UST filed Motion to Dismiss...under 2 different arguments!

[alorth]

First....the UST filed a 707(b)(2) complaint. In essence, the UST argues our Means Test was wrong. Then the UST did a Means Test using our Info, and stated the changes he made....EXCEPT FOR ONE THING! The UST changed our Charitable Contribution amount WITHOUT noting it, form $41.67/mo to $21.67/mo, and that was just enough of a change to get us to FAIL the Means Test, but he CANNOT make that change, especially in light of it mostly being religious tithing/offering. To arbitrarily knock $20 off/month is ridiculous. Congress ruled that a person may tithe up to 15% of their Gross Income, and the UST cannot dispute it. Obviously, $41.67/month is actually far less than 1% of our Gross Income, and is perfectly reasonable. With that $20 added back on to our monthly expenditure...ACCORDING TO THE UST's NUMBERS.....we would pass the Means Test (The Presumption Does Not Arise) because our total of payments over 60 months would be less than 25% of unsecured debt, whereas without it added back in, the presumption does arise, as we would be over the 25% threshold by less than $200 TOTAL over the 60 months. So really, the difference ended up being like $3.00/month! Ridiculous! Also, the UST did NOT complete that section on their reformulated Means Test! Basically, its like the UST tried to "Slip That Past" us, hoping it wouldn't be figured out.

So....to further support their claim of Abuse, the UST is ALSO filing a Totality of Circumstances argument. They are saying our House payment and Montessori Payment are too much, and that we are paying too much for Health Care. I have found case law supporting our House Payment being well over the IRS allowance and being accepted as NOT a luxury item, which is what the UST is trying to argue! In a 2008 case in California, a Ch 7 was allowed to proceed despite a person having a $6,000/month house payment (ours is $2400/month)! The court found the person could reasonably be allowed to stay in the house and continue to make payments as its value was underwater, and it was a secured debt, just like ours! Take THAT, UST. Also, our health expenditures over and above our Health Insurance deduction from our pay is what it is, and we can back that up with receipts. The Montessori schooling is the only area left to argue, but I am still researching case law for that. It may not matter anyway, because of our house value being underwater, which will make the biggest difference!

So UST files 2 different arguments to dismiss our Ch 7, and we can fight BOTH solidly and legitimately. Don't know if we will win, but we'll have a good swing at it. And if we have to convert to 13, then that's what we'll do, but our atty. thinks our chances are about even.

Keep in mind, that this is a case where our income is DOUBLE the state median income, so it really raised a red flag with the UST. In fact, it was the HEAD UST for this District himself who wrote the argument/motion to dismiss for our case.

I just got notice from the Court today that I have 14 days to answer the Order. Not exactly what I want to be concerned with during Christmas season, but can't be helped.

[bk2009]

Um, but you're in Michigan, not CA where houses are super expensive. I bet you could let the house go and find a rental for far cheaper than $2400/month. To me, that amount does sound like a luxury, must be a really swanky house for Michigan.

[keepsmiling]

Sorry it didn't go the way you hoped. But I think you just got a much needed reality check. You have more luxuries than many of us here. Lots of us are scrounging for loose change under the cushions and worried about very basic needs such as putting a meal on the table.

We kinda warned you it might go this way, back when you first started posting.
Good luck, let us know what happens.

[alorth]

Uh...excuse me....

the IRS allowance for a house in THAT California county in that case was $2000/month...

the $6000 payment being 3 times the allowance.

SAME as our payment is to OUR IRS allowance of $867/month in our County.

[bk2009]

Well good luck with your arguments.

[alorth]

Neither of you are actually getting the point of the OP, which is that the arguments for dismissal are flimsy. We have every right under the law to the relief of BK as you supposed "scroungers", like we aren't scrounging. We're certainly not saving, nor spending. And if you DON'T THINK we are "scrounging" every month with our health care bills, and our groceries, then I suggest you live like I do with nothing more than a $10 bill in your wallet to last the week, every week. A far cry from the supposed "good old days" of me making a good wage, and us having credit....we have sold every "luxury" item we had to try and avoid BK. Sorry its not good enough for your standards of who should be allowed BK, and who shouldn't. Our home is 2100 sq. ft., needing repairs. No pool. No luxury rooms. I bet most of you have more than the single flat screen TV we have.... Yes, we are lucky to be able to pay for Montessori for our daughter due to my wife's wage...THAT is our one "luxury"....education for our daughter! How dare we!?! Actually spend money to try and get our only child off to a good start in life. Does she have a game system? NO. A closet full of clothes from The Gap? NO. Try Walmart. Screw you people who act like we're trying to get one over on anyone! We made EVERY EFFORT to avoid this, short of cashing out our 401k. All selling this house will do is add money to our UNSECURED debt.

[alorth]

California Court: $6,060 Monthly Mortgage Payment Not an Abuse of Chapter 7

by Craig Andresen, Minneapolis, MN, Bankruptcy Attorney

In In re Johnson, 2008 WL 5265740 (Bky.S.D.Cal. Dec. 8, 2008), a California bankruptcy court ruled that a debtor with a $6,060 monthly mortgage payment was not to be denied a bankruptcy discharge based solely upon the size of the mortgage payment. The court turned aside a challenge under section 707(b) which claimed that the $6,060 payment was unreasonably high, and claimed that the debtor could rent a more modest residence which would enable him to fund a chapter 13 repayment plan.

The court noted that the debtor had suffered a $60,000 cut in pay prior to filing chapter 7 bankruptcy. The debtor’s home was valued at $900,000 while the mortgage balance was about $1,100,000. Partly due the $6,060 monthly payment on this mortgage, the debtor “passed” the means test, and the presumption of abuse contained in section 707(b)(2) did not arise. However, the U.S. Trustee argued that under the “totality of the circumstances” test contained in section 707(b)(3), the debtor’s chapter 7 filing constituted an abuse, due to the unreasonably high $6,060 monthly mortgage payment.

The court observed that Congress allowed a bankruptcy debtor an expense on the means test equal to the amount of the debtor’s monthly mortgage payment, with no limitation on the amount of the monthly payment. It would be illogical for section 707(b)(2)’s means test to allow a mortgage payment regardless of the size of the payment, only to have the same mortgage payment disallowed by section 707(b)(3)’s totality of the circumstances test. Furthermore, if the debtor were forced to convert to chapter 13, the mortgage payment would once again be allowed by the means test contained in chapter 13. Creditors would not benefit from a conversion to chapter 13 if the mortgage payment were to be allowed in chapter 13 anyways.

The court concluded that a monthly mortgage payment allowed as an expense by the chapter 7 means test could not form the basis for dismissal under either section 707(b)(2) or (3).

[IamOld]

Alorth do NOT give up! Depending on where w/in your county are, the house payment (especially if it is a higher than average interest) may very well be very arguable. Re health costs - they are what they are!

TIthing - I think you have a good point - if the statute law allows it, he's got to allow it.

Re Montessori - I think quality of education and/or what is available - if that's the day care you have that's what you have...it's not like you can necessarily change...

[bk2009]

Neither of you are actually getting the point of the OP, which is that the arguments for dismissal are flimsy. We have every right under the law to the relief of BK as you supposed "scroungers", like we aren't scrounging. We're certainly not saving, nor spending. And if you DON'T THINK we are "scrounging" every month with our health care bills, and our groceries, then I suggest you live like I do with nothing more than a $10 bill in your wallet to last the week, every week. A far cry from the supposed "good old days" of me making a good wage, and us having credit....we have sold every "luxury" item we had to try and avoid BK. Sorry its not good enough for your standards of who should be allowed BK, and who shouldn't. Our home is 2100 sq. ft., needing repairs. No pool. No luxury rooms. I bet most of you have more than the single flat screen TV we have.... Yes, we are lucky to be able to pay for Montessori for our daughter due to my wife's wage...THAT is our one "luxury"....education for our daughter! How dare we!?! Actually spend money to try and get our only child off to a good start in life. Does she have a game system? NO. A closet full of clothes from The Gap? NO. Try Walmart. Screw you people who act like we're trying to get one over on anyone! We made EVERY EFFORT to avoid this, short of cashing out our 401k. All selling this house will do is add money to our UNSECURED debt.

I didn't say you were trying to get one over on anyone. I just said that it's a high payment for Michigan.

But, no we don't have more than one flat screen. Yes, we often live with just $10 in our wallets. Our clothes are hand me downs, some gifts that are brand names, thrift store items, clearance and Walmart.

Okay, what happens if you just walk away from the house, forget about selling it. Then you can rent something for $900 or so and have much more comfort room. That was my point.

[alorth]

Heck...my wife and I aren't even giving each other anything for Christmas, let alone to anyone else, EXCEPT our daughter. She is what's most important to us.

But also, another case in Support of a High House Payment...

• In re Dumas
E.D. Tex. - 419 B.R. 704 - 2009-11-17 - ,
Google ID#: 8615608555109410908
(Type B : Ability or inability to fund a Chapter 13 plan is relevant to finding of abuse under "totality of circumstances" and/or special circumstances for NOT finding abuse )

A higher than average mortgage payment did not preclude debtor from filing a Chapter 7 (it was not abusive).

"In defining a future ability to pay for an above-median income debtor in a Chapter 13 context, §1325(b)(3) provides that: "Amounts reasonably necessary to be expended ... shall be determined in accordance with subparagraphs (A) and (B) of section 707(b)(2)...." Whether arising as a product of congressional intent or congressional blunder, §707(b)(2) fails to impose any limit on the amount of debt which can be legitimately secured by a principal residence for Chapter 7 purposes."

"The house was not purchased at the last minute at the expense of creditors, but instead was acquired when the Debtors enjoyed a greater level of income."

[alorth]

In our case, it is not Marital problems, but MY health problems which prevented me from continuing in my well-paying occupation. I am NOT on disability currently...don't know if I ever will be. But our circumstances are much like this case suggests....


Fifth Cir (TX-N)
In re Daugherty, 416 B.R. 582 (Bankr.N.D. Texas )
2009-09-08 - (In re Daugherty, 416 B.R. 582, Bankr.N.D. Texas, 9/8/2009, 7, Above,) Google ID#: 1871327002715980529
(Type E : )
100K income debtor allowed to file chapter 7 where string of bad luck and poor decisions and marital problems, rather than attempt to evade creditors, was motive for financial moves that led to bankruptcy. -

[biotechsolution]

I don't think the housing payment is going to be the issue. THe big issue is the education, you are limited to $150/month under the IRS standards. The argument of passing the means test of 25% isn't followed very often. If you have more than the 150/month is disposable they will try to push you into that 13.
You will have to pad the rest of your expenses to make up the education expense, it's pretty cut and dry that they will only allow 150/month.

[HHM]

Not sure why you would cite a CA case for a Michigan BK. different animals.

Also, why are YOU, looking for case law, where is your attorney?

You need to find case law IN YOUR CIRCUIT, otherwise, you are basically spinning your wheels. Just because some court in the 9th circuit said yes, does not mean the 6th circuit (your circuit) needs to go along with it. Note, I am not saying don't cite those cases, but realize, they hold no authoritative relevance in your circuit. Districts are very different on how they view housing expense, most have a "choking" point, which seems to be what the trustee is pushing for in that, at some point, that creditors are being disadvantaged at the expense of the debtor lavish lifestyle.

[alorth]

Not sure why you would cite a CA case for a Michigan BK. different animals.

Also, why are YOU, looking for case law, where is your attorney?

You need to find case law IN YOUR CIRCUIT, otherwise, you are basically spinning your wheels. Just because some court in the 9th circuit said yes, does not mean the 6th circuit (your circuit) needs to go along with it. Note, I am not saying don't cite those cases, but realize, they hold no authoritative relevance in your circuit. Districts are very different on how they view housing expense, most have a "choking" point, which seems to be what the trustee is pushing for in that, at some point, that creditors are being disadvantaged at the expense of the debtor lavish lifestyle.

I see what you are saying....however, I think the most important language in the 9th Circuit ruling is what they recognize that Congress intended....which I believe could be construed to cover the Nation (all circuits), not just CA. I know that Michigan is not tied by the 9th Cir. ruling by any means, but it provides a good basis for an argument, especially if I (or my atty) can find several OTHER cases that basically agree with that type of ruling, regardless of circuit - though I recognize it would be best IF we could find one in the 6th.

This part here is what I think applies:

"The court observed that Congress allowed a bankruptcy debtor an expense on the means test equal to the amount of the debtor’s monthly mortgage payment, with no limitation on the amount of the monthly payment. It would be illogical for section 707(b)(2)’s means test to allow a mortgage payment regardless of the size of the payment, only to have the same mortgage payment disallowed by section 707(b)(3)’s totality of the circumstances test. Furthermore, if the debtor were forced to convert to chapter 13, the mortgage payment would once again be allowed by the means test contained in chapter 13. Creditors would not benefit from a conversion to chapter 13 if the mortgage payment were to be allowed in chapter 13 anyways."

Logic is logic, in any Circuit, and the way I see it, that seems to be the gist of the ruling.

As for why I'm looking up cases, instead of my atty., all I can say is I'm doing everything I can to lend a hand. I am rep'd, and my atty. is a veteran bk litigator, and I'm sure he will be looking too (I hope), but I figure any help I can provide that could possibly be useful, I will try and supply. If he doesn't want any part of my help, that's fine too...he's the expert, but I haven't been asked to stop.


One last thing I wish to point out, is that the UST cited OLD 6th Circuit case law (In re Krohn (1989)) in making the argument for dismissal. He also cited 2 other cases in support of Krohn, but both of those cases were also before the BAPCPA of 2005. All of my case law is from much more recent cases, and I also think the circumstances of the present economy should be taken into account. I will be more than happy to describe in great detail to the UST exactly ALL of the so-called "belt-tightening" we have done in the last 5 years, and especially the last 2.

[momofthree]

1. House payment, you should be able to fight and win.
2. Tithing, you should be able to fight and win.
3. Education, you probably cannot successfully win this one unless your child has some sort of special needs (medical diagnosis) that require this type of schooling.
4. The 25% rule only applies if your DMI using allowable expenses is between $117-$195 per month. You've stated that your income is 2x the median. I don't see how you can possibly come up with enough allowable expenses to get your dmi into that range, especially since the educational expense is being objected to.