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Policing Debtor's Lifestyle: Judicial Discretion or Requirement?
Published: 2008 | Author: William J. Tucker

This paper discusses whether the policing of a debtor’s lifestyle is discretionary or a judicial requirement.  The degree to which Chapter 13 debtors are required to sacrifice to benefit from bankruptcy’s “fresh start” policy is governed by a determination of what are debtors’ reasonable and necessary expenses.  The types of expenditures which are considered “reasonable and necessary” are not defined by the Bankruptcy Code, so some type of judicial “policing” of debtor lifestyle is required to ensure appropriate payment to creditors.  

 

It is well-established that although bankruptcy courts should not squeeze every last dollar from a debtor, the debtor may not maintain an excessive life-style at the expense of his creditors.  In re Stein, 91 B.R. 796 (Bankr. S.D. Ohio 1988).  In many cases, it is appropriate for the courts to determine that some changes in lifestyle are necessary to prevent the debtor from continuing the lifestyle that drove him or her into bankruptcy at the creditors’ expense.  In re Tibbs, 242 B.R. 511 (Bankr. N.D. Ala. 1999).  This paper discusses in detail the changes in lifestyle courts have required debtors to make in order to obtain bankruptcy relief.



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