Mark D. Hanlin

OCR transcription for search; preserved printed pages are authoritative

The court incorporates by reference in this paragraph and adopts as the findings and orders
of this court the document set forth below.

[$/ RUSS KENDIG

Russ Kendig
United States Bankruptcy Judge

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

CHAPTER 7

IN RE:

MARK D. HANLIN, CASE NO. 10-60275

MEMORANDUM OF OPINION
(NOT INTENDED FOR

)
)
Debtor. ) JUDGE RUSS KENDIG
)
)
) PUBLICATION)

Now before the Court is the United States Trustee’s (hereafter “UST’) motion to
dismiss Debtors’ case pursuant to 11 U.S.C. § 707(b)(1) and (3), filed May 11, 2010.
UST alleges Debtor is not needy, thereby warranting dismissal ofhis case. Debtor disagrees.

The Court conducted an evidentiary hearing on September 21, 2010. Catherine
Lowman, an analyst for the UST, and Debtor testified.

Jurisdiction is premised in 28 U.S.C. § 1334 and the general order of reference

entered in this district on July 16, 1984. In accordance with 28 U.S.C. § 1409, venue in this
district and division is proper. This is a core proceeding pursuant to 28 U.S.C.
§ 157(b)(2)(A). The following Memorandum of Opinion constitutes the Court’s findings
of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052. In
rendering its decision, the Court has considered the testimony of witnesses and the exhibits
admitted into evidence.

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This opinion is not intended for publication or citation. The availability of this
opinion, in electronic or printed form, is not the result of a direct submission by the court.

FACTS

Following the evidentiary hearing, it appears this case is driven by primarily three
items: Debtor’s Schedule J shows $233.76 in monthly net income; Debtor claims $450.00
per month in transportation expenses, and Debtor’s contributes $247.00 monthly to his
401(k). The premise of UST’s argument is that the budget is excessive. UST also
questioned Debtor’s expenses for recreation ($200.00/month) and charitable contributions

($100.00/month).

Debtor is a fifty-eight year old senior support specialist in the JM. Smucker
Company (“Smucker’s”) IT department. He has been employed with Smucker’s for six
years, although he has only been a full-time employee for three years. Previously, he
worked for the company as an independent contractor. He earns an annual gross salary of
approximately $51,000.00, rendering him an above-median debtor, and his income is
stable. Since he obtained the “senior” support status, this is the top salary for his
position. His monthly net earnings are $2,874.54.

Debtor currently resides with his aged mother in a century home in the village of
Beach City. He pays $550.00 per month in rent, which includes utilities. He testified that
he does help with home maintenance and repairs. He is purchasing a 2007 Ford Mustang,
his only vehicle. He drives 37 miles to work each way. He testified that there are no
conveniences or amenities, like a grocery store, in Beach City, requiring trips to New
Philadelphia or Massillon to shop for necessities, including groceries. At the time he
filed his petition, Debtor was driving between his job in Orrville, the house in Beach City
where he was living, and the Massillon nursing home where his mother temporarily
resided. Thus, his daily commute was substantially in excess of 74 miles per day.

Debtor’s filing was the culmination of factors. First, he divorced in 2008. His ex-
wife filed bankruptcy and was discharged of all obligations on their joint debt. The
marital house was the subject of a foreclosure action. Debtor’s nonpayment of debt
ultimately resulted in a wage garnishment, which Debtor testified was the straw that
broke the camel’s back.

According to Debtor, he intends to move closer to work, hopefully in the next
month or two. This has been his plan since filing the bankruptcy case. Upon moving, his
rent payment will likely remain in the $550.00 per month neighborhood, but he will add
utility expenses to his budget. Upon relocating, he’!I pay less in transportation expenses.

Debtor’s has minimal assets, including a bank account which, at filing, had
$150.00 in it. Other assets include household goods of $1,200.00, clothing valued at

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$250.00 and a life insurance policy with no cash value. His retirement accounts total
approximately $10,000.00. He is purchasing the 2007 Ford Mustang.

Debtor’s testimony was credible. Ms. Lowman’s testimony was generally
credible, but the court discounts her testimony regarding fuel costs for Debtor. The
calculations were unduly rigid and formulaic.

LAW AND ANALYSIS

Section 707(b)(3) motions appear to be the new routine for the court. In the
course of 2010, the court issued several section 707(b)(3) decisions, including In re
LaBolt, Case No. 08-64428 (Bankr. N.D. Ohio January 13, 2010); In re Gilmore, Case
No. 09-64893 (Bankr. N.D. Ohio June 8, 2010): In re Jackson, Case. No. 09-64920
(Bankr. N.D. Ohio September 17, 2010); In re McPhail, Case No. 10-61090 (Bankr. N.D.
Ohio August 27, 2010). These opinions adequately outline the standards for dismissing a
case as abusive. The court will not go to great lengths to repeat the legal framework for a

707(b)(3) analysis.

By agreement, the parties limit the inquiry in this case to whether there is a “want
of need” by Debtor. A “needy” debtor is one whose “financial predicament warrants the
discharge of his debts in exchange for liquidation of his assets.” Behlke v. Eisen (In re
Behlke, 358 F.3d 429,434 (6" Cir. 2004) (quoting In re Krohn, 886 F.2d 123, 126 (6" Cir.
1989)). Identified considerations for determining whether a debtor is needy include
whether a debtor has an

ability to repay his debtors out of future earnings . . . whether
the debtor enjoys a stable source of future income, whether he

is eligible for adjustment of his debts through Chapter 13 of the
Bankruptcy Code, whether there are state remedies with the
potential to ease his financial predicament, the degree of relief
obtainable through private negotiations, and whether his expense
can be reduced significantly without depriving him of adequate
food, clothing, shelter and other necessities.

Krohn at 126. The court must look at the totality of the circumstances to determine if
Debtor is needy. See Behlke, 358 F.3d 429, Krohn, 886 F.2d 123. In order to succeed on
its motion, UST carries the burden of persuasion by a preponderance of the evidence. See
In re Beckerman, 381 B.R. 841 (Bankr. E.D. Mich. 2008); In re Gonzalez, 378 B.R. 168
(Bankr. N.D. Ohio 2007) (citation omitted). For the reasons that follow, the court finds
that UST failed to meet its burden.

One of the problems with this case is that the budget varies depending on whether
you are looking at filing, at the present time, or in the future. With each time period, the

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figures fluctuate as a result of changes in rent, transportation, and utility expenses. The
court is convinced that the rent and transportation expenses listed at filing were accurate.
Debtor’s unusually high transportation costs were adequately explained. Debtor had a
lengthy drive to work.' He was driving between Beach City and Massillon to visit his
mother in the nursing home. He was driving between Beach City and Massillon or New
Philadelphia for necessities like groceries. The accumulation of mileage at this rate
requires more frequent oil changes and increases the wear and tear expenses on a vehicle,
ultimately increasing the rate of replacement. The $450.00 figure includes all car
expenses, including fuel, repair, maintenance, titling, and licensing, except the car
payment and insurance. The court accepts the $450.00 figure as an accurate
representation of Debtor’s expenses as of the date of filing.

The question then must be focused on whether the $233.76 in disposable income
demonstrates a lack of need. In this case, the court finds it does not because reality shows

the figure to be lower than $233.76.

While Schedule I shows disposable income, the court cannot conclude it is
accurate. First, Debtor testified to the inaccuracy of that figure, stating he does not have
$200.00 left at the end of a month. To illustrate his point, he stated his budget is tight
enough that he is buying new tires one tire at a time because that is the only way he can
afford to purchase them. The court has no doubt as to the veracity of these statements.

UST challenged Debtor’s $200.00 recreation expense. According to Debtor, he
believes that this figure includes the $97.00 per month storage fee he incurs to store his
furniture and personal belongings that he cannot use while living in his mother’s home.
According to Debtor, it may also include the expense he incurs for cigarettes when he
resumed smoking a pack a day. At $47.00 per carton, Debtor spends nearly $150.00 per
month on cigarettes alone. Between these two expenses alone, what Debtor classified as
“recreation” amounts to $247.00 per month, without accounting for any actual recreation

expenses.

Debtor’s $100.00 charitable contribution budget also came under attack. While
being examined, Debtor explained that Smucker’s employees are strongly encouraged to
participate in the United Way campaign, as well as other charitable giving. Debtor
pledged $50.00 per month to the United Way, but stopped the deduction when the
garnishment started. This year’s campaign is now underway and Debtor indicated he will
participate again, giving $50.00 per month. Other examples of monetary charitable
giving in which Debtor participates include:

| Ag further illustration of Debtor’s mileage, at filing, Debtor’s Schedule B indicated his
vehicle at 49,000 miles on it. At the hearing approximately eight months later, he
testified that the car had 72,000 miles, or 23,000 miles in eight months.

4

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- the purchase of a raffle ticket to support a charitable cause at a department
golf outing

- aholiday “adopt a family” cause

- donations to a benefit to support an accident victim

- donations to sponsor families to the Cedar Point family picnic

The testimony was sufficient to convince the court that the expense was legitimate, on-
going, and in the vicinity of $100.00 per month on average. UST failed to present
sufficient evidence to suggest otherwise.

A great deal of time was spent addressing Debtor’s expenses upon a move to his
own apartment closer to work. It is undisputed that his transportation expenses will
decrease. However, the trade off is that his utility expenses, and possibly rent, will
increase. While Ms. Lowman attempted to calculate Debtor’s future fuel costs, the court
finds the testimony to be speculative and rigid. The premise of the calculations was that
Debtor would need 22.2 gallons of fuel per month to drive to and from work, then
doubling this figure to account for all other driving, with no allowance for repair or
maintenance costs. The factual underpinnings of the methodology were dubious. It is not
known when Debtor will move, how far he will be from work, how many trips to visit his
mother will be required. Consequently, the court will not undertake an analysis of the
unknowns, but will base its decision on existing facts.

Also notable is Debtor’s age. He is fifty-eight. He has approximately $10,000.00
in retirement savings. He needs to be saving for retirement. Debtor has no disposable
income, but if he had some minimal amount, the only meaningful repayment he could
afford in a chapter 13 case would be funded by his future retirement needs.

CONCLUSION

Based on the evidence before the court, UST failed to prove, by a preponderance
of the evidence, Debtor does not need the benefit of a discharge. He does not have the
ability to repay his debts out of future earnings because his expenses consume the bulk of
his net income. While he would be eligible for a chapter 13 proceeding, based on
Debtor’s testimony, his income does not support a repayment plan. Looking at the
totality of the circumstances, Debtor’s financial predicament does not establish a basis for
denying him the benefit of a discharge. The motion to dismiss will be denied.

An appropriate order will be entered reflecting the decision of the Court.

# # #

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SERVICE LIST

Richard A Nicodemo
Nicodemo & Wilson
124 15th Street, N.W.
Canton, OH 44703

Scott R. Belhorn

Office of the US Trustee

Howard M. Metzenbaum U.S. Court House
201 Superior Avenue, Suite 441

Cleveland, OH 44114-1240

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