In re: : MICHAEL D. SCHWARTZ and ASENETA SCHWARTZ

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 15-1416
IN RE : MICHAEL D. SCHWARTZ and A SENETA SCHWARTZ,
Debtors-Appellants.
____________________
Appeal from the United States Bankruptcy Court for the
Northern District of Illinois, Eastern Division.
No. 13-44047 — Pamela S. Hollis, Bankruptcy Judge.
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A RGUED AUGUST 4, 2015 — D ECIDED A UGUST 24, 2015
____________________
Before P OSNER , KANNE , and R OVNER , Circuit Judges.
P OSNER , Circuit Judge. When Michael Schwartz was hired
as an executive of Barclays Capital, Inc., the company lent
him $400,000 and promised to forgive the loan in equal in-
stallments on the first through seventh anniversaries of his
start date. But before the second anniversary came round,
the company fired him, which under their agreement made
the unforgiven principal (about $340,000) immediately due
and owing. Schwartz refused to pay, and pursuant to a term
in the agreement the dispute between the parties was sub-
mitted to an arbitrator. The arbitrator sided with Barclays
and ordered Schwartz to pay the company $568,568, which

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2 No. 15-1416
included attorneys’ fees incurred by Barclays in trying to col-
lect the debt as well as the debt itself, plus interest.
It was, as Schwartz admits, in response to the arbitrator’s
award that he and his wife petitioned for bankruptcy under
Chapter 7. Their goal was to obtain a discharge of their
debts, not only the debt to Barclays but also debts to other
creditors. A discharge would give them a “fresh start,”
which is to say a future without debt until they borrowed
again, or otherwise accrued new debt. See Harris v. Viegelahn,
135 S. Ct. 1829, 1835 (2015).
But between the announcement of the arbitration award
and the filing of the bankruptcy petition the Schwartzes
spent thousands of dollars on inessential consumer goods
and services, including tickets to Disney World (they have
two children). Learning of these expenditures, Barclays,
which was both the Schwartzes’ principal creditor and the
only active opponent of granting a discharge, moved the
bankruptcy court to dismiss the petition. It based its motion
primarily on two provisions of 11 U.S.C. § 707 (we say “pri-
marily” because Barclays’ challenge under section 707(b)
was not limited to subsection (1) but extended to other sub-
sections of 707(b) as well):
(a) The court may dismiss a case under this chapter
only after notice and a hearing and only for cause,
including—(1) unreasonable delay by the debtor
that is prejudicial to creditors; (2) nonpayment of
any fees or charges required under chapter 123 of
title 28; and (3) failure of the debtor in a voluntary
case to file, within fifteen days or such additional
time as the court may allow after the filing of the
petition commencing such case, the information re-

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No. 15-1416 3
quired by paragraph (1) of section 521(a), but only
on a motion by the United States trustee.
(b)(1) After notice and a hearing, the court, on its
own motion or on a motion by the United States
trustee, trustee (or bankruptcy administrator, if
any), or any party in interest, may dismiss a case
filed by an individual debtor under this chapter
whose debts are primarily consumer debts, or, with
the debtor’s consent, convert such a case to a case
under chapter 11 or 13 of this title, if it finds that
the granting of relief would be an abuse of the pro-
visions of this chapter … .
Initially Barclays stressed subsection (b), pointing out that
Schwartz’s debt was consumer debt, as it was debt created
by a personal loan. The social goal of discharging a debt in
bankruptcy is to enable the bankrupt to continue to engage
in productive activity (Schwartz is a businessman), which
would often be impossible were the bankrupt so deeply bur-
ied in debt that he would have to devote an inordinate frac-
tion of his resources to debt repayment rather than to busi-
ness investment. But since losing his job with Barclays
Schwartz has been spending his money on consumption by
himself and his family, and much of that consumption is op-
tional rather than essential. His monthly income (his wife
does not work and has no income separate from her hus-
band’s) exceeds $9500, the family has assets of about
$350,000, and the family’s monthly expenses, of some
$11,100, exceed that monthly income by more than $1500.
Among the family’s many optional consumer expenditures
are private-school tuition for their children and a monthly
payment of $850 for a Range Rover. In addition, the
Schwartzes were represented by counsel during the arbitra-

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4 No. 15-1416
tion proceedings and for the first eight months of the bank-
ruptcy proceeding; and although the lawyer withdrew be-
fore the dismissal of their bankruptcy petition and they are
now litigating pro se, they had spent a good deal of money
on attorneys’ fees during those earlier phases of their strug-
gle with Barclays and those were consumer expenditures be-
cause their purpose was to avoid repayment of a personal
loan.
It may seem odd that the Schwartzes have only $350,000
in assets despite the $400,000 loan that Barclays had given
Mr. Schwartz, but living expenses, monthly car payments on
their Range Rover, the legal bills for the arbitration and for
the early stages of the litigation in the bankruptcy court, and
a period of unemployment following his termination by Bar-
clays, may have depleted the loan. Yet they remain well off.
Though their after-tax annual household income of $114,000
($9500 x 12) doesn’t put them in the top 1 percent of Ameri-
can households, extreme wealth is not the criterion for
whether to dismiss a petition for bankruptcy under 11 U.S.C.
§ 707(b). There are several criteria: whether the debts are
mainly consumer debts, which the Schwartzes’ debts are; if
so whether the debtors’ income is high enough to enable
them to repay a significant amount of debt without sacrific-
ing a reasonable standard of living, which it is; and whether
their income is at least as high as the median family income
in their region, which it also is.
But we needn’t dwell on section 707(b), because the
bankruptcy judge decided that rather than become entan-
gled in that section she would decide the case under section
707(a), which is at least superficially simpler, as it permits
dismissal of the bankruptcy petition (thus precluding dis-

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No. 15-1416 5
charge) “for cause.” It may not really be simpler, because the
analysis required by section 707(b) is mainly arithmetical,
while the undefined term “cause” in 707(a) invites a more
open-ended inquiry.
The Schwartzes argue that the three subsections of sec-
tion 707(a) are procedural and so the only grounds for dis-
missal under the section are procedural, or alternatively that
the specified grounds are the only possible grounds for dis-
missal under that section. To take the second argument first,
the fact that the three grounds are introduced by “including”
tugs against the argument that they are exclusive, or that
they exhaust the statute. If you tell your maid to iron your
clothes, including your Bond Street tuxedo and its cummer-
bund, there is no implication that she is not to iron your oth-
er clothes. And as for whether the three grounds specified in
section 707(a) are procedural, two are not: the first, which
punishes unreasonable delay, by a debtor who has filed a
bankruptcy petition, in taking steps necessary to the admin-
istration of the bankrupt estate; and the second, which in-
volves nonpayment of fees, mainly filing fees. See 6 Collier on
Bankruptcy ¶ 707.03 (16th ed. 2015).
It would make no sense to limit “for cause” to procedural
defects in the bankruptcy petition. Suppose the debtor can
pay all or some of his debts without hardship yet refuses
without any plausible excuse. We agree with the cases that
allow “for cause” to embrace conduct that, while not a viola-
tion of required procedures, avoids repayment of debt with-
out an adequate reason. See, e.g., In re Piazza, 719 F.3d 1253,
1261–71 (11th Cir. 2013); In re Zick, 931 F.2d 1124, 1126–28
(6th Cir. 1991); In re Huckfeldt, 39 F.3d 829, 832–33 (8th Cir.
1994). These and other cases often use “bad faith” to denote

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6 No. 15-1416
“cause” for dismissing a bankruptcy petition for other than
procedural reasons, but we can’t see what is gained by the
terminological substitution. (Rule 707(b)(3)(A), however,
specifies “bad faith” as a ground for dismissal, though with-
out defining or explaining the term.) On the case law gener-
ally, see 6 Collier on Bankruptcy, supra, ¶ 707.03.
The bankruptcy judge, focusing, as we’ve just said is
proper, on “for cause” cut loose from the three subsections
in section 707(a), dismissed the Schwartzes’ petition for
bankruptcy because of their failure to use any of their earn-
ings or assets to pay any part of the debt they owed Barclays.
By spending even more than their substantial income for
private purposes, they depleted the assets available to pay
their creditors. No one is asking them to live in a tent, dress
in rags, drive a 1950 Chevy, or emulate Mme. Loisel in Guy
de Maupassant’s short story “The Necklace” (“La Parure”)
who loses a borrowed necklace that she believes to be very
valuable and ruins herself and her husband financially in
order to remunerate the owner, only to discover in the end
that the necklace was a fake, made of glass and worth almost
nothing. What the Schwartzes failed to do was pay as much
of their indebtedness as they could without hardship. Their
action was deliberate and selfish, and provides good cause
for denying the discharge. The dismissal of their petition
will place them under greater pressure to pay off, or at least
pay down, their debts than if they’re permitted to persist in
living high on the hog (relative to the average American
family, which cannot afford to spend $11,100 a month on
consumption) in the face of a considerable indebtedness.
The Zick opinion that we cited states that a bankruptcy
petition generally is denied under section 707(a) “only in

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No. 15-1416 7
those egregious cases that entail concealed or misrepresent-
ed assets and/or sources of income, and excessive and con-
tinued expenditures, lavish life-style, and intention to avoid
a large single debt based on conduct akin to fraud, miscon-
duct, or gross negligence.” 931 F.2d at 1129. That’s not the
happiest formula. If it is read literally, then “concealed or
misrepresented assets and/or sources of income” are
grounds for dismissal only if coupled with “excessive and
continued expenditures” and with the other terms in the
quoted passage; nor is it obvious that failure to repay “a
large single debt” is worse behavior than a gratuitous failure
to repay multiple debts. So we don’t like the formula, but we
agree that an unjustified refusal to pay one’s debts is a valid
ground under 11 U.S.C. § 707(a) to deny a discharge of a
bankrupt’s debts.
For reasons unclear to us the bankruptcy judge went out
of her way to emphasize that she was not finding the
Schwartzes guilty of “bad faith.” She said they’d have been
guilty of bad faith had they stepped up their personal ex-
penditures in anticipation of declaring bankruptcy, so that
they would have fewer assets for repaying their creditors.
True, the Schwartzes didn’t change their standard of living;
they just didn’t take it down a peg so that there would be
some money for their creditors. But that was sufficient cause
for denying a discharge of their debts. They could so easily
have paid them at least in part; they had no excuse for not
doing so. But there’s no need to consider whether their con-
duct amounts to “bad faith.” Redundant terminology should
be avoided.
We’ve left for last a jurisdictional issue that arose late in
the case. When ordering the bankruptcy petition dismissed

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8 No. 15-1416
the judge said that she would retain jurisdiction of the case
in order to rule on the bankruptcy trustee’s not yet presented
motion for an award of fees. She added that the Schwartzes
would have 14 days after she ruled on the motion within
which to appeal. Four months later, with the motion for fees
still pending, the Schwartzes and Barclays jointly moved the
bankruptcy court to allow the Schwartzes to bypass the dis-
trict court (to which appeals from decisions by bankruptcy
courts normally are taken) and appeal directly to the court of
appeals, that is, to us. The bankruptcy judge then issued a
statement explaining her dismissal of the bankruptcy peti-
tion, along with an order awarding trustee’s fees, and told
the Schwartzes they had 21 days to appeal (not 14, as she
had originally said). They filed their notice of appeal 19 days
later.
The actual interval between the order dismissing the pe-
tition and the filing of the appeal was more than 160 days.
Although the bankruptcy judge thought she could suspend
the deadline for appealing, even after issuing the order, until
she decided on the trustee’s fee, the calculation of that fee
was unrelated to the dismissal and therefore could not affect
the 21-day deadline for appealing. Federal Rule of Bank-
ruptcy Procedure 8002(d)(3). That deadline is jurisdictional
so far as an appeal to the district court is concerned. 28
U.S.C. § 158(c)(2). But the appeal in this case was taken di-
rectly to the court of appeals, hence governed by 28 U.S.C.
§ 158(d)(2)(A), which has no time limit provided that all the
parties have jointly certified that the case satisfies one of
three specified conditions. Id. at (A)(i)–(iii); see Peterson v.
Somers Dublin Ltd., 729 F.3d 741, 746 (7th Cir. 2013).

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No. 15-1416 9
The principal parties to the litigation so certified on
Bankruptcy Form 24, the prescribed form. See Federal Rule
of Bankruptcy Procedure 8006(c). But Mrs. Schwartz did not
sign the form, just as she did not sign the brief, as she should
have done because she’s a party and the Schwartzes are pro-
ceeding pro se. They explained that her failure to sign both
documents was a mistake—she and her husband didn’t
know she was supposed to sign them—and now that she
knows that she should have signed them she wants us to
treat them as if signed by her. We are happy to correct a
harmless, innocent mistake by a pro se litigant. Unfortunate-
ly the correction does not help the Schwartzes, because it
merely confirms our power to decide the case on the merits.
The dismissal of the petition for bankruptcy is
A FFIRMED.

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