Opinion
Bankruptcy No. BK98-41983.
March 8, 1999.
Mr. Allan J. Eurek, Lincoln, NE, for Debtors.
Mr. Jerry Jensen, Omaha, NE, for United States Trustee.
Joseph H. Badami, Chapter 7 Trustee.
MEMORANDUM
This matter is before the Court upon the United States Trustee's Motion to Dismiss Under 11 U.S.C. § 707(b) for Substantial Abuse (the "Motion"), and Objection/Resistance by Debtors. The case is dismissed under 11 U.S.C. § 707(b).
The debtors initially reported aggregate annual gross income of $46,935.48 and aggregate annual net income of $39,999.60. Debtors now allege that their aggregate annual net income has decreased to $37,722.84 due to deductions for certain benefits. Debtors' unsecured debt is $70,703.39. Debtors have three (3) minor dependents residing with them. As the debtors have the ability to make substantial payments to creditors over the next three years under a Chapter 13 plan, I conclude that this Chapter 7 case shall be dismissed.
Debtors' allege that their aggregate income has been reduced due to a reduction in debtor Ronnie Shelley's retirement income and due to deductions for health and life insurance.
LAW
Section 707(b) of the Bankruptcy Code provides for dismissal of a Chapter 7 case filed by an individual debtor where the debts are primarily consumer debts and the court finds that granting relief would be a substantial abuse of Chapter 7 proceedings. 11 U.S.C. § 707(b). To qualify as having primarily consumer debt, it is sufficient that more than half of the dollar amount owed by the debtor is a consumer debt. United States v. Kelly (In re Kelly), 841 F.2d 908, 913 (9th Cir. BAP 1988).
Debtors have argued that the Trustee's Motion should be dismissed based, in part, upon debtors' inability "to retire even one-third of their outstanding debt under a three year Chapter 13 plan. . . ." This Court has previously held that the appropriate test to apply when determining whether a debtor has sufficient expendable income to fund a Chapter 13 Plan is "whether or not a debtor can make substantial payments to creditors over the life of a three-year Chapter 13 Plan." In re Coleman, 231 B.R. 760 (Bankr. D.Neb. 1999). Where the debtor has the ability to make substantial payments, it is a substantial abuse of the bankruptcy process to permit the debtor to proceed in Chapter 7.
DISCUSSION
Debtors' total unsecured debt is $70,703.39, and there are no secured creditors. The debtors are individuals and their debts are primarily consumer debts pursuant to 11 U.S.C. § 707(b).
Debtors list aggregate net monthly income of $3,333.30, and aggregate monthly expenses of $2,353.00. Debtors' assert that both the net monthly income and monthly expense figures, as listed on Schedules I and J, have changed since the time of filing. Debtors' disposable monthly income pursuant to the original schedules is $980.30. Debtors' now assert, by way of a letter to the United States Trustee's Office, that their net monthly income has been reduced to $3,143.57, and that their monthly expenses should be increased to $2,804.48, which yields net disposable income of $339.00 per month. However, I conclude that some of the expense figures are discretionary and excessive and are not reasonable or necessary for the maintenance or support of the debtors or their dependents. 11 U.S.C. § 1325(b)(2). In the context of a Chapter 13 case, these debtors would be expected to cut excessive expenses, making more disposable income available with which to pay creditors. See generally In re Anderson, 143 B.R. 719 (Bankr.D.Neb. 1992).
The following monthly expenses listed on debtors' bankruptcy schedules are to some extent discretionary and*or excessive.
First, debtors' list $700.00 per month as a monthly food expense. This amount is excessive and could be reduced. I also note that the debtors' allege additional expenses in the amount of $100.00 per month for school lunches for their children.
Second, debtors' list recreation expenses of $250.00 per month. This is a discretionary expense, it is on the high side and it should be reduced.
Third, debtors' list $200.00 per month for transportation, and have asserted an additional $50.00 per month for automobile maintenance. As these sums do not include an automobile payment, they are on the high side and could be reduced.
I have taken into consideration the fact that debtors are residing in a two bedroom house with a monthly rental rate of $415.00. This housing expense is certainly on the low side. However, based upon all of the facts in this particular case, I conclude that the debtors can fund a Chapter 13 Plan.
Having carefully considered debtors' income and expenses, I conclude that the debtors could make monthly payments in excess of $450.00 in a Chapter 13 case. The ability to make payments of $450.00 per month is sufficiently substantial to render these debtors' utilization of Chapter 7 an abuse of the bankruptcy process. Monthly payments of $450.00 would payoff approximately $16,200.00 of debtors' unsecured debt under a three-year plan.
A separate order dismissing this case under 11 U.S.C. § 707(b) will be issued concurrently herewith.
IT IS SO ORDERED.
ORDER
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED, that this bankruptcy case is dismissed effective 14 days after the date hereof, unless prior to that date, debtors duly file a motion to convert this case from Chapter 7 to Chapter 13.
IT IS SO ORDERED.