707(b) action: When someone requests the court to dismiss a person’s bankruptcy case due to suspicion of the person attempting to exploit the bankruptcy system, such as being dishonest or attempting to conceal information.
A 707(b) action is a legal motion that can be filed by various parties involved in a bankruptcy case, including the court, the United States trustee, the trustee, the administrator, or any party involved. This motion is used to request the dismissal of the debtor’s case on the grounds that granting relief would be an abuse of the provisions outlined in Chapter 7 of the United States Bankruptcy Code. For instance, in the case of In re Stewart, the court was presented with a 707(b) action. The debtor had filed for Chapter 7 bankruptcy, but the trustee argued that the debtor had sufficient disposable income to repay their debts through a Chapter 13 bankruptcy instead. Ultimately, the court agreed with the trustee and dismissed the debtor’s case, stating that granting relief under Chapter 7 would have constituted an abuse of the bankruptcy system. This example demonstrates how a 707(b) action can be utilised to prevent a debtor from exploiting the bankruptcy system. In this particular case, the court determined that the debtor had enough income to repay their debts through a different type of bankruptcy, thus making relief under Chapter 7 inappropriate. By dismissing the case, the court ensured that the debtor could not take advantage of the system and evade their debt obligations.
A 707(b) action refers to a legal proceeding under section 707(b) of the Bankruptcy Code, which allows a bankruptcy court to dismiss a bankruptcy case if it determines that the debtor has committed fraud, abuse, or misconduct.
A 707(b) action can be initiated by the United States Trustee, a bankruptcy trustee, or any party in interest who believes that the debtor has engaged in fraudulent or abusive behavior.
Examples of conduct that may lead to a 707(b) action include concealing assets, providing false information, multiple bankruptcy filings, or engaging in fraudulent transfers.
If a 707(b) action is successful, the bankruptcy case may be dismissed, and the debtor may lose the protections and benefits of bankruptcy, including the discharge of debts.
Yes, a debtor can defend against a 707(b) action by presenting evidence and arguments to refute the allegations of fraud, abuse, or misconduct.
In a 707(b) action, the burden of proof is on the party seeking dismissal to prove by a preponderance of the evidence that the debtor has engaged in fraudulent or abusive behavior.
If a debtor’s bankruptcy case is dismissed under a 707(b) action, they may still be able to file for bankruptcy again in the future. However, the dismissal may have an impact on their ability to obtain certain bankruptcy protections.
While a 707(b) action itself is a civil proceeding, the conduct that leads to such action may also be subject to criminal prosecution if it involves fraudulent or criminal behavior.
Yes, a debtor can appeal a decision made in a 707(b) action if they believe that the bankruptcy court made an error in dismissing their case.
Yes, it is highly recommended to consult with an experienced bankruptcy attorney if you are facing a 707(b) action. They can provide guidance, represent your interests, and help you navigate the complex legal process.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 16th April 2024.
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