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Trustee Says Toni Braxton's Bankruptcy Is Currently An Abuse

Grammy award winning singer Toni Braxton recently for chapter 7 bankruptcy relief. Now the United States Trustee is stepping in after reviewing Braxton's bankruptcy petition. The Trustee's Office reportedly filed a document in the Bankruptcy Court proceeding saying Braxton's filing is presumed to be an abuse of the bankruptcy process.

The trustee is a part of the Department of Justice and serves to oversee bankruptcy proceedings. In Braxton's chapter 7 bankruptcy, the trustee claims her case is presumed to be an abuse under Section 707(b).

The bankruptcy code changes that were made in 2005 affected Section 707(b). The so-called "means test" and a totality of the circumstances test were written into Section 707(b) to give the trustee more ammunition to get cases dismissed or converted to chapter 13 bankruptcy cases.

Braxton's attorneys reportedly were not surprised by the trustee's assertion. Part of the problem reportedly is that some of the paperwork the trustee needs in order to make its initial determination on the filing was not submitted in time for the trustee to examine it. Because of that, Braxton's lawyers say, it was almost a foregone conclusion that the trustee would make an initial determination of presumption of abuse.

The timing difficulty arose in Braxton's case due to the nature of her debts. The paperwork that Braxton's attorneys are compiling relate to business debts. Her attorneys say that Braxton is exempt from the means test under Section 707(b), because the majority of her chapter 7 debt is business debt.

They hope to clear the matter up with the trustee and are optimistic that the trustee will conclude the bulk of the singer's debts are business related and therefore the filing is not an abuse of the bankruptcy system.

Source: Wall Street Journal, "Bankruptcy Watchdog Seeks Braxton's Financial Info," 24 Nov 2010

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