In re Henebury

• Decision Date: 16 March 2007
• Docket Number: No. 06-13354-BKC-PGH.,06-13354-BKC-PGH.
• Citation: 361 B.R. 595
• Parties: In re Mark Andrew HENEBURY and Yvette Joan Henebury, Debtors.
• Court: U.S. Bankruptcy Court — Southern District of Florida

361 B.R. 595

In re Mark Andrew HENEBURY and Yvette Joan Henebury, Debtors.

No. 06-13354-BKC-PGH.

United States Bankruptcy Court, S.D. Florida, West Palm Beach Division.

March 16, 2007.

COPYRIGHT MATERIAL OMITTED

Stuart A. Young, West Palm Beach, FL, for Debtors.

Michael R. Bakst, West Palm Beach, FL, for Trustee.

Heidi A. Feinman, Office of the U.S. Trustee, Miami, FL, for U.S. Trustee.

ORDER DISMISSING CHAPTER 7 CASE UNLESS DEBTORS MOVE TO CONVERT TO CHAPTER 13 WITHIN TEN DAYS OF ENTRY OF THIS ORDER

PAUL G. HYMAN, Bankruptcy Judge.

THIS MATTER came before the Court for evidentiary hearing on January 25, 2007 upon the United States Trustee's ("UST") Amended Motion to Dismiss Case Pursuant to 11 U.S.C. § 707(b)(1) & (b)(3) ("Motion") filed on November 17, 2006. On December 19, 2006, Debtors filed a Response to UST's [Motion].

BACKGROUND

Mark Andrew Henebury ("Mr. Henebury") and Yvette Joan Henebury ("Mrs. Henebury")(collectively, "Debtors") filed a joint petition for Chapter 7 bankruptcy relief on July 21, 2006. Debtors are married and have three minor children. The Debtors moved to Florida from Massachusetts in May 2005. Contemporaneously with the filing of their petition, Debtors filed their Schedules, Statement of Financial Affairs, and Official Form B22A: Statement of Current Monthly Income and Means Test Calculation ("Means Test"). The Debtors' Means Test shows annualized Current Monthly Income ("CMI") in the amount of $96,768.24 which is above the median income for a family of five residing in Florida.¹ Debtors' Means Test indicates that Debtors had negative monthly disposable income of $1,128.07 after calculating deductions to CMI. Thus, although the Means Test shows that Debtors had above median income, a presumption of abuse did not arise pursuant to 11 U.S.C. § 707(b)(2).

The Debtors' Schedules show that as of the petition date, the Debtors owned real property located in Lake Worth, Florida valued at $295,000.00 ("Lake Worth Property") with a mortgage of approximately $233,237.81. Debtors claimed that the Lake Worth Property was exempt as their homestead. However at trial, Mr. Henebury testified that the family no longer resides at the Lake Worth Property, and that the family now resides in Port Orange near Daytona Beach, Florida.² Mr. Henebury testified that he has not made mortgage payments on the Lake Worth Property since June 2006.³ Mr. Henebury further testified that the Debtors hoped to keep the home "and sell it and obviously use the proceeds to buy another home."

Mr. Henebury also testified that he had not been happy with his job since it was not in the hotel industry in which he had pursued his career. Subsequently when a job in the hotel industry opened in Daytona Beach, he applied and obtained the job. Mr Henebury currently is, and as of the petition date was, employed as an engineer for Fairfield Resorts in Daytona Beach earning an annual salary of $85,000.00.

Debtors provided the UST with revised Schedules I and J on November 7, 2006 ("Proposed Revised Schedules")(Debtor Ex. 2; UST Ex. F). The Proposed Revised Schedules were not filed with the Court. However they show that the Port Orange residence where the family now resides is rented at a cost of $1,550.00 per month.

In addition to the Lake Worth Property, the Debtors also scheduled a 0.4349% ownership interest in a Disney Vacations Development, Inc. timeshare ("Timeshare") with a listed value of $15,000.00 that was secured by debt in the amount of $12,415.85. On November 30, 2006, Debtors signed a reaffirmation agreement for the Timeshare debt ("Reaffirmation Agreement"). The Reaffirmation Agreement was filed with the Court on December 21, 2006. The UST filed an Objection to the Reaffirmation Agreement. The Court heard the matter on December 27, 2006, and entered an Order Denying Reaffirmation Agreement on December 28, 2006.

Debtors' Schedule D also shows secured debt in the amount of $264.00 for a 1998 Subaru automobile valued at $1,200.00. Debtors listed no unsecured priority claims on Schedule E. Schedule F reflects unsecured nonpriority claims totaling $73,799.46. It is uncontested that essentially all of the debts are consumer/nonbusiness debts.

Mrs. Henebury testified that she was unemployed prepetition because she needed to care for her five year old daughter who had undergone surgery in September 2005. However on Debtors' Schedule I, filed July 21, 2006, in answer to the line 17 directive to describe any increase or decrease in income reasonably anticipated to occur within the year postpetition, Debtors indicated: "Debtor wife will begin a teaching position on 7/25/06 for approximate wages of $39,000 per year." Mrs. Henebury testified that she indeed began working as a teacher at Spruce Creek High School in Port Orange the week after Debtors filed their petition. Debtors' Schedule I, as filed, lists only Mr. Henebury's gross monthly income of $7,122.87 with his net monthly income as 84,836.88. Schedule J reflects total monthly expenses of $5,871.66. Included in these expenses are mortgage payments for the Lake Worth Property in the amount of $2,403.97, and monthly payments for the Timeshare in the amount of $252.56. Debtors' filed Schedules indicate that as of the petition date Debtors had negative monthly net income in the amount of $576.86.

The Proposed Revised Schedules, which were admitted into evidence but not filed with the Court, list Mrs. Henebury' s monthly income as $3,401.66 with net monthly income of $2,875.00. The Proposed Revised Schedules list Debtors' combined net monthly income as $7,711.88. Proposed Revised Schedule J shows monthly expenses of $9,039.66. This expense amount represents an increase of $3,168.00 over the monthly expenses listed in Debtors' Schedule J which was filed on the petition date. Part of the increased expense reflected on Debtors' Proposed Schedule J is due to Debtors' listing expenses for both the Port Orange rental home where the family resides, and the Lake Worth Property where they do not reside and for which they stopped paying the mortgage prior to filing for bankruptcy. The Proposed Revised Schedules indicate that Debtors had negative monthly net income of $1,327.78.

At the January 25, 2007 hearing, Debtors introduced Exhibit 3 which was a second revised Schedule J dated November 30, 2006, that had not been previously filed with the Court ("Second Revised Schedule J"). Second Revised Schedule J shows even further increased expenses for home maintenance, medical expenses, and recreation resulting in total monthly expenses of $10,207.66. However upon questioning, Debtors were unable to substantiate the increased expenses claimed with any documentary proof.

CONCLUSIONS OF LAW

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(1) and (b)(2)(A) and (0).

A. Procedural Posture and Arguments of the Parties

Debtors filed their petition on July 21, 2006 and therefore the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA") governs this matter.

Interim Federal Rule of Bankruptcy Procedure 1017(e)(1) states in pertinent part that:

a motion to dismiss a case for abuse under § 707(b) or (c) may be filed only within 60 days after the first date set for the meeting of creditors under § 341(a), unless, on request filed before the time has expired, the court for cause extends the time for filing the motion to dismiss. The party filing the motion shall set forth in the motion all matters to be considered at the hearing. A motion to dismiss under § 707(b)(1) and (3) shall state with particularity the circumstances alleged to constitute abuse.

Interim Bankr.R. 1017(e)(1)⁴

The § 341 meeting of creditors in this case was held and concluded on August 18 2006. Thus pursuant to Rule 1017(e)(1), the sixty day deadline to file a motion to dismiss pursuant to § 707(b)(3) would have expired October 17, 2006. However on October 16, 2007, the UST, timely filed an Amended Agreed Ex-Parte Motion for Order for Extension of Time to File Motion to Dismiss Under 11 U.S.C. § 707(b)(3) and For Extension of Time to Object to Discharge Pursuant to 11 U.S.C. § 727 ("Motion for Extension of Time"). The Court entered the parties' Agreed Order Granting UST's [Motion for Extension of Time] which pursuant to the parties' agreement extended the deadlines for filing a motion to dismiss and a complaint objecting to discharge until November 20, 2006. The UST's Motion seeking dismissal was thus timely filed on November 17, 2006.

The UST's Motion argues with particularity that based upon the totality of circumstances of the Debtors' financial situation, the granting of relief to the Debtors in this case would be an abuse of the provisions of Chapter 7 pursuant to 11 U.S.C. § 707(b)(1) and (3). The UST further argues that the Debtors have the present ability to pay some, if not all, of their unsecured debts based upon Mrs. Henebury's employment as a teacher earning $39,000 per year and based upon the Debtors not making payments for among other things, the Lake Worth Property mortgage and the Timeshare debt. Finally, the UST argues that Debtors' other expenses are overstated.

Debtors' counsel argues that a debtor's ability to pay standing alone is insufficient cause for dismissal pursuant to § 707(b)(3)(B) which looks to the totality of the circumstances of debtor's financial situation to determine if the granting of Chapter 7 relief would be an abuse. Debtors' counsel further argues that Debtors have no ability to pay creditors because their expenses exceed their income.⁵

In the Court's view, the arguments of counsel raise questions of "what" and "when". First, under BAPCPA what is meant by the totality of the circumstances of the Debtors' financial situation. Second, are post petition events relevant to the determination of whether the granting of relief would be an abuse of the provisions of ...