In re Planck

In Re TREVOR RYAN PLANCK, Debtor.

Case No. 17-70023

UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF ILLINOIS

August 3, 2017

Chapter 7

OPINION

This case is before the Court on the United States Trustee's Motion to Dismiss Pursuant to 11 U.S.C. §§707(b)(1) and (b)(2) or in the Alternative Motion to Dismiss Pursuant to 11 U.S.C. §707(b)(3) ("Motion to Dismiss"). After considering the evidence and arguments of counsel presented at a hearing on the Motion to Dismiss, the Court finds that the Motion to Dismiss should be granted. Prior to the entry of a dismissal order, however, the Debtor will be given the opportunity to convert this case to Chapter 13.

I. Factual and Procedural Background

Trevor Planck ("Debtor") filed his voluntary petition under Chapter 7 on January 6, 2017. On his petition, he acknowledged that his debts were primarily consumer debts, and, on his Schedule E/F, he listed over $105,000 in non-priority, unsecured debt. On his Schedule I, the Debtor disclosed that he was employed by the State of Illinois, had gross earnings of $4954 per month, and, after mandatory deductions, took home $3216 per month. The Debtor's Schedule J identified $6611 in monthly expenditures, including over $2000 in monthly credit card and unsecured debt payments expected to be discharged through this case.

The Debtor filed his Chapter 7 Statement of Your Current Monthly Income—Official Form 122A-1, wherein he disclosed that his income had averaged $4916.47 per month during the six-month period preceding his filing. He acknowledged that his annualized income of $58,997.64 exceeded the Illinois median income for a household of one person. Because he was "over the median," the Debtor then completed a Chapter 7 Means Test Calculation—Official Form 122A-2. On his Form 122A-2, he listed what he claimed were his allowable expenses, calculated his projected disposable income to be only $8.32 per month, and checked the box asserting that his means test calculation resulted in no presumption of abuse.

The United States Trustee ("UST") timely filed a statement of presumed abuse and her Motion to Dismiss. In the Motion to Dismiss, the UST asserted that, although the Debtor correctly calculated his income on his means test form, he claimed improper or unavailable deductions for some of his expenses.Specifically, the UST objected to the Debtor's claimed deductions of $539 for rent in excess of the allowable standard for housing, $46 per month for unsubstantiated additional health care expenses, $30 in extra telecommunications expenses, and $250 in unsupported charitable contributions. The UST alleged that, if the objected to deductions were disallowed, the Debtor would be able to pay a significant dividend to his unsecured creditors, and therefore his filing was an abuse of Chapter 7. The UST also argued in the Motion to Dismiss that the Debtor's lease of a home for $1800 per month and certain of his other expenditures, including his voluntary retirement contributions, demonstrated abuse under a totality of the circumstances analysis.

The Debtor responded to the Motion to Dismiss by asserting that the additional $539 he claimed for his rental expense was an actual expenditure and was justified by the special educational needs of his ex-fiancée's daughter, which could only be met by renting a home in the Chatham School District. He also claimed that he had provided documentation to support the other questioned deductions and that he would continue to provide additional documentation to justify those deductions. He requested an evidentiary hearing be scheduled to allow him to testify as to his good faith in filing his petition under Chapter 7.

An evidentiary hearing was held on May 24, 2017. Prior to the hearing, the UST and the Debtor filed a joint stipulation. In large measure, the stipulation simply recited uncontested facts easily discernible from the record and the documents filed by the Debtor. New information in the stipulation included the fact that on September 29, 2016, the Debtor, along with his ex-fiancée, had entered into to a lease of a residence in Chatham, Illinois ("Chatham residence"),for $1800 per month. The Debtor and his ex-fiancée expected to occupy the Chatham residence along with the ex-fiancée's minor daughter. The ex-fiancée had agreed to pay $500 per month toward the rent with the Debtor paying the $1300 balance. A copy of the lease was attached to the stipulation. The UST and the Debtor also stipulated that the Debtor's witness, Mike George, if called to testify, would have competently testified, based on his extensive experience and education, that, in his expert opinion, $1800 is a reasonable amount to be paid to rent a residence in Chatham large enough to accommodate three people.

The Debtor testified at the evidentiary hearing. Regarding the Chatham residence, he said that, at the time he entered into the lease, he was engaged and expected to occupy the premises with his then fiancée and her daughter. The daughter has learning disabilities and was, at the time, already enrolled in the Chatham School District where her special needs were being met. The daughter's father resided within the school district, and the daughter's enrollment in the district was predicated on her father's residence and his role as her primary custodian. According to the Debtor, his then fiancée's dissolution of marriage judgment required that her daughter be enrolled in the Chatham School District and provided that his fiancée could only be listed on school records as her daughter's primary custodian if she moved into the district. Accordingly, he agreed to enter into the lease for the Chatham residence to facilitate his then fiancée's compliance with the provisions of her dissolution of marriage judgment.

The Debtor admitted that his engagement had ended and that his now ex-fiancée had moved out of the Chatham residence in February 2017.¹ The Debtor stated, however, that during the periods of time when his ex-fiancée has physical custody of her daughter, she moves back into the Chatham residence with the daughter. Because their relationship has deteriorated so seriously, during the periods of time when his ex-fiancée occupies the house, the Debtor moves out.

The Debtor also testified regarding his auto loan at Citizens Equity First Credit Union ("CEFCU"). In his means test calculation, the Debtor had deducted $710 for his monthly payment to CEFCU secured by his 2011 Chevrolet Silverado truck. He acknowledged that, although he had been making a $710 monthly payment to CEFCU before filing bankruptcy, only $433.68 of that amount was for his auto loan. The balance was for payment on unsecured debt owed to CEFCU. He admitted that his means test calculation should be adjusted to correct his error.

With respect to his charitable contributions, the Debtor testified that he was an active member of First United Methodist Church and had committed to a 10% tithe to the church. He said that he had not been able to meet his tithe commitment but had been donating approximately $250 per month to the church. His donations were made in cash, and he acknowledged that he had no cancelled checks or receipts for the donations. He said that he did not donate by check because he was trying to phase out his checking account.

The Debtor identified his prescription medication records from Walgreens and said that he was taking numerous prescriptions for a variety of ailments. He stated that he had calculated his extra deduction for medical expenses based not only on the prescription expenses but also on other out-of-pocket expenses for doctor visits and treatments. He acknowledged that he had not provided any records or proof of his other medical expenses, and he did not provide testimony about the amounts of any out-of-pocket medical expenses he regularly incurs.

With respect to his retirement accounts, the Debtor admitted that he was making voluntary contributions of $150 per month. He also acknowledged that the $113 per month payment to T. Rowe Price shown on his Schedule J was related to a loan from his deferred compensation account. He also discussed his student loan payments of $462.70 per month. He said that some of the student loans were incurred for his own education but others were loans he co-signed for his stepson. As part of his dissolution of marriage judgment with his ex-wife, she was ordered to refinance the loans incurred by her son but had yet to do so, leaving the Debtor liable on the loans.

The Debtor concluded his testimony by stating that he did not lead a luxurious lifestyle. He assured the Court that he had made every effort to provide complete and accurate information on all of his bankruptcy paperwork.

The only other witness to testify at the hearing was Megan Shaw, an analyst in the UST's office responsible for the review of debtors' Chapter 7 means test forms. Ms. Shaw identified a spreadsheet she had prepared recasting the Debtor's means test calculation. She testified that she had reviewed the Debtor's pay advices for the relevant time periods and her calculation of the Debtor's incomewas "to the penny" consistent with the Debtor's calculation. With respect to his expenses, however, Ms. Shaw reduced the Debtor's rent deduction to the IRS standard of $761², made an adjustment for the Debtor's error in reporting his CEFCU auto loan payment, credited the Debtor with only $13.97 in additional medical deductions based on the limited documents provided, and gave the Debtor no deductions for extra telecommunications expenses or charitable contributions because no documents in support of those expenses had been provided to her. Based on all her adjustments, Ms. Shaw calculated that the Debtor had $990.12 per month available to pay his unsecured creditors. Alternatively, she suggested that, if the Debtor were allowed to deduct his student loan payments, he would still have $535 per month for the payment of unsecured debt.

The parties...