Kulakowski v. Walton (In re Kulakowski)

Kulakowski v. Walton (In re Kulakowski), Case No. 12-15294 (11th Cir. Nov. 15, 2013) (published).
Bankruptcy court, in appropriate circumstances, can consider the entirety of a non-filing spouse's income in its totality of the circumstances analysis under 11 U.S.C. Section 707(b)(3)(B).
Procedural context:
Appeal from the district court for the Middle District of Florida, affirming bankruptcy court's decision to grant summary judgment in favor of the United States Trustee and dismiss the Debtor's bankrutpcy filing under the abuse provisions of 11 U.S.C. Sections 707(b)(1) and 707(b)(3)(B).
The Debtor and her husband were married for over 20 years. During the marriage, they operated as a single financial unit, maintaining a joint checking account, filing joint tax returns, and pooling their income and expenses. The Debtor did not earn any income, but her husband despositted all his income into the joint checking account and it was used to pay household expenses. The majority of the Debtor's debt was unsecured credit card debt that was incurred for the benefit of the household and in some instances, solely for the benefit of her husband. The Debtor then filed for bankruptcy seeking to discharge this unsecured debt and the United States Trustee sought dismissal of the case under the abuse provisions of Section 707. The bankruptcy court ruled that all of the income and expenses of the Debtor's husband should be considered in determining the ability of the Debtor to pay her debts under the totality of the circumstances test of Section 707. The Debtor then appeal arguing that the bankruptcy court erred in considering the entirety of her spouse's income and that instead, her spouse's income could only be considered to the extent that it was used for the household expenses of the Debtor. The district court affirmed the decision of the bankruptcy court and the Debtor again appeal. The Eleventh Circuit ruled that the totality of the circumstances test and the means test are not completely co-extensive. Further, the bankruptcy court could consider a non-debtor spouse's income under the totality of the circumstances test. Based on the inherent flexibility of the totality of the circumstances test together with the fact that Congress did not include "current monthly income" as an explicit limiting factor under 707(b)(3)(B) and the facts and circumstances of the case, the Eleventh Circuit affirmed the bankruptcy court's dismissal of the Chapter 7 bankruptcy petition.
Jordan, Dubina, and Baldock

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