In re Delbecq

• Decision Date: 26 April 2007
• Docket Number: No. 06-04785-JKC-7.,06-04785-JKC-7.
• Citation: 368 B.R. 754
• Parties: In re Brenda K. DELBECQ, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of Indiana

Page 754

368 B.R. 754

In re Brenda K. DELBECQ, Debtor.

No. 06-04785-JKC-7.

United States Bankruptcy Court, S.D. Indiana, Indianapolis Division.

April 26, 2007.

Charles R. Wharton, Office of United States Trustee, Indianapolis, for Creditor — Objector.

Rodger K. Hendershot, Bose McKinney & Evans, Indianapolis, for Debtor.

ORDER DENYING MOTION TO DISMISS

JAMES K. COACHYS, Bankruptcy Judge.

This matter came before the Court on the United States Trustee's (the "Trustee") Motion to Dismiss Pursuant to 11 U.S.C. § 707(b) (the "Motion"). Following a hearing on January 9, 2007, the Court requested that the parties file post-hearing briefs. Those briefs having been filed, the Court now issues the following Order.¹

Facts and Procedural History

Debtor Brenda K. Delbecq ("Debtor") filed a voluntary petition for relief under Chapter 7 of the United States Bankruptcy Code on August 18, 2006. At the time of her filing, she was employed, and continues to be employed, as an elementary school teacher for Indianapolis Public Schools with an annual gross income of $47,412. With her petition, Debtor filed Form B22A, which sets forth her "current monthly income" and included a "means test" calculation. Debtor represented on the face of Official Form B22A that the "presumption of abuse" had arisen in her case because, according to the means test, she has disposable income of approximately $306 per month. Based on that representation, the Trustee filed its Motion under § 707(b).

The evidence before the Court indicates that Debtor made $47,412 in 2006. She has student loans in the approximate amount of $21,000, with a current monthly payment of approximately $327. Debtor briefly deferred her loan payment in' 2006. Prior to the deferral, her loan payment was $350, and the payment is soon expected to return to that amount. At her current rate of repayment, she will pay off the loan-which earns interest at the rate of nine percent per annum-in a little over six years. Debtor has approximately $35,000 in other general unsecured debts, mostly consumer debt in the form of credit card balances.

Discussion and Decision

As amended by the Bankruptcy Abuse and Consumer Protection Act of 2005 ("BAPCPA"), section 707(b)(1) provides that a Chapter 7 case filed by an individual whose debts are primarily consumer debts may be dismissed or, with a debtor's consent, converted to Chapter 11 or 13, if the Court determines that the granting of relief would be an abuse of Chapter 7. The Code specifies that for debtors above the median household income for their state, the court shall presume abuse exists if the debtor's gross income and disposable income exceed certain threshold amounts. 11 U.S.C. § 707(b)(2). The calculations set forth in § 707(b)(2) establishing those threshold amounts constitute what is commonly known as the "means test." In re Johnson, 346 B.R. 256, 259-60 (Bankr. S.D.Ga.2006). Under the means test, abuse is presumed "if the debtor's current monthly income² reduced by the amounts determined under clauses (ii), (iii) and (iv) [of § 707(b)(2)(A)] and multiplied by 60 is not greater than the lesser of 25 percent of the debtor's nonpriority unsecured claims in the case, or $6,000, whichever is greater; or $10,000." 11 U.S.C. § 707(b)(2)(A)(i).³

As indicated above, Debtor admitted on Form B22A that the presumption of abuse arises in her case. In response to the Trustee's Motion, however, Debtor argues that the presumption of abuse does not, in fact, arise. More specifically, she contends that her monthly student loan payment of $350 should be treated as an "other necessary expense" in determining her monthly disposable income pursuant to § 707(b)(2)(A)(ii)(I). That section provides in relevant part that "[t]he debtor's monthly expenses shall be the debtor's applicable monthly expense amounts specified under the National Standards and Local Standards and the debtor's actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides...."

In support of her argument, Debtor directs the Court to Chapter 5.15.1.10 of the Internal Revenue Manual. According to the Manual "other necessary expenses" includes student loans if they are secured by the federal government and used only for the taxpayer's education. Debtor's student loans do appear to qualify in that regard. However, in making her argument, Debtor wholly ignores that portion of § 707(b)(2)(A)(ii)(I) which indicates that "other necessary expenses" "shall not include any payments for debts." Thus, regardless of the standards used by the Internal Revenue Service, the Code dictates that Debtor's student loan payments cannot constitute an "other necessary expense." It appears, then, that the presumption of abuse applies in Debtor's case.

In the alternative, Debtor attempts to rebut the presumption of abuse by arguing that her student loan payment constitutes "special circumstances" pursuant to § 707(b)(2)(B). That section provides:

[T]he presumption of abuse may only be rebutted by demonstrating special circumstances, such as a serious medical condition or a call to active duty in the Armed Forces, to the extent such special circumstances that [sic] justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.

(ii) in order to establish special circumstances, the debtor shall be required to itemize each additional expense or adjustment of income and to provide —

(I) documentation for such expense or adjustment to income; and

(II) a detailed explanation of the special circumstances that makes such expenses or adjustment to income necessary and reasonable.

(iii) the debtor shall attest under oath to the accuracy of any information provided to demonstrate that additional expenses or adjustments to income are required.

(iv) the presumption of abuse may only be rebutted if the additional expense or current monthly income reduced by the amounts determined under clauses (ii), (iii) and (iv) of subparagraphs (A) when multiplied by 60 to be less than the lesser of —

(I) 25 percent of the debtor's nonpriority unsecured claims, or $6,000, which ever is greater; or

(II) 10,000.

Clearly, the merits of Debtor's argument turn on the meaning of "special circumstances" as used above. All statutory interpretation begins with the language of the statute itself, and where "the statute's language is plain, the sole function of the courts is to enforce it according to its terms.'" United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 194, 61 L.Ed. 442 (1917)). A court should look to legislative history only when the statute is ambiguous or when the application of the statute's plain meaning produces a result demonstrably at odds with the intention of the drafters. Id., at 242, 109 S.Ct. at 1031.

Certainly, the plain meaning of "special"⁴ provides some instruction to the Court that the expense or adjustment to income in question must be out of the ordinary or exceptional in some way. However, given the myriad of possible scenarios — from the exceedingly rare to the slightly unusual — it is difficult for the Court to discern exactly what Congress intended by its use of the word. As such, the Court finds the term "special circumstances" to be ambiguous and, therefore, turns to § 707(b)'s legislative history for additional guidance. The Supreme Court has repeatedly stated that "[i]n surveying legislative history ... the authoritative source for finding the Legislature's intent lies in the Committee Reports on the bill, which `represen[t] the considered and collective understanding of those [Members of Congress] involved in drafting and studying proposed legislation.'" Eldred v. Ashcroft, 537 U.S. 186, 209 n. 16, 123 S.Ct. 769, 783, 154 L.Ed.2d 683 (2003) (quoting Garcia v. United States, 469 U.S. 70, 76, 105 S.Ct. 479, 83 L.Ed.2d 472 (1984) (quoting Zuber v. Allen, 396 U.S. 168, 186, 90 S.Ct. 314, 24 L.Ed.2d 345 (1969))).

The concept of "special circumstances" was first introduced to the means test in 1999, per Senate Bill 625. In reporting favorably on the bill, the Senate Judiciary Committee explained that "[t]he bankrupt can rebut this presumption [of abuse] by demonstrating `special circumstances' which would show that the bankrupt in fact does not have a meaningful ability to repay his or her debts." S. REP. NO. 106-49, at 2 (1999). The Report further states:

In order to protect debtors from rigid and arbitrary application of a means-test, section 102 also provides that in some cases where the presumption applies the debtor may be able to demonstrate "special circumstances" that justify additional expenses or an adjustment to the debtor's income. The Committee adopted the "special circumstances" standard, rather than the "extraordinary circumstances" standard included in the Conference Report to accompany H.R. 3150 to provide a different standard of when a debtor may overcome the presumption of abuse.

In applying the "special circumstances" test, it is important to note that a debtor who requests a special circumstances adjustment is requesting preferential treatment when compared to other consumers, and it is those other consumers who, by paying their debts, must assume the cost of the debts discharged by the debtors seeking the preferential treatment. In order to ensure fairness with respect to the consumers who must pay the cost when others discharge debts in bankruptcy, it is essential that the "special circumstances" test establish a significant, meaningful threshold which a debtor must satisfy in order to receive the preferential treatment. The debtor's ability to overcome the presumption of abuse must be based solely on financial considerations (i.e., adjustments to income or expenses required by special...