Chapter 7 Debtors with $400/month Disposable Income Failed the Totality of the Circumstances Test for Abuse

Chapter 7 Debtors with $400/month Disposable Income Failed the Totality of the Circumstances Test for Abuse

Debtors filed a petition for relief under Chapter 7 of the Bankruptcy Code on December 7, 2016, stating that their debts are primarily consumer debts. Debtors’ Schedule D shows total secured debt in the amount of $34,321.00. Debtors’ secured debt total includes $16,080.00 secured by a 2013 Subaru W2X Empreza, which was valued at $15,400.00 on the Schedules. It also includes a second vehicle, a 2011 BMW 328i, that is subject to a secured debt of $18,241.00, and which was valued at $11,520.00 on the Debtors’ Schedules. Debtors stated an intention to reaffirm the debts on both motor vehicles, and reaffirmation agreements on both motor vehicles have been entered into and filed with the court in this case.

Debtors’ bankruptcy schedules reflect unsecured priority debt in the amount of $4,900. Debtors’ schedules show unsecured nonpriority debts in the amount of $195,705.00, which includes a mortgage deficiency of $123,000.00, and student loan debt in the amount of $18,983.00.

Debtor-Husband is a supervisor at JB Hunt, with listed gross income of $4,038.48 per month. He has been employed in his present position for 3 months. [Id.] Debtor-Wife is a registered nurse who has worked for the State of Ohio for 5 years, with listed gross income of $6,761.60 per month. Debtors’ combined net income, after deductions for taxes, medicare, social security, insurance and mandatory retirement contributions, was listed as $7,874.12 per month.

Debtors’ Schedule J shows five dependent children living in the household, with ages of 4, 10, 12, 17 and 20. Expenses listed on Schedule J total $7,458.00. Subtracting expenses of $7,458.00 from net income of $7,874.12, the Debtors list “Monthly Net Income” of $416.12.

At the Hearing on the UST’s Motion, the Debtors presented testimony that their expenses were even higher than those listed on Schedule J. The amount for home maintenance was stated to be $100 a month on their rented housing, not $35 per month. Medical expenses that had been listed at $150 per month were increased to $300 per month, in part because of an extra $100 per month for braces for one of the children. Child care was increased $50 per month, from $450 to $500.1 The Debtors had also, post-Petition, purchased a $2,000 vehicle for the use of their son after his car’s engine seized up. There is a payment of approximately $250 a month associated with that vehicle. This would increase the monthly expenses on Schedule J by over $

Those expenses include $580 for telecommunications services (such as cable services, internet, telephone and cell phones), three monthly car payments totaling $1,371, $408 per month for vehicle insurance, transportation expenses of $580 per month, $1,600 for food and housekeeping supplies, $85 for cigarettes, and $200 for “extracurricular fees/expenses”. It also includes a deduction of $174 per month for student loans.

Even with all of the expenses, including the increases in expenses the Debtors testified to at the Hearing, there would still be approximately $400 per month available to pay creditors using income figures that were calculated based upon the Debtors being paid bi-weekly, rather than semi-monthly.

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