Benito Respicio Caratiquit and Joana David

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
BENITO CARATIQUIT and JOANA DAVID, 	No. 08-12822
Debtor(s).
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Memorandum on Motion to Dismiss for Abuse
_________________
Debtors Benito Caratiquit and Joana David are in their thirties and have three young children.
The are both medical professionals. When they filed their Chapter 7 petition on December 31, 2008,
they reported a combined gross income of over $180,000.00 per year. They scheduled $1.6 million in
secured debt and $716,000.00 in unsecured debt. 	Their scheduled assets included a super-luxury 2008
Mercedes automobile costing almost $100,000.00, a luxury 2006 Lexus costing almost $50,000.00, a
2007 Winnebego worth at least $80,000.00, a 2007 Jeep Wrangler, a 2000 Toyota, and a vacation
timeshare purchased on a credit card. They also admitted $15,000.00 in gambling debts incurred a few
months before their filing.
Congress enacted the 2005 amendments to the Bankruptcy Code in order to stop what it
perceived as widespread abuse of bankruptcy by high-income debtors. While such debtors have
proved to be largely apocryphal, this is one of the very few cases the court has seen where the debtors
fit the image of abusive filers. Within a year or so before filing they went on a huge spending binge,
purchasing a vehicle most people can only dream of driving, a second luxury vehicle, and an expensive
Entered on Docket
October 03, 2009
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 08-12822 Doc# 47 Filed: 10/03/09 Entered: 10/03/09 15:13:51 Page 1 of 3

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1Kelly interpreted pre-2005 law, which required a showing of substantial abuse before a case
could be dismissed. The current law only requires a finding of abuse, not substantial abuse.
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RV. It is clear that they were living a lifestyle far beyond their means despite their more-than-
adequate incomes. Moreover, despite their bankruptcy they have elected to keep the Mercedes and the
Lexus, assuring that they cannot afford to pay their unsecured creditors.
Incredibly, the debtors have “passed” the mechanical means test devised by Congress to deny a
bankruptcy discharge to debtors without involving a judge’s discretion. Accordingly, the U.S. Trustee
has moved for dismissal pursuant to § 707(b)(3) of the Code, which calls upon the court to dismiss a
case if the totality of circumstances of the debtor’s financial situation demonstrates abuse.
The Bankruptcy Code does not define what abuse is. The most common basis for a finding of
abuse is that the debtor can afford to pay his debts; such a finding can support dismissal without
considering other factors. In re Kelly, 841 F.2d 908, 915 (9th Cir 1988).1 The debtors here argue that
their case should not be dismissed because they cannot afford to pay their debts. However, to the
extent that is true (which the court does not find) it is only because the debtors have insisted in
maintaining their luxury lifestyle despite their financial failure. The payments and insurance on their
two luxury vehicles would alone pay about a quarter of their unsecured debt over a five-year period.
Moreover, ability to pay debt is not the only test for abuse. The court may take into account
past and present expenses it considers extravagant. 6 Collier on Bankruptcy (15 th Ed. Rev.) ¶
707.04[4], p. 707-33; In re Stewart, 175 F.3d 796, 809 (10 th Cir. 1999)[There may be substantial abuse
even if there is not the ability to repay].
In this case, the debtors engaged in extremely extravagant purchases and a profligate lifestyle
within the year before filing, calling their basic honesty into question. Even if they did not intend to
live the high life at the expense of their creditors, the extent of their bad judgment and their efforts to
maintain an unjustified lifestyle even after financial failure compels the court to the conclusion that
allowing them a discharge without a complete adjustment of their spending and a good faith attempt to
Case: 08-12822 Doc# 47 Filed: 10/03/09 Entered: 10/03/09 15:13:51 Page 2 of 3

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repay at least some of their debts would be an abuse of the bankruptcy system. The court does not
believe that their arguments regarding a temporary reduction in income are mitigating, especially given
their continuing ability to earn an income far beyond the ability of most people. Accordingly, the
court will grant the motion to dismiss this case. The U.S. Trustee shall submit an appropriate form of
order.
Dated: October 3, 2009
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 08-12822 Doc# 47 Filed: 10/03/09 Entered: 10/03/09 15:13:51 Page 3 of 3