Nestor Castillo Cayanan and Emiliana Cunanan Cayanan

UNITED
STATES
BANKRUPTCY
COURT
NORTHERN DISTRICT OF CALIFORNIA
1300 Clay Street (2d fl.)
Oakland, CA. 94612
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Memorandum
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	Case No. 07-42354 EDJ
NESTOR CASTILLO CAYANAN and 	Chapter 7
EMILIANA CUNANAN CAYANAN,
Debtors./
MEMORANDUM RE: MOTION TO DISMISS
On October 9, 2007, Sara L. Kistler, Acting United States
Trustee (the “Trustee”) moved to dismiss the above-captioned chapter
7 case. 	The Trustee contends that granting relief to Debtors Nestor
Castillo Cayanan and Emiliana Cunanan Cayanan (“Debtors”) would be
an abuse of the provisions of chapter 7, which therefore merits a
dismissal under Bankruptcy Code § 707(b)(2) (presumption of abuse
under the “means test”) and § 707(b)(3) (totality of the
circumstances shows an abuse). 	The court heard the matter on March
27, 2008. 	Both the Trustee and Debtors appeared through counsel.
The court will deny the Trustee’s motion under § 707(b)(2), but
grant the Trustee’s motion under § 707(b)(3).
Signed: April 01, 2008

EDWARD D. JELLEN
U.S. Bankruptcy Judge

Entered on Docket
April 01, 2008
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 07-42354 Doc# 58 Filed: 04/01/08 Entered: 04/01/08 15:27:33 Page 1 of 5

UNITED
STATES
BANKRUPTCY
COURT
NORTHERN DISTRICT OF CALIFORNIA
1300 Clay Street (2d fl.)
Oakland, CA. 94612
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
2	Memorandum
On July 27, 2007, Debtors filed a petition for relief under
chapter 7 of the Bankruptcy Code. 	Along with their petition,
Debtors filed a statement of financial affairs and Form 22A
(“original Means Test”). 	On September 14, 2007, Debtors filed an
amended Form 22A (“amended Means Test”). 	On March 20, 2008, Debtors
filed a second amended Form 22A (“second amended Means Test”). 	On
March 28, 2008, after the hearing on the Trustee’s motion to
dismiss, Debtors filed an amended statement of financial affairs.
The Trustee seeks to dismiss this case under § 707(b)(2),
arguing that the case is presumptively abusive and Debtors have not
rebutted the presumption. 	She bases her analysis on Debtors’
amended Means Test, which shows an abuse. 	Debtors argue, however,
that the income figures therein were in error, and that the correct
figures, as set forth in the second amended Means Test, should
control. 	Under these corrected figures, no presumption of abuse
arises.
The court agrees with Debtors. 	The court cannot use the
original Means Test, as it incorrectly stated that this is a
business case. 	The amended Means Test correctly states that this is
a consumer case, but incorrectly lists Debtors’ rental income. 	The
Trustee has not presented any evidence disputing the information in
the second Means Test, and has had ample opportunity to obtain and
either challenge or verify the accuracy of such information.
Therefore, the Trustee’s motion to dismiss under § 707(b)(2) will be
denied.
///
Case: 07-42354 Doc# 58 Filed: 04/01/08 Entered: 04/01/08 15:27:33 Page 2 of 5

UNITED
STATES
BANKRUPTCY
COURT
NORTHERN DISTRICT OF CALIFORNIA
1300 Clay Street (2d fl.)
Oakland, CA. 94612
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
1The court notes that § 707(b)(3) also contains a provision
dismissing a case filed in bad faith. 	That issue was not raised
by the Trustee nor briefed by either party, so the court will not
address it.
3	Memorandum
The Trustee also seeks to dismiss this case under § 707(b)(3)
following a totality of the circumstances analysis. 	Section
707(b)(3) states in relevant part, “In considering ... whether the
granting of relief would be an abuse ... the court shall consider
whether ... the totality of circumstances ... of the debtor’s
financial situation demonstrates abuse.” 1 	Both parties agree that
the court may look at pre-petition conduct when determining whether
the case is abusive.
Debtors’ pre-petition conduct indicates that they were spending
recklessly and without regard to either their deteriorating
financial situation or their creditors. 	Within two years of filing
their petition, Debtors refinanced four of their five houses. 	Of
the approximately $1,850,000 Debtors took out in loans, the Trustee
argues that Debtors may have received as much as $313,000 in cash.
Debtors do not deny receiving that money. 	Of major importance to
the court in reaching its decision are the facts that
(a) Debtors failed to disclose those refinances until after the
hearing when they filed their amended statement of financial
affairs, and (b) they have yet to account for the $313,000.
Some of the funds may have been put toward Debtors’ purchase of
an $85,000 Mercedes in November of 2006. 	The Mercedes purchase
occurred just six months before the Debtors’ house in Brentwood was
Case: 07-42354 Doc# 58 Filed: 04/01/08 Entered: 04/01/08 15:27:33 Page 3 of 5

UNITED
STATES
BANKRUPTCY
COURT
NORTHERN DISTRICT OF CALIFORNIA
1300 Clay Street (2d fl.)
Oakland, CA. 94612
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
2This vehicle was just one of five vehicles Debtors owned at
the time they filed their petition.
4	Memorandum
sold at Trustee’s sale. 	By the end of June 2007, four of Debtors’
five houses had been foreclosed on. 	The purchase of a luxury
vehicle when Debtors had to have known that they could not afford
their house payments is not the conduct of an honest but unfortunate
debtor, but rather someone attempting to abuse the system. 2
It is true that when Debtors filed this petition under chapter
7, they were not eligible for chapter 13. 	It is also true that
Debtors may not be able to propose a feasible chapter 11 plan, given
their current income and expenses. 	Even so, the court believes that
the totality of the circumstances, as described herein, dictates
dismissal. 	The court will therefore issue its order granting the
Trustee’s motion.
** END OF DOCUMENT **
Case: 07-42354 Doc# 58 Filed: 04/01/08 Entered: 04/01/08 15:27:33 Page 4 of 5

UNITED
STATES
BANKRUPTCY
COURT
NORTHERN DISTRICT OF CALIFORNIA
1300 Clay Street (2d fl.)
Oakland, CA. 94612
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
5	Memorandum
COURT SERVICE LIST
Michael J. Primus
Law Offices of Michael J. Primus
500 Alfred Nobel Dr. #135
Hercules, CA 94547
Margaret H. McGee
Office of the U.S. Trustee
1301 Clay St. #690N
Oakland, CA 94612-5217
Case: 07-42354 Doc# 58 Filed: 04/01/08 Entered: 04/01/08 15:27:33 Page 5 of 5