Facts:
-The Shaws, a married couple, filed for Chapter 7 on May 27, 2003.
-The Shaws have two children over the age of 20.
-Their house was valued at $415,000 but they testified it was actually worth less than $400,000.
-They listed personal property worth $56k. Their AGI for 2001 was $138,000, with an increase in 2002 to $157,000.
-They listed combined total income of $7,800.
-Mrs. Shaw lost her job, but receives $2,700 monthly income as severance. Mr. Shaw just received a raise.
-Their current Monthly Income is $7889. Their listed monthly expenses are only $7517.
-They have 3 cars and pay their daughters tuition.
-The Shaws have $469,000 in secured debt and $131,000 in unsecured credit card debt.
-They have 15 CC accounts!!!
Issue:
Is dismissal appropriate for substantial abuse under §707(b)
Holding:
Yes. This case shows substantial abuse. Delay the order for 10 days
to allow them to convert to Chapter 13 if they choose.
Analysis:
§101(8) defines their debts as primarily consumer debts. The Fourth
Circuit follows a “totality of the circumstances” test to decide
substantial abuse. It involves 1) sudden illness, disability,
unemployment, 2) the debtor’s schedules and statement of current
income and expenses reasonably reflect their true financial
condition, 3) whether the debtor incurred cash advances and made
consumer purchase in excess of his ability to repay; 4) whether the
proposed family budget is excessive or unreasonable; and 5) whether
the petition was filed in good faith.
- Debtor can repay a meaningful portion of their unsecured debt over 36 month period based on their income and future expenses.
- If debtor remains in Chapter 7, it will be a no asset case and unsecured receive nothing
- Their family budge is excessive and unreasonable. They ought to reduce their expenses significantly.
- Their son is a deadbeat and they should move to a smaller home. Reduce their phones, cars, and college expenses and it frees up $2k in monthly payments in a Chapter 13 plan.
- A discharge of their debt would be at the expense of the creditors
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