                                     PUBLISHED

                       UNITED STATES COURT OF APPEALS
                           FOR THE FOURTH CIRCUIT


                                      No. 17-1197


RALPH JANVEY,

             Creditor - Appellant,

v.

PETER ROMERO,

             Debtor - Appellee.



Appeal from the United States District Court for the District of Maryland, at Baltimore.
J. Frederick Motz, Senior District Judge. (1:16-cv-03355-JFM)


Argued: December 6, 2017                                     Decided: February 21, 2018


Before GREGORY, Chief Judge, and WILKINSON and HARRIS, Circuit Judges.


Affirmed by published opinion. Judge Wilkinson wrote the opinion, in which Chief Judge
Gregory and Judge Harris joined.


ARGUED: Kevin Marshall Sadler, BAKER BOTTS L.L.P., Palo Alto, California, for
Appellant. Kevin Gerald Hroblak, WHITEFORD TAYLOR & PRESTON, L.L.P.,
Baltimore, Maryland, for Appellee. ON BRIEF: Scott D. Powers, Stephanie F. Cagniart,
BAKER BOTTS L.L.P., Austin, Texas, for Appellant.
WILKINSON, Circuit Judge:

       Appellee Peter Romero filed a Chapter 7 bankruptcy petition after he was found

liable for $1.275 million to the victims of a multibillion-dollar Ponzi scheme. Appellant

Ralph Janvey, the receiver in the Ponzi scheme litigation, moved to dismiss Romero’s

bankruptcy petition for cause under 11 U.S.C. § 707(a). The bankruptcy court denied the

motion, and the district court affirmed the bankruptcy court’s order. We focus only on the

matter before us—that is, whether Romero’s decision to file for bankruptcy rises to the

level of bad faith and therefore constitutes cause for dismissal under § 707(a). Because

the bankruptcy court did not abuse its discretion in denying Janvey’s motion to dismiss,

we affirm.

                                             I.

                                             A.

       We begin with the facts of the underlying litigation, which hover above and

around the present action but do not strictly pertain to the question before us. They are, to

borrow a term from film, the McGuffin in this case. 1

       Peter Romero had a storied career in the Foreign Service. He served for twenty-

four years with the State Department, most prominently as an Ambassador and as

Assistant Secretary of State for Western Hemisphere Affairs. Upon retiring from the


       1
          See 3 Oxford English Dictionary Additions Series 285 (John Simpson & Michael
Proffitt eds., 1997) (defining “McGuffin” as “a particular event, object, factor, etc., which
assumes great significance to the characters and acts as the impetus for the sequence of
events depicted, although often proving tangential to the plot as it develops”).


                                             2
Foreign Service, Romero founded a private consulting company to advise companies that

do business overseas. One of his clients was the Stanford Financial Group (Stanford).

Romero consulted for Stanford for approximately seven years. He earned a total of

$700,000 in fees plus reimbursements for travel expenses and returns on his own

Stanford investments. While Romero was working for Stanford, the company was being

used to carry out a multibillion-dollar Ponzi scheme. The scheme was unearthed in 2009,

at which point Romero cut ties with Stanford.

       The Securities and Exchange Commission sued Stanford, its affiliated entities, and

its leadership in the Northern District of Texas. That court appointed Ralph Janvey to be

the receiver in the litigation. Pursuant to his duties as receiver, Janvey sued Romero to

recover for victims of the scheme the payments Romero had received while consulting

for Stanford. Romero participated in mediation and offered to settle with Janvey. But

mediation proved unsuccessful, and Janvey rejected the settlement offer without

proposing a counteroffer. Romero ultimately lost at trial, and Janvey was awarded

approximately $1.275 million in damages, interest, and fees. Romero appealed the

judgment to the Fifth Circuit with no success. See Janvey v. Romero, 817 F.3d 184 (5th

Cir. 2016). While the appeal was pending, he again offered to settle with Janvey, who

again rejected the offer without a counteroffer. Janvey instead moved for leave to register

the judgment in California under 28 U.S.C. § 1963 on the belief that Romero had

property there. The district court granted the motion.

                                            B.



                                             3
          And so we arrive at the present bankruptcy action. Romero voluntarily filed a

Chapter 7 bankruptcy petition in the District of Maryland the day after the judgment

against him was certified in California. At the time, Romero’s financial situation was as

follows:

          Assets: Romero’s assets totaled more than $5.348 million. The majority of these

assets, however, were statutorily exempt. Nobody challenged these claimed exemptions.

Among Romero’s exempt assets were three real properties he owned with his wife as

tenants by the entirety, one of which was their home and the others of which were rental

properties. Romero also claimed as exempt pension, retirement, and benefit plans.

Romero’s nonexempt assets included one car and two boats, which he turned over to the

Chapter 7 trustee for administration. The trustee sold both the car and one of the boats,

and Romero agreed to pay the docking and insurance fees for the other boat until it was

sold. 2

          Unsecured Debts: Janvey’s judgment accounted for roughly 90% of Romero’s

unsecured debt when he filed for bankruptcy. The remainder was composed of debts with

two law firms for unpaid legal fees totaling approximately $150,000. 3

          Expenses: Most prominent among Romero’s expenses were his wife’s medical

costs, which averaged $12,000 per month. Romero’s wife had contracted a bacterial brain

          2
              The remaining boat sold after Janvey moved to dismiss Romero’s petition.
          3
         Romero initially listed three unpaid credit card debts among his unsecured debts.
Those cards, however, were primarily in his wife’s name, and Romero later amended his
petition to reflect that all three debts had been paid.


                                                4
infection in 2013 that left her incapacitated and in need of extensive care. Until recently,

the majority of Romero’s wife’s medical expenses were covered by her three disability

policies and Romero employed a live-in caretaker. After Romero filed for bankruptcy,

however, two of his wife’s three disability policies were terminated; meanwhile, her

condition slightly improved and Romero was able to scale back to daily care. Romero

also listed entertainment expenses of $1,000 per month, most of which went to the

docking and other costs for the boat he had turned over to the trustee.

       Income: Romero reported monthly income approximately $350 less than his

monthly expenses. Romero and his wife were both unemployed—she because of her

illness and he because he had been unable to find work after the Stanford scheme was

discovered. Their combined monthly income came entirely from Romero’s State

Department pension plan, their two rental properties, social security, and long-term

disability.

       More than six months after Romero filed for bankruptcy, Janvey moved to dismiss

his petition under 11 U.S.C. § 707(a) on the ground that Romero had abused the

bankruptcy process to avoid Janvey’s judgment. The bankruptcy court denied the motion.

See In re Romero, 557 B.R. 875 (Bankr. D. Md. 2016). It acknowledged that bad faith

can constitute cause for dismissal under § 707(a), but it found that Romero had not acted

in bad faith. In doing so, it applied the eleven bad-faith factors set forth in McDow v.

Smith, 295 B.R. 69 (Bankr. E.D. Va. 2003). The bankruptcy court acknowledged that

Romero’s “primary motivation in filing the petition was to address [Janvey]’s judgment”

but that he also “faced the inability to earn a living, his wife’s illness and care needs, the

                                              5
pending termination of two disability policies, and aggressive and costly litigation tactics

by [Janvey].” Romero, 557 B.R. at 883-84. The court also noted that Romero had twice

tried and failed to settle the matter in the course of the underlying litigation. Id. at 884. It

observed that most of Romero’s assets were statutorily exempt and that he “lives a

comfortable, but not exorbitant, lifestyle. Perhaps his primary discretionary expense is

eating out at restaurants. He belongs to no country clubs or social clubs.” Id. at 883. The

court accordingly denied Janvey’s motion to dismiss and ultimately granted Romero a

discharge under 11 U.S.C. § 727.

         Janvey appealed the denial of his motion to dismiss and—by inference, at least—

the eventual discharge of Romero’s debt to the district court, which affirmed the order of

the bankruptcy court. He now appeals to this court. We, like the district court, review the

bankruptcy court’s denial of a motion to dismiss for abuse of discretion, its factual

findings for clear error, and its legal conclusions de novo. See In re Jenkins, 784 F.3d

230, 234 (4th Cir. 2015); In re Piazza, 719 F.3d 1253, 1271 (11th Cir. 2013). Janvey’s

claims boil down to an accusation that Romero has abused the bankruptcy process and

should therefore be ineligible for its protections. For the reasons that follow, we do not

agree.

                                              II.

         A bit of background may be helpful in understanding the operation of the relevant

statutes. The Bankruptcy Code balances the interests of both creditors and debtors in the

distribution of an insolvent party’s assets. The purpose of the Code is therefore twofold:

“to convert the estate of the bankrupt into cash and distribute it among creditors and then

                                               6
to give the bankrupt a fresh start.” Kokoszka v. Belford, 417 U.S. 642, 645-46 (1974)

(quoting Burlingham v. Crouse, 228 U.S. 459, 473 (1913)). The Code serves the interests

of creditors by “consolidat[ing] the debtor’s assets into a broadly defined estate from

which, in an equitable and orderly process, the debtor’s unsatisfied obligations to

creditors are paid to the extent possible.” In re Andrews, 80 F.3d 906, 909-10 (4th Cir.

1996) (footnote omitted).

       At the same time, the Code aims to “grant a ‘fresh start’ to the ‘honest but

unfortunate debtor.’” Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367 (2007)

(quoting Grogan v. Garner, 498 U.S. 279, 286, 287 (1991)). This fresh start allows the

debtor to “restructure [his] financial obligations, discharge [his] pre-existing debt, and

emerge from bankruptcy with a new capital structure that better reflects financial reality.”

Bosiger v. U.S. Airways, 510 F.3d 442, 448 (4th Cir. 2007). To ensure that a debtor is

able to receive this fresh start, the Code prevents creditors from making claims on certain

assets. See 11 U.S.C. § 522. These so-called exemptions ensure that individuals are able

to actually rehabilitate themselves after the bankruptcy process has concluded.

       Although the interests of creditors and debtors are at odds during insolvency—the

creditor would like to be paid in full and the debtor would like to pay as little as

possible—as a general matter, the Code’s balance benefits creditors and debtors alike.

See generally Douglas C. Baird, Bankruptcy’s Uncontested Axioms, 108 Yale L.J. 573,

583-86 (1998); Thomas H. Jackson, The Fresh-Start Policy in Bankruptcy Law, 98 Harv.

L. Rev. 1393, 1424-47 (1985). If debtors had to pay their creditors no matter what, or if

they were forced to give up all their assets before they could discharge their debts,

                                             7
individuals and businesses would be less likely to borrow money. In protecting certain

assets from creditor claims, the Code incentivizes individuals to incur debt and thereby

support both creditors and our capital markets. Similarly, by ensuring that creditors

receive a fair and predictable distribution of assets, the Code reduces the risks creditors

face and allows creditors to account for the risk that a borrower will fail to repay. The

benefit of these decreased risks is then passed on to debtors in the form of lower interest

rates. The fresh start policy is therefore “of public as well as private interest.” Local Loan

Co. v. Hunt, 292 U.S. 234, 244 (1934).

       In furtherance of this dual mandate, the Code supplies various avenues of relief to

debtors seeking to discharge their debts. Relevant here is Chapter 7, which allows debtors

to discharge their outstanding debts in exchange for liquidating their nonexempt assets

and distributing them to their creditors. Chapter 7 also supplies various tools for

bankruptcy courts to use in policing the Code’s enduring tension between debtors and

creditors. This case involves § 707(a), which sets forth the grounds on which a Chapter 7

bankruptcy petition may be dismissed:

       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 required by
              paragraph (1) of section 521(a), but only on a motion by the United
              States trustee.

                                              8
11 U.S.C. § 707(a).

       “Cause” is an open-ended term. It is not defined in § 707(a), and the examples

provided are illustrative rather than exhaustive. See id. § 102(3) (noting that for purposes

of the Code, “‘includes’ and ‘including’ are not limiting”); Fed. Land Bank of St. Paul v.

Bismarck Lumber Co., 314 U.S. 95, 100 (1941) (“[T]he term ‘including’ is not one of all-

embracing definition, but connotes simply an illustrative application of the general

principle.”). Bankruptcy courts are therefore left to determine case by case what

constitutes valid cause for dismissal of a Chapter 7 bankruptcy petition.

                                            III.

                                            A.

       For the most part, courts have recognized that a debtor’s bad faith in filing may

constitute cause for dismissal under § 707(a). See In re Krueger, 812 F.3d 365, 370 (5th

Cir. 2016) (“[A] debtor’s bad faith in the bankruptcy process can serve as the basis of a

dismissal ‘for cause’ . . . .”); In re Schwartz, 799 F.3d 760, 764 (7th Cir. 2015) (“[A]n

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.”); Piazza, 719 F.3d at 1260-61 (“[T]he power to dismiss

‘for cause’ in § 707(a) includes the power to involuntarily dismiss a Chapter 7 case based

on prepetition bad faith.”); In re Tamecki, 229 F.3d 205, 207 (3d Cir. 2000) (“Section

707(a) allows a bankruptcy court to dismiss a petition for cause if the petitioner fails to

demonstrate his good faith in filing.”); In re Zick, 931 F.2d 1124, 1127 (6th Cir. 1991)

(“[L]ack of good faith is a valid basis of decision in a ‘for cause’ dismissal by a


                                             9
bankruptcy court.”). But see In re Padilla, 222 F.3d 1184, 1191 (9th Cir. 2000) (“[B]ad

faith as a general proposition does not provide ‘cause’ to dismiss a Chapter 7 petition

under § 707(a).”); In re Huckfeldt, 39 F.3d 829, 832 (8th Cir. 1994) (adopting a “narrow,

cautious” approach that requires “extreme misconduct falling outside the purview of

more specific Code provisions”).

       We think the majority view is the sounder one, because it is the most helpful in

preventing serious abuses of the bankruptcy process. But acknowledging that bad faith

may constitute “cause” under § 707(a) also requires that the remedy of dismissal be

reserved for cases of real misconduct. Those courts that have found that bad faith in filing

for bankruptcy can constitute cause for dismissal have counseled “[c]aution in dispensing

the remedy of dismissal for bad faith” because of “the need . . . to maintain the balance of

remedies in bankruptcy.” In re Khan, 172 B.R. 613, 626 (Bankr. D. Minn. 1994). They

have accordingly emphasized that the bar for finding bad faith is a high one. See, e.g.,

Zick, 931 F.2d at 1129 (explaining that bad faith exists “only in those egregious cases that

entail concealed or misrepresented assets and/or sources of income, and excessive and

continued expenditures, lavish life-style, and intention to avoid a large single debt based

on conduct akin to fraud, misconduct, or gross negligence”). In short, bad faith exists

only where “the petitioner has abused the provisions, purpose, or spirit of bankruptcy

law.” Tamecki, 229 F.3d at 207.

                                            B.

       The concept of bad faith “does not lend itself to a strict formula.” Piazza, 719 F.3d

at 1271. Courts must consider the totality of the circumstances underlying each case to

                                            10
determine whether a debtor has acted in bad faith. To aid in this effort, bankruptcy courts

have developed a number of multifactor tests. See, e.g., McDow, 295 B.R. at 79 n.22

(proposing eleven factors); In re Griffieth, 209 B.R. 823, 827 (Bankr. N.D.N.Y. 1996)

(proposing six factors); In re Spagnolia, 199 B.R. 362, 365 (Bankr. W.D. Ky. 1995)

(proposing fourteen factors). These tests are meant to be guides only. A bankruptcy court

need not mechanically tick off each factor and tally up its tick-marks at the end. It may be

the case that many factors are relevant, or it may be the case that relatively few of them

are. It all depends. Evaluating these factors and their comparative relevance is a

discretionary exercise that is best left to bankruptcy judges. After all, many of the

potentially pertinent factors involve credibility determinations or exercises in fact-

finding. See, e.g., Griffieth, 209 B.R. at 827 (“debtor’s failure to make significant

lifestyle changes”); Spagnolia, 199 B.R. at 365 (“an intent to avoid a large single debt”);

id. (“debtor is paying debts to insiders”).

       The bankruptcy court in this case employed the eleven-factor bad-faith test set

forth in McDow, 295 B.R. at 79 n.22. Those eleven factors represent a distillation of the

various “totality of the circumstances test[s]” courts have applied in determining whether

a debtor’s actions amounted to bad-faith cause for dismissal. Id. at 79. They are meant to

represent the “factors [that] are typically considered” in that analysis. Id. at 79 n.22.

Among them are “[t]he debtor’s lack of candor and completeness in his statements and

schedules”; “[t]he debtor has sufficient resources to repay his debts, and leads a lavish

lifestyle”; “[t]he debtor’s motivation in filing is to avoid a large single debt incurred



                                              11
through conduct akin to fraud, misconduct, or gross negligence”; and “[t]he debtor’s lack

of attempt to repay creditors.” See id. 4

       Careful consideration of the McDow factors here—aided by lengthy briefing from

the parties, dozens of exhibits, and a three-hour evidentiary hearing—led the bankruptcy

court to conclude that Romero had not acted in bad faith. While Janvey’s judgment may

have been Romero’s “primary motivation in filing,” the bankruptcy court found that it

was not the only reason he filed. Romero, 557 B.R. at 883. Romero’s wife was suffering

from a brain infection that required extensive care and left her “100% incapacitated for

work.” Id. at 879. The bankruptcy court found that this infection had impaired her motor

skills, balance, and eyesight to such an extent that she and Romero had to remodel their

home so that she could live on the first floor. Id. It also found that Romero’s wife’s

condition had at one point necessitated employment of a live-in caretaker and that it still

required “a daily home caregiver, except for Sundays and part of Saturdays when

[Romero] manages his wife’s care on his own.” Id. Moreover, the court noted that two of

Romero’s wife’s disability policies—which together comprised the majority of her

disability payments—were about to end when he filed for bankruptcy. Id. at 879, 883-84.


       4
         The other seven factors are: “[t]he debtor’s concealment or misrepresentation of
assets and/or sources of income”; “[t]he debtor’s petition is part of a ‘deliberate and
persistent pattern’ of evading a single creditor”; “[t]he debtor is ‘overutilizing the
protection of the Code’ to the detriment to his creditors”; “[t]he debtor reduced his
creditors to a single creditor prior to filing the petition”; “[t]he debtor’s payment of debts
to insider creditors”; “[t]he debtor’s ‘procedural gymnastics’ that have the effect of
frustrating creditors”; and “[t]he unfairness of the debtor’s use of the bankruptcy
process.” McDow, 295 B.R. at 79 n.22.


                                             12
It predicted that the subsequent termination of these policies would result in an increase

in the couple’s out-of-pocket medical expenses, which were already steep at $55,000 in

the year before Romero filed. Id. at 884.

       The bankruptcy court also found that, as a result of his affiliation with Stanford,

Romero had “found it impossible to obtain work.” Id. at 883. And he still owed

approximately $150,000 in legal fees from the underlying litigation, in which Janvey had

employed “aggressive and costly litigation tactics.” Id. at 884. The bankruptcy court

commended Romero for being candid, forthcoming, timely, and cooperative throughout

both the instant and the underlying litigation. It explained that he had surrendered his

nonexempt assets and twice attempted to settle with Janvey. The bankruptcy court also

found that Romero’s lifestyle was “comfortable, but not exorbitant.” Id. at 883. And it

found nothing duplicitous about Romero’s desire to preserve exempt assets he and his

wife would “be required to live off” in the future. Id. at 885. In light of these

circumstances, the bankruptcy court concluded that no “cause” for dismissal existed in

this case.

                                            IV.

       Janvey raises three primary objections to the bankruptcy court’s denial of his

motion to dismiss. First, he argues that Romero should not be allowed to benefit from the

Code’s protections because he filed for bankruptcy solely to avoid Janvey’s judgment.

Second, he suggests that Romero’s efforts to settle the underlying litigation betrayed his

bad-faith motive. And finally, Janvey maintains that Romero’s petition ought to be

dismissed on the basis of his substantial assets and attendant ability to pay the judgment.

                                            13
       Each of these objections is rooted in a factor that may well prove relevant to the

bad-faith analysis. See McDow, 295 B.R. at 79 n.22 (listing as potentially relevant factors

“[t]he debtor’s motivation in filing is to avoid a large single debt incurred through”

improper conduct; “[t]he debtor’s lack of attempt to repay creditors”; and the debtor’s

“sufficient resources to repay his debts”). But there is a risk in elevating any single factor

above all others as the sine qua non of bad faith. And yet this is precisely what Janvey’s

objections would have us do.

                                             A.

       Janvey first objects that bankruptcy should be unavailable to Romero because he

seeks to avoid a single large debt—namely, Janvey’s judgment against him. This

objection is flawed for two reasons.

       As a factual matter, it is simply not the case that Romero filed for bankruptcy

solely to avoid the judgment. The bankruptcy court found that Romero filed for many

reasons. Romero, 557 B.R. at 883-84. Chief among his motivations was his wife’s

medical condition, which left her totally incapacitated and entailed substantial expenses

for her care. Additionally, Romero had multiple debts. Aside from to the $1.275 million

he owed Janvey, he also owed debts to two separate law firms totaling approximately

$150,000. The fact that Janvey’s judgment accounted for roughly 90% of Romero’s total

debt does not negate those other claims. In fact, courts have declined to dismiss Chapter 7

petitions filed in response to debts that constitute similarly large fractions of the debtor’s

total debt. See In re Bage, No. 13-33367, 2014 WL 4749072, at *2, *5 (Bankr. N.D. Ohio

Sept. 24, 2014) (denying a motion to dismiss where litigation-related debt accounted for

                                             14
more than 90% of the total unsecured debt); In re Ajunwa, No. 11-11363 (ALG), 2012

WL 3820638, at *1, *9 (Bankr. S.D.N.Y. Sept. 4, 2012) (denying a motion to dismiss

where one judgment “accounted for over 90% of the total claims listed”).

      As a legal matter, the fact that a bankruptcy petition was filed in response to a

single debt need not alone constitute bad-faith cause for dismissal. “Almost every

bankruptcy case is filed because a creditor is pursuing a debtor.” In re Bushyhead, 525

B.R. 136, 149 (Bankr. N.D. Okla. 2015). The purpose of bankruptcy law, after all, “is to

provide a procedure by which certain insolvent debtors can reorder their affairs, make

peace with their creditors, and enjoy ‘a new opportunity in life.’” Grogan, 498 U.S. at

286 (quoting Local Loan Co., 292 U.S. at 244). A person becomes insolvent when he is

no longer able to meet his financial obligations as they become due. See 11 U.S.C. §

101(32)(A). This may happen over time, or it may happen very suddenly. But in every

case, the debtor reaches a tipping point. That may well happen because of a single

additional debt. And that debt may be either large or small. It may be the result of

litigation, or it may be the product of a large hospital bill or a decline in the housing

market. Regardless, equating a decision to file for bankruptcy in response to a sizeable

debt with cause for dismissal would fault debtors for using the Code in precisely the way

Congress intended. As one bankruptcy court has observed, “if filing bankruptcy to avoid

the payment of a debt was cause for dismissal, no debtor would ever be able to file a

bankruptcy case.” In re Uche, 555 B.R. 57, 62 (Bankr. M.D. Fla. 2016).

      For these reasons, courts have frequently held that without additional evidence of

fraud or misconduct, the fact that a debtor filed for bankruptcy in response to a single

                                           15
large debt is not sufficient for a finding of bad faith. See, e.g., In re Chovev, 559 B.R.

339, 347 (Bankr. E.D.N.Y. 2016); In re McVicker, 546 B.R. 46, 51 (N.D. Ohio 2016); In

re Gutierrez, 528 B.R. 1, 15 (Bankr. D. Vt. 2014); In re Grullon, No. 13-11716 (ALG),

2014 WL 2109924, at *3 (Bankr. S.D.N.Y. May 20, 2014); In re Mazzella, No. 09-

78449-478, 2010 WL 5058395, at *6 (Bankr. E.D.N.Y. Dec. 6, 2010); In re Glunk, 342

B.R. 717, 736 (Bankr. E.D. Pa. 2006).

       None of this is to say that courts may not consider the nature of a debtor’s

motivation to file for bankruptcy. The fact that a bankruptcy petition was filed to skirt the

collection efforts of a single creditor may well prove relevant in the overall bad-faith

analysis. See McDow, 295 B.R. at 79 n.22 (listing this factor among others); Griffieth,

209 B.R. at 827 (same); Spagnolia, 199 B.R. at 365 (same). Indeed, both the district and

bankruptcy courts below took note of the fact that Janvey’s judgment served as the

catalyst for Romero’s bankruptcy petition. But Janvey now attempts to transform this

single factor into a per se test for bad faith. Because such an attempt would blind us to the

totality of Romero’s circumstances, we reject it.

                                             B.

       Janvey’s second objection attributes bad-faith motivation to Romero’s two

attempts to settle the underlying judgment. He suggests that Romero was trying to

pressure him into accepting a mere fraction of his judgment by casting bankruptcy as the

alternative to settlement.

       Janvey was, of course, well within his rights to reject Romero’s settlement offers.

But we find groundless the notion that Romero’s attempts to settle with a judgment

                                             16
creditor constitute cause to dismiss his case. The law encourages voluntary settlement of

disputes. See United States v. Cannons Eng’g Corp., 899 F.2d 79, 84 (1st Cir. 1990) (“[I]t

is the policy of the law to encourage settlements.”); Bank of Am. Nat. Tr. & Sav. Ass’n v.

Hotel Rittenhouse Assocs., 800 F.2d 339, 344 (3d Cir. 1986) (describing “the strong

public interest in encouraging settlement of private litigation”). Settlement yields both

private and public benefits. It spares the parties substantial costs in terms of time and

money, and it lightens the docket of a resource-strapped judicial system.

       In line with these principles, debtors and creditors remain free to settle their debts

among themselves outside the courtroom and before resorting to bankruptcy. The tools at

their disposal are varied. A creditor, for instance, may choose to forbear from

immediately collecting a debt and thereby offer the debtor a momentary reprieve. Or he

may allow the debtor to refinance or modify his loan in order to provide a more

permanent solution. Settlement is simply a way creditors and debtors can avoid

protracted litigation and resolve their disputes in a mutually satisfactory manner.

       But the fact that parties often settle does not mean that the failure to settle should

deprive debtors of the backstop provided by bankruptcy law. Far from amounting to

“blackmail,” Appellant’s Br. at 38, the backstop of bankruptcy encourages parties to

come to the table to reach an agreement when debts cannot be paid in full. It is altogether

right that the parties can rest assured that, should settlement fail, bankruptcy will provide

a way for them to resolve their case.

       There are, to be sure, limitations on settlement in bankruptcy, among them the

prohibition on preferred treatment of certain creditors in the immediate prepetition

                                             17
period. See 11 U.S.C. § 547. But the Code’s voidable preference provisions are designed

to prevent parties from privileging some creditors at the expense of others; they are not

designed to hinder the efforts of parties to settle to avoid bankruptcy in the first place.

Nobody has claimed that questions of preference are at issue here. Rather, Janvey claims

that Romero’s two settlement offers were unacceptably low. But the bankruptcy court

determined that this was not the entire story. Romero, 557 B.R. at 884. As Janvey himself

explained in rejecting Romero’s second settlement offer, “[p]ursuing the Ambassador

ha[d] strategic importance beyond the amount of money involved.” Id. at 878. Janvey

sought to make an example of Romero to ease his collection efforts elsewhere. He aimed

to show through his relentless pursuit of the judgment that those found liable in the Ponzi

scheme litigation would be required to compensate the victims in full. But just as Janvey

was within his rights to reject Romero’s settlement offers, Romero, too, had every right

to take advantage of the mechanism by which insolvent individuals can discharge their

debts.

                                             C.

         Janvey’s final objection boils down to a belief that Romero should not be allowed

to discharge his debts in bankruptcy because he has too much money. Janvey suggests

that Romero should use his substantial assets—which were almost all exempt—to pay the

judgment against him. This argument falters not only on its assumption that a debtor’s

ability to repay his debts alone constitutes cause for dismissal but also on its reliance on

Romero’s exempt assets. We address these flaws in turn.



                                            18
       A debtor’s ability to repay debts does not alone amount to cause for dismissal. See

Bushyhead, 525 B.R. at 148 (noting a “consensus among the courts” on this issue). As the

House Report noted, “[t]he section [§ 707(a)] does not contemplate . . . that the ability of

the debtor to repay his debts in whole or in part constitutes adequate cause for

dismissal.” 5 H.R. Rep. No. 95-595, at 380 (1977). Such a conclusion also follows

logically from the Code’s fresh-start philosophy. A penniless start is not a fresh start.

Were absolute depletion of one’s assets a prerequisite for bankruptcy relief, debtors and

their families would be left destitute and without the means to become productive

members of society. This would increase the strain on our social safety net by increasing

the number of people who might potentially qualify for government benefits.

       Forcing a debtor to repay his debts using exempt assets before resorting to

bankruptcy would also undercut the entire exemption scheme that Congress designed.

The “historical purpose” of bankruptcy exemptions “has been to protect a debtor from his

creditors, to provide him with the basic necessities of life so that even if his creditors levy

on all of his nonexempt property, the debtor will not be left destitute and a public

charge.” H.R. Rep. No. 95-595, at 126. Bankruptcy exemptions are meant to “afford the

debtor some economic and social stability, which is important to the fresh start

guaranteed by bankruptcy.” In re Morehead, 283 F.3d 199, 203 (4th Cir. 2002). They

       5
        The language of what is today § 707(a) was enacted as § 707. See Bankruptcy
Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549, 2606 (codified as amended at 11
U.S.C. § 707(a)). It was later renumbered as § 707(a) when §707(b) was added to the
provision in 1984. See Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.
L. No. 98-353, 98 Stat. 333, 355 (codified as amended at 11 U.S.C. § 707(a)).


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represent a careful balance of “the difficult choices that exemption limits impose on

debtors with the economic harm that exemptions visit on creditors.” Schwab v. Reilly,

560 U.S. 770, 791 (2010). Janvey’s suggestion that Romero should use his exempt assets

to pay the judgment turns this carefully crafted scheme on its head. We reiterate that the

ability to repay debts may be a relevant factor in the holistic bad-faith analysis. See

McDow, 295 B.R. at 79 n.22. But for the reasons stated above, we reject Janvey’s attempt

to transform it into a per se bar to bankruptcy relief.

                                              V.

       In ruling that the bankruptcy and district courts did not err in declining to dismiss

Romero’s petition, we remain aware that the bankruptcy process is subject to real abuse.

See Robinson v. Worley, 849 F.3d 577, 583 (4th Cir. 2017) (denying debtor a discharge

for “knowingly and fraudulently” making “a false oath or account” under 11 U.S.C.

§ 727(a)(4) (quoting 11 U.S.C. § 727(a)(4)(A))). Any process that is established for

legitimate reasons will occasionally be hijacked for illegitimate ends. It remains for

bankruptcy judges to detect in the first instance those cases of fraud upon the court and

creditors that constitute cause for dismissal under § 707(a) or reason for a denial of

discharge under the scenarios set forth in 11 U.S.C. § 727(a). The standard of review—

one of abuse of discretion—is of paramount importance here. We do not ask whether we

necessarily would have reached the same result as the bankruptcy court, but we do note

its greater familiarity with Romero’s case and the fact that the court gave good and sound

reasons for ruling as it did. Its decision is hereby

                                                                              AFFIRMED.

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