In Re Lindstrom
ORDER
THIS MATTER comes before the Court on the Motion to Dismiss, filed by the United States Trustee (“UST”) and the Debtor’s response. Under changes made by the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”), a debtor’s Chapter 7 case may be dismissed under 11 U.S.C. § 707(b) if a court finds that the granting of relief would be “an abuse” of the provisions of Chapter 7. Under subsection 707(b)(2), a “presumption of abuse” will arise if a debtor fails to meet the so-called “Means Test.” 1 The Means Test essentially gauges a debtor’s ability to repay his or her debts by measuring how much disposable income the debtor will have each month, after the deduction of allowable expenses. 2 The issue in this case is whether, under 11 U.S.C. § 707(b)(2)(A)(iii)(I), the Debtor can deduct, as an allowable expense, monthly payments on a car loan when the car was repossessed prior to the filing of the UST’s motion to dismiss.
1. BACKGROUND
At the time of his bankruptcy filing, the Debtor owned a 2005 Ford F-150 pickup truck (the “Truck”). When he filed his voluntary Chapter 7 petition on February 28, 2006, he listed the Truck as an asset on his Schedule B, and the corresponding secured car loan owed to Fireside Bank (“Fireside”) on his Schedule D. On the petition date, he also filed a Statement of Intention, indicating that he intended to surrender the Truck to Fireside at some point during his bankruptcy. Fireside moved for, and the Court granted, relief from stay to repossess the Truck. Following the repossession, the UST filed his Motion to Dismiss, arguing several points of error in the Debtor’s calculations on his
II. DISCUSSION
There is an emerging split of authority on the issue of whether a debtor must retain the collateral securing a particular debt in order to claim the § 707(b)(2)(A)(iii)(I) deduction for the payments on that secured debt. 4 These differing interpretations focus on the statutory phrase “amounts scheduled as contractually due” in § 707(b)(2)(A)(iii)(I). The majority follows the reasoning first laid out by the court in In re Walker, 5 The Walker court concluded that this language covers payments owed under a contract at the time of filing of the petition, whether or not they are actually paid. 6 Use of the phrase “scheduled as contractually due” allows for the possibility that the payments may not actually be made by a debtor either because the debtor will surrender the collateral or because the payments might be modified and paid through a Chapter 13 plan. 7 As a result of this interpretation, “nothing the debtor does or does not do changes the fact that scheduled payments remain contractually due.” 8 If Congress had intended to permit the deduction of only those payments that would actually be made postpetition, Congress could have done so. 9
Further, the
Walker
court points out that the very structure of the Means Test indicates it is a backward-looking, “snapshot” test, designed to determine whether a debtor is in need of bankruptcy relief on the petition date.
10
To consider postpetition actions would be inconsistent with the intent of the statute.
11
The court acknowledged that consideration of a debtor’s actual postpetition expenses might result in more accurate picture of the debtor’s financial condition.
12
This possibility, however, was not a sufficient basis to overcome the plain language of the statute because, “section 707(b)’s presumption of abuse was not intended to and does not produce the most accurate prediction of the debtor’s actual ability to fund a Chapter 13 plan.”
13
Instead, it is only a “mechanical estimate of the debtor’s abilities
The contrary view, first published in In re Skaggs, 15 concludes that the phrase “scheduled as contractually due” refers to the schedules and statements accompanying a bankruptcy petition. 16 According to this view, if the debtor indicates on his statement of intention that a particular item will be surrendered during the course of the bankruptcy, then that item necessarily cannot be encumbered by a debt that will be “scheduled” throughout the course of the bankruptcy. 17 As support for this rationale, the court in Skaggs notes that “Congress used the phrase ‘scheduled as’ several times in the Bankruptcy Code to refer not to the common dictionary meaning for the word schedule (i.e., ‘to plan for a certain date’), but to whether a debt is identified on a debtor’s bankruptcy schedules.” 18 The court goes on to find that “[njothing in 11 U.S.C. § 707(b) (2) (A) (iii) indicates an intent to assign a different meaning to the phrase ‘scheduled as’ in this provision and to do so would run contrary to the statute.” 19 The court therefore concludes that “the Debtors’ schedules and statements form the basis from which the Court should determine whether a debt is ‘scheduled as contractually due.’ ” 20 The Skaggs court, and other courts that following its reasoning, believe this interpretation carries out Congress’ intent in passing BAPCPA, by ensuring that those who can afford to repay some portion of their debts will be required to do so. 21 The UST relies on the Skaggs analysis in arguing that the Debtor should not be allowed to claim the Truck payments because his Statement of Intention, filed on the petition date, indicated his intent to surrender the Truck.
A third line of cases, originating with the decision in In re Singletary, 22 also rejects the “snapshot” approach of In re Walker and concludes a court must consider postpetition events in applying § 707(b)(2)(A)(iii). 23 Unlike Skaggs, however, the Singletary court holds that the determinative issue is whether debtor has actually surrendered the collateral at issue by the time the motion to dismiss is filed. 24 Thus, under Singletary, if the debtor has already surrendered the property on the date the motion to dismiss is filed, as is the case here, the debtor is not permitted to take the deduction. 25 If the debtor has merely filed a Statement of Intention indicating possible surrender, but has not actually surrendered the collateral, then the debtor is permitted to take the § 707(b)(2)(A)(iii) deduction. 26
Many of the cases addressing this issue focus on whether “scheduled as” should be given its dictionary meaning of “to plan for a certain date,” 28 or its common usage in bankruptcy, meaning those assets and liabilities identified on a debtor’s bankruptcy schedules. 29 The Court finds this to be a distinction without a difference since, under either definition, “scheduled as” is modified by “contractually due.” Listing a debt on bankruptcy schedules or even on a statement of intent does not eliminate a debtor’s contractual liability. 30 Thus, whether a secured debt is “scheduled as” due in the dictionary sense, or is listed on bankruptcy schedules as debt owed by the debtor, the key determination is whether that debt was contractually due on the petition date. 31 The Skaggs and Single-tary line of decisions give no meaning to the phrase “contractually due.”
In addition, both terms “scheduled” and “contractually due” in § 707(b)(2)(A)(iii)(I) are modified by the phrase “in each month of the 60 months following the date of the petition[.]” This phrase does not require that a debtor actually pay the debt in each of the 60 months postpetition. Rather, when read in context of § 707(b)(2), the clause simply operates to define the period over which the debtor’s “contractually due” payments are averaged. 32
Moreover, the
Skaggs
and
Singletary
lines of cases render § 707(b)(2)(iii)(I) meaningless. Subsection (iii) of § 707(b)(2) is comprised of two parts, and it is the sum of these separate parts which determines the amount that a debtor may
Finally, this result comports with this Court’s understanding of the Means Test as a mechanical, backward-looking test, designed to measure the debtor’s ability to fund a chapter 13 plan as of the petition date. Congress wanted to ensure that debtors who have the ability to repay a portion of their debts be forced to do so through Chapter 13. 34 It wanted to eliminate the broad discrepancies in court decisions interpreting “substantial abuse” under the prior version of § 707(b). 35 To do this, they enacted the Means Test, which was intended to impose a “rigid and inflexible” set of expense standards. 36 To consider postpetition actions would be inconsistent with the creation of an inflexible test that considers only the petition date “snapshot.”
In this case, the UST has not raised § 707(b)(3) as an additional ground for dismissal. While the Court has its own obligation to consider whether the granting of relief would be an abuse of Chapter 7 under that subsection, it can only make its determination based on the facts presented by the parties. The only facts presented by the UST relate to Debtor’s surrender of the Truck. The Court finds that this fact alone does not warrant dismissal under § 707(b)(3).
III. CONCLUSION
For the foregoing reasons, the Court concludes that Debtor’s claimed deduction for Truck payments under § 707(b)(2)(A)(iii)(I) is proper. Accordingly, it is hereby ORDERED that the UST’s Motion is DENIED.
Notes
. All references to "section” shall refer to Title 11, United States Code, unless expressly stated otherwise.
.
See generally In re Scarafiotti,
. The facts in this matter are undisputed and the parties have submitted it to the Court on supporting briefs, without requesting an evi-dentiary hearing.
. To date, neither the Tenth Circuit nor any other Circuit court has provided any guidance on this particular topic.
.
.
In re Walker,
. Id. at *4.
. Id.
. Id.
. Id. at *5.
. Id.
. Id. at *6.
. Id.
. Id.
.
. Courts following the decision in
In re Skaggs
include:
In re Harris,
.
In re Skaggs,
. Id. at 599.
. Id.
. Id.
. Id. at 600.
.
. Courts following
Singletary
include
In re Tamez,
.
In re Singletary,
. Id.
.
Id.
The
Singletary
decision has been criticized for relying on pre-BAPCPA precedent in construing § 707(b)(2)(A)(iii).
See, e.g., In re Nockerts,
.
See also In re Galyon,
.
See In re Walker,
.
See In re Skaggs,
.
See In re Haar,
.
See In re Haar,
.In re Walker,
.
See In re Walker,
.
In re Scarafiotti,
. See H.R.Rep. No. 109-31 at 12 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 99 ("The standard for dismissal — substantial abuse — is inherently vague, which has lead to its disparate interpretation and application by the bankruptcy bench.”).
.145 Cong. Rec. H2718 (daily ed. May 5, 1999) (statement of Chairman Hyde); see also Statement of Administration Policy, Executive Office of the President (May 5, 1999), http:// clinton2.nara.gov/OMB/legislative/sap/HR 833-h.html ("H.R. 833 in its current form would limit access to Chapter 7 to debtors who meet an inflexible and arbitrary means test.... H.R. 833 simply takes IRS expense standards, which were not developed for bankruptcy purposes, and applies them rigidly to determine ability to repay in bankruptcy.”).
.
In re Mundy,
.
See In re Scarafiotti,
.
In re Hartwick,