477 B.R. 118
9th Cir. BAP2012Background
- Debtors sought Chapter 7 relief; U.S. Trustee moved to dismiss under §707(b)(1) and (3)(B) alleging abuse and the ability to pay.
- Initial Schedule I showed Mr. Ng earned $7,439.47/month plus $1,439.88 military pension; Mrs. Ng was unemployed.
- Original Schedule J projected $5,225/month expenses; debt included $38,261 unsecured and $10,213.11 priority tax; secured claims totaled $484,830.70 with $112,480.70 unsecured.
- Bankruptcy court denied §707(b)(2) and ordered a §707(b)(3)(B) hearing to evaluate abuse under totality of circumstances.
- Debtors relocated during proceedings; retirement contributions and a prepetition pension loan were disclosed and later modified.
- Bankruptcy court ultimately dismissed the case under §707(b)(3)(B) after finding Debtors could repay creditors and that retirement contributions, pension loan repayments, and tax payment were not reasonably necessary or were improper adjustments to income.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether dismissal under §707(b)(3)(B) was proper | Ngs contended no abuse; post-petition income increases and reasonable expenses show lack of abuse | UST argued totality of circumstances shows Debtors can repay debts without hardship | Yes; dismissal proper under totality of circumstances |
Key Cases Cited
- In re Price, 353 F.3d 1135 (9th Cir. 2004) (nonexclusive Price factors govern totality inquiry; ability to pay matters)
- In re Cortez, 457 F.3d 448 (5th Cir. 2006) (courts may consider developments before discharge in §707(b)(1) abuse analysis)
- In re Hartwick, 359 B.R. 16 (D.N.H. 2007) (consideration of current/foreseeable circumstances in abuse analysis)
- In re Egebjerg, 574 F.3d 1045 (9th Cir. 2009) (retirement loan repayments are treated distinctly; not debts to creditors)
- Craig v. Educ. Credit Mgmt. Co. (In re Craig), 579 F.3d 1040 (9th Cir. 2009) (Hebbring factors used to determine reasonable retirement contributions)
- In re Reed, 422 B.R. 214 (Bankr. C.D. Cal. 2009) (debtor’s ability to pay analyzed under totality; post-petition changes considered)
- In re Kelly, 841 F.2d 908 (9th Cir. 1988) (ability to pay can justify dismissal under §707(b)(3))
- In re Pennington, 348 B.R. 647 (Bankr. D. Del. 2006) (case cited for totality framework under pre-BAPCPA law)