Keith A Rable

OCR transcription for search; preserved printed pages are authoritative

AUTHENTICATED 4

U.S. GOVERNMENT
INFORMATION Z| .

UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OHIO

In Re: )
) JUDGE RICHARD L. SPEER
Keith Rable )
) Case No. 10-35681
Debtor(s) )
)
DECISION AND ORDER

This cause comes before the Court on the Motion of the United States Trustee to Dismiss this
case pursuant to 11 U.S.C. § 707(b)(1), § 707(b)(2) and § 707(b)(3). (Doc. No. 13). The Debtor filed
a response, objecting to the dismissal of his case. (Doc. No. 17). A Hearing was then held on the
matter. (Doc. No. 18). At the conclusion of the Hearing, the Court afforded the Debtor the
opportunity to submit updated financial information, which the Debtor has now filed. (Doc. No. 20).
Based upon a review of this information, as well as the entire record of this case, the Court finds, for

the reasons now explained, that the Motion of the United States Trustee to Dismiss has merit.

4

BACKGROUND

On April 9, 2010, the Debtor, Keith A. Rable, filed a petition in this Court for relief under
Chapter 7 of the United States Bankruptcy Code. (Doc. No. 1). In the schedules filed with his
petition, the Debtor disclosed that he had $133,968.39 in unsecured debt, The Debtor also disclosed

that he is married and that he has two minor children, both of whom are dependents.

At the time he filed his bankruptcy petition, the Debtor also, as required by the Bankruptcy
Rules, submitted an Official Form B22A, entitled “Chapter 7 Statement of Current Monthly Income
and Means-Test Calculation.” This form implements the directive of § 707(b)(2)(C), by requiring
a debtor to perform the ‘means test’ calculation of § 707(b)(2) so as to determine if granting relief

in the case should be presumed to be an abuse.

GPO A
1635681-rls Doc 22 FILED 03/04/11 ENTERED 03/04/11 16:10:40 Page1of8

In re Keith Rable
Case No. 10-35681

In completing Form B22A, the Debtor represented that he was an Ohio resident. The Debtor
also represented on this form that he had a gross monthly income of $1,531.00, and that his wife,
who is not a debtor in this case, had a gross monthly income of $5,885.77. Based upon these figures,
the Debtor reported on line 12 of Form B22A a current monthly household income of $7,416.77. As
then required by Line 13 of Form B22A, the Debtor annualized this income, showing a yearly
household income of $89,001.24.

The ‘means test’ of § 707(b)(2) requires that a debtor having an annualized income above
the state-median income for a like-size household to complete Form B22A by itemizing those
expenditures allowed by statute. At the time the Debtor filed his petition for bankruptcy relief, the
median income for a family of four in the state of Ohio was $73,040.00.’ Because his annualized

income of $89,001.24 exceeded this figure, the Debtor completed Form B22A.

In completing the ‘means test’ calculation on Form B22A, a debtor is directed to subtract his
allowed expenditures from his annualized income so as to yield the debtor’s “disposable income.”
If, after performing this calculation, the debtor’s remaining income, as calculated over a five-year
period, satisfies one of two conditions, the granting of relief in the case is then presumed to be
abusive: (1) the debtor’s income is greater than $11,725.00; or (2) although less than $11,725.00,
the debtor’s income is greater than $7,025.00 and that amount will pay more than 25% of the
debtor’s unsecured debt. 11 U.S.C. § 707(b)(2)(A)(i). On a per month basis, these income thresholds
total $195.42 and $117.08 respectively.

1

http://www.justice.gov/ust/eo/bapcpa/20100315/bci_data/median_income_table.htm

Page 2

10-35681-rls Doc 22 FILED 03/04/11 ENTERED 03/04/11 16:10:40 Page 2 of 8

In re Keith Rable
Case No. 10-35681

On his Form B22, the Debtor reported a negative monthly disposable of $786.64. Asa result,
the Debtor reported that the filing ofhis bankruptcy case was not presumptively abusive for purposes
of § 707(b)(2). For its Motion to Dismiss, however, the UST disputed this determination.

DISCUSSION

This matter is before the Court on the Motion of the UST to Dismiss. The determination of
a matter such as this, concerning the dismissal of a case, which affects both the ability of a debtor
to receive a discharge and directly affects the creditor-debtor relationship, is deemed to be core
proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(J)/(O). As such, this Court has jurisdiction to enter
final orders and judgments in this matter. 28 U.S.C. § 157(b)(1).

The Motion of the UST to Dismiss is brought pursuant to 11 U.S.C. § 707(b)(1), § 707(b)(2)
and § 707(b)(3). These sections operate together, with § 707(b)(1) first setting forth the foundational
mandate, providing that, where the granting of relief under Chapter 7 would be an abuse, the debtor’s
case is to be dismissed. Sections 707(b)(2) and 707(b)(3) then set forth separate methodologies by
which a determination of abuse is to be assessed under § 707(b)(1). If either of the methods set forth
in § 707(b)(2) or § 707(b)(3) then result in a finding of abuse, the case becomes ripe for dismissal
under § 707(b)(1). In re Longo, 364 B.R. 161, 164 (Bankr. D.Conn. 2007). :

For purposes of § 707(b)(2), the UST challenged the Debtor’s determination that the filing
of his case is not presumptively abusive. In doing so, the UST took issue with the marital adjustment

made by the Debtor on his ‘means test’ calculation. In the words of the UST:

In arriving at negative $786.64, the debtor deducts the sum of $2,003.56 on
Line 17 as a martial adjustment with the notation of “First mortgage” and
“Second mortgage.” The debtor may not deduct these amounts because these

Page 3

10-35681-rls Doc 22 FILED 03/04/11 ENTERED 03/04/11 16:10:40 Page 3 of 8

10

In re Keith Rable
Case No. 10-35681

mortgage payments are paid for the household expenses of the debtor and the

debtor’s dependents.
(Doc. No. 13, at pg. 2-3). Accordingly, the UST maintains that once the Debtor’s marital adjustment
of $2,003.56 is eliminated, the Debtor’s monthly ‘disposable income,’ for purposes of the ‘means
test’ calculation of § 707(b)(2), should be set at $1,216.92, an amount which gives rise to a

presumption of abuse since it significantly exceeds $195.42, the maximum abuse threshold.

The position taken by the UST is consistent with this Court’s recent decision in Jn re
Shannon Q. Sturm, Case No. 10-34829 (January 7, 2011). In Jn re Sturm, the debtor, a married
woman, filed a petition for relief under Chapter 7 of the Code. As in the instant case, the debtor’s
spouse did not join the debtor in seeking bankruptcy relief. Also, as in this case, the debtor reported
on Form B22A a negative disposable income for purposes of the ‘means test’ calculation of

§ 707(b)(2).

In arriving at a negative ‘disposable income,’ the debtor in Jn re Sturm itemized a number
of expenditures of her spouse, which the debtor claimed as a marital adjustment on line 17 of her
Form B22A. Among the expenses claimed by the debtor as a marital adjustment was a monthly
expenditure of $1,250.00 for ahome equity loan incurred by her spouse against the marital residence.

The UST objected to the allowance of this expenditure as a marital adjustment.

In finding the objection of the UST to have merit, the Court turned first to the Bankruptcy
Code’s definition of “current monthly income,” which forms the starting point in any § 707(b)(2)
‘disposable income’ calculation. Under the Code, the term “current monthly income” is defined to
include “any amount paid by any entity other than the debtor (or in a joint case the debtor and the
debtor’s spouse), on a regular basis for the household expenses of the debtor or the debtor’s
dependents (and in a joint case the debtor’s spouse if not otherwise a dependent) . . .” Based upon

this definition, this Court then explained:

Page 4

-35681-rls Doc 22 FILED 03/04/11 ENTERED 03/04/11 16:10:40 Page 4of8

In re Keith Rable
Case No. 10-35681

where a debtor is married, but the debtor’s spouse does not file for
bankruptcy relief, the current monthly income of a debtor will include not
only the debtor’s income but that of the non-filing spouse provided that the
income of the nondebtor spouse is paid toward the household expenses of the
debtor or the debtor’s dependents on a regular basis. This means that to the
extent that a non-filing spouse’s income is deemed to be a contribution to the
debtor’s household expenses, it will raise the debtor’s current monthly
income and increase the likelihood that the presumption of abuse will arise.
In re Sturm, Case No. 10-34829, at pg. 5 (internal citation omitted), citing In re Travis, 353 B.R.

520, 526 (Bankr. E.D.Mich. 2006).

Pursuant, therefore, to this Court’s decision in Jn re Sturm, the key to the marital adjustment
on Line 17 of Form B22A is not who holds legal responsibility for the debt, but rather whether the
expense is paid by the nondebtor spouse “on a regular basis for the household expenses of the debtor
or the debtor’s dependents[.]” /d., at pg. 7, quoting 11 U.S.C. § 101(10A)(B). Looked at from this
perspective, it may be first said that if an expense is paid by the nondebtor spouse on a regular basis
to the household expenses of the debtor, then the expenditure cannot be taken as a marital
adjustment, thus resulting in a higher “disposable income” figure for the debtor. The opposite then
holds true, so that an expenditure purely personal in character to the nondebtor spouse (e.g., a
student-loan debt) would be allowed as a marital adjustment on Line 17 of Form B22A, thereby

decreasing a debtor’s “disposable income.”

In this case, the Debtor acknowledged that he and his spouse reside in the same residence.
As aresult, the mere fact that the Debtor’s spouse, but not the Debtor, is the only party having a legal
obligation to pay the debts secured by the first and second mortgages on the marital residence does
not afford a basis for the Debtor to make a marital adjustment to his ‘disposable income’ on Line 17
of Form B22A. To the contrary, with the Debtor residing in the marital property, the costs incurred

by the Debtor’s spouse to service the first and second mortgages on the property are, by their very

Page 5

10-35681-rls Doc 22 FILED 03/04/11 ENTERED 03/04/11 16:10:40 Page 5 of 8

In re Keith Rable
Case No. 10-35681

nature, paid by the nondebtor “on a regular basis for the household expenses of the debtor or the

debtor’s dependents[.]”

Accordingly, consistent with this Court’s recent decision in In re Sturm, the Debtor
improperly took a marital deduction on Line 17 of Form B22A for the sum of $2,003.56,
representing the monthly amount the Debtor’s spouse is obligated to pay to service the two
mortgages encumbering the marital residence. When this adjustment is then made to his ‘means test’
calculation on Form B22A, the Debtor’s ‘disposable income’ must be revised upward from a
negative $786.64 to $1,216.92. Moreover, since this amount exceeds the monthly abuse threshold
of $195.42, as set by Congress in 11 U.S.C. § 707(b)(2)(A)(i)D, granting relief to the Debtor under
Chapter 7 of the Bankruptcy Code must be presumed to be an abuse.

No evidence was offered under § 707(b)(2)(B) of “special circumstances” — e.g., “a serious
medical condition or a call or order to active duty in the Armed Forces” — so as to rebut this
presumption. The Court is, therefore, required to find that the Debtor is not entitled to relief under
Chapter 7 of the United States Bankruptcy Code. In reaching this conclusion, the Court has
considered all of the evidence, exhibits and arguments of counsel, regardless of whether or not they

are specifically referred to in this Decision.

Page 6

10-35681-rls Doc 22 FILED 03/04/11 ENTERED 03/04/11 16:10:40 Page 6 of 8

10

In re Keith Rable
Case No. 10-35681

Accordingly, it is

ORDERED that, subject to the Debtor’s election to convert this case, the Motion of the
United States Trustee to Dismiss under 11 U.S.C. § 707(b)(1) and § 707(b)(2), be, and is hereby,
GRANTED.

IT IS FURTHER ORDERED that the Clerk, United States Bankruptcy Court, is directed
to prepare for presentation to the Court an order of dismissal under 11 U.S.C. § 707(b)(1) if, at the
opening of business on Monday, March 21, 2011, this case is still proceeding under Chapter 7 of the
United States Bankruptcy Code.

Dated: March 4, 2011

LIE

Ao

a

Richard L. Speer
United States
Bankruptcy Judge

Page 7

-35681-rls Doc 22 FILED 03/04/11 ENTERED 03/04/11 16:10:40 Page 7 of 8

CERTIFICATE OF SERVICE

Copies were mailed this 4" day of March, 2011, to the following parties:

John N Graham
5151 Monroe St, #245
Toledo, OH 43623

Keith A Rable
5254 Weckerly Rd
Monclova, OH 43542

John L Jacobson
3450 W Central Ave, #124
Toledo, OH 43606-4347

Recovery Mgmt Systems Corp
25 S.E. 2nd Ave, #1120
Miami, FL 33131

Office of the U.S. Trustee
201 Superior Ave, E, #441
Cleveland, OH 44114

/s/ Robert C.W. Birmingham
Deputy Clerk, U.S. Bankruptcy Court

10-35681-rls Doc 22 FILED 03/04/11

ENTERED 03/04/11 16:10:40 Page 8 of 8