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The Debtor in this case was successfully represented by NACBA member Mr. David Wilkinson of Frego & Associates – The Bankruptcy Law Office, PLC in Dearborn Heights, Michigan.
In this case the Debtor filed a chapter 7 bankruptcy without her spouse. Their combined income was above median and therefore the Debtor had to complete Chapter 7 Means Test Calculation on Form 122A-2.
Line 3 of Form 122A-2 allows an adjustment of the spouse’s income not used for household expenses. Among other deductions the Debtor claimed a $600.00 monthly expense for her spouse’s cigarettes. (A copy of the Debtor’s Form 122A-2 is attached below.)
The United States Trustee (“UST”) filed a Motion to Dismiss and objected to this deduction. (A copy of the motion is attached below.) The UST argued that the cigarette expense is already accounted for on Line 6 of the means test which includes deductions for food, clothing and other miscellaneous items.
The Debtor responded to the UST’s motion arguing that nothing on the means test demonstrates that tobacco use is part of the standard household allowance. Further the expenses is an extremely high and hazardous expense that is in no shape, way, or form isthe result of the Debtor’s habit or control, and it is placed in the proper category. (A copy of the Debtor’s Response is attached below.)
In ruling whether the Debtor’s bankruptcy was abusive under 11 U.S.C. § 707(b)(2) the Bankruptcy Court concluded
Because the personal smoking-habit expense of the non-filing spouse, if substantiated, is not regularly used to pay Debtor’s household expenses, Debtor may properly make a marital adjustment to her CMI and concurrently deduct the IRS National Standard expense for food, clothing, and other items-notwithstanding any potential overlap for the cigarette expense.
In re Anderson, No. 19-56381, at *2 (Bankr. E.D. Mich. Apr. 10, 2020).
The Court began it’s analysis of the definition of current monthly income (“CMI”).
A debtor’s CMI “includes any amount paid by any entity other than the debtor . . . on a regular basis for the household expenses of the debtor or the debtor’s dependents[.]” 11 U.S.C. § 101(10A)(B). (Emphasis added).
Unless a non-filing spouse is the debtor’s dependent, his “separate expenses do not form part of the ‘household’ for purposes of the Chapter 7 means-test.” Sturm v. U.S. Trustee, 455 B.R. 130, 136 (N.D. Ohio 2011). Only his “regular contributions to household expenses of the debtor or her dependents are included in the debtor’s [CMI].” Id. It is “the debtor’s burden to prove which expenses are purely personal to the non-filing spouse.” In re Montalto, 537 B.R. 147, 149 (Bankr. E.D.N.Y. 2015). “[B]ecause of the impact of the . . . marital adjustment calculation on a debtor’s ability to remain in bankruptcy, courts have an obligation to scrutinize challenges to [the marital adjustment calculation] very carefully.” In re Travis, 353 B.R. 520, 526 (Bankr. E.D. Mich. 2006).
In re Anderson, No. 19-56381, at *3-4 (Bankr. E.D. Mich. Apr. 10, 2020).
The Court rejected the UST’s argument that the cigarette deduction from the NFS’ income but claiming the NFS as part of her household, constituted double dipping. The UST argued that cigarettes are a household expenses already allowed for in the means test.
“Moreover, a debtor’s ability to make a marital adjustment to CMI does not impair her ability to also take the IRS National Standard deduction for food, clothing, and other items-even if there is a potential for overlapping expenses.”
In re Anderson, No. 19-56381, at *5 (Bankr. E.D. Mich. Apr. 10, 2020). The Court stated
‘Whether a debtor can make the marital adjustment to CMI for a particular expense under section 101(10A), and whether he can claim certain expenses under section 707(b)(2), depends on the Code. It may well be that in some cases debtors can do both. But the Code, not some general prohibition on ‘double dipping’ is the deciding factor.’ In re Moss, 591 B.R. 338, 341-42 (Bankr. N.D. Ill. 2018) (citations omitted) (emphasis added)…
In re Anderson, No. 19-56381, at *5-6 (Bankr. E.D. Mich. Apr. 10, 2020).
The Court acknowledged other courts that “have ruled that the cigarette expenses of a non-filing spouse/co-habitant are the type of purely personal expenses that may be excluded from CMI. See, e.g., In re Lopes, Case No. 08-12008, 2008 WL 3893707, at *3 (Bankr. D. Mass. Aug. 21, 2008) (overruling a creditor’s objection to confirmation of an above-median Chapter 13 debtor’s plan, which adjusted from CMI a $410.00 monthly cigarette expense of the non-filing spouse); DeAngelis v. Holmes (In re Holmes), 496 B.R. 765, 774 (Bankr. M.D. Pa. 2013) (excluding 13 different categories of expenses-including the non-filing, co-habitant’s cigarette expense-as “strictly personal” to the non-filer and, thus, properly subtracted from debtor’s CMI). In re Anderson, No. 19-56381, at *6 (Bankr. E.D. Mich. Apr. 10, 2020).
The Court reset the matter for a hearing on the UST’s Section 707(b)(3) (“totality of the circumstances”) argument. Finally, the Court concluded
Because the personal cigarette expense of the non-filing spouse, if substantiated, is not regularly used to pay Debtor’s household expenses, Debtor may properly make the marital adjustment to her CMI and concurrently deduct the IRS National Standard expense for food, clothing, and other items-notwithstanding any potential overlap for the cigarette expense.
In re Anderson, No. 19-56381, at *6-7 (Bankr. E.D. Mich. Apr. 10, 2020).
- The Court affirmed that an expense deducted from a NFS’s income pursuant to 11 U.S.C. § 101(10A) is separate from an expense allowed to the Debtor under 11 U.S.C. § 707(b).
- The Bankruptcy Code, not a general prohibition on double dipping, is the deciding factor whether the adjustment should be allowed.
- This doesn’t mean cigarette expenses for a NFS can be allowed in every case. The decision may have been different if the NFS was a dependent on the Debtor and/or whether the Debtor also smoked. Bankruptcy courts scrutinize adjustments to a NFS’s income very carefully.
A copy of the Debtor’s Form 122A-2 is here: Anderson Form 122A-2
A copy of the UST’s Motion to Dismiss is here: Anderson UST Motion to Dismiss
A copy of the Debtor’s Response is here: Anderson Response to UST MTD
A copy of the opinion is here: In re Anderson
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