Bankr. E.D.N.C.: In re Hector- Accounting for Income, Expenses and Household Size under 11 U.S.C. § 707(b) with Domestic Partner

Summary:

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.

For a copy of the opinion, please see:

Hector- Accounting for Income, Expenses and Household Size under 11 U.S.C. § 707(b) with Domestic Partner

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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