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E.D.N.C.: In re Gregory- Marital Adjustment under § 707(b)

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By Ed Boltz, 16 May, 2012
Summary: The Debtor excluded from her CMI her non-filing husband's monthly payments of $166.00 for his student loans and $1,628.00 related to  their former residence, including renovation costs..  This resulted in a negative disposable monthly income.  The Bankruptcy Administrator argued that since the non-filing spouse was spending money on expenses and renovations of joint property, such payments were benefitting the Debtor and should be included in CMI. First the Bankruptcy Court and then, on appeal, the District Court agreed with the Debtor, finding that 11 U.S.C. § 101(10A)(B) included within the Debtor's CMI "any amount paid by any entity other than the debtor ... on a regular basis for the household expenses of the debtor or the debtor's dependents...."  The District Court examined the term "household expenses" by looking to  the definition used by the 4th Circuit for the similar term "household goods" in In re McGreevy, 955 F.2d 957, 961-962 (1992), as "those items of person property that are typically found in or around the home and used by the debtor or his dependents to support and facilitate day-to-day living within the home, including maintenance and upkeep of the home itself."  Even if the non-filing husband were to stop paying  these debts, "it would not affect the day-to-day functioning of the debtor's household." The Bankruptcy Administrator also objected under the "totality of the circumstances" test of 11 U.S.C. § 707(b)(3), arguing that as the former residence was unencumbered, its eventual liquidation (even though fully exempt) would  provide sufficient proceeds to pay all of the Debtors claims.  Using the pre-BAPCPA Green factors as "instructive guidance", the District Court held that exempt assets were not a basis for finding abuse under  § 707(b)(3). For a copy of both the district and bankruptcy court opinions, please see: Gregory- Marital Adjustment under § 707(b) (District).pdf Gregory- Marital Adjustment under § 707(b) (Bankruptcy).pdf

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