9.7 Motions to Dismiss on the Basis of a Bad-faith Filing

• Library: Enforcement of Liens and Judgments in Virginia (Virginia CLE) (2019 Ed.)

9.7 MOTIONS TO DISMISS ON THE BASIS OF A BAD-FAITH FILING

Debtors, especially those having estates comprised of single-asset real estate, continually attempt to use the bankruptcy process to fight battles with a single creditor, who is commonly a secured lender. In such instances, courts will often dismiss the debtor's bankruptcy case or, in the alternative, grant the second lender relief from the automatic stay for "cause" upon a finding of bad faith. In In re Natural Land Corp., ³⁴⁴ the court determined that the debtor had abused the bankruptcy process by filing its petition in bad faith and enumerated the following bad-faith factors: (i) lack of realistic possibility of an effective reorganization; (ii) evidence of intent to delay the legitimate efforts of secured creditors to enforce their rights; (iii) use of the bankruptcy laws to create and organize a new business rather than to rehabilitate an existing one; (iv) the timing of the actions of the debtor; (v) the appearance of the debtor as a shell corporation; and (vi) creation...