In Re Grinkmeyer
ORDER
This matter comes before the Court on the United States Trustee’s Motion to Dismiss Pursuant to
The prevailing issue under
Gerald Bruce Grinkmeyer and Joan Noonan Grinkmeyer [“Grinkmeyers”] filed for relief under Chapter 7 of the United States Bankruptcy Code on September 80, 2010, bringing them within the purview of the Bankruptcy Abuse Prevention and Consumer Protection Act [“BAPCPA”]. The first issue before the Court is whether a presumption of abuse arises in this case under
The Grinkmeyers, in calculating their disposable income, included a mortgage expense on real estate which they intend to surrender. Because they will not be making those monthly mortgage payments, the Trustee, relying on
In re Turner,
Bankruptcy courts have been endeavoring to interpret the means test since BAPCPA’s introduction in 2005. The issue currently before this Court has been addressed in whole or in part by courts at every level across the nation with varying conclusions. Recently, however, the Supreme Court has weighed in on the discussion and has provided a glimmer of light in the darkness.
In June, 2010, the Court issued its decision in
Hamilton v. Lanning,
560 U.S. -,
In January, 2011, the Supreme Court revisited the issue of projected disposable
The Debtors, however, assert that the foregoing precedent is inapplicable in the context of a Chapter 7 proceeding and cite
In re Vecera,
Though never defined, “projected disposable income” certainly means something different than “disposable income” and only in the context of a chapter 13 proceeding is the concept of PDI relevant. As noted by Judge Metz in
Vecera,
“disposable income” is based solely on historical numbers and regional averages while a debtor’s “projected disposable income” necessarily contemplates a forward-looking number.
Id.
at 843. Even the Seventh Circuit acknowledged as much when it stated that “the calculation of ‘disposable income’ ... ‘is a starting point for determining the debtor’s ‘projected disposable income’ ... the final calculation can take into consideration changes that have occurred in the debtor’s financial circumstances.’ ”
Turner,
The only circuit court to squarely address this issue is the First Circuit in
In re Rudler,
This Court adopts the reasoning set forth in
Rudder
and aligns itself with the majority of courts which allow chapter 7 debtors to deduct mortgage payments on property to be surrendered. In accordance with the foregoing, therefore, the
The U.S. Trustee contends, as an alternative to dismissal under
In considering under paragraph (1) whether the granting of relief would be an abuse of the provisions of this chapter in a case in which the presumption in subparagraph (A)(i) of such paragraph does not arise or is rebutted, the court shall consider—
(A) whether the debtor filed the petition in bad faith; or
(B) the totality of the circumstances (including whether the debtor seeks to reject a personal services contract and the financial need for such rejection as sought by the debtor) of the debtor’s financial situation demonstrates abuse.
Unlike the previous section, the Trustee bears the burden under 707(b)(3) to demonstrate the Debtors’ bad faith or to show that the totality of the circumstances indicate abuse. The Trustee has made no allegations of bad faith but relies, instead, on the totality of the circumstances in support of her motion.
BAPCPA amended
Dismissal under 707(b) is also authorized when there is “abuse.” It is intended that by changing the standard for dismissal from “substantial abuse” to “abuse,” stronger controls will be available ... to limit the abusive use of Chapter 7 based on a wide range of circumstances. The “bad faith” and “totality of the circumstances” of the debt- or’s situation is adopted as an appropriate standard. It is intended that all forms of inappropriate and abusive debt- or use of Chapter 7 will be covered by this standard, whether because of the debtor’s conduct or the debtor’s ability to pay.... Cases which have decided that a debtor’s ability to pay should not be considered when determining abuse, or can be outweighed if the debtor is otherwise acting in good faith, are intended to be overruled....
In re Paret,
BAPCPA itself does not define “totality of the circumstances.” Nevertheless, it is well established that a debtor’s actual current and future income and expenses, intentions, and resulting ability or inability to pay are crucial to an assessment of the debtor’s “financial situation” under
A debtor’s ability to pay a significant portion of unsecured debt has been held to be sufficient to establish abuse under
(1) whether the bankruptcy petition was filed because of sudden illness, calamity, disability, or unemployment; (2) whether the debtor made consumer purchases far in excess of his ability to repay; (3) whether the debtor’s proposed family budget is excessive or unreasonable; (4) whether the debtor’s schedules and statements of current income and expenditures reasonably and accurately reflect his true financial condition; (5) whether the bankruptcy petition was filed in bad faith; (6) whether the debtor enjoys a stable source of future income; (8) whether he is eligible for adjustment of his debts through chapter 13 of the Bankruptcy Code; (9) whether there are state remedies with the potential to ease his financial predicament; (10) the degree of relief obtainable through private negotiations; and (11) whether the debt- or’s expenses can be reduced significantly without depriving him of adequate food, clothing, shelter, and other necessities.
Turning to the specifics of this case, the Court must consider the income that the Grinkmeyers actually have available to pay nonpriority unsecured debt. The Grinkmeyers have no dependents. Mrs. Grinkmeyer has been employed by the same employer for eleven years as of the date of filing. Debtors’ Schedule I indicates gross monthly income for the Grinkmeyers of $9,194 and net monthly income of $6,355. Schedule J shows monthly expenses of $6,827, which includes a $2,986 mortgage payment on property which is to be surrendered.
Once the Debtors shed their high mortgage payment and substitute a lower housing expense
3
, they will have a significant amount per month to dedicate toward payment of their $75,532 in nonpriority unsecured debt. Looking at the Grinkmeyers’ schedules, calculation of monthly income and expense, and their actual income and expenditures, this Court is satisfied that the Debtors have the ability to pay a sig
Although additional factors may be pertinent to this 707(b)(8) analysis, all of those factors are related to the Debtors’ ability to repay debt. Specifically, the Court finds that the Debtors’ housing expense, as scheduled, is excessive and that the schedules do not reasonably and accurately reflect the Debtors’ true financial condition. Both Debtors are currently employed and although Mr. Grinkmeyer has only been in his job a short while, Mrs. Grinkmeyer is gainfully employed and enjoys a stable source of future income. As such, the Debtors are eligible for chapter 13 relief and have the ability to fund a plan.
Based upon the foregoing, the Court now GRANTS the Trustee’s Motion to Dismiss pursuant to
IT IS SO ORDERED.
Notes
. In the Seventh Circuit case of
Turner,
a Chapter 13 debtor included a mortgage expense in calculating his projected disposable income on a home that he intended to abandon to the mortgagee. The Court found that the debtor could not utilize a "phantom deduction to reduce the recovery by his unsecured creditors without benefiting any other creditor.”
.
See In re Turner,
. The Debtors testified at an April 7, 2011 hearing that they were trying to locate rental housing. Mr. Grinkmeyer suggested that a rental expense of up to $1,500 per month might fit into their budget.