In re Dinardo

559 B.R. 32

In re: Jackie A. Dinardo, Debtor.

Case No. 15-51582-ast

United States Bankruptcy Court, D. Connecticut, Bridgeport Division.

Signed October 4, 2016

Douglas J. Lewis, Evans & Lewis, 93 Greenwood Avenue, Bethel, CT 06801, Attorney for Debtor

Steven E. Mackey, The Giaimo Federal Building, 150 Court Street, Room 302, New Haven, CT 06510, Office of the U.S. Trustee

DECISION AND ORDER ON MOTION TO DISMISS UNDER SECTION 707(b)

Honorable Alan S. Trust, United States Bankruptcy Judge

This matter comes before the Court on the motion of William K. Harrington, the United States Trustee for Region 2 (the “UST”), seeking dismissal of this case pursuant to 11 U.S.C. § 707(b)(1), (2), and (3) for abuse of the provisions of chapter 7 of the Bankruptcy Code.¹ Debtor argues that as a preliminary matter, the UST's statement pursuant to § 704(b)(1)² (the “Ten-Day Statement”) was not timely filed, therefore precluding the UST from proceeding on its motion to dismiss under either § 707(b)(2) or (3). For the reasons set forth below, this Court concludes that the relevant date by which the Ten-Day Statement must be filed runs from the conclusion, rather than the commencement, of the meeting of creditors under § 341(a), and that in any event, an untimely Ten-Day Statement does not prevent the UST from seeking dismissal under § 707(b)(2) or (3).

JURISDICTION

This Court has jurisdiction over this core proceeding pursuant to 28 U.S.C. §§ 1334(b) and 157(b)(2)(A) and (O), and the General Order of Reference dated September 21, 1984 in effect in the District of Connecticut.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

To the extent required, this decision constitutes the Court's findings of fact and conclusions of law in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure, which are based on the undisputed allegations contained in the parties pleadings.

FACTUAL AND PROCEDURAL BACKGROUND

On November 11, 2015 (the “Petition Date”), Jackie A. DiNardo (the “Debtor”) filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code (the “Petition”). [dkt item 1] According to the Petition, Debtor is an individual whose debts are primarily consumer debts.³ [dkt item 1] On the Petition Date, Debtor also filed her Chapter 7 Statement of Current Monthly Income (the “CMI Form”) and the Chapter 7 Means Test Calculation (the “Means Test Form”) (Official Forms 22A-1 and 22A-2, respectively). [dkt item 3]

According to her CMI Form, Debtor reports current monthly income of $17,701.00, with an annual income of $212,412.00. Debtor further indicates that she has a household of three and that the presumption of abuse is determined by the Means Test Form. [dkt item 3] On the Means Test Form, Debtor lists her adjusted current monthly income as $17,701.00 and her total deductions from income as $18,518.62, leaving her with negative monthly disposable income of ($817.62). Accordingly, Debtor indicates there is no presumption of abuse. [dkt item 3]

The meeting of creditors pursuant to § 341(a) (the “§ 341 meeting”) was held on December 10, 2015, and was subsequently continued to January 14, 2016.

On January 25, 2016, the UST filed its Ten-Day Statement pursuant to § 704(b)(1) asserting that this case is presumed to be an abuse under § 707(b). [dkt item 14]

On February 2, 2016, the UST filed a motion seeking dismissal of this case pursuant to § 707(b)(1) based on the presumption of abuse arising under § 707(b)(2) and based on the totality of circumstances under § 707(b)(3). [dkt item 21] The UST contends that while Debtor's Means Test Form indicates that there is no presumption of abuse, after making certain adjustments to Debtor's reported expenses, the presumption of abuse does arise.⁴ For example, the UST asserts that several of Debtor's claimed expense deductions are not appropriate, e.g., optional phone services of $450.00, and including overstated student loan payments as priority claims of $3,924.35. Accordingly, the UST asserts that after making proper adjustments, Debtor's total monthly expenses of $18,518.62 drop to a point where her disposable income increases from ($817.62) to $2,948.41, and thus, a presumption of abuse arises.

On February 23, 2016, Debtor filed an objection to the motion to dismiss, arguing that the motion should be denied as untimely⁵ , or alternatively, that there is no abuse under the totality of circumstances, and filed an affirmation in support on March 1, 2016. [dkt items 22, 26] The UST filed a response on March 7, 2016. [dkt item 27]

On March 11, 2016, a hearing was held on the motion to dismiss and the objection thereto, at which the Court directed both the UST and Debtor to file additional briefing limited to the issues of: (i) whether the Ten-Day Statement was untimely, and if so, (ii) whether it precludes the UST from proceeding on its § 707(b)(3) claim. On March 25, 2016, the UST filed its sur-reply to the objection, to which Debtor filed its response on March 30, 2016. [dkt items 30, 31]

DISCUSSION

Section 704(b) sets forth the duties of the UST in cases of individual chapter 7 debtors as they pertain to a determination of whether a case is an “abuse” as defined by § 707(b). Among those duties is the obligation to review a debtor's schedules and statements, and to subsequently file with the court a statement as to whether the case is presumed to be an abuse under § 707(b) ; this Ten-Day Statement is due not later than ten days after the date of the first meeting of creditors. See 11 U.S.C. § 704(b)(1). The Ten-Day Statement must be filed by the UST in every chapter 7 case, indicating whether or not the presumption of abuse arises.

In the event that the UST finds that the presumption of abuse does arise, within 30 days of the filing of the Ten-Day Statement, the UST has a duty to either: (i) file a motion to dismiss or convert the case under § 707(b), or (ii) file a statement with the reasons why the UST does not consider such a motion appropriate, e.g., if the UST believes that the debtor has demonstrated special circumstances that would rebut the presumption of abuse. See 11 U.S.C. § 707(b)(2).

Timeliness of the Ten-Day Statement Under § 704(b)(1)

The filing of a Ten-Day Statement pursuant to § 704(b)(1) is a prerequisite to seeking dismissal based on a presumption of abuse under § 707(b)(2). Thus, the threshold issue is whether § 704(b)(1) requires the Ten-Day Statement to be filed within ten days from the start of the first § 341 meeting or after the meeting has concluded.

This Court's analysis necessarily begins with an examination of the statute itself to determine if the statute is either plain or ambiguous. See RadLAX Gateway Hotel, LLC v. Amalgamated Bank , ––– U.S. ––––, 132 S.Ct. 2065, 2073, 182 L.Ed.2d 967 (2012) ; Lamie v. United States Trustee , 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004) ; United States v. Ron Pair Enters. , 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). “[I]n determining plainness or ambiguity, courts are directed to look ‘to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole.’ ” In re Phillips , 485 B.R. 53, 56 (Bankr. E.D.N.Y. 2012) (quoting Robinson v. Shell Oil Co. , 519 U.S. 337, 341, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997) ). “If the statutory language is clear, a court's analysis must end there.” See Hartford Underwriters Ins. Co. v. Union Planters Bank, Nat'l Ass'n ., 530 U.S. 1, 6, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000) (“[W]hen the statute's language is plain, the sole function of the courts—at least where the disposition required by the text is not absurd—is to enforce it according to its terms.”); In re AJW Offshore, Ltd. , 488 B.R. 551 (Bankr. E.D.N.Y. 2013).

However, “[s]tatutory language is ambiguous if it is susceptible to two or more reasonable meanings.” AJW , 488 B.R. at 558 (quoting Phillips , 485 B.R. at 56 ). “In that setting, where the plain language as clarified by context fails to resolve any statutory ambiguity, a court may resort to canons of statutory construction to aid in its interpretation.” AJW , 488 B.R. at 558 ; (citing United States v. Colasuonno , 697 F.3d 164, 173 (2d Cir. 2012) ; United States v. Dauray , 215 F.3d 257, 264 (2d Cir. 2000) ). “Significantly, statutory construction is a holistic endeavor; thus, a statute must be interpreted in light of the statutory scheme as a whole.” United Sav. Ass'n of Texas v. Timbers of Inwood Forest Assoc., Ltd. , 484 U.S. 365, 371, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988) ; AJW , 488 B.R. at 558 ; Phillips , 485 B.R. at 59. See also Roberts v. Sea – Land Services, Inc. , ––– U.S. ––––, 132 S.Ct. 1350, 1357, 182 L.Ed.2d 341 (2012) (quoting Davis v. Michigan Department of Treasury , 489 U.S. 803, 809, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989) ) (internal quotations omitted).

Section 704(b)(1) provides:

[w]ith respect to a debtor who is an individual in this case under this chapter—(A) the United States trustee...shall review all materials filed by the debtor and, not later than 10 days after the date of the first meeting of creditors , file with the court a statement as to whether the debtor's case would be presumed to be an abuse under section 707(b).

11 U.S.C. § 704(b)(1) (emphasis added).

The phrase “date of the first meeting of creditors” as used in § 704(b)(1) is ambiguous. Pursuant to Bankruptcy Rule 2003(e), a § 341 meeting of creditors may commence on one date but be adjourned to another date, and thus, there may often be multiple dates for the first meeting of creditors. See FED. R. BANKR. P . 2003(e).⁶ When a time period is to be measured from the start of the § 341 meeting, for instance, the Bankruptcy Code refers to the “first date set” for the meeting, or otherwise references similarly unambiguous language. See, e.g. , § 521(a)(2)(B) (“within 30 days after the first date set for the meeting of creditors”) (emphasis added); § 521(e)(2)(A)(i) (“not later than 7 days before the first date set for...