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The coach for one of the world’s most well-known mixed martial arts (MMA) fighters filed a voluntary petition for Chapter 7 bankruptcy during the summer of 2015. In re Tarverdyan, No. 2:15-bk-21909, petition (C.D. Cal., Jul. 29, 2015). The case has experienced multiple delays, with the court-appointed trustee and the debtor jointly requesting continuances on several occasions. This demonstrates many of the complicated factors sometimes found in Chapter 7 proceedings.

A Chapter 7 case allows an individual debtor to liquidate assets and use the proceeds to pay down their debts. At the end of the case, the court may grant a discharge of some or all remaining debts. Several important proceedings must take place before a court can grant a discharge. First, the trustee must hold a meeting of creditors and other interested parties “within a reasonable time” after a debtor files a voluntary bankruptcy petition. 11 U.S.C. § 341(a). This is commonly known as a “341 meeting” or “341 hearing.”

In Chapter 7 cases, the trustee must conduct an oral examination of the debtor at the 341 meeting in order to make several findings, including the “potential consequences” for the debtor of a discharge, the effect of a discharge on creditors and others, and whether the debtor could file under a different chapter. Id. at § 341(d). Once the trustee has obtained all the required information from the debtor, they must decide whether to recommend or oppose a discharge of debt based on these findings.

Chapter 7 provides the trustee, as well as other interested parties, with several means to object to a discharge. A court cannot grant a discharge if it finds that the debtor has engaged in a variety of acts, including concealing or transferring property in order to “hinder or delay” a creditor, making false statements or presenting false claims to the court, or failing to follow the court’s orders. 11 U.S.C. § 727(a). The trustee or a creditor may ask the court to deny a discharge on these or other grounds. Id. at § 727(c).

The trustee or another party in interest may also ask the court to dismiss the case altogether, or convert it to a Chapter 11 or Chapter 13 bankruptcy, if it finds that it would be “an abuse of the provisions of” Chapter 7 to grant the debtor relief. 11 U.S.C. § 707(b). This is where the Chapter 7 “means test” comes into play.

The debtor in Tarverdyan filed a petition in May 2015, but the court dismissed it after he reportedly missed the 341 meeting. He filed again in July 2015, and after a continuance, the trustee held a 341 meeting in December. The trustee is reportedly investigating various discrepancies in the debtor’s schedules, and is seeking information about the training gym he owns. The difficulty of obtaining this information has resulted in several additional delays of the 341 meeting, as well as extensions of the trustee’s deadline to file an objection under § 727 or a motion to dismiss under § 707(b). That deadline is presently set in May 2016.

Since 1997, Los Angeles bankruptcy attorney Devin Sawdayi has helped individuals and families repair their finances through Chapter 7 and Chapter 13 bankruptcies. To schedule a free and confidential consultation with an experienced financial advocate, contact us today online or at (310) 475-9399.

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