Calhoun v. U.S. Trustee

Summarized by John Bollinger , Boleman Law Firm, PC
14 years 10 months ago

Citation:

No. 09-1646 (4th Cir. May 3, 2011)

Tag(s):

4th Circuit

Ruling:

Affirmed. The bankruptcy court looked at the totality of the debtors' financial circumstances and determined that based upon the debtors' ability to pay their creditors and other considerations, abuse was present. The Court found no error in the bankruptcy court's decision to dismiss the debtors' Chapter 7 case and the evidence supported the bankruptcy courts finding of abuse pursuant to Section 707(b)(3). Additionally, the Court found that that although there may not be a presumption of abuse pursuant to Section 707(b)(2), the means test is not conclusive and abuse may still be found even when there is no presumption.

Procedural context:

Appeal from the United States District Court for the District of South Carolina, at Columbia affirming decision of bankruptcy court to dismiss debtors Chapter 7 petition premised upon Section 707(b)(3) abuse.

Facts:

Husband and wife filed for relief pursuant to Chapter 7. Husband receives total income in the amount of $8,772 which consists of $7,313 monthly from two retirement plans and $1,459 in Social Security benefits (excluded from means test calculation). Wife does not receive any income. After Husband's retirement in 1997, they spent over $130,000 in home improvements and suffered a significant financial loss on Husband's IRA which was intended to supplement their income. They accumulated further debt on a second mortgage and credit cards over several years. The Debtors eventually entered into a payment plan with a credit management company and reduced their debt expenses to $2,638 per month. The Debtors remained in the plan for 22 months prior to filing Chapter 7. Pursuant to the means test, the Debtors' monthly expenses totaled $7,330.19 and were classified into three different categories: (A) expenses allowed under IRS standards; (B) additional expense deduction under 707(b); and (C) deductions for debt payment. The Debtors listed $3,917.83 in monthly expenses under the IRS standards ($925 for food, clothing, household supplies, personal care, and miscellaneous; $426 for housing and utilities; $1,318 for transportation and expenses for two vehicles; $556.83 for taxes; $439 for two life insurance policies; $76 for health care; and $69 for telecommunications services). In additional expenses, pursuant to 707(b), they claimed $286 for health insurance and $884 for charitable contributions. Debt payment expenses included $2,151 in a mortgage payment $91.36 towards priority claims. The Debtors' monthly disposable income was not sufficient to trigger a presumption of abuse pursuant to Section 707(b)(2).

Judge(s):

Berger,Motz & Wynn

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!