Schwartz was hired as an executive by Barclays Bank. As a perk, Barclays lent Schwartz $400,000 and promised to forgive the loan in 7 installments on the anniversary of his start date. Soon after that period started to run Schwartz was fired, making the unforgiven principal immediately due and payable. ‘
Schwartz refused to pay so the matter went to Arbitration. The Arbitrator sided with Barclays and ordered Schwartz to pay $568,568 which included Attorneys’ Fees and interest. Following the Arbitration decision Schwartz sought Chapter 7 protection.
Between the announcement of the award and the filing of Schwartz’s Petition, he and his wife spent thousands on non-essential consumer goods and services such as tickets to Disney World, private school tuition, and a monthly payment for a Range Rover. Barclays moved to dismiss the case.
The Bankruptcy Court dismissed Schwartz’ Chapter 7 Petition pursuant to 11 U.S.C. 707(a) “for cause.” Schwartz appealed to the District Court and, eventually, to the 7th Circuit – which Affirmed.
The 7th Circuit found that the phrase “for cause” as used in the Bankruptcy Code embraces conduct that, even if not a violation of required procedures, avoids repayment of a debt without an adequate reason. In other words, the case was dismissed because the Schwartzes failed to pay as much of their indebtedness as they could.