and Practice: 13.3.1 Reasons for Dismissal or Conversion

Involuntary dismissal or conversion, in either a chapter 7 or chapter 13 case, may occur for a number of reasons, some of which are listed in sections 707 and 1307(c).23 Probably the most common causes are failure to pay the filing fees24 or chapter 13 plan payments,25 failure to file appropriate papers, such as the bankruptcy schedules or chapter 13 plan, failure to obtain credit counseling prior to filing the petition,

Consumer Bankruptcy Law and Practice: 13.3.2 “Automatic” Dismissal Under Section 521(i)

The 2005 amendments added a new provision concerning dismissal of a case. Failure to provide documents required by section 521(a)(1) of the Code, but not other documents, may lead to dismissal. Under section 521(i)(1), a case is to be “automatically dismissed” if the debtor does not file the information required by section 521(a)(1) within forty-five days after filing the petition. However, section 521(i)(2) provides that in such circumstances the case is to be dismissed on request of a party of interest within seven days of the request.

Consumer Bankruptcy Law and Practice: 13.4.1 Overview

Section 707(b) permits a bankruptcy court to dismiss a chapter 7 case, after notice and a hearing, if the court finds that granting relief under chapter 7 would be an abuse of its provisions. Because the section applies only to cases “filed” under chapter 7, it is arguably inapplicable to a case originally filed under chapter 13 and later converted to chapter 7.65

Consumer Bankruptcy Law and Practice: 13.4.2 Section 707(b) Applicable Only to Debtors with Primarily Consumer Debts

Section 707(b) applies only to debtors whose debts are primarily consumer debts.67 The Bankruptcy Code defines “consumer debt” as “debt incurred by an individual primarily for a personal, family, or household purpose.”68 Thus, for debtors who have incurred most of their debts in business or through investment losses, section 707(b) should not be a problem.69 Courts generally use a profit motive test when analyzing whether a debt is a consumer debt.

Consumer Bankruptcy Law and Practice: 13.4.3.2.1 A six-month average normally used

“Current monthly income” is defined in section 101 of the Bankruptcy Code as the average of the last six months’ income received from all sources by the debtor (or, in a joint case, by the debtor and the debtor’s spouse), derived during the six-month period,87 with certain adjustments.88 As a result, the debtor’s actual income at the time the petition is filed may be significantly below or above current monthly income, which is a six-month average.

Consumer Bankruptcy Law and Practice: 13.4.3.2.2 Payments toward household expenses of debtor or dependents on a regular basis

Included in current monthly income is any amount paid by any entity toward the household expenses of the debtor or the debtor’s dependents on a regular basis.94 Amounts not used for such a purpose or not received on a regular basis are not included. For example, the definition would exclude child support received on a sporadic basis.95 Similarly, expenses paid for a dependent not in the household should not be considered a payment toward household expenses.