Lloyd Venustiano Escano and Rita Theresa Deguzman-Escano

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INFORMATION

GPO

Entered on Docket
October 27, 2008

GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA

Inte

LLOYD and RITA ESCANO, No. 08-11008

Debion(s).

Memorandum on Motion to Dismiss (Totality of Circumstances)

The U.S. Trustee originally moved for dismissal of this Chapter 7 case on grounds of jaresumptive
abuse pursuant to § 707(b)(2) of the Bankruptcy Code and grounds that the totality of the circumstances
constitute abuse pursuant to § 707(b)(3). The court has previously ruled that there is no presumption of
abuse in this case. The remaining issue is whether the totality of the circumstances constitute alouse.

Where there is no jaresumption of abuse, the burden is on the moving party to demonstrate that the
totality of the circumstances of a debtor's financial situation demonstrate abuse. In re Ansar, 383 B.R. 344,
348 (Bkrtcy.D.Minn.2008); In re Walker, 381 B.R. 620, 623 (Bkrtcy.M.D. Pa.2008).

The schedules and stipulated facts establish that debtors Lloyd Escano and Rita Deguzman-Fscano,
who are in their early 40s and have one child, both have stable employment and eam about $147,000.00 per
year. They owe approximately $59,000.00 in unsecured debt, on at least a dozen credit cards plus other
consumer accounts. Most relevant in this case, about five months before they filed they purchased a jare-
owned Mercedes CL, 500 for $43,453.00. The payments on the Mercedes are $532.00 per month.

The court has several times given the U.S. Trustee a hard time over arguing that every vehicle not a
cheap subcompact is a luxury automobile. In this case, however, the charge is entirely justified. The court is
at a loss to understand what debtors who owe so much in unsecured debt were thinking when, just a few

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months before bankruptcy, they purchased such an expensive automobile. The Escanos have another vehicle,
and Lloyd Escano is supplied a vehicle by his employer which can be used for personal purposes. Setting
aside the U.S. Trustee’s arguments relating to other budget items, if the Escanos got rid of the Mercedes they
could pay at least half of their unsecured debt in Chapter 13.
The decision to dismiss a case under § 707(b)(3) can be influenced by numerous factors, both pro
and con. For instance, evidence that the debtors have engaged in illegal or abusive conduct might properly
influence a court to dismiss a case, and evidence that the debtors have faced particularly difficult
circumstances with honesty and a sincere effort to do right by their creditors might properly influence a court
to deny a motion to dismiss. In the absence of such influencing factors the debtors’ ability to fund a Chapter
13 plan is the primary factor governing dismissal of a Chapter 7 case. In re Kelly, 841 F.2d 908, 914 (9th
Cir. 1988).
In this case, the debtors have not done right by their creditors. Despite a decent income, the
schedules show profligate use of credit cards and significant unsecured debt. The purchase of a luxury vehicle
when the Debtors had to have known that they could not afford to pay their debts is not the conduct of an
honest but unfortunate debtor, but rather of someone attempting to abuse the system. In re Cayanan, 2008
WL 906205 (Bkrtcy.N.D.Cal.,2008).
For the above reasons, the motion of the U.S. Trustee will be granted and this Chapter 7 case will be
dismissed unless the debtors elect to convert this case to Chapter 13. If the debtors convert to Chapter 13,
they may seek reconversion to Chapter 7 upon a showing of changed circumstances and a good faith attempt
to complete a Chapter 13 plan.
Counsel for the U.S. Trustee shall submit an appropriate form of order, which shall be stayed for 10
days after entry.
Dated: October 27, 2008
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Case: 08-11008 Doc# 39 Filed: 10/27/08 Entered: 10/27/08 15:17:16 Page 2 of 3

Alan Jaroslovsky U.S. Bankruptcy Judge
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