In re Sale

• Decision Date: 15 October 2007
• Docket Number: No. 06-51290.,06-51290.
• Court: United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — Middle District of North Carolina
• Parties: In re Debbie H. SALE, Debtor.

Page 281

397 B.R. 281

In re Debbie H. SALE, Debtor.

No. 06-51290.

United States Bankruptcy Court, M.D. North Carolina, Winston-Salem Division.

October 15, 2007.

Thomas C. Flippin, Elkin, NC, for Debtor.

MEMORANDUM OPINION

THOMAS W. WALDREP, JR., Bankruptcy Judge.

This matter came before the Court on April 13, 2007, upon a Motion to Dismiss Case Pursuant to 11 U.S.C. § 707(b)(2), or in the Alternative, Pursuant to 11 U.S.C. § 707(b)(3) (the "Motion to Dismiss"), filed by the United States Bankruptcy Administrator (the "Bankruptcy Administrator") on December 6, 2006.¹ Thomas C. Flippin appeared on behalf of Debbie H. Sale (the "Debtor"), and Robin R. Whitman appeared on behalf of the Bankruptcy Administrator. After consideration of the Motion to Dismiss, the evidence presented at the hearing, the arguments of the parties, the entire official file, and the relevant law, the Court will grant the Motion to Dismiss.

I. FACTS

On September 26, 2006, the Debtor filed for bankruptcy relief under Chapter 7 of the Bankruptcy Code. The Debtor filed a Form B22A Statement of Current Monthly Income and Means Test Calculation with her petition. On November 27, 2006, the Debtor filed an amended Form B22A. On her Amended Form B22A, the Debtor reported current monthly income of $8,147.21 (line 12) and annualized income of $97,766.52 (line 13). The Debtor's household consists of four people, and the median family income for a family of four in North Carolina is $56,985.00 (line 14). After subtracting the allowed deductions, the Debtors report negative $385.73 of monthly disposable income under Section 707(b)(2) (line 50). The Debtor's 60-month disposable income is negative $23,143.80 ($385.73 x 60) (line 51), which does not exceed $10,000.00, and therefore a presumption of abuse does not arise under Section 707(b)(2).

The Debtor's marital adjustment on line 17 of her Form B22A (the "Marital Adjustment") totals $1,023.78. This amount includes $813.22 for payments of debts secured by three vehicles (the "Vehicles"), $176.56 for a loan payment, and $34.00 for life insurance and disability insurance payments. This amount (i.e., $1,023.78) is deducted from the paycheck of the Debtor's non-filing spouse (the "Spouse") before it is deposited into the joint account that the Debtor maintains with her Spouse. The Debtor's adjusted Current Monthly Income is $7,123.43 (line 18). On lines 23 and 24, the Debtor has taken deductions of $471.00 and $332.00, respectively, for two of the Vehicles pursuant to the IRS local Standards for transportation ownership/lease expenses (the "Transportation Ownership Expense").

At the Debtor's Section 341 meeting on October 27, 2006, the Debtor testified, and the parties have so stipulated, that although she took the Transportation Ownership Expense deductions for two of the Vehicles,² she did not own any of the Vehicles, all three Vehicles were titled in her Spouse's name, and she was not liable for any portion of the debt secured by the Vehicles. The Vehicles include a 2005 Kia Sedona van operated mainly by the Debtor, with a monthly payment of $278.26; a 1999 Ford F-250 truck mainly operated by the Spouse, with a monthly payment of $370.20; and a 1999 Kia Sportage mainly operated by the Debtor's daughter. There is currently no lien on the Kia Sportage.³

The Debtor and her Spouse maintain a joint account where both of their salaries are deposited. The expenses of the household are paid from the joint account. Expenses for gas, oil changes, and other maintenance on the Kia van and the Ford F-250 truck are paid out of the joint account. The Spouse uses the Ford F-250 truck for work and household purposes. The Debtor's daughter occasionally uses the Kia Sportage for household purposes, such as errands.

The Debtor testified that all of her debts are consumer debts.

The issues before the Court involve the Transportation Ownership Expense deduction, the Marital Adjustment, and Section 707(b)(2).⁴ The Bankruptcy Administrator argues that when the income of the Spouse is taken into account and appropriate adjustments are made to the Debtor's expenses and deductions, the Debtor has disposable income that would provide for a meaningful distribution to her unsecured creditors. The Bankruptcy Administrator bases this argument on two facts. First, the Debtor takes an ownership deduction for the Kia Sedona and the Ford F-250 truck even though she does not own these Vehicles, is not liable for making the payments on them, and does not make payments on them. Second, the Debtor deducts the payments on the Kia Sedona and the Ford F-250 truck as part of her Marital Adjustment on line 17 of her Form B22A and on the Transportation Ownership Expense on lines 23 and 24. The Bankruptcy Administrator argues that this is a "double dip" by the Debtor.⁵

The Debtor admits that allowing the deduction for the Vehicle expense in both the Marital Adjustment and the Transportation Ownership Expense portions of Form B22A could be characterized as double dipping, but she asserts that she did so only because there is no guidance as to what should be included in the Marital Adjustment. The Debtor argues that if the Court disallowed the deduction for the vehicle payments in the Marital Adjustment, then the Vehicle Ownership Expense deduction should be allowed. The Debtor bases this argument on the fact that on Form B22A the income of both the debtor and the non-filing spouse must be included. It follows, the Debtor argues, that a debtor should be allowed to deduct for the expenses that her family actually experiences. Further, the Debtor argues that the reasoning of this Court in In re Enright⁶ should prevail in this case. In Enright, this Court determined that ownership of a vehicle free and clear of all liens does not control whether a debtor can take the Transportation Ownership Expense on line 23 of the B22A Form. Id. at 276, 2007 WL 748432 *5-7. The Debtor argues that the Court must look to the Debtor's actual expenses and use those to cap the deductions that the Debtor is allowed to take. The Debtor cites Enright as support for her position,⁷ reasoning that if only one spouse holds title to a vehicle but the other spouse contributes to the expenses associated with that vehicle, then ownership of the vehicle should not control as to whether the Transportation Ownership Expense is allowed.

II. DISCUSSION

The Bankruptcy Administrator seeks dismissal of the Debtor's case pursuant to Section 707(b)(2)(A)(I) of the Bankruptcy Code, which provides:

In considering under paragraph (1) whether the granting of relief would be an abuse of the provisions of this chapter, the court shall presume abuse exists if the debtor's current monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv), and multiplied by 60 is not less than the lesser of—

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

(II) $10,000.

11 U.S.C. § 707(b)(2)(A)(I).

The moving party, in this case the Bankruptcy Administrator, has the burden of proving substantial abuse pursuant to Section 707. In re Hall, No. 06-71296, 2007 WL 445517 at *1-2 (Bankr.C.D.Ill. Feb. 12, 2007); In re Quarterman, 342 B.R. 647, 652 (Bankr.M.D.Fla.2006)(citing In re Heath, 182 B.R. 557, 561 (9th Cir. BAP 1995)).

This case presents two related issues. First, may a debtor properly take the Transportation Ownership Expense on line 23 of the B22A Form where the vehicle is not owned by the debtor, she is not obligated to make the payment on the vehicle, and she does not in fact make the payment?⁸ Second, may a debtor properly take the Transportation Ownership Expense for a vehicle where she also deducts the monthly payment on the vehicle by including it in the Marital Adjustment on line 17 for income not contributed by her non-filing spouse?

A. The Transportation Ownership Expense

Several courts have addressed whether a debtor can deduct the Transportation Ownership Expense for a vehicle that she owns free and clear. This Court finds the well-reasoned analysis in In re Sawdy, 362 B.R. 898, 902-903 (Bankr.E.D.Wis.2007), to be the most persuasive. The Sawdy court analyzed the cases that have examined the language of Section 707(b)(2)(A)(ii)(I) in the context of this issue and noted that half of them have allowed the deduction, while the other half have disallowed it. Compare In re Hardacre, 338 B.R. 718 (Bankr.N.D.Tex.2006)(refusing to allow debtor to deduct ownership cost); In re McGuire, 342 B.R. 608 (Bankr.W.D.Mo.2006) (same); In re Barraza, 346 B.R. 724 (Bankr.N.D.Tex. 2006)(same); In re Oliver, 350 B.R. 294, 301 (Bankr.W.D.Tex.2006)(same); In re Wiggs, No. 06-70203, 2006 WL 2246432 at *1-2 (Bankr.N.D.Ill., Aug. 4, 2006)(same); In re Carlin, 348 B.R. 795 (Bankr.D.Or. 2006) (same); In re Harris, 353 B.R. 304 (Bankr.E.D.Okla.2006)(same) with In re Fowler, 349 B.R. 414 (Bankr.D.Del.2006)(allowing debtor to deduct ownership cost); In re Wilson, 356 B.R. 114 (Bankr.D.Del.2006)(same); In re Hartwick, 352 B.R. 867 (Bankr.D.Minn. 2006)(same); In re Haley, 354 B.R. 340 (Bankr.D.N.H.2006)(same); In re Grunert, 353 B.R. 591 (Bankr.E.D.Wis.2006)(same); and In re Prince, No. 06-10328, 2006 WL 3501281 at *1 (Bankr.M.D.N.C. 2006)(same); see also In re Swan, 368 B.R. 12 (Bankr.N.D.Cal.2007); In re Ragle, No. 06-30208, 2007 WL 1119632 at *1-2 (Bankr.E.D.Ky. Mar. 23, 2007)(concurring with Sawdy); In re Talmadge, 371 B.R. 96, (Bankr.M.D.Pa.2007)(disagreeing with Sawdy). The conclusions reached by these courts, being divided, are not helpful, but the reasoning behind their decisions is instructive.

Although all of the courts that have addressed this issue have relied upon the "plain meaning" doctrine to support their conclusions, they are evenly divided on what that meaning is. Sawdy, 362 B.R. at 903-904. The Sawdy court concluded that "the `plain meaning' rule is not particularly helpful in analyzing the statutory...