McGowan v. McDermott, 445 B.R. 821

McGowan debtors filed a voluntary Chapter 7 petition in the U.S. District Court for the Northern District of Ohio (Eastern Division).
UST moved to dismiss as abusive under §707(b)(1) and (b)(3)(B) based on income above Ohio median and excessive expenses.
Bankruptcy Court held an evidentiary hearing, denied Debtors' summary-judgment motion, and dismissed the petition under §707(b)(3) after finding abuse.
Findings: Debtors had ability to pay some unsecured debt; they paid adult children’s college expenses and student loans at creditors’ expense; mortgage payments exceeded IRS National Standards; and meals/other expenses supported adult children.
Debtors appealed under 28 U.S.C. §158(a)(1); district court affirmed the Bankruptcy Court’s dismissal.
Jurisprudence underlying the decision includes the meaning of “means test” as a screening mechanism, and the totality-of-circumstances standard under §707(b)(3).

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether totality of circumstances supports §707(b)(3) abuse finding	McGowans passed the means test and thus §707(b)(3) abuse not shown	Totality of circumstances shows abuse despite means-test result	Abuse found under §707(b)(3) based on totality of circumstances
Whether paying adult children’s college expenses is improper in calculating disposable income	Payments for adult children's tuition are permissible or not decisive	Such payments are improper when at creditor expense and not factored into disposable income	Court disallowed adult-child college expenses in calculating disposable income
Whether the bankruptcy court properly rejected the Debtors’ ability to repay as sole basis for abuse	Ability to repay alone should not justify dismissal	Ability to repay can be sole basis for abuse under Krohn; other factors may reinforce	Totality-of-circumstances governs; ability to repay alone can be a basis but is not sole determinant

In re Krohn, 886 F.2d 123 (6th Cir. 1989) (substantial abuse may be predicated on want of need; needs test remains relevant under totality analysis)
Ransom v. FIA Card Services, N.A., 131 S. Ct. 716 (2011) (means test is a screening mechanism, not dispositive; allows totality review afterward)
In re Behlke, 358 F.3d 429 (6th Cir. 2004) (standard of review and framework for evaluating bankruptcy decisions)
In re Baker, 400 B.R. 594 (Bankr. N.D. Ohio 2009) (prohibits using adult-child college expenses as priority over general unsecured creditors)
In re Nockerts, 357 B.R. 497 (Bankr. E.D. Wis. 2006) (minority view that ability to pay may be sole basis for abuse)