Marissa B Lamug and Dan F. Famularcano

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For The Northern District Of California
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1Unless 	otherwise 	indicated, 	all 	chapter, 	section 	and 	rule
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1330, and to
the 	Federal 	Rules 	of 	Bankruptcy 	Procedures, 	Rules 	1001-9036, 	as
enacted and promulgated after October 15, 2005, the effective date of
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,
Pub.L. 109-8, Apr. 20, 2005, 119 Stat. 23 (hereinafter, “BAPCPA”).
1
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
In re 	Case No. 07-53724-RLE
Chapter 7
MARISSA B. LAMUG and
DAN F. FAMULARCANO,
Debtors.
__________________________________
MEMORANDUM DECISION RE MOTION BY UNITED STATES TRUSTEE
TO DISMISS CHAPTER 7 CASE PURSUANT TO 11 U.S.C. § 707(b)(3)
Before the Court is the motion by the United States Trustee
(the “UST”) to Dismiss the chapter 7 bankruptcy case of debtors
Marissa Lamug and Dan Famularcano (the “Debtors”) pursuant to 11
U.S.C. § 707(b)(3) (the “Motion”) 1. 	The Motion has been fully
briefed and argued and the Court now renders its decision.
The following constitutes the
Memorandum Decision of the Court.
Signed February 18, 2009
________________________________________
Roger L. Efremsky
U.S. Bankruptcy Judge	________________________________________
Entered on Docket
February 18, 2009
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
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I. 	INTRODUCTION
The UST has asked this Court to dismiss Debtors’ bankruptcy
case as an abuse of chapter 7 under § 707(b)(3), based solely on
Debtors’ apparent ability to pay their debts. 	The UST concedes
that Debtors have “passed” the Means Test and are therefore, not
presumed abusive under § 707(b)(2). 	The UST asserts, however, that
Debtors’ decision to surrender two parcels of real property, along
with other small adjustments, results in disposable income with
which Debtors can repay their creditors. 	The UST further asserts
that ability to pay remains a relevant factor for dismissal under
the post-BAPCPA § 707(b)(3)(B) totality of the circumstances
standard. 	Thus, the UST contends that the totality of the
circumstances demonstrate abuse and Debtors’ case should be
dismissed.
Debtors, on the other hand, assert that once they “pass” the
Means Test, their ability to pay is no longer a valid consideration
or basis for dismissal under § 707(b)(3). 	Debtors also assert that
even if ability to pay is still a valid factor in the totality of
the circumstances analysis under § 707(b)(3)(B), the facts of this
case do not warrant dismissal as an abuse because, among other
reasons, Debtors would not be required to pay anything to unsecured
creditors under a chapter 13 plan and/or Debtors are not eligible
for chapter 13.
The Court finds that: (1) even where debtors are not presumed
abusive under § 707(b)(2), ability to pay remains a valid
consideration under the totality of the circumstances test of
§ 707(b)(3)(B); (2) Debtors have an ability to pay their debts;
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(3) considerations regarding whether Debtors would be required to
pay anything to creditors in a chapter 13 and/or whether Debtors
are eligible for chapter 13 are not relevant considerations for the
totality of the circumstances analysis under § 707(b)(3)(B); and
(4) the totality of the circumstances of Debtors’ financial
condition indicate that Debtors’ case is an abuse of chapter 7.
II. 	FINDINGS OF FACT
The basic facts of the case appear to be undisputed.
A. 	Background
Debtors filed a voluntary chapter 7 bankruptcy petition on
November 14, 2007.
B. 	Debts
Debtors are individuals with primarily consumer debts. 	Their
scheduled unsecured debts total $92,220. 2 	Their scheduled secured
debts total $1,046,910, and are secured by two parcels of real
property and one vehicle. 	Debtors did not schedule any priority
debt.
C. 	Properties
On the filing date, Debtors owned a residence located at 2111
Pruneridge Avenue in Santa Clara, California (the “Pruneridge
Property”) and a rental property located at 5448 Mead Stone Way in
Sacramento, California (the “Sacramento Property”) (together, the
“Properties”). 	The Properties were overencumbered and Debtors had
not made payments on the mortgages since June and August of 2007,
respectively. 	Debtors’ Statement of Intention indicated their
intent to surrender the Properties.
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3Ms. 	Lamug 	quit 	her 	second 	job 	at 	V.H. 	Holdings 	on 	January 	7,
2008. 	Subsequently, she increased her hours at Kaiser to at least 32
hours 	per 	week. 	It 	appears 	that 	the 	income 	from 	Ms. 	Lamug’s
additional 	hours 	at 	Kaiser 	is 	at 	least 	as 	much 	as, 	and 	maybe 	more
than, the income from her part-time job at V.H. Holdings. 	Because the
UST has not done an updated calculation and Debtors have not filed an
amended schedule I, the Court assumes the difference is negligible and
relies on the income information in the schedule I, as filed.
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An order granting relief from stay as to the Pruneridge
property was entered on January 7, 2008. 	An order granting relief
from stay as to the Sacramento Property was entered on January 11,
2008. 	The record does not indicate the current status of the
Properties.
D. 	Means Test
Debtors’ Means Test form shows negative monthly disposable
income of ($3,054) per month. 	Thus, the presumption of abuse does
not arise.
E. 	Schedule I Income
On the filing date, Debtors were both employed. 	Ms. Lamug
worked 24 hours per week as a nurse at Kaiser Permanente and had
gross income of $6,184 per month. 	She had been employed at this
job for four years. 	Mr. Famularcano worked full-time as a
technician at Automation Controls and his gross income was $3,423.
He had been employed at this job for eight years. 	Debtors’
combined gross income was $9,606. 	Ms. Lamug also had a second job
at V.H. Holdings, which netted Debtors $928 per month. 3 	Debtors’
gross income before taxes was $10,535. 	Debtors’ net income, after
taxes and a $172 401k deduction totaled $8,226.
F. 	Schedule J Expenses
Debtors’ amended schedule J reflects $10,508 in expenses,
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including payments of $6,007 on the Pruneridge Property, payments
of $2,201 on the Sacramento Property and $190 in utilities (i.e.,
gas, electric, water and sewer (“Utilities”)).
On October 12, 2007, Debtors entered into a lease to rent a
single family home for $1,800, plus $140 per month for Utilities
(the “Rental Property”). 	On November 15, 2007 (the day after the
bankruptcy filing), Debtors moved out of the Pruneridge Property
and into the Rental Property. 	Debtors have not amended schedule J
to remove the mortgages that they no longer pay on the Properties,
or to replace the mortgages with the monthly rent and Utlities they
currently pay on the Rental Property.
G. 	UST’s Proposed Adjustments to Income and Expenses
Debtors’ schedules I and J reflect net income of ($2,283).
The UST asserts that if adjustments are made to reflect actual and
necessary expenses and tax withholdings, Debtors have disposable
income of approximately $3,489 per month.
The UST asserts the following reductions should be made to
Debtors’ expenses: (1) reduction of the mortgage/housing expense
from $6,007 (mortgage on the surrendered Pruneridge Property) to
$1,800 (the actual rent on the Rental Property); (2) elimination of
the $2,201 in first and second mortgage payments on the surrendered
Sacramento Property; and (3) reduction of the Utilities expense
from $190 (as listed on schedules), to $140 (the actual amount paid
under the Rental Property lease). 	With these adjustments, the UST
asserts that Debtors’ actual monthly expenses will total $4,051
(the “Adjusted Expenses”).
The UST does not challenge the $10,535 in gross income on
schedule I, but recommends two adjustments to the net income:
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4Section 707(b)(1) states, in pertinent part,
After 	notice 	and 	a 	hearing, 	the 	court, 	. 	. 	. 	on 	motion 	by 	the
United States trustee. . . or any party in interest, may dismiss
a 	case 	filed 	by 	an 	individual 	debtor 	under 	this 	chapter 	whose
debts 	are 	primarily 	consumer 	debts. 	. 	. 	if 	it 	finds 	that 	the
granting of relief would be an abuse of the provisions of this
chapter[.]
Under BAPCPA, the statutory standard for dismissal under § 707(b) has
been lowered from the pre-BAPCPA standard of “substantial abuse,” to
mere “abuse.” 	In re Maya, 374 B.R. 750, 754 (Bankr. S.D. Cal. 2007).
In addition, BAPCPA has deleted the pre-BAPCPA presumption in favor
of 	granting 	relief 	to 	debtors. 	In 	re 	Booker, 	2009 	WL 	160252 	*1
(Bankr. W.D. Mo. Jan. 23, 2009); In re Kaminski, 387 B.R. 190, 194-95
(Bankr. N.D. Ohion 2008).
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(1) eliminating the 401k account deduction; and (2) increasing
Debtors’ payroll taxes from $2,137 to $2,995 to reflect the fact
that Debtors will no longer have a mortgage interest deduction as a
result of the surrender of the Properties and to reflect the
proposed elimination of the 401k contribution. 	With these
adjustments, the UST contends that Debtors’ actual monthly income
totals $7,540 (the “Adjusted Income”). 	The UST contends that
subtracting Adjusted Expenses from the Adjusted Income results in
monthly disposable income of $3,489.
III. DISCUSSION
A. 	Dismissal Under § 707(b), Generally
Section 707(b)(1) provides that a case of an individual debtor
whose debts are primarily consumer debts may be dismissed if the
court finds, after notice and a hearing, that granting a discharge
would be an abuse of chapter 7. 4 	Section 707(b) provides two
methods under which to determine if “abuse” is present: (1)
presumed abuse under the objective Means Test prescribed in
§ 707(b)(2); and (2) the more subjective test found in § 707(b)(3),
which is based on a debtor’s good faith and/or the totality of the
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circumstances.
The function of the Means Test under § 707(b)(2) is to
estimate the ability of a chapter 7 debtor to repay his or her
debts. 	In re Baeza, 2008 WL 5411118 *2 (Bankr. E.D. Cal. Dec. 29,
2008). 	If a debtor’s annualized income exceeds the applicable
median family income, and application of the comprehensive list of
allowable expenses shows that debtor has the ability to repay the
lesser of a percentage of his or her nonpriority unsecured debts,
or a sum certain over a five year period, a presumption of abuse
arises. 	11 U.S.C. § 707(b)(2).
Section 707(b)(3), on the other hand, offers a more subjective
test that requires a case-by-case analysis of a debtor’s financial
situation and course of conduct to determine abuse. 	In re Baeza,
2008 WL 5411118 *2; In re Kaminski, 387 B.R. 190, 195 (Bankr. N.D.
Ohio 2009) (citation omitted)). 	Specifically, § 707(b)(3)
provides,
In considering . . . whether the granting of relief would be
an abuse of the provisions of this chapter in a case in which
the presumption [of abuse]. . . does not arise or is rebutted,
the court shall consider–
(A) whether the debtor filed the petition in bad faith;
or
(B) the totality of the circumstances (including whether
the debtor seeks to reject a personal services contract
and the financial need for such rejection as sought by
the debtor) of the debtor’s financial situation
demonstrates abuse.
11 U.S.C. § 707(b)(3).
The UST has not brought a motion under § 707(b)(2) and does
not argue that the presumption of abuse applies. 	Nor does the UST
argue that Debtors have engaged in bad faith under § 707(b)(3)(A).
Instead, the only argument advanced by the UST is that the totality
of circumstances show abuse under § 707(b)(3)(B). 	The burden of
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proof on this matter is on the UST. 	Hebbring v. U.S. Trustee, 463
F.3d 902, 909 (9th Cir. 2006).
B. 	Relationship Between § 707(b)(2) and § 707(b)(3)
As an initial matter, Debtors argue that under BAPCPA, the
§ 707(b)(2) Means Test is the exclusive test of Debtors’ ability to
pay and, once Debtors pass the Means Test, the UST is precluded
from arguing ability to pay under the totality of the circumstances
provision of § 707(b)(3)(B). 	The Court disagrees.
Section 707(b)(3) clearly states that when the § 707(b)(2)
presumption of abuse does not arise, or is rebutted, the Court
shall consider whether the totality of the circumstances of the
Debtors’ financial situation demonstrates abuse. 	11 U.S.C. §
707(b)(3)(B). 	Here, there is no dispute that Debtors “passed” the
§ 707(b)(2) Means Test. 	Thus, under the plain language of the
Code, the Court is required to take the next step and determine
whether abuse is present. 	In re Baeza, 2008 WL 5411118 at *3
(citing In re Paret, 347 B.R. 12 (Bankr. D. Del. 2006) and Eugene
R. Wedoff, Means Testing in the New § 707(b), 79 Am. Bankr. L.J.
231, 236 (2005)); In re Maya, 374 B.R. 750, 754 (Bankr. S.D. Cal.
2007). 	To answer that question in this case, the Court must
determine the threshold issue; whether the “totality of the
circumstances” analysis under § 707(b)(3)(B) includes an inquiry
into Debtors’ “ability to pay.”
C. 	§ 707(b)(3)(B) and Totality of the Circumstances
The Bankruptcy Code does not define “totality of the
circumstances” and there is little case law, and no binding case
law, on the post-BAPCPA meaning of the phrase. 	Despite this lack
of authority, however, various sources provide this Court with
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guidance for interpreting the phrase.
First, the plain language of the statute directs the Court to
consider the “totality of the circumstances (including whether the
debtor seeks to reject a personal services contract and the
financial need for such rejection as sought by the debtor) of
[Debtors’] financial situation.” 	11 U.S.C. § 707(b)(3)(B).
Debtors’ actual current and future income and expenses, intentions,
and resulting ability or inability to pay are crucial to an
assessment of Debtors’ “financial situation.” 	In re Booker, 2009
WL 160252 *3 (Bankr. W.D. Mo. Jan. 23, 2009); See also In re Baeza,
2008 WL 5411118 *5 (finding that plain language of statute requires
court to consider debtor’s actual financial situation at time of
filing); In re Maya, 374 B.R. at 754 (citing language of statute to
support conclusion that court may rely on post-petition events to
determine ability to pay, debtors may not rely on payments and
expenses they surrender post-petition, and citing cases that have
considered post-petition events in a § 707(b)(3)(B) analysis).
Second, the majority of courts that have conducted a post-
BAPCPA § 707(b)(3) analysis have utilized pre-BAPCPA case law and
concluded that a debtor’s ability to pay creditors out of future
disposable income remains a sufficient basis to support a finding
of abuse. 	See In re Booker, 2009 WL 160252 *2-3 (analyzing pre-
BAPCPA case law to conclude consideration of actual ability to pay
is primary, if not exclusive, consideration under post-BAPCPA
§ 707(b)(3) and listing cases that find similarly); In re Baeza,
2008 WL 5411118 (analyzing pre-BAPCPA case law and concluding
ability to pay debts from future income, standing alone, is
sufficient for finding of abuse under § 707(b)(3)(B)); In re
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Hickman, 2008 WL 2595182 *6 (Bankr. W.D. Wash. June 27, 2008
(citing pre-BAPCPA case law and listing post–BAPCPA cases that hold
that ability to pay out of future disposable income is sufficient
to support a finding of abuse under § 707(b)(3)(B)); In re Talley,
389 B.R. 741, 743 (Bankr. W.D. Wash. 2008) (citing In re Stewart,
383 B.R. 429, 432 (Bankr. N.D. Ohio 2008) and concluding that post-
BAPCPA § 707(b)(3)is “best understood as a codification of pre-
BAPCPA case law,” and therefore, pre-BAPCPA case law is still
relevant when determining whether to dismiss a case for abuse under
post-BAPCPA § 707(b)(3)); In re Maya, 374 B.R. at 754 (utilizing
pre-BAPCPA case law to conclude that post-BAPCPA, ability to pay
may support dismissal of a case under § 707(b)(3) and citing cases
that find similarly); In re Pak, 343 B.R. 239 (Bankr. N.D. Cal.
2006) (reasoning, “prior to BAPCPA courts considered whether to
dismiss a . . . case for ‘substantial abuse’ under § 707(b)(1)
based on the ‘totality of the circumstances.’ 	All courts
considered the debtor’s ability to pay to be an important factor in
this context. 	It would be counterintuitive to construe this same
phrase, as used in BAPCPA, to exclude a consideration of the
debtor’s ability to pay.”); but see, In re Walker, 381 B.R. 620,
(Bankr. M.D. Pa.2008) (utilizing canon of negative implication to
conclude that a debtor who has passed the Means Test is not
required to withstand a second examination of schedule I and J
income and expenses under § 707(b)(3)).
Finally, it is a well-established rule of statutory
construction, that “where Congress uses terms that have accumulated
settled meaning under . . . common law, a court must infer, unless
the statute otherwise dictates, that Congress means to incorporate
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the established meanings of these terms.” 	Neder v. U.S., 527 U.S.
1, (1999) (citations omitted) (emphasis added); see also In re Oot,
368 B.R. 662 (Bankr. N.D. Ohio 2007) (It is a “fundament of
statutory construction that, where Congress codifies prior case
law, those prior holdings remain not only good law, but should
serve as a valuable touchstone for interpreting the statute.”).
Because neither the Code, nor post-BAPCPA § 707(b)(3)(B) “otherwise
dictates,” this Court must infer that Congress meant to incorporate
the established meanings of the term “totality of the
circumstances.”
Pre-BAPCPA in the Ninth Circuit, the meaning of the phrase
“totality of the circumstances” was well-settled. 	Under the former
§ 707(b), courts in the Ninth Circuit looked to the “totality of
the circumstances” to determine whether substantial abuse was
present. 	In re Price, 353 F.3d 1135, 1139 (9th Cir. 2004).
Various non-exclusive factors were considered when reviewing the
totality of the circumstances under pre-BAPCPA § 707(b), including:
(1) 	Whether the debtor had a likelihood of sufficient future
income to fund a Chapter 11, 12 or 13 plan which would
pay a substantial portion of the unsecured claims;
(2) 	Whether the debtor’s petition was filed as a consequence
of illness, disability, unemployment, or some other
calamity;
(3) 	Whether the schedules suggested the debtor obtained cash
advancements and consumer goods on credit exceeding his
or her ability to repay them;
(4) 	Whether the debtor’s proposed family budget was excessive
or extravagant;
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(5) 	Whether the debtor’s statement of income and expenses was
misrepresentative of the debtor’s financial condition;
and
(6) 	Whether the debtor had engaged in eve-of-bankruptcy
purchases.
Id. at 1139-40. 	In the Ninth Circuit, it was also well-settled
that a debtor’s ability to fund a Chapter 11, 12 or 13 plan to pay
his or her debts, standing alone, justified a § 707(b) dismissal.
Id. at 1140 (citing Zolg v. Kelly (In re Kelly), 841 F.2d 908, 914
(9th Cir. 1988)).
The phrase “totality of the circumstances” was well-settled
prior to the passage of BAPCPA. 	If Congress intended for the
phrase to have a meaning other than the established meaning,
Congress could have defined the phrase, used a different phrase, or
qualified the phrase in some way. 	Either intentionally or
unintentionally, Congress did not do so. 	Because Congress used a
phrase that was well-settled pre-BAPCPA, and nothing in BAPCPA
indicates that courts are now required to give a different meaning
to the phrase, this Court finds that: (1) the phrase continues to
have the same settled meaning post-BAPCPA; (2) ability to pay
remains a legitimate consideration under the post-BAPCPA
§ 707(b)(3)(B) totality of the circumstances test; and (3) ability
to pay, standing by itself, remains a sufficient ground to support
a finding of abuse under post-BAPCPA § 707(b)(3)(B).
D. 	Application to the Specific Facts of This Case
The parties agree that Debtors can satisfy a majority of the
Price factors. 	There is no evidence that Debtors engaged in eve-
of-bankruptcy purchases or that Debtors obtained cash advances and
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consumer goods on credit exceeding their ability to repay them.
Further, while there is no evidence that Debtors’ petition was
filed as a result of illness or disability, there is some evidence
that Debtors incurred a portion of the debt they seek to discharge
in dealing with family illness and emergencies.
On the other hand, Debtors have enjoyed and continue to enjoy
a stable income that is substantially more than the applicable
median family income in California. 	In addition, as a result of
their decision to surrender the Properties and move into the Rental
Property, Debtors are no longer burdened with mortgage payments in
excess of $8,000 per month. 	Instead, they have replaced these
$8,000 in payments with payments totaling approximately $2,000. 	As
a result, as discussed in more detail below, it does appear that
based on their current financial condition, Debtors have an ability
to repay a substantial portion of their unsecured debt.
1. 	Housing/Real Property/Utilities Expenses
The UST asserts that Debtors’ mortgage/rental expenses should
be adjusted to reflect the fact Debtors have not made payments on
the Properties since before the bankruptcy, have lost or will lose
the Properties to foreclosure, have replaced the Properties with
the Rental Property, and now only pay rent of $1,800 per month.
The UST also asserts that Debtors’ Utilities should be reduced to
reflect the actual amount they must pay under the terms of the
Rental Property lease. 	Debtors disagree, alleging that the UST’s
proposed adjustments are unreasonable because they do not conform
with the IRS standards used in the Means Test.
Debtors do not cite, and the Court is not aware of, any
authority for the proposition that in a § 707(b)(3)(B) analysis,
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the IRS standards control, thereby rendering Debtors’ actual
expenses irrelevant or “unreasonable.” 	In fact, the plain language
of § 707(b)(3)(B) requires the Court to consider the Debtors’
actual financial situation. 	See In re Baeza, 2008 WL 5411118 *5
(Bankr. E.D. Cal. December 29, 2008) (“By the plain meaning of
§ 707(b)(3)(B), the court must consider the Debtors’ actual
financial situation”); In re Kaminski, 397 B.R. at 196 (finding
that while IRS standards may be helpful in determining
reasonableness of expenses, “[a]s a matter of purely statutory
application, the IRS [standards] are not applicable in a
§ 707(b)(3) analysis”). 	Further, while the IRS standards may be
relevant or helpful to determine reasonableness in some cases, they
are all but irrelevant in a case such as this, where it was Debtors
themselves who determined the reasonableness of their housing
expenses by replacing the Pruneridge Property with the Rental
Property pre-petition. 	This is not a situation where the UST is
attempting to impose a fictional “reasonable” housing expense on
Debtors. 	The rent on the Rental Property is the actual amount that
Debtors voluntarily contracted to pay for housing that they
believed was suitable, prior to their bankruptcy filing and prior
to any review by the UST or this Court. 	Thus, the Court agrees
with the UST and finds that Debtors’ mortgage/rental expenses
should be reduced from $8,208 to $1,800 and their Utilities should
be reduced from $190 to $140, to reflect Debtors’ actual post-
petition housing and utility expenses.
2. 	Tax Withholdings
The UST also contends that in calculating Debtors’ ability to
pay their debts, Debtors’ withholding taxes must be increased from
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5Per the UST Bankruptcy Analyst, the UST computed the tax amount
using an independent payroll tax calculator. 	The calculated amount
is based on a filing status of married with two dependents.
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$2,309 to $2,995, to reflect the fact that Debtors will no longer
benefit from an itemized deduction for home mortgage interest. 5
The increase in withholding taxes also assumes that this Court will
not permit Debtors to continue contributing to a 401k account,
thereby increasing Debtors’ gross income and appropriate tax
withholding amount. 	Debtors have not disputed the UST’s proposed
increase, nor have they provided their own figures. 	As the
withholding tax increase benefits Debtors by decreasing their
monthly net income, the Court finds this increased amount to be
equitable and appropriate in determining Debtors’ ability to pay.
3. 	Contribution to 401k Account
Finally, schedule I indicates that Mr. Famularcano contributes
$172 per month to a 401k account. 	The UST asserts that Debtors’
401k contribution should not be permitted as it is, in effect, a
payment by Debtors, to themselves, of funds that could be used to
pay creditors. 	Thus, the UST suggests increasing Debtors’ income
by the amount that Debtors contribute to a 401k account each month.
The Debtors disagree, arguing that the contribution is necessary as
they are nearing retirement age, have two children and their
existing retirement accounts total less than $20,000.
In the Ninth Circuit, bankruptcy courts have discretion to
determine whether retirement contributions are a reasonably
necessary expense for a particular debtor, based on the specific
facts of each individual case. 	Hebbring v. U.S. Trustee, 463 F.3d
at 907 (citation omitted). 	The determination is fact-specific and
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6The Court recognizes that if Debtors are permitted to continue
the 401k contribution, their pre-tax income would decrease, thereby
reducing their withholdings to below the $2,995 amount calculated by
the UST. 	Given, however, that the 401k deduction is minimal, the net
effect to the withholdings would likely also be minimal.
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the Ninth Circuit utilizes a non-exclusive list of factors to
consider in making this determination. 	Id. 	Ultimately, “[c]ourts
must allow debtors to seek bankruptcy protection while voluntarily
saving for retirement if such savings appear reasonably necessary
for the maintenance or support of the debtor or the debtor’s
dependents.” 	Id.
Here, the Court declines to make any specific findings as to
the reasonableness or necessity of Mr. Famularcano’s 401k deduction
because it is not necessary to the Court’s ruling. 	Assuming
arguendo, that the Court were to find that Debtors’ 401k deduction
is reasonable and necessary, the Court’s ultimate conclusion is
unchanged, as discussed below.
4. 	Debtors have an Ability to Repay
After making adjustments to Debtors expenses to only allow
actual housing and Utility expenses, Debtors’ actual monthly
expenses total $4,051. 	Adjusting Debtors’ withholding taxes as
suggested by the UST and allowing Debtors to continue making their
401k deduction results in monthly income of approximately $7,368.
Even with a 401k deduction, therefore, Debtors have approximately
$3,317 in monthly disposable income which could be used to pay
creditors. 6 	This amount is substantial as Debtors could pay 100%
of their unsecured debt in less than 28 months. 	Thus, the totality
of the circumstances of Debtors’ financial condition indicate that
Debtors have an ability to repay their debts.
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E. 	Impact of In re Kagenveama on Court’s Analysis
Debtors argue that their case is not an abuse because under
the recent Ninth Circuit case In re Kagenveama, 541 F.3d 868 (9th
Cir. 2008), Debtors would not be required to pay anything to
unsecured creditors in a chapter 13. 	Debtors mischaracterize the
issue and, in doing so, put the proverbial cart before the horse.
This is a motion to dismiss; no less and no more. 	Any
discussion about what would happen in another chapter is purely
hypothetical. 	In deciding the Motion to Dismiss, the relevant
question for the Court is not whether Debtors would be required to
pay anything in a chapter 13 case, but whether the totality of the
circumstances of Debtors’ financial condition in this chapter 7
case show an ability to repay their debts. 	Nothing in the text of
§ 707(b)(3)(B) requires the Court to anticipate what would happen
if Debtors converted to chapter 13. 	In fact, § 707(b)(3)(B)
neither mentions, nor refers to chapter 13, or any other chapter
under the Code. 	Going down the road Debtors suggest, and
unilaterally expanding § 707(b)(3)(B) to include such an inquiry,
would necessarily require the Court to anticipate not only what
Debtors would be required to pay if they decided to convert to or
file a chapter 13 case, but also whether Debtors would be eligible
for chapter 13, what the chapter 13 trustee and creditors would do
if Debtors were in chapter 13, what would happen if Debtors decided
to file a chapter 11 instead, whether Debtors would be required to
pay anything in a chapter 11 case, what would happen if Debtors
decided not to refile and whether state anti-deficiency statutes
would apply. 	The list of scenarios that may or may not ever occur
and issues that may or may not ever arise, but that the Court would
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have to anticipate, decide, and issue an advisory opinion on, is
potentially endless. 	Nothing in the text of § 707(b)(3)(B)
indicates that this was the type of inquiry envisioned by Congress.
The only question raised by § 707(b)(3)(B) and the only
question in front of the Court, at this time, is whether the
totality of the circumstances of Debtors’ financial condition
indicates abuse and supports dismissal. 	Because the Debtors have
an ability to pay their debts, the Court finds that it does.
IV. CONCLUSION
Based on the foregoing, the Court finds and concludes, based
on the totality of the circumstances, that Debtors have the ability
to pay a substantial portion of the debts for which they seek a
discharge and, as a result, granting Debtors a discharge under the
facts of this case would be an abuse of chapter 7. 	Accordingly,
the UST’s Motion is granted. 	Debtors’ case will be dismissed with
a ten-day stay to allow Debtors the opportunity to convert their
case to a case under another appropriate chapter, if they so
choose. 	A separate order shall issue.
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Case No. 	07-53724
Court Service List - by U.S. mail and/or ecf:
Marissa Lamug and Dan Famularcano
2111 Pruneridge Ave
Santa Clara, CA 95050
Marissa Lamug and Dan Famularcano
4114 Gheeney Street
Santa Clara, CA 95050
Drew Henwood
Law Offices of Drew Henwood
41 Sutter St. #621
San Francisco, CA 94104
John S. Wesolowski, Esq.
Office of the U. S. Trustee
280 So. First Street, Rm. 268
San Jose, CA 95113-3099
Carol Wu
25A Crescent Dr. #413
Pleasant Hill, CA 94523
**and any other parties requesting special notice**
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