What is bad faith?
Under 11 U.S.C. § 707(b)(3) (Chapter 7) and § 1325(a)(3) (Chapter 13), the court evaluates whether the filing was made in good faith. There is no single definition of bad faith -- courts look at the totality of the circumstances.
Common indicators of bad faith include:
- Serial filings. Filing repeatedly to abuse the automatic stay and delay creditors without genuine intent to reorganize or obtain a discharge. See serialfiler.org.
- Filing on the eve of foreclosure. Filing solely to delay a scheduled foreclosure sale, with no ability to propose a viable plan.
- Concealing assets or income. Filing while hiding property or understating income.
- Timing manipulation. Strategically filing to exploit lookback periods or to defeat a specific creditor action.
- No genuine financial distress. Filing when you can actually pay your debts but prefer not to.
Consequences of bad faith finding
- Case dismissal under § 707(b) or § 1307(c)
- 180-day refiling bar under § 109(g)
- In extreme cases, a permanent injunction against refiling without court permission
- Sanctions or attorney fee awards to affected creditors
How courts evaluate good faith
Courts typically consider factors including: accuracy and completeness of the petition, whether the debtor has a genuine need for relief, the debtor's payment history, whether the filing was timed to abuse the process, and the debtor's overall conduct. Good faith is evaluated case by case.
Serial filings trigger special rules. Under 11 U.S.C. § 362(c)(3), if you had a case dismissed within the past year, the automatic stay in your new case lasts only 30 days (instead of for the duration of the case). If you had two or more cases dismissed within the past year, § 362(c)(4) provides no automatic stay at all -- you must file a motion and prove good faith to get stay protection.