In Re Pageau
MEMORANDUM OPINION
I. INTRODUCTION
The Court has before it the Motion of United States Trustee for Order Dismissing Case under 11 U.S.C. § 707(b)(2) or 11 U.S.C. § 707(b)(3) (Doc. No. 17) (the “Motion”). After a preliminary hearing on November 5, 2007, the Court denied the Motion in part with respect to certain claims of the United States Trustee (the “UST”) under 11 U.S.C. § 707(b)(2)
1
(Doc. No. 23). The Court held a further hearing on January 8, 2008, on the remaining issue under § 707(b)(2), i.e., whether the Debtor has rebutted the presumption of abuse by establishing special circumstances warranting the inclusion of the Debtor’s
This Court has jurisdiction of the subject matter and the parties pursuant to 28 U.S.C. §§ 1334 and 157(a) and the “Standing Order of Referral of Title 11 Proceedings to the United States Bankruptcy Court for the District of New Hampshire,” dated January 18, 1994 (DiClerieo, C.J.). This is a core proceeding in accordance with 28 U.S.C. § 157(b).
II. FACTS
On June 29, 2007, the Debtor filed a chapter 7 bankruptcy petition. On August 13, 2007, the UST filed a statement indicating the Debtor’s case should be presumed to be an abuse under § 707(b), and on September 10, 2007, the UST filed the Motion seeking to dismiss the Debtor’s case under § 707(b)(2) or (b)(3). The Debtor filed a statement under oath to rebut the presumption of abuse as well as an objection to the Motion. As amended by the Debtor, and in accordance with rulings made by the Court at the preliminary hearing on November 5, 2007, the Means Test Form presently shows the Debtor’s monthly disposable income on line 50 as $240.62. Monthly disposable income in that amount results in a presumption of abuse as the disposable income the Debtor could pay through a five-year plan totals $14,427.20 as shown on line 51 of the Means Test Form, which is more than $10,950.00, the amount necessary to establish a presumption of abuse pursuant to § 707(b)(2)(A)®. 2
The parties agree that the Debtor obtained student loans through the New Hampshire Higher Education Assistance Foundation during the period of January 1994 through May 1998, totaling $14,875.00. In September 2001, the Debt- or was able to consolidate these loans into the Student Loan at an interest rate of 6.79%. The current principal balance on the Student Loan is $13,449.16, and the Debtor’s monthly payment on the Student Loan is $170.00. The remaining term of the Student Loan exceeds sixty months. The parties agree the Student Loan is nondischargeable pursuant to 11 U.S.C. § 523(a)(8), and payments on the Student Loan cannot be deferred. The Debtor listed the Student Loan payment on line 56 of the Means Test Form as an additional monthly expense.
III. DISCUSSION
The Debtor seeks .to rebut the presumption of abuse arising under § 707(b)(2)(A) on the grounds that the Student Loan constitutes a “special circumstance” within the meaning of § 707(b)(2)(B). The Bankruptcy Code specifically provides at § 707(b)(2)(B):
(i) In any proceeding brought under this subsection, the presumption of abuse may only be rebutted by demonstrating special circumstances, such as a serious medical condition or a call to active duty in the Armed Forces, to the extent such special circumstances ... justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.
(ii) In order to establish special circumstances, the debtor shall be required to itemize each additional expense or adjustment of income and to provide (I) documentation for such expense or adjustment to income; and (II) a detailed explanation of the special circumstances that make such expenses or adjustment to income necessary and reasonable.
(iii) The debtor shall attest under oath to the accuracy of any information provided to demonstrate that additional expenses or adjustments to income are required.
(iv) The presumption of abuse may only be rebutted if the additional expenses or adjustments to income referred to in clause (i) cause the product of the debt- or’s currently monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv) of subparagraph (A) when multiplied by 60 to be less than the lesser of (I) 25 percent of the debt- or’s nonpriority unsecured claims, or $6,575, whichever is greater; or (II) $10,950.
11 U.S.C. § 707(b)(2)(B). Section 707(b)(2)(B) sets forth both procedural and substantive requirements.
In re Haman,
A. Procedural Requirements for Establishing Special Circumstances
The procedural requirements for establishing special circumstances are set forth in § 707(b)(2)(B)(ii), (iii), and (iv), and they require a debtor (1) to “itemize” each additional expense or income adjustment by setting forth the nature of the suggested adjustment, its amount, and its impact on the debtor’s finances and the means test calculation; (2) to provide “documentation” of the additional expense or income adjustment; (3) to provide a “detailed explanation” of the “special circumstances” that make the additional expense or income adjustment “necessary and reasonable;” and (4) to “attest under oath” to the accuracy of the information the debtor provides.
See In re Littman,
The Debtor has satisfied the procedural hurdles of § 707(b)(2)(B). Through her verified statement of rebuttal, the parties agreed statement of facts which had attached to it copies of the Debtor’s student loan applications and promissory notes, and her offer of proof at the hearing, the Debtor provided the Court with sufficient documentation demonstrating she is liable for the Student Loan in the amount of $170.00 per month. In addition, she explained that the Student Loan expense is necessary and reasonable in her view because the Student Loan is nondischargeable and she will be required to make ongoing payments until the Student Loan is paid in full. The Debtor further demonstrated that if she were allowed to deduct the Student Loan expense of $170.00 from her current monthly income of $240.62, her monthly disposable income would be reduced to $70.62, which when multiplied by sixty totals $4,237.20, or less than $6,575.00, the threshold amount for finding a presumption of abuse.
B. Substantive Requirements for Establishing Special Circumstances
The substantive requirements of § 707(b)(2)(B) are set forth in § 707(b)(2)(B)(i), and they require a debtor (1) to demonstrate “special circumstances” that justify the additional expense or income adjustment; and (2) to demonstrate that there is “no reasonable alternative” to making the additional expense or income adjustment.
Haman,
Further, courts have held that determining whether special circumstances exist is a fact-specific determination that should be made on a case-by-case basis.
In re Robinette,
No. 7-06-10585 SA,
Courts disagree whether the language of the statute requires the circumstances to be unanticipated, unforeseeable, or outside the debtor’s control.
Compare Robinette,
C. Arguments of the Parties
In the Debtor’s view the mere fact that she is required to make monthly payments of $170.00 per month on the non-dischargeable Student Loan constitutes “special circumstances” within the meaning of § 707(b)(2)(B)(i). The Debtor argues that there is no reasonable alternative to paying the Student Loan each month as she has no ability to pay the Student Loan in full, she has no basis for seeking further deferral of the loan, and she already has consolidated her educational debt. According to the Debtor, the federal government encourages students to borrow money to fund a college education, and it expects such loans to be repaid, excepting them from discharge in bankruptcy in most cases. The Debtor
The UST disputes the Debtor’s contentions. According to the UST, the Debtor has failed to demonstrate how circumstances giving rise to the Student Loan qualify as special or how they differ from the “general financial problems that precede almost every bankruptcy filing.”
Turner,
D. Analysis
To date, the courts considering the issue of whether the presumption of abuse can be rebutted under the provision of § 707(b)(2)(B), on the basis of student loan debt, have reached different results. Several courts have held that student loans do constitute special circumstances.
Robi-nette,
Other courts have concluded that student loans do not fall within the special circumstances provision.
Vaccariello,
In this Court’s view, the Debtor’s Student Loan should not be included as an additional expense on the Means Test Form. The examples in § 707(b)(2)(B)(i), which provide guidance as to what may constitute special circumstances, do not identify specific expenses, but rather identify some circumstances that give rise to such expenses.
Turner,
Educational loans incurred in pursuit of education and training that is necessitated by permanent injury, disability or an employer closing might constitute special circumstances because such events are outside the control of a debtor as are the two examples in the statute. However, the Court need not explore such questions in this case. Here, the Debtor provided no evidence as to any special circumstances that caused her to borrow money to fund her education. Rather, the record before the Court supports a finding that the Debtor incurred the Student Loan in the ordinary course of acquiring her education and without any special circumstances.
See Vaccariel-lo,
Payments on student loans, business loans or equipment loans, incurred solely to secure a more advantageous income or to enter a different vocation, are not special circumstances. Similar to retirement plan loans, which some courts find do not satisfy the special circumstance provision, the Student Loan payments in this case are neither extraordinary nor rare.
See Eisen,
In addition to the lack of special circumstances demonstrated by the Debtor in this particular case, the Court further finds that the nondischargeable nature of the Student Loan cannot constitute special circumstances.
If non-dischargeability was the standard for a special circumstance, Congress would have said so. Those courts concluding that “special circumstances” include non-dischargeable student loan obligations arguably will have to apply this standard to every other non-dischargea-ble obligation from long-term auto lease payments that exceed the IRS standards ... to debts arising from fraud, embezzlement, DUI, and the like. Every one of these non-dischargeable obligations could qualify as debts for which a debtor has no reasonable alternative but to continue payments to avoid economic harm, and there is no suggestion in Section 707(b)(2)(B) that courts have been delegated the policy decision of deciding that some non-dischargeable debts are “good” and some are “bad” so as to permit treating some but not all as a “special circumstance.”
The premise that educational loans are a “special circumstance” for which there is no alternative but to raise a debtor’s expenses by a sufficient amount to escape the means test presumption, in order to avoid long-term economic harm, is misplaced.
Student loan repayments are authorized by Code-based provisions that authorize debtors to maintain regular student loan payments as part of a Chapter 13 plan and avoid the perceived economic hardships recited by Knight and Delbecq. ... Chapter 13 repayment provides the “reasonable alternative” to engaging in a strained reading of what constitutes a special circumstance in order to adjust the income or expense calculations of the means test.
Lightsey,
In this district, student loan debts may be paid directly and separately during a debtor’s chapter 13 plan in accordance with § 1322(b)(5) as long as payments are to maintain and keep current long-term student loan debt, i.e., loans that mature after plan completion, with no acceleration of that debt.
In re Chandler,
The Debtor argues that the Court should examine what might happen if the Debtor were to convert to chapter 13 in determining the existence of special circumstances, contending the dividend to non-student loan, unsecured creditors will be negligible. The Court does not believe that it should engage in the type of analysis advocated by the Debtor in determining special circumstances under § 707(b)(2)(B)® as this would involve hypothetical postpetition events and the
Because the Debtor filed chapter 7 bankruptcy, the Court must limit its examination to the Debtor’s circumstances under § 707(b)(2)(B) as of the petition date to determine whether she has overcome her burden in rebutting the presumption of abuse in this case.
See Johns,
The record demonstrates that the Debt- or borrowed money to fund her education in the ordinary course. The Debtor has not demonstrated that the circumstances giving rise to the Student Loan were special in any way or that any unique factors in her case would justify an expense adjustment to her current monthly income
IV. CONCLUSION
For the reasons set forth above, the Court concludes the Debtor has not rebutted the presumption of abuse under § 707(b)(2)(A)© as the Debtor has not established special circumstances within the meaning of § 707(b)(2)(B)© warranting the inclusion of the Student Loan’ as a deductible expense, which would cause the Debtor’s monthly disposable income to fall below the threshold amount establishing abuse under § 707(b)(2)(A)©. Accordingly, the Court shall issue a separate order consistent with this opinion granting the UST’s Motion seeking dismissal under § 707(b)(2), denying as moot the UST’s Motion seeking dismissal under § 707(b)(3), and providing the Debtor with an opportunity to convert her case to chapter 13 if she chooses. This opinion constitutes the Court’s findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.
Notes
. In this opinion the terms "Bankruptcy Code,” "section,” or "§ ” refer to title 11 of the United States Code, 11 U.S.C. §§ 101-1532, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. No. 109-8 ("BAPCPA”).
. If a debtor's monthly disposable income is less than $109.58 (i.e., less than $6,575.00 over sixty months), the presumption of abuse does not arise. If a debtor’s monthly disposable income is equal to or exceeds $182.50 (i.e., at least $10,950.00 over sixty months), the presumption of abuse arises. If a debtor’s monthly disposable income is between $109.58 and $182.50, the presumption arises if that amount, over sixty months, is sufficient to pay at least 25% of the debtor’s nonpriority unsecured debt. 11 U.S.C. § 707(b)(2)(A)(i);
see Eisen v. Thompson,
. In addition, the Debtor appears to be inviting the Court to formulate a hypothetical chapter 13 plan for the Debtor, evaluate the Debtor’s “projected disposable income” for a hypothetical confirmation, and then evaluate the level of return to creditors, all without notice and a hearing. See 11 U.S.C. § 1325(b)(1). The Court declines any such invitation.
. This is not to say, however, that a debtor may not complete such an analysis and argue that it is relevant to the separate "reasonable alternative” analysis required by § 707(b)(2)(B)(i) as noted by the
Lightsey
court.