Ms. Hector, a realtor with income subject to fluctuation dependent on sales, filed Chapter 7, but did not include her Domestic Partner in her household size nor any income contribution, as their finances and expenses were neither commingled nor shared. Ms. Hector did not assist her Domestic Partner with housing expenses, but did pay all for all groceries and cleaning supplies for both. As such, Ms. Hector claimed deductions for housing and utility expenses on the Means Test. The Bankruptcy Administrator sought to dismiss the case, arguing that those were inapplicable and left sufficient disposable income to pay unsecured creditors.
The first issue addressed by the court was whether Ms. Hector may list a household size of one for means test purposes, when she shares a residence with a partner. Following Johnson v. Zimmer, 686 F.3d 224, 237 (4th Cir. 2012) and In re Morrison, 443 B.R. 378 (Bankr. M.D.N.C. 2011), the bankruptcy court applied the “economic unit” approach to determining household size, with factors including:
1) the degree of financial support provided to the individual by the debtor;
2) the degree of financial support provided to the debtor by the individual;
3) the extent to which the individual and the debtor share income and expenses;
4) the extent to which there is joint ownership of property;
5) the extent to which there are joint liabilities;
6) the extent to which assets owned by the debtor or the individual are shared, regardless of title; and
7) any other type of financial intermingling or interdependency between the debtor and the individual.
Finding that, due to their minimal financial commingling, the bankruptcy court held that Ms. Hector’s household size was 1.
Next the court examined whether Ms. Hector should include some or all of her Domestic Partner’s income in the Current Monthly Income calculation. Turning to the statute, the bankruptcy court held that 11 U.S.C. § 101(10A) only required inclusion of “any amount paid . . . on a regular basis for the household expenses of the debtor.” Since her Domestic Partner did not directly pay her or give any money, there was nothing to include.
In determining if the claimed housing and utility deductions were allowable, the bankruptcy court started with Ransom v. FIA Card Services, N..A., 562 U.S. 61, 64, 131 S.Ct. 716 (2011), which allowed only “applicable” expense amounts, which mean those that are mean “appropriate, relevant, suitable, or fit” in light of a debtor’s individual circumstances. Further, as Lynch v. Jackson, 853 F.3d 116, 119 (4th Cir. 2017) allows deductions which the debtor actually incurs, Ms Hector could not claim housing and utility deductions that she did not actually have. Accordingly, the case was ordered to be dismissed if not converted to Chapter 13.
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