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Case Dismissed on Bad Faith Due to Purchase of Vehicle on Eve of Bankruptcy

On Behalf of | Nov 17, 2014 | Bankruptcy |

In the recent case of In Re Nadeau, 2014 WL 5325224 (Bankr. D. R.I. 10/17/14), the court granted the U.S. Trustee’s Motion to Dismiss the debtors’ Chapter 7 case on bad faith due to their purchase of a new vehicle just prior to filing their bankruptcy case. In the Nadeau case, the debtors met with a bankruptcy attorney to explore bankruptcy options and hired the firm to represent them. At the time of their initial meeting they owned a 2012 Toyota Camry. After meeting the attorney, they decided to trade in the Camry for a 2013 Nissan 370Z coupe. As a result of the purchase, they were paying $133 more per month for the Nissan then they had been for the Toyota. About two months later they filed the Chapter 7 case.

The court found that the purchase of the newer, more expensive vehicle was done in bad faith. The only reason they made this purchase was because they anticipated being able to discharge all of their unsecured debt and without having these debts, they could more likely afford the increased car payment. The court found their conduct did not meet the standard anticipated by Congress, i.e. the unfortunate, honest debtor for whom a fresh financial start is the intended economic goal of bankruptcy. The court stated that this was not a case where the debtors needed to purchase a new car because the older one they owned was unreliable or needed expensive repairs. In this case, the male debtor simply could not resist the new, sporty 370Z, even though it was not a reliable car in Rhode Islands’ harsh winters.

If you are considering filing bankruptcy, you need to consider whether you really need a new car before you purchase one on the even of filing. The attorneys at the law firm of Laura Margulies & Associates, LLC have assisted thousands of clients through the bankruptcy process. Please call us for a consultation today. To learn more about our firm visit our web site at