Creditor Lacks Standing to Move for Dismissal under 707(b)

Posted by NCBRC - September 16, 2013

In In re Gandy, No. 11-30369 (Bankr. E.D. Tenn. July 12, 2013), the court found that a creditor had no standing under section 707(b) to seek dismissal of a chapter 7 petition, after conversion from chapter 13, where debtor’s petition documents showed him to be below-median. Section 707(b)(1) permits a “party in interest” to move for dismissal on the basis that “granting of relief would be an abuse of the provisions of this chapter.” But section 707(b)(6) provides that when a debtor is below median, “[o]nly the judge or United States trustee . . . may file a motion under section 707(b),” and section 707(b)(7) provides that no party may file a motion to dismiss under section 707(b)(2) (presumption of abuse) in a below-median case. The creditor in this case argued that the debtor misrepresented his current monthly income and that, looking at six months of pay stubs indicated that the debtor was, in fact, above median. However, the judge found that debtor’s status as below median had to be determined on the basis of the Statement of Current Monthly Income and his means test calculation, stating: “The Debtor was not required to attach six months of paycheck stubs to this document, which he signed ‘under penalty of perjury that the information provided [therein] is true and correct[,]’ and creditors are not authorized to go behind the figures listed in the Chapter 7 Statement of Current Monthly Income and Means-Test Calculation for the purposes of filing a § 707(b) motion.”

The current procedural posture of the case is convoluted. Covering all his bases the creditor has appealed the dismissal to the District Court for the Eastern District of Tennessee and that case is fully briefed. Schuchardt v. Gandy, No. 13-149 (E.D. Tenn.). He has also re-filed his motion to dismiss in the bankruptcy court on the basis that, in an amended Statement of Current Monthly Income, the debtor admitted to a higher current monthly income, and, per advice from the bankruptcy court, he has filed an adversary proceeding objecting to discharge under section 727.

Gandy opinion

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