John Pak

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1All statutory references are to Title 11 of the United States
Code (the “Bankruptcy Code”) unless otherwise specified.
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	No. 05-49326 TD
Chapter 7
JOHN PAK,
Debtor.
___________________________/
MEMORANDUM OF DECISION
Sara L. Kistler, Acting United States Trustee, (the “UST”) moves
to 	dismiss 	the 	above-captioned 	case 	as 	an 	abuse 	of 	the 	Bankruptcy
Code pursuant to section 707(b)(3). 1 	For the reasons stated below,
the motion will be GRANTED.
BACKGROUND
John Pak (the “Debtor”), an individual whose debts are primarily
consumer 	debts, 	filed 	a 	voluntary 	petition 	seeking 	relief 	under
chapter 7 of the Bankruptcy Code on October 31, 2005. 	Because this
case 	was 	commenced 	after 	October 	16, 	2005, 	it 	is 	subject 	to 	the
amendments 	to 	the 	Bankruptcy 	Code 	made 	by 	the 	Bankruptcy 	Abuse 	and
Signed: May 18, 2006
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
May 18, 2006
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
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2Formerly, section 707(b) provided for dismissal only if the
case constituted a “substantial abuse.” 	Moreover, there was a
statutory presumption in favor of granting the debtor relief. 	11
U.S.C. § 707(b) (2002).
2
Consumer 	Protection 	Act 	of 	2005 	(“BAPCPA”). 	As 	amended 	by 	BAPCPA,
section 	707(b)(1) 	provides 	that 	a 	chapter 	7 	case 	filed 	by 	an
individual 	debtor 	whose 	debts 	are 	primarily 	consumer 	shall 	be
dismissed if the Court determines that it constitutes an abuse of the
Bankruptcy Code. 2
The test for determining whether a debtor’s case constitutes an
abuse pursuant to section 707(b)(1) varies depending on whether the
debtor’s “current monthly income”: (1) exceeds the applicable state
median 	or 	(2) 	is 	equal 	to 	or 	less 	than 	it. 	The 	case 	of 	a 	debtor
whose “current monthly income” exceeds the applicable state median is
subjected 	to 	a 	“means 	test.” 	The 	“means 	test” 	consists 	of 	a
statutory 	formula 	for 	determining 	whether 	the 	debtor’s 	income 	in
excess of his expenses is sufficient to permit him to pay a specified
amount or percentage of his nonpriority unsecured debts during a five
year 	period. 	If 	so, 	the 	statute 	creates 	a 	rebuttable 	presumption
that 	his 	case 	is 	abusive. 	See 	11 	U.S.C. 	§ 	707(b)(2)(A). 	This
presumption may be rebutted by evidence of “special circumstances.”
See 11 U.S.C. § 707(b)(2)(B).
“Current 	monthly 	income” 	is 	defined 	as 	“the 	debtor’s 	average
monthly income for the six calendar months prior to the filing of the
bankruptcy case.” 	See 11 U.S.C. § 101(10A). 	Because the Debtor was
unemployed for most of the six calendar months preceding the filing
of 	his 	bankruptcy 	petition, 	the 	Debtor’s 	“current 	monthly 	income”
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does 	not 	exceed 	the 	California 	median 	income 	and 	thus 	he 	is 	not
subject 	to 	the 	“means 	test.” 	As 	section 	707(b)(7) 	expressly
provides, 	his 	case 	cannot 	be 	dismissed 	based 	on 	the 	standard 	set
forth in section 707(b)(2).
This 	does 	not 	mean 	that 	his 	case 	may 	not 	be 	dismissed 	as 	an
abuse. 	The 	test 	for 	determining 	whether 	the 	case 	of 	an 	individual
chapter 7 debtor whose “current monthly income” is equal to or less
than the applicable state median is set forth in section 707(b)(3).
Section 707(b)(3) provides that a case may be dismissed as an abuse
based on: (1) bad faith or (2) “the totality of the circumstances ...
of 	the 	debtor’s 	financial 	situation....” 	11 	U.S.C. 	§ 	707(b)(3).
There 	is 	no 	presumption 	of 	abuse 	under 	section 	707(b)(3). 	The 	UST
brings her motion to dismiss this case under section 707(b)(3).
The UST does not contend that the Debtor has acted in bad faith
by 	filing 	his 	bankruptcy 	petition. 	Rather, 	she 	contends 	that 	“the
totality 	of 	the 	circumstances...of 	the 	[D]ebtor’s 	financial
situation” 	make 	this 	case 	abusive. 	The 	Debtor 	is 	now 	employed,
earning 	slightly 	over 	$100,000 	a 	year. 	He 	is 	single, 	with 	no
dependents.
The 	Debtor 	opposes 	the 	motion 	on 	two 	grounds. 	First, 	he
contends 	that 	his 	ability 	to 	pay 	his 	debts 	is 	not 	part 	of 	the
“totality of the circumstances” test. 	Second, he argues that, even
if 	the 	Court 	may 	consider 	his 	ability 	to 	pay 	his 	debts 	in 	this
context, the totality of the circumstances of his financial situation
do 	not 	make 	his 	case 	abusive. 	The 	Court 	finds 	neither 	of 	these
arguments persuasive.
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ANALYSIS
A. 	CAN 	DEBTOR’S 	ABILITY 	TO 	PAY 	BE 	CONSIDERED 	UNDER 	SECTION
707(B)(3)?
At first blush, the Debtor’s contention appears frivolous: i.e.,
that 	a 	debtor’s 	ability 	to 	pay 	his 	nonpriority 	unsecured 	debts 	may
not be considered as part of “the totality of the circumstances...of
the debtor’s financial situation.” 	What could be more central to the
debtor’s financial situation than his income and expenses? 	However,
a similar argument, albeit in a slightly different context, is made
in a recent law review article authored by respected academics. 	See
Marianne B. Culhane and Michaela M. White, Catching Can-Pay Debtors:
Is 	the 	Means 	Test 	the 	Only 	Way?, 	13 	Am. 	Bankr. 	Inst. 	L. 	Rev. 	665,
678-80 (2005)(the “Culhane-White Article”).
The Culhane-White Article was written as a rebuttal to another
recent 	law 	review 	article, 	authored 	by 	a 	Chicago 	bankruptcy 	judge,
also 	highly 	respected 	for 	his 	expertise 	on 	BAPCPA. 	See 	Eugene
Wedoff, 	Means 	Testing 	in 	the 	New 	707(b), 	79 	Am. 	Bankr. 	L.J. 	231
(2005) 	(the 	“Wedoff 	Article”). 	As 	noted 	in 	the 	Culhane-White
Article, the Wedoff Article states that:
Because 	the 	general 	abuse 	provisions 	of 	§
707(b)(3) 	expressly 	apply 	when 	the 	means 	test
has been rebutted, “passing” the means test does
not preclude a discretionary finding of abuse by
the 	court....If 	a 	debtor’s 	overall 	financial
circumstances 	would 	easily 	allow 	the 	debtor 	to
repay debts...the court may find abuse.
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3Necessarily, the Court presumes, he would also conclude that
a below-median debtor’s case could be dismissed based on his
ability to pay under section 707(b)(3), although not under section
707(b)(2).
4As noted above, the issue addressed by these two articles
differs somewhat from the issue presented here. 	These articles
address whether a debtor whose “current monthly income” is above
the median but who passes the 	“means test” may have his case
dismissed based on his ability to pay under section 707(b)(3)(B).
The issue presented here is whether a debtor whose “current monthly
income is below the median (and thus is not subject to the “means
test”) may have his case dismissed pursuant to section
707(b)(3)(B).
5This does not represent a change in the law in the Ninth
Circuit. 	See In re Kelly, 841 F.2d 908, 913-15 (9th Cir.
1988)(ability to pay, standing alone, is sufficient basis for
section 707(b) dismissal).
5
Wedoff 	Article, 	at 	236, 	n.8. 	Thus, 	Judge 	Wedoff 	posits 	that 	an
above-median debtor’s case may be dismissed based on his ability to
pay under either section 707(b)(2) or (3). 3
The 	Culhane-White 	Article 	disagrees 	with 	Judge 	Wedoff’s
statement. 	It characterizes his view as a judicial attempt to “fix”
an 	imperfect 	statute. 	It 	opines 	that 	the 	plain 	language 	of 	the
statute 	and 	canons 	of 	statutory 	construction 	compel 	a 	different
conclusion. 	Culhane-White Article at 677. 4
The 	rationale 	of 	the 	Culhane-White 	Article 	is 	as 	follows:
Section 	707(b)(2) 	represents 	an 	attempt 	to 	remedy 	two 	pre-BAPCPA
problems, 	as 	perceived 	by 	Congress. 	First, 	section 	707(b)(2)
establishes 	definitely 	that 	ability 	to 	pay, 	standing 	alone, 	is 	a
sufficient 	ground 	for 	dismissal 	as 	an 	abuse. 	Some 	courts 	had
previously 	taken 	a 	contrary 	view. 5 	Second, 	section 	707(b)(2)
establishes 	a 	“bright 	line” 	test 	for 	a 	debtor’s 	“ability 	to 	pay.”
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6The “safe harbor” language appears to come from a statement
made by Senator Hatch. 	See 151 Cong. Rec. S1787 (February 28,
2005)(“[a]fter all these exemptions are applied, including the safe
harbor, it is estimated that 90 percent of debtor will not be
affected by the changes in the repayment provisions of this bill.
[Emphasis added]”).
6
One 	of 	the 	problems 	perceived 	by 	Congress 	in 	this 	context 	was 	the
lack 	of 	uniformity 	of 	bankruptcy 	courts’ 	decisions 	on 	this 	issue.
Culhane-White 	Article 	at 	678. 	According 	to 	the 	Culhane-White
Article, part of this “bright line” test is the establishment of the
median income as the dividing line for debtors whose ability to pay
may serve as the basis for dismissal. 	Culhane-White Article at 679.
According 	to 	the 	Culhane-White 	Article, 	“[t]o 	say 	that 	judges
are 	free 	under 	section 	707(b)(3) 	to 	substitute 	their 	own 	can-pay
standards 	for 	Congress’ 	means 	test 	would 	render 	the 	means 	test
superfluous.” 	It 	would 	also 	go 	against 	the 	canons 	of 	statutory
construction, 	requiring 	statutes 	to 	be 	interpreted 	so 	as 	to 	be
consistent 	with 	each 	other 	and 	to 	give 	meaning 	to 	all 	parts. 	Id.
at 680.
The 	Debtor 	does 	not 	cite 	the 	Culhane-White 	Article. 	However,
he 	argues 	along 	similar 	lines. 	He 	notes 	that 	the 	“means 	test” 	was
established 	by 	Congress 	to 	eliminate 	the 	lack 	of 	uniformity 	in
judicial 	decisions 	on 	motions 	to 	dismiss 	under 	section 	707(b). 	By
providing 	that 	the 	“means 	test” 	applies 	only 	to 	debtors 	whose
“current monthly income” exceeds the median, according to the Debtor,
Congress created a “safe harbor” for all other debtors. 6 	Any other
view 	would 	reintroduce 	the 	very 	judicial 	discretion 	that 	BAPCPA
sought 	to 	eliminate. 	The 	Debtor 	also 	quotes 	various 	statements 	by
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members 	of 	Congress, 	predicting 	that 	BAPCPA 	will 	have 	no 	effect 	on
debtors whose income is not above the median.
The 	Debtor 	recognizes 	that, 	but 	for 	the 	timing 	of 	his
unemployment 	and 	the 	statutory 	definition 	of 	“current 	monthly
income,” 	he 	would 	fall 	into 	the 	category 	of 	debtors 	that 	Congress
wished to subject to the “means test.” 	However, he notes that this
potentiality 	was 	“absolutely 	predictable 	to 	legislators.” 	If
Congress had wished to prevent such debtors from falling through the
statutory 	cracks, 	it 	could 	have 	provided 	an 	express 	provision
preventing them from doing so. 	Courts may not remedy what Congress
failed to do.
There do not appear to be any reported decisions on this issue
to date. 	The only recent decisions addressing discrepancies between
actual 	income 	and 	expenses 	and 	the 	new 	statutory 	definitions 	for
income 	and 	expenses 	have 	been 	decided 	in 	the 	context 	of 	chapter 	13
cases. 	See 	In 	re 	Jass, 	340 	B.R. 	411 	(Bankr. 	D. 	Utah); 	In 	re
Hardacre, 	338 	B.R. 	718 	(Bankr. 	N.D. 	Tex. 	2006); 	In 	re 	Barr, 	___
B.R. 	___ 	(Bankr. 	M.D.N.C)(2006 	WL 	1030242). 	Because 	these 	cases
construe different statutory provisions, the Court does not find them
helpful.
There 	is 	a 	general 	canon 	of 	statutory 	construction 	that 	a
specific 	statute 	covering 	the 	same 	subject 	matter 	as 	a 	general 	one
will 	prevail 	over 	the 	more 	general 	one. 	This 	canon 	offers 	some
substantial support for the view taken by the Culhane-White Article.
However, this rationale cannot be applied to the debtor whose current
monthly income is equal to or less than the median. 	For this debtor,
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there is no specific statute–-i.e., “means test”–-for determining his
ability to pay. 	There is only the more general one: i.e., section
707(b)(3).
The 	Debtor’s 	argument 	that 	Congress 	knew 	that 	there 	would 	be
debtors 	whose 	actual 	income, 	due 	to 	pre-filing 	unemployment, 	would
be 	greater 	than 	their 	statutorily 	defined 	“current 	monthly 	income”
and 	could 	have 	provided 	for 	them 	is 	easily 	countered. 	By 	enacting
section 707(b)(3), Congress did provide for them.
The Court also finds instructive section 707(b)(3)’s use of the
phrase “the totality of the circumstances.” 	Prior to BAPCPA, courts
considered whether to dismiss a consumer case for “substantial abuse”
under section 707(b)(1) based on the “totality of the circumstances.”
See 	In 	re 	Price, 	353 	F.3d 	1135, 	1139 	(9th 	Cir. 	2004). 	All 	courts
considered the debtor’s ability to pay to be an important factor in
this 	context. 	It 	would 	be 	counterintuitive 	to 	construe 	this 	same
phrase, as used in BAPCPA, to exclude a consideration of the debtor’s
ability to pay.
The 	Debtor 	relies 	heavily 	on 	Congress’s 	stated 	intention, 	in
enacting BAPCPA, to severely limit judicial discretion with respect
to 	section 	707(b) 	motions 	so 	as 	to 	establish 	more 	uniformity. 	He
argues 	that, 	by 	construing 	section 	707(b)(3) 	as 	including 	a
consideration of the debtor’s ability to repay, Congressional intent
is subverted and judicial discretion is reintroduced into the system.
He also cites statements from the Congressional Record, assuring the
public 	that 	the 	below-median-income 	debtor’s 	right 	to 	obtain
bankruptcy relief will not be affected.
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The 	Court 	is 	not 	persuaded 	by 	these 	arguments. 	First, 	while
BAPCPA did severely limit judicial discretion for above-median-income
debtors, 	judicial 	discretion 	has 	not 	been 	entirely 	eliminated. 	As
noted above, the presumption of abuse may be rebutted by evidence of
“special 	circumstances.” 	As 	to 	equal 	to 	or 	below-median-income
debtors, 	clearly, 	judicial 	discretion 	will 	have 	to 	be 	applied 	to
consider 	the 	“totality 	of 	the 	circumstances” 	whether 	or 	not 	those
circumstances 	include 	consideration 	of 	a 	debtor’s 	ability 	to 	pay.
Finally, a debtor earning over $100,000 a year cannot fairly complain
of being misled by Congressional statements that low income debtors’
rights to bankruptcy relief will not be affected by BAPCPA.
For all of these reasons, the Court concludes that the Debtor’s
actual 	ability 	to 	repay 	his 	nonpriority 	unsecured 	debts 	may 	be
considered as part of the totality of circumstances of his financial
situation pursuant to section 707(b)(3).
B. 	DOES 	DEBTOR’S 	CASE 	CONSTITUTE 	AN 	ABUSE 	UNDER 	“TOTALITY 	OF
CIRCUMSTANCES” TEST?
As noted above, the Debtor’s fallback argument is that, even if
his actual ability to repay his debts is considered, the totality of
the circumstances of his financial situation do not make his case an
abuse under section 707(b)(3). 	The UST disagrees. 	In support of her
motion, the UST cites In re Price, 353 F.3d 1135 (9th Cir. 2004), a
case decided prior to the enactment of BAPCPA. 	In Price, the Ninth
Circuit 	enumerated 	six 	factors 	to 	be 	considered 	in 	determining
whether 	to 	dismiss 	a 	consumer 	debtor’s 	chapter 	7 	case 	as 	a
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“substantial abuse” pursuant to the former version of section 707(b)
as follows:
1) 	whether 	the 	debtor 	has 	a 	likelihood 	of
sufficient 	future 	income 	to 	fund 	a 	Chapter 	11,
12, 	or 	13 	plan 	which 	would 	pay 	a 	substantial
portion of the unsecured claims;
2) whether the debtor’s petition was filed as a
consequence 	of 	illness, 	disability,
unemployment, or some calamity;
3) 	whether 	the 	schedules 	suggest 	the 	debtor
obtained cash advancements and consumer goods on
credit 	exceeding 	his 	or 	her 	ability 	to 	repay
them;
4) 	whether 	the 	debtor’s 	proposed 	family 	budget
is excessive or extravagant;
5) whether the debtor’s statement of income and
expenses 	is 	misrepresentative 	of 	the 	debtor’s
financial condition; and
6) 	whether 	the 	Debtor 	has 	engaged 	in 	eve-of-
bankruptcy purchases.
See Price, 353 F.3d at 1139. 	The UST contends that the majority of
these 	factors 	support 	dismissal 	of 	the 	Debtor’s 	case 	as 	an 	abuse.
The Debtor disagrees.
The Court finds it unnecessary to resolve this dispute. 	Unlike
the 	statute 	addressed 	in 	Price, 	section 	707(b)(3) 	contains 	two
prongs: 	(1) 	bad 	faith 	and 	(2) 	the 	totality 	of 	the 	circumstances 	of
the debtor’s financial situation. 	Most of the Price factors listed
above 	pertain 	to 	the 	debtor’s 	bad 	faith, 	not 	to 	his 	financial
situation. 	The 	only 	factor 	that 	pertains 	to 	his 	current 	financial
situation 	is 	his 	ability 	to 	pay 	his 	debts, 	e.g., 	through 	a 	chapter
13 	plan. 	To 	analyze 	this 	factor, 	the 	Court 	must 	consider 	the
provisions of chapter 13, as amended by BAPCPA.
The principal issue in this context is which of the two incomes
of 	the 	Debtor 	to 	use 	in 	analyzing 	his 	ability 	to 	fund 	a 	chapter 	13
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plan: i.e., his “current monthly income” or his actual and projected
future income. 	Section 1325(b)(1) provides that, if the trustee or
an 	unsecured 	creditor 	objects 	to 	confirmation, 	the 	Court 	may 	not
confirm the plan unless, among other things, “the plan provides that
all of the debtor’s projected disposable income to be received in the
applicable 	commitment 	period...will 	be 	applied 	to 	make 	payments 	to
unsecured 	creditors 	under 	the 	plan.” 	11 	U.S.C. 	§ 	1325(b)(1).
Section 1325(b)(2) provides that “disposable income” means “current
monthly 	income 	received 	by 	the 	debtor...less 	amounts 	reasonably
necessary 	to 	be 	expended...[for 	the 	support 	of 	the 	debtor 	and 	the
debtor’s dependents, charitable contributions, and necessary business
expenses].” 	11 U.S.C. § 1325(b)(2).
As discussed above, “current monthly income” looks back at the
debtor’s 	income 	during 	the 	six 	calendar 	months 	preceding 	the
bankruptcy 	filing. 	11 	U.S.C. 	§ 	101(10A). 	The 	question 	is 	whether
the insertion of the word “projected” before the phrase “disposable
income” 	means 	that 	the 	Court 	should 	instead 	look 	forward, 	at 	the
debtor’s actual and anticipated future income.
This question was recently addressed in a chapter 13 context in
In 	re 	Jass, 	340 	B.R. 	411 	(Bankr. 	D. 	Utah). 	In 	Jass, 	it 	was
contended that, after filing for bankruptcy, one of the joint debtors
had 	suffered 	a 	serious 	injury, 	thus 	increasing 	their 	expenses 	and
reducing 	their 	projected 	income. 	The 	debtors 	had 	an 	above-median
income. 	Thus, 	in 	calculating 	their 	projected 	disposable 	income,
section 	1325(b)(3) 	required 	their 	expenses 	to 	be 	determined 	in
accordance 	with 	section 	707(b)(2)(A) 	and 	(B). 	11 	U.S.C. 	§
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7Based on the calculations required by the “means test,” the
Jass debtors could afford to pay $3,625.63 to unsecured creditors.
In their plan, they proposed to pay only $790.
8Arguably, the debtors could have filed an amended “means
test” form to claim the additional expenses as “special
circumstances” pursuant to section 707(b)(2)(B). 	However, the
definition of “current monthly income” does not include any
category into which a post-filing reduction in income would fit.
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1325(b)(3). 	Section 	707(b)(2)(A) 	requires 	an 	above-median-income
debtor’s 	expenses 	to 	be 	determined 	in 	accordance 	with 	guidelines
issued by the Internal Revenue Service in a form to be filed when the
case is commenced. 7 	The debtors contended that the use of the word
“projected” 	before 	the 	phrase 	“disposable 	income” 	indicated 	that
post-filing changes in circumstances should be considered. 	The Jass
court 	agreed. 	Id. 	at 	414-16. 	It 	based 	its 	decision 	on 	the 	plain
language of the statute. 8
A case more similar factually to the instant one is In re Barr,
___ B.R. ___ (2006 WL 1030242), another chapter 13 case involving an
above-median-income 	debtor. 	In 	Barr, 	the 	debtor’s 	financial
situation had improved since the six months preceding the bankruptcy
filing. 	The debtor’s “current monthly income” showed a negative cash
flow 	whereas 	her 	actual 	disposable 	income 	was 	substantial. 	The
debtor 	did 	not 	want 	her 	post-filing 	change 	in 	circumstances 	to 	be
considered 	in 	the 	confirmation 	process. 	The 	Barr 	court 	concluded
that it should not be. 	However, it did not base its decision on a
construction of the phrase “projected disposable income.”
In Barr, it appears, the only objection to confirmation made by
the 	chapter 	13 	trustee 	was 	based 	on 	lack 	of 	good 	faith. 	See 	11
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U.S.C. 	§ 	1325(a)(3). 	The 	Barr 	court 	examined 	the 	evolution 	of
confirmation 	requirements 	and 	concluded 	that 	a 	debtor’s 	ability 	to
pay could not be considered in determining good faith under section
1325(a)(3). 	Barr, at *1-*3. 	Thus, while the Barr court’s decision
on the issue presented appears sound, it does not call into question
the correctness of the decision in Jass.
The 	Court 	agrees 	with 	the 	Jass 	court 	that 	the 	actual 	and
anticipated future income must be considered, rather than simply his
“current 	monthly 	income,” 	in 	determining 	the 	debtor’s 	“projected
disposable 	income” 	for 	purposes 	of 	confirming 	a 	chapter 	13 	plan.
Thus, 	this 	is 	also 	the 	correct 	income 	figure 	to 	use 	in 	deciding
whether to grant or deny a motion to dismiss a chapter 7 case under
section 707(b)(3)(B). 	The Debtor’s actual monthly income at present
is $5,530.20.
How 	the 	Debtor’s 	reasonably 	necessary 	expenses 	should 	be
determined 	is 	not 	at 	issue. 	See 	11 	U.S.C. 	§ 	1325(b)(3). 	Section
1325(b)(3) 	provides 	that, 	if 	the 	debtor’s 	“current 	monthly 	income”
is above the median, these expenses must be determined in accordance
with 	the 	section 	707(b)(2)(A) 	and 	(B). 	However, 	the 	Debtor’s
“current 	monthly 	income” 	is 	not 	above 	the 	median. 	Therefore, 	his
actual expenses provide the starting point, subject to reduction to
the 	extent 	the 	Court 	finds 	that 	they 	are 	not 	reasonably 	necessary.
The 	Debtor 	claims 	actual monthly expenses of $3,718.00. 	This
leaves 	a 	projected 	disposable 	income 	of 	$1,117.20. 	The 	UST 	argues
that 	some 	of 	the 	Debtor’s 	expenses 	are 	excessive. 	Moreover, 	she
notes that, even without eliminating any of his claimed expenses, his
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9Under BAPCPA, a debtor’s “applicable commitment period” is
only 36 months if his “current monthly income” does not exceed the
median. 	11 U.S.C. § 1325(b)(4)(A). 	In this context, “current
monthly income” is not modified by the word “projected.”
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projected disposable income will allow him to make plan payments of
$33,497.28 over a 36 month period. 9
Because 	the 	Debtor 	has 	substantial 	unsecured 	debt, 	including
substantial nonpriority debt to the Internal Revenue Service, these
payments 	will 	only 	amount 	to 	19 	percent 	of 	his 	unsecured 	debts.
Thus, 	the 	final 	issue 	presented 	is 	whether 	a 	chapter 	7 	case 	is
abusive 	if 	a 	debtor 	could 	pay 	only 	a 	19 	percent 	dividend 	to 	his
creditors through a chapter 13 plan. 	Pre-BAPCPA, the Court generally
used 	a 	33-1/3 	percent 	“rule 	of 	thumb” 	in 	determining 	motions 	to
dismiss 	for 	“substantial 	abuse” 	under 	section 	707(b). 	Three
considerations persuade the Court to grant the motion notwithstanding
the relatively low percentage payment that the Debtor is capable of
making to his creditors through a 36-month chapter 13 plan.
The 	first 	consideration 	is 	that, 	by 	removing 	the 	word
“substantial” from the phrase “substantial abuse,” Congress appears
to 	have 	expressed 	an 	intent 	that 	a 	more 	stringent 	standard 	be
applied. 	This 	inference 	is 	clearly 	in 	keeping 	with 	the 	numerous
statements 	by 	members 	of 	Congress 	concerning 	the 	purpose 	of 	the
consumer 	amendments 	in 	BAPCPA. 	The 	second 	consideration 	is 	that,
while 19 percent is a relatively small percentage payment, $33,497.28
is a relatively large amount. 	Finally, without making line-by-line
rulings, 	the 	Court 	agrees 	with 	the 	UST 	that 	some 	of 	the 	Debtor’s
claimed expenses are excessive: e.g., $150.00 per month for telephone
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services, 	$850 	per 	month 	to 	maintain 	two 	cars, 	and 	$125.00 	for
recreational activities. 	Based on all of these considerations, the
Court concludes that the Debtor’s chapter 7 case constitutes an abuse
and should be dismissed or converted to chapter 13.
CONCLUSION
In summary, the Court concludes that, in determining whether to
dismiss the case of a debtor whose “current monthly income” does not
exceed the median under the “totality of the circumstances” test, the
Court 	should 	consider 	whether 	the 	debtor 	has 	the 	ability 	to 	pay 	a
significant 	portion 	of 	his 	unsecured 	claims 	through 	a 	hypothetical
chapter 	13 	plan. 	Second, 	in 	connection 	with 	this 	hypothetical
chapter 	13 	plan, 	the 	Debtor’s 	“projected 	disposable 	income” 	should
take 	into 	account 	any 	post-filing 	change 	in 	circumstances, 	such 	as
increased or decreased income. 	Based on these legal conclusions, the
Court finds that the amount that the Debtor could pay approximately
19 percent of the claims of his nonpriority unsecured creditors over
36 	months. 	Under 	the 	circumstances 	of 	this 	case, 	this 	makes 	his
chapter 7 case abusive under section 707(b)(3)(B).
The 	UST’s 	motion 	is 	hereby 	GRANTED 	with 	a 	14 	day 	stay 	to 	give
the Debtor an opportunity to request conversion to chapter 13. 	The
UST 	is 	directed 	to 	submit 	an 	order 	consistent 	with 	the 	conclusions
of this Memorandum.
END OF DOCUMENT
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COURT SERVICE LIST
Minnie Loo
Office of the United States Trustee
1301 Clay St., Ste. 690N
Oakland, CA 94612-5231
Cathleen Cooper Moran
Moran Law Group, Inc.
1674 N. Shoreline Blvd., Ste. 140
Mountain View, CA 94043
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