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If Debtors Are Eligible for Either Chapter 7 or Chapter 13, May They Choose Between Them Solely on the Basis of Their Own Interests?
The choice between chapters is generally left to any eligible debtor. However, courts have on grounds of "substantial abuse" dismissed some consumer Chapter 7 cases filed by debtors with significant incomes but minimal unencumbered assets. The reason for those dismissals is primarily that such debtors should be committing some of their income to unsecured creditors rather than leaving them with a minimal Chapter 7 distribution based solely on the debtor's heavily mortgaged assets. The courts disagree over the meaning of "substantial abuse" and the issue has come up relatively infrequently, perhaps because it can be raised only by the court itself or a public officer known as the United States trustee-not by creditors. Congress is currently considering more stringent restrictions on the use of Chapter 7 by debtors whose incomes would fund a significant payment to creditors.
Family Legal Guide
Copyright © 2000, 2002 American Bar Association
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