Can I File Chapter 7 and Keep All of My Toys?

On June 28, the Bankruptcy Appellate Panel for the Sixth Circuit issued an opinion holding that Mr. and Mrs. Weixel’s Chapter 7 case was properly dismissed for “substantial abuse” under the bankruptcy laws.   In re Weixel, 13 FED App 0003P.   This case is binding on Kentucky bankruptcy courts.

The Weixels were not eligible under Chapter 13 because they had too much debt.  Rather than attempt an individual Chapter 11 repayment plan, they tried Chapter 7.  Without going into all the details that the Court discussed about the levels of their incomes and expenses, the most important facts appear to be two:  first, they wanted to keep living in their $600,000, 3300 sq. ft. home, with Lake Erie views, which was 100% financed; and second, Mr. Weixel’s budget for Chapter 7 continued his poker league playing, with trips, tourney fees, etc.  The family (with their 5 kids) often traveled with him on his gambling trips.

 Every case like this is extremely fact- intensive, and no two are exactly alike.  It often boils down to the “smell” test — does the judge think there has been any meaningful effort at “belt- tightening” or not? The Court seemed troubled by the fact that the Weixels stopped making mortgage payments in November 2009, continued to live in their home, and then filed Chapter 7 on the very last day before a foreclosure sale in February, 2012, all the while continuing their “recreational habits.” Goodbye, Chapter 7.  Case over.

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