The Bankruptcy Administrator sought dismissal of Mrs. Gonyo’s Chapter 7 arguing that she improperly excluded several of her non-filing husband’s expenses as “marital adjustments” from her Current Monthly and also failed to include both the couple’s tax refund and her husband’s incentive pay in that calculation.
In reaching the later conclusion, the bankruptcy court defined “income” as “a gain or recurrent benefit . . . that derives from capital or labor.” In re Sanchez, No. 06-40865, 2006 WL 2038616, at *2 (Bankr. W.D. Mo. 2006) and that her husband’s incentive pay received during the preceding six calendar months was included in CMI.
As to the tax refund, Mrs. Gonyo argue that since it was received outside the six calendar months it was not included in CMI. The bankruptcy court, however, held that Mrs. Gonyo’s portion of the tax refund must be pro rated over 12 months to adjust the actual tax liability deduction in the Means Test.
In regard to the Marital Adjustment, the bankruptcy court held that only those expenses that “do not support, benefit, or otherwise affect household members” (emphasis in the original) and that are “purely personal in character to the non-debtor spouse” (emphasis again in the original) are appropriate . The bankruptcy court rejected Mrs. Gonyo’s contention, from In re Gregory, No. 10-09739-8-JRL, 2011 WL 5902884 (Bankr. E.D.N.C. Aug. 17, 2011), aff’d sub nom. Bankr. Adm’r v. Gregory, 471 B.R. 823 (E.D.N.C. 2012), that expenses not necessary for the “day-to-day functioning of the household” was a controlling factor. Accordingly, the expenses for the RV, the college expenses for two children and the soccer expenses for a third were household expenses that could not be excluded under the marital adjustment.
Lastly, the bankruptcy court held that the failure to include all applicable income and the accumulation of $40,000 in debt in just her name since her prior bankruptcy, raised concerns about abuse under the totality of the circumstances of § 707(b)(3), but that the court was not required to address, since the case would be dismissed under § 707(b)(1).
While Mrs. Gonyo has converted her case to Chapter 13, many of these issues may not have been thrown into such sharp relief if the case had originally been filed with some dividend proposed to the sole unsecured creditor.
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