Cynthia A. Gray

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
IN RE: 	)
)
CYNTHIA GRAY, 	) 	Case No. 06-927
)
Debtor. 	) 	Chapter 11
)
MEMORANDUM OPINION
Down East Community Hospital (“Down East”) objects to confirmation of Dr. Gray’s
proposed Chapter 11 Plan of Reorganization on the grounds that Dr. Gray is not committing all
of her projected disposable income to her Plan. 	Down East also seeks dismissal of Dr. Gray’s
bankruptcy case due to it allegedly being filed in bad faith.
For 	the 	reasons 	stated 	herein, 	the 	court 	will 	sustain 	Down 	East’s 	objection 	to
confirmation of the Debtor’s proposed plan, but will not dismiss the Debtor’s case.
I.BACKGROUND
Dr. Gray, the Debtor, is a physician practicing in the area of obstetrics and gynecology.
During the late 1990’s, the Debtor maintained an independent medical practice in Pittsburgh,
Pennsylvania. 	When she decided to close her independent practice and seek employment at a
medical facility, the Debtor liquidated approximately $500,000 in retirement accounts to pay her
business creditors. 	By doing so, the Debtor incurred about $200,000 in individual income tax
liability, which is a precipitating cause of the Debtor’s bankruptcy.
The Debtor obtained employment with Down East in Machias, Maine, and it loaned her
over $100,000 to finance her move. 	Meanwhile, the Debtor put her Pittsburgh home on the
market, but was unsuccessful in selling it. After moving to Maine and purchasing a home there,
she had an employment dispute with Down East and she left her job.
The Debtor relocated to Weirton, West Virginia, and obtained employment at Weirton
Hospital. Meanwhile, the Debtor was unable to sell her home in Maine, and the Debtor was also
obligated to repay Down East the loan it gave her to finance her move to Maine.
Dated: Tuesday, August 11, 2009 8:30:37 AM
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The Debtor lives with a companion, Trudy Strupe, who accompanied her on her move
from Pittsburgh, to Machias, and then to Weirton. The two have lived together for over twenty
years, and the Debtor’s Pittsburgh home was built to provide room enough for Ms. Strupe’s
parents to live with them. The Debtor testified that they lived as “one large family” during that
time, with both the Debtor and Ms. Strupe contributing to the household expenses. For the past
twelve months, however, Ms. Strupe has not contributed to the household expenses because she
has had two major surgeries, and she suffers from severe arthritis. 	These ailments prevent her
from working. 	Consequently, the Debtor pays for many of Ms. Strupe’s household expenses,
and medical bills.
II.DISCUSSION
In her proposed Chapter 11 Plan, the Debtor states that she will make monthly plan
payments of $4,500. 	Down East contends that the $4,500 monthly payment does not represent
the Debtor’s best efforts to repay her creditors on the grounds that the Debtor has budgeted for
unreasonable and/or unnecessary expenses. Also, Down East contends that the Debtor’s actions
throughout her case demonstrate her bad faith, and Down East seeks dismissal of her case on that
basis.
A. Calculation of Disposable Income
As proposed, the Debtor’s plan calls for monthly payments of $4,500 to be paid to a
“representative” who will then distribute the funds in accordance with the Plan. Down East does
not believe $4,500 represents the Debtor’s best effort to repay her creditors.
Section 1129(a)(15) requires that “the value of the property to be distributed under the
plan is not less than the projected disposable income of the debtor . . . .” 	11 U.S.C. §
1129(a)(15). 	Section 1129(a)(15)(B) references § 1325(b)(2) as providing the definition of
“disposable income.”
Under § 1325(b)(2), “disposable income” is defined as “current monthly income received
by the debtor . . . less amounts reasonably necessary to be expended – (A)(i) for maintenance or
support of the debtor or a dependant of the debtor . . . .” 	11 U.S.C. § 1325(b)(2). 	A Debtor’s
“current monthly income” (CMI), is calculated pursuant to § 101(10A) of the Bankruptcy Code.
In that section, Congress prescribed a six-month look back period to determine the CMI of a
debtor before filing bankruptcy; the look back period ends on “the last day of the calendar month
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immediately preceding the date of the commencement of the case . . . .” 	11 U.S.C. §
101(10A)(A)(i).
Using Official Form 22B, the Debtor calculated her CMI as $18,830.35. 	Having
determined the Debtor’s CMI, the next step in determining the Debtor’s “disposable income” is
to look to her reasonably necessary expenses. 	§§ 1129(a)(15)(B); 1325(b)(2)(A). 	The Debtor
estimates her monthly payroll deductions on Schedule I at $8,962.55 and monthly expenses on
Schedule J at $6,743.31. Down East contends that the following expenses should be eliminated
from the Debtor’s budget as being unreasonable and/or unnecessary: (1) expenses to support Ms.
Strupe; (2) expenses related to the care of 15 dogs; and (3) television and telecommunication
expenses.
1. 	Ms. Strupe
The Debtor and Down East disagree on whether Ms. Strupe is a “dependent” of the
Debtor, and whether expenses for her support are excludable from the Debtor’s disposable
income.
The term “dependent” is not defined in the Bankruptcy Code. Although definitions exist
in other federal statutes,1 these definitions are not duplicated in § 1325, and, therefore, are not
controlling. E.g., In re Bauer, 309. B.R. 47, 51 (Bankr. D. Idaho. 2004) (“Congress did not in §
1325 establish the sort of express and detailed conditions for finding dependency as it did in
[other statutes; therefore, the definition of dependent in § 1325 is] to be evaluated based on that
term’s commonly understood meaning.”).
In determining who is a “dependent” under § 1325, some courts allow a debtor to budget
expenses 	for 	the 	support 	of 	a 	debtor’s 	adult 	children, 	parents 	and 	grandparents, 	and
grandchildren. 	E.g., In re Smith, 269 B.R. 686, 689-90 (Bankr. W.D. Mo. 2001) (allowing
expenses of 20-year-old daughter living at home and attending college); In re Wegner, 91 B.R.
854, 859 (Bankr. D. Minn. 1988) (allowing expenses for adult children and grandchildren).
Other courts have declined to adopt such individuals as “dependents” under the Bankruptcy
Code. E.g., In re Beharry, 264 B.R. 398, 404 (Bankr. W.D. Pa. 2001) (disallowing expenses for
second wife’s minor child); In re Cox, 249 B.R. 29, 32 (Bankr. N.D. Fla. 2000) (disallowing
expenses for support of mother, fiancé, and fiancé’s children).
1 26 U.S.C. § 152(d)(2)(H) (an individual with the same principal place of abode as the taxpayer qualifies an a
“dependent” for purposes of the federal income tax code; 10 U.S.C. § 1072 (“dependent” as defined with respect to
members of the U.S. Armed Forces)
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In determining whether Ms. Strupe is a “dependent” of the Debtor, the court is guided by
the purpose of the term “dependent” in § 1325, which is to recognize and protect a genuine
family unit, which may be broader than the traditional nuclear family. E.g., In re Gonzales, 297
B.R. 143, 150-152 (Bankr. D.N.M. 2003) (noting that standards set by administrative agencies or
industries should not influence courts to ignore “cultural and societal norms”).
Here, the Debtor and Ms. Strupe have lived together for over twenty years. At one point,
they lived as “one large family” with Ms. Strupe’s parents and the respective children of the
Debtor and Ms. Strupe. 	Until becoming ill and unable to work, Ms. Strupe contributed to the
Debtor’s household expenses. For example, the Debtor testified that during the period when her
wages were subject to garnishment by the Internal Revenue Service, Ms. Strupe paid the
household bills until the Debtor’s garnishment was stopped. Currently, however, Ms. Strupe is
unable to work due to extensive surgeries and severe arthritis, and the Debtor supports Ms.
Strupe through the payment of Ms. Strupe’s medical bills ($375.00 monthly), household
expenses ($900.00 monthly for the Debtor and Ms. Strupe), and occasionally fuel ($350.00
monthly, part of which is for Ms. Strupe’s automobile). 	Based on their extensive history
together, including the continued support they provide for one another, the court concludes that
the Debtor and Ms. Strupe form a “family unit,” such that Ms. Strupe is a “dependent” of the
Debtor.
Having established the dependency of Ms. Strupe, the court must determine whether the
Debtor’s expenses listed on Schedule J are reasonably necessary for the support of the Debtor
and Ms. Strupe. 	This determination is left entirely to the court’s discretion. 	E.g., In re
Roedemeier, 374 B.R. 264, 272-273 (Bankr. D. Kan. 2007) (“[section] 1129(a)(15) must be read
to allow a judicial determination of the expenses that are reasonably necessary for the support of
the debtor and his or her dependents.”).
The expenses that the Debtor incurs to support Ms. Strupe in the form of medical bills
($375.00 monthly), household expenses (jointly totaling $900.00 monthly), and fuel (jointly
totaling $350.00 monthly) for Ms. Strupe’s car are reasonable and necessary. 	Ms. Strupe is
currently unable to support herself due to her medical conditions. Therefore, it is necessary that
the Debtor pay Ms. Strupe’s expenses until such time when Ms. Strupe can begin working again.
The amounts of the expenses are reasonable, do not appear to be extravagant, and are consistent
with the long term living arrangement between Ms. Strupe and the Debtor.
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2. 	Dogs
The Debtor currently cares for 15 dogs. 	She spends approximately $750.00 per month
for the care and maintenance of the animals. 	Spending $750.00 per month on animals that
provide no necessary service to the Debtor is unreasonable and unnecessary — the Debtor cares
for these dogs only out of a feeling of moral responsibility. 	The court will therefore disallow
this expense from the Debtor’s budget.
3. 	TV & Telecommunications
The Debtor subscribes to two television services: Comcast and Direct TV. The Debtor’s
Comcast package consists of telephone, television, and internet service; Direct TV is also a
television service provider. 	It is unreasonable and unnecessary for the Debtor to maintain two
television services. The Court will disallow the $149.00 per month spent on Direct TV service.
See, e.g., In re Gavita, 177 B.R. 43 (Bankr. W.D. Pa. 1994) (disallowing $100.00 expense for
movie rentals when debtors subscribed to cable television plus “The Movie Channel”).
Likewise, 	considering 	that 	the 	Debtor 	has 	internet 	service 	through 	her 	Comcast
subscription, it is unnecessary for her to spend $25.90 per month to subscribe to AOL. See, e.g.,
id.
Regarding her $250.00 monthly cellular phone service, the court finds that this expense is
too high. 2 A more reasonable amount is $100 per month. See, e.g., In re Veenhuis, 143 B.R. 887
(Bankr. D. Minn. 1992) (reducing cell phone service of $40 per month).
In sum, having determined which expenses are not reasonably necessary for the support
of the Debtor and Ms. Strupe, an additional $1,074.90 per month is available as disposable
income for the benefit of the Debtor’s unsecured creditors. Also, the Debtor budgeted $667.95
in monthly vehicle installment payments on Schedule J, which are also listed by the Debtor as
being paid in her proposed plan. Because the Debtor already provides for payment of this claim
in her Plan, the court will disallow it as a scheduled expense. Therefore, the Debtor’s disposable
income will be increased by $1,741.90 per month. 	Using the formula prescribed in §
1325(b)(2),3 the Debtor’s monthly disposable income is $4,867.30. Therefore, the total value of
2 The Debtor testified that a $10.00 charge on her cell phone bill is attributed to her adult daughter being on the plan.
The Debtor’s adult daughter is gainfully employed and self-reliant. In determining that $100.00 monthly is a
reasonable and necessary cell phone expense, the court has also deducted the monthly $10.00 charge attributed to the
cell phone given to the Debtor’s daughter.
3 CMI (Form 22B) – Payroll Deductions (Schedule I) – reasonably necessary expenses (Schedule J) = monthly
disposable income; $18,830.35 - $8,962.55 - $5,000.51 = $4,867.30.
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property to be distributed pursuant to § 1129(a)(15), including installment payments on the
Debtor’s vehicle, is $292,038.004 or payment of 100 percent to the unsecured creditors,
whichever is less.
Because the Debtor’s current proposal to contribute $4,500 per month is less than the
Debtor’s disposable income as calculated above,5 the Debtor has not met her disposable income
requirement as prescribed by statute. Thus, the court will sustain Down East’s objection.
A. Dismissal
Down East also seeks to have the Debtor’s Chapter 11 case dismissed on the basis that its
filing and/or prosecution is in bad faith.
Under § 1112(b), a court may dismiss a case under Chapter 11 if the moving party
establishes cause. 	11 U.S.C. §1112(b)(1). 	In deciding whether a case is filed in bad faith, the
court may consider any factor that evidences an intent to abuse the protections afforded in
bankruptcy. In re Marshall, 403 B.R. 668, 689-90 (C.D. Cal. 2009) (“A filing lacks good faith if
it is filed in an attempt . . . to achieve objectives outside the legitimate scope of the bankruptcy
laws.”). 	In determining whether to dismiss a case for bad faith, the court must consider the
totality of the circumstances . . . .” 	In the Matter of Madison Hotel Associates, 749 F.2d 410,
425 (4th Cir. 1984).
Here, considering the totality of the circumstances, there does not appear to be any
illegitimate end sought by the Debtor in filing her bankruptcy petition. The court is satisfied that
the Debtor did not file her case in an attempt to delay or frustrate creditors. Rather, it appears as
though the Debtor filed in good faith to handle substantial tax liabilities which she encountered
while paying past creditors, and to shed her liability from two unsold homes that she purchased
in her efforts to find better employment opportunities.
I.CONCLUSION
The court will enter a separate order that sustains Down East’s objection to confirmation,
and that denies Down East’s request to dismiss the case.
4 $4,867.30(60 months) = $292,038.00
5 $4,867.30 > $4,500.00
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