611 B.R. 236 (Bkrtcy.W.D.Pa. 2020), 18-22406-GLT, In re Harms

Docket Nº:18-22406-GLT
Citation:611 B.R. 236
Opinion Judge:GREGORY L. TADDONIO, UNITED STATES BANKRUPTCY JUDGE
Party Name:IN RE: Damien W. HARMS and Casey M. Harms, Debtors. v. Damien W. Harms and Casey M. Harms, Respondents. United States Trustee, Movant,
Attorney:George M. Conway, Esq., Office of the United States Trustee, Philadelphia, PA, Attorney for the United States Trustee Bryan P. Keenan, Esq., Bryan P. Keenan & Associates, P.C., Pittsburgh, PA, Attorney for Damien and Casey Harms
Case Date:January 29, 2020
Court:United States Bankruptcy Courts, Third Circuit

Page 236

611 B.R. 236 (Bkrtcy.W.D.Pa. 2020)

IN RE: Damien W. HARMS and Casey M. Harms, Debtors.

United States Trustee, Movant,

v.

Damien W. Harms and Casey M. Harms, Respondents.

No. 18-22406-GLT

United States Bankruptcy Court, W.D. Pennsylvania

January 29, 2020

Page 237

George M. Conway, Esq., Office of the United States Trustee, Philadelphia, PA, Attorney for the United States Trustee

Bryan P. Keenan, Esq., Bryan P. Keenan & Associates, P.C., Pittsburgh, PA, Attorney for Damien and Casey Harms

Related to Dkt. Nos. 45, 56, 58, 62

MEMORANDUM OPINION

GREGORY L. TADDONIO, UNITED STATES BANKRUPTCY JUDGE

Page 238

Told that they cannot receive a chapter 7 discharge because their net monthly income indicates that such relief would be an abuse under the totality of circumstances of their financial situation,1 the debtors Damien W. and Casey M. Harms now want a "do-over." Asserting that Schedule J, which was relied upon by the Court, never provided an accurate picture of their monthly expenses, the Harmses now seek reconsideration based on an Amended Schedule J

2 that increases their expenses by $568.06 to include expenditures "inadvertently omitted" from their original schedules.3 The United States Trustee (the "Trustee") opposes reconsideration, arguing that the Harmses are trying to improperly recast the facts underpinning the Court’s judgment.4 Because the Court finds the Harmses’ belated attempt to supplement the record lacks merit and signals bad faith, the Motion to Reconsider will be denied.

I. BACKGROUND

Although no presumption of abuse arose in this case,[5] the Trustee moved to dismiss pursuant to 11 U.S.C. § 707(b)(3)(B),[6] contending that the totality of the circumstances of the Harmses’ financial situation nonetheless signaled abuse.7 He argued that certain expenses, including payments for prepetition taxes and student loan obligations, should be counted towards disposable income (rather than deducted from it), and therefore show an ability to repay creditors. After a hearing and oral argument, consideration of the motion to dismiss was consolidated with two other cases presenting common legal questions. At the Court’s direction, both the Trustee and the Harmses filed additional briefs and reply briefs.8 At no time did any party request

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an evidentiary hearing or otherwise suggest that the record before the Court— including the bankruptcy schedules— was deficient.

On October 1, 2019, the Court entered a Memorandum Opinion concluding that the Trustee sustained his burden under section 707(b)(3)(B) as to the Harmses.[9] To avoid confusion, the Court will address only those aspects of its opinion relevant to the Motion to Reconsider.

Generally, the Court "d[id] not discern any bad faith in this chapter 7 filing,"10 and found that "[t]he Harmses’ expenses appear reasonable and necessary, though perhaps slightly understated," specifically noting the absence of an expense for telephone, cell phone, internet, and cable services.11 That said, the Court held that debts could not be treated as monthly expenses on Schedule J if it would favor those creditors over other similarly situated creditors.12 The Court determined that the Harmses’ monthly student loan payments constituted disposable income in an "ability to pay" analysis under section 707(b)(3)(B),[13] but payments to the Internal Revenue Service, their only priority creditor, did not.14 Recognizing that the tax obligation should be satisfied in 18 months, the Court found that funds would be available for the remaining 42 months of a hypothetical 60-month chapter 13 plan.15 As a result, the Court reasoned that the Harmses had the ability to pay general unsecured creditors $31,978.80 over 60 months in a hypothetical chapter 13 case and yield a dividend to their general unsecured creditors of approximately 27%.16 Absent other compelling facts, the Court held that the Harmses’ "ability to repay creditors is significant enough that allowing them to obtain a chapter 7 discharge would be an abuse under the totality of the circumstances."17 Rather than dismiss the case outright, the Court afforded them a brief opportunity to consider conversion to chapter 13.

The Motion to Reconsider, filed ten days later, seizes on the Court’s observation that the Harmses’ expenses appeared "slightly understated" and posits the Court made a "significant finding despite not having all the necessary information before it at the time of decision."18 The Harmses assert that they "inadvertently omitted" their monthly cable, internet, and telephone expenses (for lack of a better term, the "Telecommunications Expenses") from Schedule J ,19 and attached statements establishing that these expenses existed at the commencement of the case.20 They also state that they "failed to adequately list reasonable living expenses associated with raising a toddler/child" or

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"include a reasonable line item ... [for] an Emergency Fund," and insist that these expenses were in place at the time of filing.21 They do not, however, explain why these additional expenses (the "Added Expenses") were omitted from Schedule J.

The following table compares the expenses reflected on Schedule J to those listed in Amended Schedule J :22

Monthly Expense Schedule J Amended Schedule J Difference
Rental or home ownership expense $737.19 $737.19
Home maintenance, repair, and upkeep expenses $100.00 $100.00
Electricity, heat, natural gas $250.00 $250.00
Water, sewer, garbage collection $134.51 $134.51
Telephone, cell phone, internet, satellite, and cable services $0 $289.58 +$289.58
Food and housekeeping supplies $850.00 $850.00
Childcare and children's education costs $1, 083.33 $1, 083.33
Clothing, laundry, and dry cleaning $100.00 $100.00
Personal care products and services $0 $100.00 +$100.00
Medical and dental expenses $167.00 $167.00
Transportation $303.33 $303.33
Entertainment, clubs, recreation, newspapers, magazines, and books $100.00 $150.00 +$50.00
Vehicle Insurance $104.00 $104.00
IRS Repayment Plan $75.00 $75.00
Car Payments for Vehicle 1 $435.76 $435.76
Student Loan W $255.00 $201.78 -$53.22
Student Loan H $260.00 $241.70 -$18.30
Auto Maintenance $150.00 $150.00
...

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