Bankr. MDNC: In re Morrison- Household Size determined using "Economic Unit" Approach

Summary: The Court examined the three options for determining household size for Means Test calculations.  Rejecting both the Census Bureau "heads on beds" approach and the IRS dependency test, the Court instead found that an analysis of  "economic unit" was appropriate. "Head on Beds" could be inaccurate "[i]f the debtor’s household includes an individual who  purchases these items from his own separate income, and contributes nothing to the debtor’s household for these items, then the deduction will include an unwarranted extra amount that wouldotherwise be part of the debtor’s disposable income."  Similarly, the IRS dependency test fails as it may not "to take into account some individuals who may receive support from the debtor, or provide support to the debtor, which leads to skewed calculations of the debtor’s disposable income."  The "economic unit" test, however, is flexible enough to adjust to the "unique, novel, or unexpected living arrangement involved" in many bankruptcy cases. Accordingly, factors used in determining if an individual is part of the debtor’s household under the economic unit test include:

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.