In re Koren

• Decision Date: 05 January 1995
• Docket Number: Bankruptcy No. 94-17811DAS.
• Citation: 176 BR 740
• Parties: In re Henry Michael KOREN a/k/a Michael Koren d/b/a Skippack Roofing, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

176 B.R. 740 (1995)

In re Henry Michael KOREN a/k/a Michael Koren d/b/a Skippack Roofing, Debtor.

Bankruptcy No. 94-17811DAS.

United States Bankruptcy Court, E.D. Pennsylvania.

January 5, 1995.

Valerie S. Rosenbluth, Skippack, PA, for debtor.

Frederic Baker, Ass't. U.S. Trustee, Philadelphia, PA.

OPINION

DAVID A. SCHOLL, Chief Judge.

A. INTRODUCTION

Before this court is the Debtor's Application to waive the $160 filing fee and administrative fee, pursuant to the in forma pauperis ("IFP") pilot program established in this court and five other bankruptcy courts ("the IFP Program"), despite the fact that a $500 attorney's fee has been paid on the Debtor's behalf. We first review the standards for granting IFP relief, and determine that, putting aside the issue of payment of the attorney's fee, the Debtor clearly qualifies for IFP status. Then, declining to follow two decisions of other IFP Program courts holding that Federal Rule of Bankruptcy Procedure ("F.R.B.P.") 1006(b)(3) bars IFP relief to a debtor when attorney's fees are paid, In re Thompson, 177 B.R. 890 (Bankr.W.D.Tenn. 1994); and In re Takeshorse, 177 B.R. 99 (Bankr.D.Mont.1994), we hold that F.R.B.P. 1006(b)(3) does not apply to the IFP Program. We will therefore grant the Application.

B. HISTORY OF THE INSTANT MATTER

On November 30, 1994, HENRY MICHAEL KOREN ("the Debtor") filed a voluntary Chapter 7 bankruptcy case. The Debtor was represented in this filing by Valerie S. Rosenbluth, Esquire, a private attorney ("Counsel"). The prescribed detailed Application for Waiver of the Chapter 7 Filing Fee for Individuals Who Cannot Pay the Filing Fee in Full or in Installments ("the Application") was executed by the Debtor and presented on the date of filing in lieu of the normal $160 charges.

In that Application, the Debtor disclosed that his sole source of income was social security retirement benefits of $752 monthly, and that his monthly expenses were $998, $695 of which was paid for rent. The Application further stated that the Debtor had no assets other than ordinary household furnishings and clothing except $40 cash on hand. It also disclosed payment of $500 to Counsel's associate as attorney's fees for handling this case.

Although the United States Trustee's office, which is served with all IFP Applications filed in this court five days before they are presented to the assigned judge for consideration, did not object to our granting the Application, one of this court's two assigned IFP Clerks questioned how the Debtor could pay Counsel, but could not pay the filing fee, and recommended that this court schedule a hearing on the Application. On December 8, 1994, in consideration of this request, notice of a hearing before this court on December 22, 1994, was dispatched.

Only Counsel appeared at that hearing. However, since no party, including the United States Trustee, appeared to oppose the Application, we allowed Counsel to certify the pertinent facts. She stated that the Debtor was 66 years old, suffering from Alzheimer's disease, and frequently somewhat disoriented. She also stated that the $500 fee had been paid to her associate by the Debtor's son, Michael Koren ("Michael"). She stated that, when she was unable to reach Michael and the Debtor was unable to post the fee necessary to make a filing to prevent an imminent execution sale on his personal property, she decided to have him fill out and submit an IFP Application.

C. DISCUSSION

1. PUTTING ASIDE THE PAYMENT TO COUNSEL, THE DEBTOR CLEARLY MEETS THE STANDARD FOR PROCEEDING WITH THIS CASE IN FORMA PAUPERIS.

The only accurate general statement that can be made about the precise standards which an application for IFP status must meet is that no definitive standards have been developed by any court or commentator. There are several general pronouncements by appellate courts which have tended to discredit mechanical tests for denial of IFP motions. There are also a few published cases, mostly trial court decisions, in the IFP area, most of which have focused on certain specific aspects of the applicant's financial status which the respective courts deemed questionable. These decisions, on the whole, suggest that the court should attempt to analyze the applicant's entire financial picture in determining whether to allow IFP status. The decisive issue is often how much benefit of any doubt the court wishes to give a particular applicant. Commentators have typically set down the factors that some courts have found decisive and other courts have not, but have not developed any firm criteria of their own.

The most commonly-referenced Supreme Court pronouncement regarding the economic standards to be employed by deciding IFP applications is the following passage from Adkins v. E.I. DuPont de Nemours & Co., 335 U.S. 331, 339-40, 69 S.Ct. 85, 89, 93 L.Ed. 43 (1948):

We cannot agree with the court below that one must be absolutely destitute to enjoy the benefit of the IFP statute. We think an affidavit is sufficient which states that one cannot because of his poverty "pay or give security for the costs . . . and still be able to provide" himself and dependents "with the necessities of life." To say that no persons are entitled to the statute\'s benefits until they have sworn to contribute to payment of costs, the last dollar they have or can get, and thus make themselves and their dependents wholly destitute, would be to construe the statute in a way that would throw its beneficiaries into the category of public charges. The public would not be profited if relieved of paying costs of a particular litigation only to have imposed on it the expense of supporting he person thereby made an object of public support. Nor does the result seem more desirable if the effect of this statutory interpretation is to force a litigant to abandon what may be a meritorious claim in order to spare himself complete destitution. We think a construction of the statute achieving such consequences is an inadmissible one. See cases collected in 6 A.L.R. 1281-1287¹ for a discussion as to whether a showing of complete destitution should be made under this and similar statutes.

In Adkins, the Court reversed the denial of an IFP application of a widow, who owned her own home and lived on rent from part of the home, to avoid paying a $4,000 transcript cost to prosecute an appeal of a Fair Labor Standards Act claim on behalf of her late husband. The lower court's holding was based on its belief that other co-claimants could raise the funds necessary and because it believed that her attorney, working on a contingent fee, could advance the costs. The Court found these reasons to be insufficient grounds for denial of the application.

The most pertinent pronouncements of the Third Circuit Court of Appeals in the IFP area, in Souder v. McGuire, 516 F.2d 820, 823-24 (3d Cir.1975); and Lockhart v. D'Urso, 408 F.2d 354, 355 (3d Cir.1969), have arisen in prisoner cases, which apparently make up the vast majority of federal district court IFP matters. The Souder decision, while implicitly disapproving but not commenting on such decisions as Ward v. Werner, 61 F.R.D. 639 (M.D.Pa.1974) (which granted IFP status to a prisoner with $7.00 in his prison account but denied the applications of other prisoners with $65.00 and $50.00, respectively, on account), 516 F.2d at 821, allowed the IFP application of a prisoner who had $50.07 on account and in addition received $15.00 bi-weekly from his "aged mother." The most pertinent passage from this case, 516 F.2d at 823-24, reads as follows:

What we have said concerning the complexity of the legal issues involved here amply demonstrates that this habeas corpus petition is not one of the kind which can be litigated on the existence of a fund in the sum of $50.97 which is supplemented by an additional $7.50 per week stipend. The purpose of § 1915 is to provide an entre, not a barrier, to the indigent seeking relief in the federal court. The Supreme Court has recognized that one need not "contribute to payment of costs, the last dollar that they have or can get . . ." in order to enjoy the benefits of § 1915. Adkins, supra . . .

In like manner, we do not think that prisoners must totally deprive themselves of those small amenities of life which they are permitted to acquire in a prison or a mental hospital beyond the food, clothing, and lodging already furnished by the state. An account of $50.07 would not purchase many such amenities; perhaps cigarettes and some occasional reading material. These need not be surrendered in order for a prisoner or a mental patient to litigate in forma pauperis in the district court.

In Lockhart, commenting on the practice of dismissing pro se IFP prisoner cases on their merits without considering the applicant's indigency, the court states as follows, 408 F.2d at 355, that,

while there may be extreme circumstances where such a right should be denied for plain lack of merit, we think that, particularly in pro se cases, the right to proceed in forma pauperis should generally be granted where the required affidavit of poverty is filed. This approach minimizes, to some extent, disparity in treatment based on economic circumstances. An attack on the truth of such affidavit or the sufficiency of the complaint should be left for appropriate disposition after service has been made on the defendants. Compare Jordan v. County of Montgomery, Pa., et al., 404 F.2d 747 (3d Cir.1969).

This passage may suggest that searching out information beyond the IFP application to determine IFP status may be inappropriate. See also Sinwell v. Shapp, 536 F.2d 15, 18-19 (3d Cir.1976); and Taylor v. Robertson, 703 F.Supp. 392, 393 (E.D.Pa.1989).

There are several sources which reference factors which courts have generally considered in deciding IFP applications. The most comprehensive discussion in a local decision appears in United States v. Scharf, 354 F.Supp. 450, 451-52 (E.D.Pa...