Opinion
Case No. 1-01-01015
April 9, 2002
For the Movant: Gregory R. Lyons, Esquire
For the Respondent: Michael D. Hess, Esquire
MEMORANDUM
Procedural History
On March 2, 2001, Jeffrey L. and Renee R. Bange (Debtors) filed a Petition for relief under Chapter 7 of the Bankruptcy Code. On May 9, 2001, the Office of the United States Trustee (JUST) moved to dismiss the case for substantial abuse under 11 U.S.C. § 707(b). Trial was held on January 15, 2002. This matter is ripe for decision. I have jurisdiction pursuant to 28 U.S.C. § 157 and 1334. This matter is core pursuant to 28 U.S.C. § 157(b)(2)(A) and (O).
Discussion
The UST has moved to dismiss the instant Petition because he believes that the instant debtors would be substantially abusing Chapter 7 if they were allowed to get a discharge while keeping such items as a recently purchased pontoon boat that costs them $210.00 per month and while supporting five (5) dogs that cost them $207.00 per month. The Debtors have monthly earnings of $5,448.55. They have three children, ages five, nine and eleven. They claim monthly expenses of $5,333.66. Their mortgage is $1,750.00 per month. Food expenses are $900.00 per month. Electricity and heating costs them $220.00 per month and they have medical and dental bills that average $290.00 per month. None of these expenses are unreasonable. Indeed, a food expense of only $900.00 per month for a family of five would appear to be somewhat conservative.
Section 707(b) of the Bankruptcy Code provides that:
After notice and a hearing, the court . . . may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debt if it finds that the granting of relief would be a substantial abuse of the provisions of this chapter. There shall be a presumption in favor of granting the relief requested by the debtor.
The Bankruptcy Code leaves the determination of "substantial abuse" to each court's discretion. In re Bacco, 160 B.R. 283, 288 (Bankr.W.D.Pa. 1993).
The concern behind § 707(b) is "abuse of the bankruptcy process by a debtor seeking to take unfair advantage of his creditors." In re Green, 934 F.2d 568 (4th Cir. 1991) (italics added). By using the term "unfair", Green recognized that in bankruptcy a debtor is necessarily, to some degree, "taking advantage of" his creditors. Similarly, for Congress, its use of the term "substantial" abuse seems to imply that a quantity of abuse less than substantial is permissible. The question (which Congress left unanswered) was "how much is too much?" The question has not been succinctly answered by any court, but for some courts, "too much" means so much that it would "shock the conscience" of the court, under the totality of the circumstances, to grant a Chapter 7 discharge. In re DeGross, 272 B.R. 309 (Bankr.M.D.Fla. 2001); In re Kornfield, 211 B.R. 468 (Bankr.W.D.N.Y. 1997) (adopting a "blended" approach to 707(b) and applying factors set forth in Green, infra, and then deciding whether the circumstances revealed by those factors shocked conscience of court).) But see, In re Pilgrim, 135 B.R. 314 (C.D.Ill. 1992). Green held that substantial abuse will be found only if the "totality of the circumstances" proves such abuse. Green, at 571. The factors by which Green defined "totality of circumstances" are as follows:
(1) whether the bankruptcy petition was filed because of sudden illness, calamity, disability, or unemployment;
(2) whether debtor made consumer purchases far in excess of his ability to repay;
(3) whether debtor's proposed family budget is excessive or unreasonable;
(4) whether debtor's schedules and statements of current income and expenditures reasonably and accurately reflect debtor's true financial condition; and
(5) whether the bankruptcy petition was filed in bad faith.
Green, at 572.
I will apply these factors to the instant case and determine whether they show that a Chapter 7 discharge for these Debtors would be shocking to the conscience.
Factor 1: The instant Petition was not filed because of sudden illness, calamity, disability or unemployment. It was filed (as great majority of cases in this District are filed) because the Debtors had accumulated more credit card debt than they could ever hope to repay.
Factor 2: The purpose of this factor is to weed out debtors who fraudulently incur debt in anticipation of bankruptcy with full knowledge that such debt will be discharged. The instant Debtors purchased their pontoon boat in June, 1999, and filed their case in March, 2001. I find sufficient time elapsed between this purchase and the filing of the Petition to believe that the Debtors did not fraudulently buy their boat "in anticipation of bankruptcy". Foolish purchases shortly pre-petition are not necessarily also fraudulent purchases. Matter of Bourdon, 160 B.R. 117, 121 (Bankr.N.D.Ind. 1993); In re Johannsen, 160 B.R. 328, 332 (Bankr.W.D.Wis. 1993) (in context of § 523(a)(2) case).
Factor 3: While "excessiveness" is a comparative thing and comparisons vary according to the "comparor's" perspective, it is safe to say that in comparison to most other debtors' budgets, the instant Debtors' is excessive in the payments it allots for the boat and the dogs. By themselves, however, these payments do not lead me to the conclusion that it would be a substantial abuse for Debtors to obtain a Chapter 7 discharge. It does not "shock the conscience" of this Court to see debtors discharged of their unsecured obligations while at the same time owning a pontoon boat and some pets. But what the UST seeks in this case is essentially a declaration that any debtors who carry such expenses are not worthy of a discharge. What the UST seeks is not compatible with the presumption in favor of discharge that Congress wrote into Section 707(b). From this Court's perspective, the presumption in favor of discharge outweighs the "excessiveness" of debtors owning a boat and five dogs.
Factor 4: There is no proof that Debtors' schedules are inaccurate.
Factor 5: Aside from the inference of bad faith that may be taken from Debtors' purchase of a boat, the UST produced no evidence that the Petition was filed in bad faith. Again, I do not take that purchase as sufficient evidence of bad faith to warrant dismissal pursuant to Section 707(b).
For these reasons, in the totality of the instant circumstances, I do not find that granting a discharge to these Debtors would amount to a substantial abuse of Chapter 7. The Trustee's Motion to Dismiss the Chapter 7 case will therefore be denied. An appropriate order will be entered.
ORDER
AND NOW, this 9th day of April, 2002, the Motion of the United States Trustee to Dismiss the above-captioned Chapter 7 case under 11 U.S.C. § 707(b) is hereby denied.