456 B.R. 385
Bankr. S.D. Ind.2011Background
- Grinkmeyers filed Chapter 7 on September 30, 2010, within BAPCPA, triggering §707(b) inquiry.
- US Trustee moved to dismiss under §707(b)(1), (2), and (3); Debtors objected on January 27, 2011.
- Means test question centered on deducting mortgage payments for property the Debtors intend to surrender.
- Trustee relied on Turner to exclude the mortgage expense from disposable income; Debtors cited Vecera and Rudler to allow the deduction.
- Court endorsed a forward-looking approach per Hamilton v. Lanning and held PDI concepts apply differently in Chap. 7 context.
- Court found Debtors can fund a Chapter 13 plan and that their housing expense is excessive, supporting dismissal under §707(b)(3) unless conversion to Chap. 13 occurs within 20 days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether mortgage payments on collateral to be surrendered are deductible under §707(b)(2). | Trustee: not contractually due, exclude mortgage expense. | Grinkmeyers: Rudler/Vecera permit deduction in Chap. 7. | Mortgage deduction allowed; no §707(b)(2) abuse presumption. |
| Whether the case constitutes abuse under §707(b)(2) after deducting the mortgage expense. | Exposure to a presumptive abuse if mortgage is not deducted and disposable income remains high. | Debtors argue no abuse given proper deductions and forward-looking income projections. | Presumption of abuse does not arise under §707(b)(2). |
| Whether dismissal under §707(b)(3) is warranted based on the totality of the circumstances. | Totality shows Debtors’ ability to pay significant unsecured debt; abuse exists. | Debtors’ finances show ability to fund a plan and avoid abuse in a Chap. 7 filing. | Abuse found under §707(b)(3); dismissal granted unless Debtors convert to Chap. 13 within 20 days. |
Key Cases Cited
- In re Rudler, 576 F.3d 37 (1st Cir. 2009) (mortgage payments deductible in Chap. 7 despite surrender in Chap. 7 context)
- Vecera, 430 B.R. 840 (Bankr. S.D. Ind. 2010) (bankruptcy court allows mortgage deduction for Chap. 7 property to be surrendered)
- Turner, 574 F.3d 349 (7th Cir. 2009) (mortgage expense not allowed as a phantom deduction in Chap. 13 context)
- In re Paret, 347 B.R. 12 (Bankr. D. Del. 2006) (court discusses 707(b)(3) and ability to pay as a factor)
- In re Ransom, 131 S. Ct. 716 (2011) (abrogates reliance on vehicle ownership deduction; PDI must match debtor)