In re Skaggs, Richard & Connie

• Decision Date: 16 August 2006
• Docket Number: No. 06-40457-399.,06-40457-399.
• Citation: 349 B.R. 594
• Court: U.S. Bankruptcy Court — Eastern District of Missouri
• Parties: In re SKAGGS, RICHARD & CONNIE, Debtors.

349 B.R. 594

In re SKAGGS, RICHARD & CONNIE, Debtors.

No. 06-40457-399.

United States Bankruptcy Court, E.D. Missouri, Eastern Division.

August 16, 2006.

Kenneth A. Seufert, Seufert & Aubuchon, P.C., Farmington, MO, for Debtors.

ORDER

BARRY S. SCHERMER, Chief Judge.

IN THIS DISTRICT, at St. Louis.

Plaintiff United States Trustee's ("Movant's") Motion to Dismiss Pursuant to 11 707(b)(2) was called and heard on July 17, 2006. Prior to the hearing, Movant filed a brief and Debtors' Counsel filed an amended reply and brief. Having received testimonial and documentary evidence as well as having reviewed the record as a whole, the Court finds that the Movant proved by a preponderance of the evidence that a presumption of abuse exists under 11 U.S.C. § 707(b)(2) in this case as discussed below.

FINDINGS OF FACT

1. This Court has jurisdiction in this matter pursuant to 28 U.S.C. § 1334(a) and (b), 28 U.S.C. § 157(a) and (b)(1) and 11 U.S.C. § 151. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (B), having been filed under 11 U.S.C. § 707(b)(2).

2. Debtors filed their Petition, Schedules, Statement of Financial Affairs, Statement of Current Monthly Income and Means Test Calculation ("B22A Form") and other related bankruptcy documents on February 7, 2006. Subsequent to the first setting of their 11 U.S.C. § 341 creditors' meeting, Debtors filed first amended Schedules D, F, J, Statement of Intention and B22A Form on March 17, 2006.

3. Amended Schedules D and F and Schedule E reflect the total unsecured debt to be primarily consumer debt of $40,725.59 which amount is not disputed by the parties.

4. On the amended Statement of Intention, the Debtors reiterated their previous intention to surrender their mobile home and their second vehicle, a 2001 Ford Taurus, to their respective secured lenders. However, the Debtors added that they intended to avoid the secured lender's lien on their three televisions, a computer and a rifle as exempted property. The amended Statement of Intention also states that the Debtors would reaffirm on their 2004 Dodge Stratus as well as retain a washer and dryer set by continuing to make regular payments to the secured creditor.

5. Debtor Richard Skaggs testified that Debtors had ceased making payments to the mobile home's secured creditor and had moved from the mobile home into an apartment before filing bankruptcy. On March 23, 2006, this Court granted, on the default by the Debtors to respond, the secured creditor's motion for lift stay on the mobile home.

6. Debtor Richard Skaggs further testified that the Debtors had ceased using and making payments on their 2001 Ford Taurus prior to the filing of this bankruptcy case, anticipating the secured creditor would repossess the vehicle.

7. Debtors' amended Schedule J sets out for monthly telecommunications costs, excluding telephone costs, $54.00 for cell phone and $102.00 for Internet. Uncontradicted testimony from Movant's witness, Cynthia Moore, Bankruptcy Analyst with the Office of United States Trustee, indicated that billing provided to her by the Debtors post-filing revealed current monthly billing for their Internet service as $16.99 and average cell phone service as $53.01.

8. Debtors' amended Schedule D sets out that three televisions, a computer and a rifle are subject to a non-purchase money security interest with an outstanding claim of $1,390.00. Their amended Schedule J sets out a monthly expense of $139.00 to the lender, World Finance Corp. Debtors' amended Statement of Intention declares that the property subject to this lien is claimed exempt and the lien will be avoided.

CONCLUSIONS OF LAW

9. Debtors' undisputed annualized current monthly income as set out on the amended Form B22A Form, line 13, is $55,570.00. The applicable median family income for a family of two is $44,631.00. Since the median family income is less that the Debtors' annualized current monthly income, Debtors completed the remaining Parts IV, V and VI of the amended B22A Form as required.

10. On line 20B, "Housing and Utilities; mortgage/rent expense", the parties agree that the Debtors set out the correct IRS Housing and Utilities Standards' net amount of $418.00 based on Debtors' applicable locale of their apartment residence. It should be noted, however, that Debtors did not subtract from the $418.00 on line 20Bb the average monthly payment of $236.70 as set out on Line 42 for their mobile home.

11. Debtors, having moved into an apartment at a monthly rent of $600.00 prior to case filing, claim an additional $182.00 above the $418.00 housing allowance set out on line 20Bc. The Debtors followed the second phrase of this line's instructions to "... enter any additional amount to which you contend you are entitled,..." Movant's witness testified that this additional rental expense on line 21 should be reduced to zero because Debtors have already claimed on line 20B the maximum allowable amount under the IRS Housing and Utilities Standards. The Court concurs with this argument and notes that the first phrase of the instructions on completing line 21 states unambiguously that only if the Debtors "... contend that the process set out in Lines 20A and 20B does not accurately compute the allowance to which you are entitled under the IRS Housing and Utilities Standards,..." (Emphasis added). Neither party has argued that Lines 20A and 20B together do not set out the maximum allowance under the IRS Housing and Utilities Standards which are considered a single expense by the IRS as set out in the IRS Manual, § 5.15.1.9.1. Further, the evidence adduced at the hearing by the Movant indicated that there were available in the Debtors' city of residence, Farmington, Missouri two person apartments for a monthly rental under the $418.00 Local IRS Standard. The Court also notes that the Debtors did not claim an additional expense for their housing under line 56 The Court finds that the IRS Local Standard of $418.00 is reasonable under the IRS Collection Financial Standards, IRS Manual 5.15.1.7, however, the expense on line 21 is reduced to zero.

12. Debtors on Line 22 claim a $345.00 vehicle operation expense for two or more vehicles and on Line 24 a $160.90 ownership expense for a second vehicle. Movant's witness testified that, as it has been the intention of the Debtors to surrender the 2001 Ford Taurus as set out on their Statements of Intention, they are entitled to only one vehicle operation expense of $251.00 on line 22 and no ownership expense for a second vehicle on line 24. The Court notes that the Debtors' original and amended Statements of Intention set out that the 2001 Ford Taurus will be surrendered and that the testimony by Debtor Richard Skaggs revealed that their decision to surrender was made prior to filing by ceasing payments to the secured lender and use of the vehicle. Debtors' counsel argues that 11 U.S.C. § 707(b)(2)(A)(ii)(I) allows Debtors to take those expenses in effect on the date of the order of relief regardless of debtors' intent to surrender, citing In re Walker, 05-15010-whd, 2006 WL 1314125 (Bankr. N.D.Ga.2006). Movant argues that the same statute states that the "debtor's monthly expenses shall be the debtor's applicable monthly expense amounts specified under the National and Local Standards.'" Emphasis added). The Court finds that the intention of the Debtors to surrender the 2001 Ford Taurus coupled with their decision not to use the vehicle preceded the filing of this bankruptcy case has remained constant thereafter. Further, it is instructive that the IRS Internal Revenue Manual at the Financial Analysis Handbook, § 5.15.1.7(4.B) states that "[i]f a taxpayer has a car payment, the allowable ownership cost added to the allowable operating cost equals the allowable transportation expense." Additionally, § 5.8.5.5.2 of the same Manual provides that the ownership expense is allowed only for the "purchase and/or lease of a vehicle". Lastly, the IRS Collection Financial Standards expressly state that "[t]he ownership costs provide maximum allowances for the lease or purchase of up to two automobiles if allowed as a necessary expense." Collection Financial Standards, www.irs.gov/individuals/ariticles/)..id= 96543,00.html. Congress, in utilizing IRS standards in providing expenses for vehicle operating and ownership expenses, intended that debtors continue to have future responsibility for owning and operating the vehicles for which they can claim expenses on the B22A Form. Accordingly, the operating expense of $345.00 on line 22 is reduced to $251.00 and the ownership expense for a second vehicle of $160.90 on line 24 is denied.

13. Movant's addition of a $0.56 monthly mandatory payroll deduction on line 26 is not disputed by the Debtors and is allowed.

14. Debtors' claim on line 31, Future Payments on Secured Claims, 60-month average secured payment expenses of $236.70 on the mobile home and $177.10 on the 2001 Ford Taurus. Also on Line 42 Debtors claim a $1622 expense for the 60-month average secured payment expense on three televisions, computer and a rifle. Debtors also include on line 43 monthly default cure amounts of $4.04 on the mobile home and $4.22 on the 2001 Ford Taurus. Movant's witness testified that these expenses should be denied because the Debtors, in stating on both of their Statements of Intention their intent to surrender the mobile home and the vehicle and to avoid the lien on the personal property, would not have monthly payments to pay on these properties. Mr. Richard Skaggs's testimony as to the unswerving intent of the Debtors to surrender the properties prior to and after the filing of this bankruptcy case is persuasive as to whether or not the Debtors will have to pay these expenses in the future. Further, it is relevant that the Debtors did not defend the lift stay motion filed by the mobile home creditor. Nor did Debtor Richard Skaggs testify at the hearing that the...