534 B.R. 883
Bankr. E.D. Va.2015Background
- Debtors in a Chapter 7 case claimed two mortgage debts as allowable expenses on the § 707(b)(2) means test despite intending to surrender the collateral. Inclusion affects whether a presumption of abuse arises.
- The United States Trustee moved to dismiss under § 707(b)(2), arguing Quigley (4th Cir.) and Supreme Court chapter 13 precedents require excluding payments on surrendered collateral.
- Debtors relied on this court’s prior decisions (In re Crawley; In re Demesones) holding that § 707(b)(2)(A)(iii) requires including all secured payments contractually due over 60 months, regardless of intent to surrender.
- The court contrasted chapter 13’s forward-looking “projected disposable income” (Lanning; Ransom; Quigley) with chapter 7’s static means test language that lacks the modifier “projected.”
- Concluding § 707(b)(2) is a mechanical, snapshot calculation, the court denied dismissal under § 707(b)(2) and scheduled an evidentiary hearing on alternative relief under § 707(b)(3).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether mortgage payments for collateral the debtor intends to surrender may be claimed as expenses under § 707(b)(2) means test | Quigley + Lanning require forward-looking exclusion of payments the debtor will not make post-filing (exclude surrendered collateral payments) | § 707(b)(2)(A)(iii) mandates inclusion of all secured payments contractually due (mechanical snapshot), even if debtor intends to surrender | Court held such secured, contractually due payments may be included in the § 707(b)(2) means test; denial of § 707(b)(2) dismissal and referral to § 707(b)(3) hearing |
Key Cases Cited
- Hamilton v. Lanning, 560 U.S. 505 (2010) (chapter 13: “projected disposable income” permits adjustments for known or virtually certain future changes)
- Ransom v. FIA Card Servs., N.A., 562 U.S. 61 (2011) (chapter 13: National Standards expense allowances apply only when "applicable")
- Morris v. Quigley (In re Quigley), 673 F.3d 269 (4th Cir. 2012) (chapter 13: payments on surrendered collateral cannot be included as expenses)
- In re Crawley, 412 B.R. 777 (Bankr. E.D. Va. 2009) (Chapter 7: secured payments contractually due are includable in means test)
- In re Demesones, 406 B.R. 711 (Bankr. E.D. Va. 2008) (Chapter 7: same)