ORDER
THIS MATTER is before the Court on the United States Trustee’s Motion to Dismiss (the “Motion to Dismiss”) (Doc. No. 17). On January 26, 2004, the Debtor filed the Response to United States Trustee’s Motion to Dismiss (the “Response”) (Doc. No. 19). On January 27, 2004, a non-evidentiary hearing was held on the Motion to Dismiss, and the Court permitted the parties to file supplemental briefs. The United States Trustee (the “Trustee”) filed its Statement of Undisputed Facts (Doc. No. 20), and the Debtor filed her Affidavit (Doc. No. 23). Thereafter, the Trustee filed its Reply to Debtor’s Response to Motion to Dismiss (the “Trustee’s Reply”) (Doc. No. 27).
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b), as well as Rule 1070-1 of the Local Rules of Practice for the United States Bankruptcy Court for the Northern District of Georgia. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (O).
The issue is whether the Debtor’s case should be dismissed pursuant to section 707(a) and/or section 707(b) of the Bankruptcy Code because a significant amount of her income is applied to a monthly mortgage payment. For the following reasons, the Court holds that the Debtor’s case should not be dismissed pursuant to section 707(a) for bad faith or pursuant to section 707(b) for substantial abuse.
I. FACTS
The Debtor filed a petition for relief under chapter 7 of the Bankruptcy Code on August 26, 2003. Schedule I indicates that the Debtor is a widow and supports a teen-age son. According to the Debtor’s Affidavit, the failure of her trucking business, DTJS Systems, caused her bankruptcy. The Debtor scheduled secured debt in *910 the amount of $442,100.00 and unsecured debt in the amount of $29,184.76. The Debtor’s $348,000.00 mortgage accounts for 73.84% of the total debt. Trustee’s Reply at 3. This mortgage is secured by a 4,800 square foot house in Henry County which the Debtor values at $358,000.00 on Schedule A and the Henry County Tax Assessor values at $367,500.00. 1 Statement of Undisputed Facts. The Debtor made a $25,000.00 down payment when she purchased the subject property. Statement of Undisputed Facts. The Debtor is a Department Manager for the Internal Revenue Service and earns $62,186.00 per year. Statement of Undisputed Facts. The Debtor’s monthly income is $4,369.00, including $1,000.00 in social security survivor benefits received on behalf of her minor son. Schedule I. The monthly mortgage payment, $2,897.00, constitutes 66.3% of her monthly net income. Statement of Undisputed Facts. The Debtor will soon no longer receive social security benefits, and the mortgage payment will constitute 85.99% of her monthly net income. Statement of Undisputed Facts. The Debtor’s monthly mortgage payment is 265% greater than the average mortgage cost in Henry County for the year 2000, which was $1,094, and the Debtor’s residence is within the 2.7% most expensive homes in Henry County. 2 Statement of Undisputed Facts.
II. CONCLUSIONS OF LAW A. SECTION 707(a)
The Trustee argues that the Debt- or’s case should be dismissed for bad faith, or for lack of good faith, which constitutes cause for dismissal under section 707(a). Section 707(a) provides:
(a) The court may dismiss a case under this chapter only after notice and a hearing and only for cause, including—
(1) unreasonable delay by the debtor that is prejudicial to creditors;
(2) nonpayment of any fees and charges required under chapter 123 of title 28; and
(3) failure of the debtor in a voluntary case to file, within fifteen days or such additional time as the court may allow after the filing of the petition commencing such case, the information required by paragraph (1) of section 521, but only on a motion by the United States trustee.
11 U.S.C. § 707(a). As noted by the Trustee, the examples listed are merely illustrative, and a case may be dismissed on other grounds when cause is found to exist.
3
See
H.R. REP. NO. 95-595, at 380 (1977), reprinted in 1978 U.S.S.C.A.N. 5963, 6336; S. REP. NO. 95-989, at 94 (1978), reprinted in 1978 U.S.S.C.A.N. 5787, 5880;
Neary v. Padilla (In re Padilla),
In Smith, the court dismissed the case pursuant to both sections 707(a) and 707(b) after concluding that the petition was filed in bad faith and thus to grant chapter 7 relief would constitute substantial abuse of the bankruptcy process. Id. at 899. After reviewing the debtors’ income, mortgage payments, and expenses, the court found that “the Debtors’ [sic] maintaining their current home at the expense of their unsecured creditors and ... attempting to discharge that accumulated unsecured debt constitute^] bad faith.” Id. at 898. The court also criticized the debtors’ lease of a Lexus in the amount of $571 per month shortly before filing bankruptcy. Ultimately, the court ruled that “[t]he Trustee argues that the Debtors filed this petition in bad faith under § 707(a) because they failed to substantially reduce their expenses prior to the filing and because the filing is an attempt to preserve a standard of living above that'which the Debtors can afford. I agree with the Trustee’s analysis.” Id. at 898. The Trustee argues that the Debtor, as in Smith, exhibits bad faith in sustaining excessive housing costs at the expense of her unsecured creditors, and thus the case-should be dismissed.
The Debtor asserts that the Court must consider whether the “totality of circumstances” warrant the dismissal of the case for cause. The Debtor contends that the failure of her business, DTJS Systems, caused the filing. The Debtor also alleges “[w]hile certain debts listed in [the Debt- or’s] case are certainly not business related, the bulk of the debts were incurred in the operation and failure of her business.” Debtor’s Response at 5. The Debtor concedes that the mortgage payment is substantial, but contends that her lifestyle is not extravagant or lavish. The Debtor asserts that she can maintain the mortgage payment because her budget is reasonable. Moreover, the Debtor argues that the size of the mortgage payment alone does not constitute cause to dismiss the case.
“[T]he power to dismiss a chapter 7 case for lack of good faith, if it exists at all, is extremely limited.” 6 Lawrence P. King et al., Collier on Bankruptcy, ¶ 707.03 (15th ed. rev.2003). Although the Trustee has cited case law holding that bad faith, *912 or lack of good faith, is grounds for dismissal under section 707(a), jurisdictions that apply this standard do so with care. The Trustee relies upon Zick, in which the Sixth Circuit cautioned:
Dismissal based on lack of good faith must be undertaken on an ad hoc basis. In re Brown, 88 Bankr. [280] at 284 [(Bankr.D. Hawaii 1988)]. It should be confined carefully and is generally utilized only in those egregious cases that entail concealed or misrepresented assets and/or sources of income, and excessive and continued expenditures, lavish life-style, and intention to avoid a large single debt based on conduct akin to fraud, misconduct, or gross negligence.
Id.
at 1129. The Third Circuit has also ruled that bad faith constitutes cause for dismissal, but advises that “[c]ourts ... must decide whether the petitioner has abused the provisions, purpose, or spirit of bankruptcy law.”
Tamecki,
Dismissal of a petition, particularly for bad faith or lack of good faith, is within the discretion of the bankruptcy court, and the court must balance the equities and consider the benefits and prejudice of dismissal.
Tamecki,
The sole basis of the Trustee’s argument for dismissal is the size of the
*913
Debtor’s mortgage. There are no allegations of questionable conduct or dishonesty such as multiple case filings, fraudulent transfers, misrepresentations or omissions in the Schedules or Statement of Financial Affairs, attempts to manipulate creditors, or filing to impact pending litigation or otherwise avoid obligations.
See Zick,
B. SECTION 707(b)
In the alternative, the Trustee argues that the case should be dismissed because allowing the Debtor to discharge her unsecured debt while committing a substantial portion of her income to excessive housing expenditures constitutes substantial abuse pursuant to section 707(b). The provision provides:
(b) After notice and a hearing, the court, on its own motion or on a motion by the United States trustee, but not at the request or suggestion of any party in interest, may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts if it finds that the granting of relief would be a substantial abuse of the provisions of this chapter. There shall be a presumption in favor of granting the relief requested by the debtor. In making a determination whether to dismiss a case under this section, the court may not take into consideration whether a debtor has made, or continues to make, charitable contributions (that meet the definition of “charitable contribution” under section 548(d)(3)) to any qualified religious or charitable entity or organization (as that term is defined in section 548(d)(4)).
11 U.S.C. § 707(b). There is a presumption in favor of granting relief, and thus the Trustee bears the burden of demonstrating substantial abuse by satisfying the two requirements set forth in the statute. The first prerequisite for dismissal is a determination that the debtor’s debts are primarily consumer debts. The second requirement is a finding by the court that granting the debtor’s petition would be a “substantial abuse” of chapter 7.
The Trustee contends that the Debtor’s obligations are primarily consumer debts, while the Debtor argues that her debts are not primarily consumer debts. Although *914 the Debtor did not contest this fact listed on the Statement of Stipulated Facts, the Debtor filed an Affidavit explaining how some of the debt was incurred from the operation of her failed business. It appears that the Debtor’s unsecured debt in the amount of $29,184.76 may not be in the nature of consumer debt. Nonetheless, the Trustee alleges that the majority of the debt, in particular the $348,000.00 mortgage, is consumer debt. The Debtor fails to address or dispute the nature of the secured debt.
Whether a particular secured debt constitutes “consumer debt” depends on the purpose of the debt. Section 101(8) of the Bankruptcy Code defines the term “consumer debt” as “debt incurred by an individual primarily for a personal, family or household purpose))]” 11 U.S.C. § 101(8). “There is no suggestion in this statutory language that a debt which is secured by real property cannot constitute consumer debt.”
In re Dickerson,
Having established the first prerequisite, the Trustee argues that the Debtor has the ability to repay her creditors, and thus the case should be dismissed. The Trustee contends that the “primary” or dispositive factor indicative of substantial abuse is the ability to repay.
United States v. Harris,
In
Smith,
the court found that three factors established substantial abuse of the chapter 7 process: (1) the debtors exhibited bad faith in filing the petition; (2) the debtors suffered no calamity which precipitated the filing, and that the filing merely resulted from their excessive spending; and (3) the debtors had the ability to repay all or a substantial portion of their unsecured debt.
The Debtor claims that she could not provide for a meaningful repayment of the debt, as her disposable income pays reasonable and necessary living expenses for herself and her minor son. Citing
In re Krohn,
the Debtor attests that there is nothing in the record indicating that the Debtor has acted in any manner that shows a lack of honesty.
The term “substantial abuse” is not defined in the Bankruptcy Code or the legislative history.
7
There has been much discussion regarding the enactment of section 707(b) and what constitutes substantial abuse.
8
Several courts have analyzed the 1984 consumer credit amendment and concluded that future income potential, specifically the debtor’s ability to repay his debts out of future earnings, should be considered when determining if a case should be dismissed for substantial abuse.
Kelly,
Several circuits have ruled that a court must evaluate the totality of circumstances when determining whether dismissal would be appropriate.
See Stewart v. United States Trustee (In re
Stewart),
1) whether unforeseen or catastrophic events such as sudden illness, disability, or unemployment propelled the debtor into bankruptcy;
2) whether the debtor’s standard of living has substantially improved as a result of the bankruptcy filing or essentially remained the same;
*917 3) the debtor’s age, health, dependents, and other family responsibilities;
4) the debtor’s eligibility for chapter 13 relief and whether creditors would receive a meaningful distribution in a chapter 13 case;
5) the age of the debts for which the debtor seeks a discharge and the period over which they were incurred;
6) whether the debtor incurred cash advances and made consumer purchases far in excess of the ability to repay;
7) whether the debtor made any payments toward the debts or attempted to negotiate with creditors;
8) the accuracy of the debtor’s schedules; and
9) whether the debtor filed the petition in good faith.
In re Brown,
The Eleventh Circuit has not ruled on this issue, however several bankruptcy judges in this circuit have held that the court should apply the totality of circumstances approach.
Lee,
The totality of circumstances in the instant case militate against dismissal. Pursuant to the Affidavit, the failure of the Debtor’s business caused the bankruptcy filing. The Debtor is a widow and is solely responsible for her minor son. Moreover, the Debtor’s budget is reasonable, even frugal. .As itemized on Schedule J, her expenses are as follows:
Mortgage, including real estate taxes and property insurance $2,897.00
Electricity and heating fuel $ 250.00
Water and sewer $ 20.00
Telephone $ 45.00
Cable $ 33.00
Home maintenance and repair $ 75.00
Food $ 400.00
Clothing $ 40.00
Laundry and dry cleaning $ 40.00
Medical and dental expenses $ 80.00
Auto insurance $ 260.00
TOTAL EXPENSES = $4,215.00
Her current monthly income is $4,369.00, and will be reduced to $3,369.00 after the social security benefits she receives on behalf of her son terminate when he reaches the age of eighteen. The Debtor’s budget does not appear excessive or lavish. In addition, the Debtor has surrendered her vehicles and relies on friends for transportation. Limited information has been provided about the Debtor’s unsecured debts in the amount of $29,184.76, 9 although the Debtor contends that the majority of the debt was incurred for the failed business. It appears that these debts arise from four credit cards and a wireless telephone ac *918 count. If the Debtor was eligible for chapter 13, these creditors would not receive a meaningful distribution in a chapter 13 case. The Trustee has not questioned the accuracy or completeness of the Debtor’s Schedules.
Despite these circumstances, the Trustee maintains that the Debtor’s case should be dismissed because the Debtor has the ability to fund a hypothetical chapter 13 case if the Debtor’s mortgage was reduced. Again, the Trustee erroneously relies on
Smith,
where the court reduced the debtors’ luxury automobile lease payment and payments to the Internal Revenue Service and Georgia Department of Revenue (claims which the debtors would pay through the chapter 13 plan), in addition to the debtors’ housing expense.
The ability to pay alone is not sufficient to justify dismissal, nor is a substantial mortgage payment.
See
H.R. REP. NO. 95-595, at 380 (1977), reprinted in 1978 U.S.S.C.A.N. 5963, 6336 (“[Section 707] does not contemplate, however, that the ability of the debtor to repay his debts in whole or in part constitutes adequate cause for dismissal. To permit dismissal on that ground would be to enact a nonuniform mandatory chapter 13, in lieu of the remedy of bankruptcy. The Committee has rejected that alternative in the past, and there has not been presented any convincing reasons for its enactment in this bill.”). In the absence of any other evidence, the Court will not dismiss the Debtor’s case. Furthermore, the evidence that the Trustee has presented — namely data concerning the average mortgage cost in Henry County for the year 2000- — is not persuasive enough to warrant dismissal of the case.
10
See Harris v. United States
*919
Trustee (In re Harris),
Although the Court is concerned about the Debtor’s financial condition, the Court will not dictate the Debtor’s lifestyle, nor pass judgment on how the Debtor lives. The Court agrees with Judge Drake, who so astutely commented:
Any determination of ‘substantial abuse’ necessitates some evaluation of the debtors’ expense and income statements, and thus some scrutiny of their personal spending habits, In re Gyurci, 95 Bankr. 639, 643 n. 3. (Bankr.D.Minn.1989), but this Court’s role is not to formulate the debtors’ budget. Instead, it is to act if there is clear evidence of abuse. The last line of § 707(b) grants a presumption in favor of granting relief to the debtor, and this presumption should apply when examining the debtors’ schedules. A stricter interpretation would lead to non-uniformity and confusion as judges pass personal judgment about how people should spend their money.
Tefertiller,
The most fundamental goal of the Bankruptcy Code is to relieve an “honest
*920
but unfortunate debtor” of his indebtedness, allowing him to make a “fresh start.”
Local Loan Co. v. Hunt,
The Trustee has failed to carry its burden; the Court cannot find substantial abuse in the absence of detailed factual findings. The Trustee has not demonstrated factors indicative of dishonesty or lack of need, except for the size of the Debtor’s mortgage.
[T]he fact that an expense appears excessive on its face does not excuse the requirement that a court’s findings be based on evidence. Treating the judge’s familiarity with local conditions as evidence renders any findings essentially unreviewable on the facts. While dismissal for substantial abuse is discretionary, the determination of abuse must be based on factual findings supported by admissible evidence, and not by what amounts to inappropriate judicial notice of the court’s own value judgments.
Harris,
III. CONCLUSION
Having considered the totality of the circumstances, which weigh in favor of the Debtor, the Court concludes that the granting of relief in this case would not be a substantial abuse of the provisions of chapter 7. The Debtor’s ability to fund a hypothetical chapter 13 case if the Debt- or’s mortgage payment was reduced is not sufficient to justify dismissal pursuant to section 707(b). Furthermore, the Court finds that the Debtor’s case should not be dismissed pursuant to section 707(a) for cause, including bad faith or lack of good faith.
IT IS ORDERED that the Motion to Dismiss be and is hereby DENIED.
*921 The Clerk’s Office is directed to serve a copy of this Order upon the Debtor, Debt- or’s Counsel, the United States Trustee, and the Chapter 7 Trustee.
Notes
. Thus, it appears that there is approximately $10,000 to $19,500 of equity in the property.
. According to the Census Summary for the 2000 Census of Population and Housing for Henry County, Georgia, issued by U.S. Census Bureau, the median household income was $57,309 in 1999 and the median family income was $61,607. Available at http://www.co.henry.ga.us/HomePageMisc /HenryCountyCensus2000Summary.pdf (last visited January 10, 2005).
.Section 102(3) of the Bankruptcy Code defines the terms "includes'' and "including” as "not limiting” when used in title 11. 11 U.S.C. § 102(3).
.
See In re Sammons,
. Although the Debtor contends that some debts are business related, the Debtor fails to address the meaning of "primarily,” and whether the debts are primarily consumer or non-consumer. Nonetheless, consumer debt exceeding 73% of the total debt constitutes "primarily” consumer debt.
Stewart v. United States Trustee (In re Stewart),
. "Disposable income” is defined in chapter 13 as "income which is received by the debtor and which is not reasonably necessary to be *915 expended ... for the maintenance or support of the debtor or a dependent of the debt- or....” 11 U.S.C. § 1325(b)(2)(A).
. The term "substantial” is generally defined as "significantly great,” "being largely but not wholly that which is specified,” or "of ample or considerable amount, quantity, or dimensions.” The term "abuse” is defined as "a corrupt practice or custom” or "wrong or improper use, misuse, misapplication, [or] perversion.” Merriam-Webster’s Collegiate Dictionary 5, 1174 (10th ed.1999); The American Heritage Dictionary of the English Language 6, 1284 (1976); Webster’s Third New International Dictionary 8, 2280 (1976); Merriam-Webster Online Dictionary available at http://www.merriam-webster.com/. Thus, substantial abuse is considerable or significant misuse or improper use of the provisions of chapter 7.
. The provision was added to chapter 7 by the Bankruptcy Amendments and Federal Judgship Act of 1984, Pub.L. No. 98-353, S 312, 98 Stat. 333, 355.
. When the debts were incurred, why the debts were incurred, whether the Debtor made any payments to creditors, etc.
. Dismissal of a chapter 7 case, particularly where chapter 11 and chapter 13 are not feasible alternatives, is tantamount to a denial of discharge under section 727, and therefore "Code § 707(b) should not be used to dismiss a case when the evidence is not quite strong enough to warrant denying a discharge under the Code § 727 or a way of overcoming a creditor's failure to object to the discharge-ability in a timely fashion as required by Code § 523. Code § 707(b) does not give a license to the court to adopt an
ad hoc,
free-wheeling approach to sift out debtors the court finds distasteful.”
In re Edwards,