446 B.R. 721
Bankr. E.D. Pa.2011Background
- Debtor Susan Harmon filed a Chapter 7 petition; UST moved to dismiss as abusive under 11 U.S.C. § 707(b)(1).
- The dispute centers on Form B22A deductions, specifically a $153 housing deduction and a $565.64 monthly student loan payment.
- Student loan is nondischargeable; Debtor concedes it would not impose undue hardship under § 523(a)(8).
- Debtor listed income of $3,498.48 and expenses of $3,456.01 on Schedules I and J, including a $981 rent and $565.64 student loan payment.
- Court disallowed the student loan payment as a means-test expense, creating a presumption of abuse under § 707(b)(2)(A)(i).
- Court considered whether Debtor could show special circumstances to rebut the presumption and ultimately granted the UST’s Motion to dismiss or convert.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the student loan payment is an allowable expense under §707(b)(2)(A)(iv). | UST contends student loans are not priority debts; the payment is not deductible. | Harmon argues the student loan payment is a valid expense under §707(b)(2)(A)(iv). | No; the payment is not an allowable expense. |
| Whether a presumption of abuse arises when the student loan payment is disallowed. | UST contends disallowing the loan payment yields a disposable income that triggers a presumption. | Debtor argues the calculation does not produce a presumption of abuse. | Presumption of abuse arises after disallowance. |
| Whether Debtor can establish special circumstances under §707(b)(2)(B) to justify the student loan expense. | UST bears the burden to show Debtor cannot prove special circumstances. | Debtor asserts nondischargeable debt and future hardship justify the expense. | Debtor failed to prove special circumstances; presumption remains unrebutted. |
Key Cases Cited
- In re Womer, 427 B.R. 334 (Bankr.M.D.Pa.2010) (special circumstances standard in student loans debated; grave consequences considerations discussed)
- In re Pageau, 383 B.R. 221 (Bankr.D.N.H.2008) (procedural/substantive requirements for special circumstances; three-part framework)
- In re Siler, 426 B.R. 167 (Bankr.W.D.N.C.2010) (narrow vs broad interpretation of special circumstances; context for evaluating special factors)
- In re Hammock, 436 B.R. 343 (Bankr.E.D.N.C.2010) (collects various approaches to special circumstances; court's stance summarized)
- In re Delbecq, 368 B.R. 754 (Bankr.S.D.Ind.2007) (alternative views on special circumstances and chapter 13 dynamics)