In re Behne

575 B.R. 893

IN RE: Michael Paul BEHNE, Debtor.

Case No.: BK16–41849

United States Bankruptcy Court, D. Nebraska.

Signed August 25, 2017

Paul W. Rea, Law Office of Paul W. Rea, Lincoln, NE, for Debtor.

ORDER GRANTING MOTION TO DISMISS

Shon Hastings, Judge, United States Bankruptcy Court

The United States Trustee filed a Motion to Dismiss Pursuant to 11 U.S.C. § 707(b)(2) and (b)(3). Debtor Michael Paul Behne opposed the motion. The Court held a hearing, during which it received Debtor's voluntary petition, schedules and statements, pay advices, amended schedules and affidavit as evidence. Docs. 1, 3, 11, 20. Neither party offered testimony. For the following reasons, the motion is GRANTED.

I. Background

Debtor petitioned for relief under Chapter 7 of the Bankruptcy Code on December 7, 2016. In his summary of assets and liabilities, Debtor indicated that his debts were primarily consumer debts. Doc. 1 at 8. He reported $78,730.55 in nonpriority unsecured claims on Schedule E/F. Doc. 1 at 32.

On his Means Test Calculation Forms 122A–1 and 122A–2, Debtor listed monthly income of $7,472.72, which totals $89,672.64 in annual income. Id. at 49–50. Subtracting deductions of $5,809.68, Debtor calculated that his monthly disposable income was $1,663.04. Id. at 58.¹ Over a period of sixty months, Debtor's monthly disposable income totals $99,782.40. Id. This sum exceeds the $12,850 applicable threshold for a presumption of abuse under section 707(b)(2)(A).² Debtor checked the box under Part 3 of the Means Test Calculation form, acknowledging that the presumption of abuse arose in his case. Id. He also admitted this fact at the hearing.

In Part 4 of the Means Test Calculation form, Debtor claimed special circumstances justified additional monthly expenses of $1,540 for "Support of Adult Daughter & 2 Grandsons." Id. at 59. Reducing Debtor's monthly disposable income of $1,663.04 by $1,540 results in a monthly disposable income of $123.04. Applying the "special circumstances" deduction over a period of sixty months results in a total of $7,382.40, which is less than the threshold sum of $12,850 required under 11 U.S.C. § 707(b)(2)(B)(iv).³

Similar to the Means Test Calculation Form, Debtor listed $7,500 in monthly gross income and $4,832.09 in monthly net income on Schedule I. Id. at 36. On Schedule J, Debtor listed expenses totaling $4,772.75, which includes a $1,540 deduction for money he spends to support his daughter and two grandsons. Id. at 38. He listed $59.34 in total net monthly income. Id.

In his affidavit, Debtor explained that he provides $1,540 per month in financial support to his 32–year-old daughter and grandchildren (ages six and nine). His daughter shares joint custody with her sons' fathers. Doc. 20 at ¶ 4. Debtor pays some of his daughter's expenses, including rent, utilities (gas, electric and internet/cable), and automobile insurance, installment payments and licensing. Id. at ¶ 12. Debtor's adult daughter and her two children do not reside with Debtor.⁴

Debtor testified that his daughter "has suffered from Attention Deficit Hyperactive Disorder all her life and alcoholism since the age of 18. She has been 'clean and sober' for approximately four years." Id. at ¶ 5. He explained that his daughter "continues to seek assistance and treatment for her alcoholism and ADHD by attending weekly Alcoholics Anonymous meetings and through regular physical exercise and diet. This is an ongoing struggle for her."Id.

Despite these challenges, Debtor's daughter is gainfully employed.⁵ Id. at ¶ 6. Debtor testified that his daughter earns approximately $42,000 per year, the most she has ever earned. Id. His daughter's employer currently withholds $325 per month from her paycheck to apply toward a salary advance. Id. at ¶ 10. She also receives $157 per month in child support for one of her children. See id. at ¶ 5. Debtor prepared a "draft" Schedule J for his daughter, which he represents comprises her current monthly expenses. See id. at ¶¶ 4–7.

Debtor testified:

7. That my daughter's inability to earn a greater income, especially in the recent past, has lead [sic] to periods where she was unable to take care of herself, has consumed alcohol and has had to move in with me at my past residences. The financial stress of not being able to afford her necessary living expenses has endangered her life and wellbeing and caused the loss of employment.

Id. at ¶ 7.

Debtor explained that his assistance with expenses enables his daughter to maintain a "secure and stable home for herself and her family and ensure[s] she has a reliable automobile to get to work and for other/family transportation needs." Id. at ¶ 12.

Without the $1,540 per month I have been providing she would have no chance of making a budget work.... She needs ALL of the monetary assistance I provide; further cuts or getting another job simply are not viable options with two young children.

Id. at ¶ 9. He claims that his daughter does not have the education or employment background to obtain a better job. Id. at ¶ 11.

Debtor maintained that his daughter has relied on his financial support "for more than the last 9 years and will continue to rely on my assistance for the indefinite future." Id. He explained that there is "no one else she can turn to" for financial support. Id. Debtor also stated: "I have kept these accounts in my name for several years because I have feared that if I simply wrote her a check she may have taken those funds and used them for other, destructive purposes." Id. at ¶ 12. He testified:

That it has been, and remains to this day, my darkest fear that without my support my daughter will succumb to the economic strain and start drinking again. By providing this support I have also allowed my daughter and her family to NOT have to rely on welfare assistance. Regardless of what happens in my Bankruptcy, I will not abandon my daughter.

Id. at ¶ 13.

Debtor explained that he decreased his personal expenses to allow him to support his daughter. For example, Debtor lives with his brother and pays him $500 per month for rent and utilities. He also reduced his cell phone, internet and cable expenses. Debtor claims that he would likely have moved into his own house if he did not have to support his daughter. Id. at ¶ 14.

II. Analysis

Section 707(b)(1) of the Bankruptcy Code provides that a court may dismiss a case filed by an individual Chapter 7 debtor whose debts are primarily consumer debts if it finds that granting relief would be an abuse of the provisions of Chapter 7. 11 U.S.C. § 707(b)(1). According to section 707(b)(2), "the court shall presume abuse" if the debtor's current monthly disposable income multiplied by 60 is above a certain threshold. 11 U.S.C. § 707(b)(2)(A)(i). In this case, the threshold is $12,850. See supra note 2. Debtor's monthly disposable income of $1,663.04 triggers the presumption of abuse. Over sixty months, a monthly disposable income of $1,663.04 totals $99,782.40, which is more than the threshold under 11 U.S.C. § 707(b)(2)(A)(i). In his Means Test Forms and at the hearing, Debtor admitted that the presumption of abuse arises in his case. Additionally, Debtor indicated that his debts are primarily consumer debts on his petition. Doc. 1 at 8.

A. Debtor's $1,540 monthly payment of his daughter's rent, utilities and vehicle expenses are not allowable expenses under section 707(b)(2)(A)(ii)(II).

Debtor did not claim his financial support for his daughter and grandchildren as an expense for the support of a chronically ill or disabled family member under section 707(b)(2)(A)(ii)(II) on his Means Test Calculation form. See Doc. 1 at 56, line 26. Despite this omission and despite his admission that the presumption of abuse arises in this case, Debtor asserted at the hearing that his support expenses for his daughter constitutes allowable expenses under section 707(b)(2)(A)(ii)(II). If Debtor prevails on this argument, his monthly disposable income will be reduced from $1,663.04 to $123.04, which does not create a presumption of abuse.

In general, the party asserting that a bankruptcy case should be dismissed under section 707 bears the burden of proof. Robbins v. Ervin (In re Ervin ), 2016 WL 721043, at *7 (Bankr. W.D. Va. Feb. 23, 2016) ; In re Montalto, 537 B.R. 147, 152 (Bankr. E.D.N.Y. 2015) ; In re Williams, 424 B.R. 207, 210 (Bankr. W.D. Va. 2010) ; In re Meade, 420 B.R. 291, 303 (Bankr. W.D. Va. 2009). Consequently, the United States Trustee typically bears the burden of coming forward with evidence showing a presumption of abuse arises under section 707(b)(2) based on a debtor's income and allowed expenses. According to several courts, this general rule is subject to an exception:

when a presumption of abuse would arise under (b)(2) based on a debtor's income and allowed expenses according to the prescribed Internal Revenue Service "national standards" and "local standards" guidelines, which comprise Lines 19A thru 24 of the (01/08) version of Form 22A, but the debtor asserts that other "necessary expenses" or permitted deductions for debt repayment, which comprise Lines 25 thru 44 of such form, negate the presumption of abuse, the burden of proof as to those deductions ought to be placed on the debtor. The reasons for this conclusion are that (i) these categories comprise information more readily available to the debtor than to any other party in interest and deal with fact intensive issues which are unique to the debtor, and (ii) such expenses are in the debtor's interest to make as large as possible in order to avoid a presumption of abuse arising. In short, these expenses are very much like the "special circumstances" which a debtor must prove by a preponderance of the evidence to rebut a presumption of abuse which has arisen and therefore might reasonably be said to partake more of the nature of affirmative defenses to a motion to dismiss rather than elements of the presumption itself. Furthermore, to impose the burden of

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