In re Khan
| Decision Date | 20 September 1994 |
| Docket Number | Bankruptcy No. 3-93-6058,3-94-90. |
| Citation | 172 BR 613 |
| Parties | In re Zubeida KHAN. In re McKinley HAMBLIN. |
| Court | U.S. Bankruptcy Court — District of Minnesota |
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Dale C. Nathan, Eagan, MN, for debtor Zubeida Khan.
Matthew R. Burton, Minneapolis, MN, for Bank of Montreal.
Richard J. Pearson, New Brighton, MN, for debtor McKinley Hamblin.
Thomas L. Garrity, Minneapolis, MN, for Transp. Ins. Co.
ORDER DENYING MOTIONS FOR DISMISSAL OF CHAPTER 7 CASES
These Chapter 7 cases are before the Court on motions of creditors for dismissal pursuant to 11 U.S.C. § 707(a).
In re Zubeida Khan, BKY 93-36058, the Court convened an evidentiary hearing on the motion of the Bank of Montreal ("the Bank") on April 21, 1994. The Bank appeared by its attorney, Matthew R. Burton; Debtor Zubeida Khan appeared personally and by her attorney, Dale C. Nathan.
In re McKinley Hamblin, BKY 94-30090, the Court convened a hearing on the motion of Transportation Insurance Company ("TIC") on April 26, 1994. TIC appeared by its attorney, Thomas L. Garrity; Debtor McKinley Hamblin appeared by his attorney, Richard J. Pearson; and the United States Trustee appeared by his attorney, Andrew J. Schmid.
Upon the evidentiary record made for both cases, the briefs and arguments presented by counsel, and all of the other files and records in these cases, the Court makes the following consolidated memorandum order in disposition of the issues presented.
Debtor Zubeida Khan filed a voluntary petition for relief under Chapter 7 on December 29, 1993. She is a medical doctor and is presently licensed to practice in the states of Minnesota and Florida. A native of Pakistan, she came to the United States in the mid-1980s to do post-graduate study in Texas. She is presently of the age of 40, as is her husband, Akbar Esker. They have two children, one 18 years old and the other 7 years old.
From 1988 until 1991, Khan was engaged in the private practice of medicine in Sydney, Nova Scotia, Canada, owning and operating her own clinic. She and her husband owned a home there. They also set up a business corporation, A to Z Holdings Ltd. ("A to Z"), to purchase, renovate, and maintain a commercial building. Khan's clinic operated in a portion of the building, and A to Z rented out the remainder to other tenants. The Bank furnished financing to Khan and her husband for the purchase of the home and for the final remodeling of the commercial building. As security for the former loan, it took a mortgage against the home.1
After Khan had spent several years in Sydney, several factors prompted her to seek employment prospects elsewhere: a persisting recession in the Canadian national economy, a decline in the local mining and fishing industries, a corresponding decrease in the volume and profitability of her medical practice, and her and her husband's wish to relocate to an area where educational opportunities would be better for their children. In the summer of 1991, she and her family moved to Orlando, Florida. For about eight months after that, she practiced on a provisional basis in a medical clinic owned by a friend of hers there.
In the spring of 1992, the Ford Motor Company ("Ford") hired Khan to be the plant physician at its Twin Cities Assembly Plant in St. Paul. As employers often do for executive-level hirees, Ford retained a "relocation consultant," Associated Relocation Management Company,2 to afford Khan a means of promptly liquidating the equity in her house in Sydney, and to otherwise free her attention from personal obligations attendant to her family's move to Minnesota. The record is not crystal-clear as to the mechanics of the relocation company's assistance, but apparently Khan and her husband granted the company a power of attorney to convey the house upon sale to a third party; it then advanced them a sum of money representing its determination as to the value of their equity in the house. As it turned out, this sum was $67,000.00. The Bank's interest in the home as mortgagee was ultimately satisfied in full. It is not clear whether this was accomplished by another advance from the relocation company, or from the proceeds of the sale of the home when that eventually closed in late 1992.
After they left Nova Scotia, Khan and her husband continued to try to service the two debts attributable to A to Z's real estate. As she testified (and without controversion from the Bank), she maintained telephone and mail contact with her loan officer at the Bank's Sydney office while she was in Florida and after she moved to Minnesota; at all times he knew where she was, and how to reach her. Initially, Khan and her husband used the proceeds of rental payments from other tenants in the building, as well as Khan's own income, to meet A to Z's obligations. By the time they had moved to Minnesota, however, the occupancy of the building had dwindled to nothing. In May, 1992, Khan and her husband resorted to the proceeds of the relocation company's advance on their homestead equity to meet the $4,500.00 monthly payments on the A to Z mortgage. Throughout this period, they had the building on the market for sale; when no buyer emerged, and after Khan and her husband stopped paying on the mortgage themselves, the mortgagee commenced and concluded foreclosure proceedings.
At some point later in 1992, someone with the Bank decided to pursue its remedies at law. The Bank set off a portion of its claim against some $16,600.00 in Canadian funds that Khan had on deposit in a "Registered Retirement Savings Plan." In late November, 1992, the Bank sued Khan in the Canadian courts, for the outstanding balance on the loans it had made to her and her husband. On December 4, 1992, it received a judgment against her in the amount of $67,214.38 (Canadian).
Khan has retained her employment with Ford since the fall of 1992. In 1992, she received gross wages from Ford in the amount of $138,510.00; in 1993 she received gross wages of $112,874.00.3 At present, Khan receives a monthly salary in the gross amount of $9,045.00, and in the net amount of $5,431.78. She has not yet received a salary increase in 1994 and does not expect to receive one.4 Her payroll deductions are itemized as follows:
Federal income tax $1,605.52
State income tax 594.20
FICA 688.65
Health care premium 43.07
"Lease car" 681.78
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Total $3,570.15
When Khan and her family relocated to Minnesota, they purchased a homestead in the St. Paul suburb of Rosemount. They made a down payment of $27,000.00 from the remainder of the relocation company's advance on their Nova Scotia house, and they financed the balance through a mortgage-secured loan from Investors Savings Bank. In her Schedules A and C, the Debtor values this homestead at $179,000.00. Khan maintains two motor vehicles, a 1994 Ford Taurus and a 1994 Lincoln Continental. She holds both on a leased basis through Ford or one of its subsidiaries; as a benefit of her employment, she is able to obtain the use of vehicles of the current model-year on this basis. As noted in the itemization above, she makes the lease payments through payroll deduction.
Between her amended Schedule J and her testimony, Khan estimates that her and her family's current monthly living expenses are:
Home mortgage payment 1703.00
Utilities
Electricity and heating 400.005
Water and sewer 70.00
Telephone 60.00
Home maintenance 200.00
Food 700.00
Clothing 250.00
Laundry and Drycleaning 230.006
Medical and dental expenses 100.00
Transportation 100.00
Recreation 50.00
Charitable contributions 150.007
Homeowner's insurance 120.00
Child care 300.00
School tuition
Son 485.00
Daughter 1660.00
_________
Total $6,578.00
In her testimony, Khan gave her explanations for the several items to which the Bank had taken great exception in its written motion. Though her husband has been unemployed since they left Nova Scotia,8 Khan testified that he is regularly out of the household for days or weeks at a time; he returns to Canada to help his brother in the operation of his brother's gas station and other businesses.9 Because she has to work 12-hour days with some frequency, and because her daughter is a full-time college student, she feels compelled to engage a babysitter to take care of her son during the time between the end of his school day and the end of her work day.
Both of Khan's children are enrolled in private schools, her daughter at the College of St. Catherine in St. Paul and her son in an elementary program at Convent of the Visitation School in Mendota Heights. When queried as to the need for these relatively costly placements, Khan stated that she felt compelled to give her children as good an education as she could, as her parents had done the same for her in Pakistan. Her daughter is not currently employed, even on a part-time basis, and apparently does not receive financial aid from her college.
In her original Schedules D, E, and F, Khan listed only one secured debt (her Minnesota homestead mortgage), no priority debts, and only two unsecured debts — the one in favor of the Bank and a $353.00 debt to the Eagan Athletic Club. As it turned out, the latter of the unsecured claims had been satisfied by a wage garnishment shortly before Khan's bankruptcy filing. In an amended Schedule F...
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