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Topics:

Topic #47:

Keywords: means test . expenses . luxury expenses . totality of circumstances . dismissal .

Expenses: What constitutes a "luxury" vs. a "reasonable and necessary" expense?

  • Topic Overview
  • 12 Cases on This Topic
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Expenses: What constitutes a "luxury" vs. a "reasonable and necessary" expense?

12 Cases , IssueID 47

Ch 7 Means Test
Form 22A, Line 25
Ch 13 Means Test
Form 22C Line

Topic Description:

Given the case by case nature of these decisions, it's hard to discern a pattern. But here is a collection.

Lines of Cases:

A:

Second car for single debtor not a luxury where good cause shown

B::

Debtor can be forced to get cheaper alternative replacement

C:

Debtors NOT required to find cheaper replacement

D:

Debtor may not keep 'luxury' asset

E:

"Everything else..."

  • Type A = Second car for single debtor not a luxury where good cause shown
  • Type B = Debtor can be forced to get cheaper alternative replacement
  • Type C = Debtors NOT required to find cheaper replacement
  • Type D = Debtor may not keep 'luxury' asset
  • Type E = "Everything Else"
  • Cases for Zip
  • All Cases By Date
  • Cases A - Z

Cases for Zip , California Northern District Bankruptcy Court

Ninth Circuit Cases

No Ninth Circuit cases in database on this topic

Other Circuits

� 1n re Kramp

Bankr. N.D. WV - Case No. 10-1681 - 2011-09-06 - 13 ,

Google ID#: 6183996337396829750
(Type D : Debtor may not keep 'luxury' asset )

Chapter 13 plan to keep expensive Harley Davidson motorcycle with monthly payments of $401 was bad faith.

� In re Gregory

Bankr.M.D.Pa - 452 BR 895 - 2011-07-13 - ,

Google ID#: 4240558836887720450
(Type E : )

Although debtor documented additional expenses deductions for housing and utility expenses (Line 26 Form 22C) , court still found they are not all "reasonable and necessary" but still allowed some.

� In re Wick

Bankr.D.Maryland - 421 B.R. 206 - 2010-01-05 - 13 , Above

Google ID#: 2303263416814642886
(Type C : Debtors NOT required to find cheaper replacement )

No "bad faith" found where Ch 13 debtors were living in home with $4,856 monthly mortgage payments (4.7x times the IRS allowance)

� In re Daniel-Sanders

Bankr.W.D.New York - 420 B.R. 102 - 2009-12-30 - 13 , Below

Google ID#: 2931058598154397293
(Type E : )

Debtor was allowed to deduct expenses for two cars because she left one for her father to provide child care for her kids while she went to work with the other car. However, debtor could not reaffirm debt of 27K on car worth only 12K -- must surrender and find cheaper replacement for that car for less than 16K.

� In re Meurer

Bankr.N.D.Texas - Case No. 09-41446 - 2009-11-18 - 7 , Above

Google ID#: 3121974087627781095
(Type B : Debtor can be forced to get cheaper alternative replacement )

Debtor's gambling and luxury lifestyle indicate that choices could be made to repay debts. Totality of circumstances prohibits chapter 7.

� In re Boyle

Bankr.W.D. New York - 412 BR 108 - 2009-09-11 - 7 , Above

Google ID#: 15601227414596467207
(Type D : Debtor may not keep 'luxury' asset )

debtor can't keep boat while seeking discharge of unsecured debts.

� In re Castellaw

Bankr.N.D.Texas - 401 B.R. 223 - 2009-02-10 - 7 ,

Google ID#: 17472080381151798819
(Type B : Debtor can be forced to get cheaper alternative replacement )

Dismissal warranted under "totality of circumstances" where debtors purchased a new GMC Yukon shortly before filing, took a trip to Florida a month before filing, lived in an expensive home, wanted to keep their boat, and supported their 22-year-old son.

� In re Rhoades

Bankr. M.D.N.C. - Case No. 08-10758 - 2009-01-21 - 7 , Above

Google ID#: 11887776314587604057
(Type D : Debtor may not keep 'luxury' asset )

The court considered the debtors' house an excessive cost and debtors case was dismissed pursuant to Section 707(b)(3) [the totality of the circumstances].

� In re Namie

Bankr. D. South Carolina - 395 BR 594 - 2008-08-05 - 13 ,

Google ID#: 18373868757828001066
(Type : )

No evidence was presented that demonstrates Debtor's mortgage expense is reasonably necessary. As in Wolf, Debtor's housing expense is more than five times that allowed by the I.R.S. and is not reasonable or necessary considering Debtor's family size, income level, location, and lack of other special needs. See In re Wolf, C/A No. 07-06119-D, slip op., 2008 WL 2117156, *5 (Bankr.D.S.C. May 16, 2008) (dismissing a chapter 7 case for abuse); Kaminski, 387 B.R. at 193 (discussing factors to be considered in determining whether a housing expense is excessive).

� In re Allawas

Bankr.D.S.C. - Case No. 07-06058 - 2008-03-03 - 13 , Below

Google ID#: 18373868757828001066
(Type D : Debtor may not keep 'luxury' asset )

denying confirmation, despite the use of exempt social security income, for lack of good faith where debtor proposed to retain an expensive motorcycle as a second vehicle

� In re Moutousis

E.D. Mich. - 418 B.R. 703 - - ,

Google ID#: 7091470619535566465
(Type E : )

Where debtor's housing expenses were three times the allowance. Trustee still must make a showing that this constitutes abuse under the totality of the circumstances.

Case remanded to have an evidentiary hearing where lower court shall apply the factors in Krohn (886 F.2d at 126.) That is:
"In determining whether a debtor was not needy, the Krohn court stated:
Among the factors to be considered in deciding whether a debtor is needy is his ability to repay his debts out of future earnings. Walton, 866 F.2d at 984-85; Kelly, 841 F.2d at 914-15 (collecting cases). That factor alone may be sufficient to warrant dismissal. For example, a court would not be justified in concluding that a debtor is needy and worthy of discharge, where his disposable income perm its liquidation of his consumer debts with relative ease. Other factors relevant to need include whether the debtor enjoys a stable source of future income, whether he is eligible for adjustment of his debts through Chapter 13 of the Bankruptcy Code, whether there are state remedies with the potential to ease his financial predicament, the degree of relief obtainable through private negotiations, and whether his expenses can be reduced significantly without depriving him of adequate food, clothing, shelter and other necessities."


� In re Caccamise

Bankr. E.D.Va. - No. 09-17165-SSM - - 13 , Below

Google ID#: 16009563107363208963
(Type E : )

Debtor was allowed to pay a small credit card bill outside the plan in order to allow her to keep the card which was necessary to continuing her independent contractor real estate business.

The court said, "there is a rational basis for the classification, and that the classification -- while it may or may not be 'necessary' in the strict sense -- is nevertheless likely to promote the debtors' rehabilitation under Chapter 13. As an independent contractor real estate agent, the [debtor] receives income only when a real estate sale is consummated, and it seems likely that a number of business- related expenses, such as advertising, would often need to be incurred in order to bring about the sale. Since the money to pay the expenses might not materialize for several months after the expense is incurred, having a credit card to which the payment could be charged makes sense."

� 1n re Kramp

Bankr. N.D. WV - Case No. 10-1681 - 2011-09-06 - 13 ,

Google ID#: 6183996337396829750
(Type D : Debtor may not keep 'luxury' asset )

Chapter 13 plan to keep expensive Harley Davidson motorcycle with monthly payments of $401 was bad faith.

� In re Gregory

Bankr.M.D.Pa - 452 BR 895 - 2011-07-13 - ,

Google ID#: 4240558836887720450
(Type E : )

Although debtor documented additional expenses deductions for housing and utility expenses (Line 26 Form 22C) , court still found they are not all "reasonable and necessary" but still allowed some.

� In re Wick

Bankr.D.Maryland - 421 B.R. 206 - 2010-01-05 - 13 , Above

Google ID#: 2303263416814642886
(Type C : Debtors NOT required to find cheaper replacement )

No "bad faith" found where Ch 13 debtors were living in home with $4,856 monthly mortgage payments (4.7x times the IRS allowance)

� In re Daniel-Sanders

Bankr.W.D.New York - 420 B.R. 102 - 2009-12-30 - 13 , Below

Google ID#: 2931058598154397293
(Type E : )

Debtor was allowed to deduct expenses for two cars because she left one for her father to provide child care for her kids while she went to work with the other car. However, debtor could not reaffirm debt of 27K on car worth only 12K -- must surrender and find cheaper replacement for that car for less than 16K.

� In re Meurer

Bankr.N.D.Texas - Case No. 09-41446 - 2009-11-18 - 7 , Above

Google ID#: 3121974087627781095
(Type B : Debtor can be forced to get cheaper alternative replacement )

Debtor's gambling and luxury lifestyle indicate that choices could be made to repay debts. Totality of circumstances prohibits chapter 7.

� In re Boyle

Bankr.W.D. New York - 412 BR 108 - 2009-09-11 - 7 , Above

Google ID#: 15601227414596467207
(Type D : Debtor may not keep 'luxury' asset )

debtor can't keep boat while seeking discharge of unsecured debts.

� In re Castellaw

Bankr.N.D.Texas - 401 B.R. 223 - 2009-02-10 - 7 ,

Google ID#: 17472080381151798819
(Type B : Debtor can be forced to get cheaper alternative replacement )

Dismissal warranted under "totality of circumstances" where debtors purchased a new GMC Yukon shortly before filing, took a trip to Florida a month before filing, lived in an expensive home, wanted to keep their boat, and supported their 22-year-old son.

� In re Rhoades

Bankr. M.D.N.C. - Case No. 08-10758 - 2009-01-21 - 7 , Above

Google ID#: 11887776314587604057
(Type D : Debtor may not keep 'luxury' asset )

The court considered the debtors' house an excessive cost and debtors case was dismissed pursuant to Section 707(b)(3) [the totality of the circumstances].

� In re Namie

Bankr. D. South Carolina - 395 BR 594 - 2008-08-05 - 13 ,

Google ID#: 18373868757828001066
(Type : )

No evidence was presented that demonstrates Debtor's mortgage expense is reasonably necessary. As in Wolf, Debtor's housing expense is more than five times that allowed by the I.R.S. and is not reasonable or necessary considering Debtor's family size, income level, location, and lack of other special needs. See In re Wolf, C/A No. 07-06119-D, slip op., 2008 WL 2117156, *5 (Bankr.D.S.C. May 16, 2008) (dismissing a chapter 7 case for abuse); Kaminski, 387 B.R. at 193 (discussing factors to be considered in determining whether a housing expense is excessive).

� In re Allawas

Bankr.D.S.C. - Case No. 07-06058 - 2008-03-03 - 13 , Below

Google ID#: 18373868757828001066
(Type D : Debtor may not keep 'luxury' asset )

denying confirmation, despite the use of exempt social security income, for lack of good faith where debtor proposed to retain an expensive motorcycle as a second vehicle

� In re Moutousis

E.D. Mich. - 418 B.R. 703 - - ,

Google ID#: 7091470619535566465
(Type E : )

Where debtor's housing expenses were three times the allowance. Trustee still must make a showing that this constitutes abuse under the totality of the circumstances.

Case remanded to have an evidentiary hearing where lower court shall apply the factors in Krohn (886 F.2d at 126.) That is:
"In determining whether a debtor was not needy, the Krohn court stated:
Among the factors to be considered in deciding whether a debtor is needy is his ability to repay his debts out of future earnings. Walton, 866 F.2d at 984-85; Kelly, 841 F.2d at 914-15 (collecting cases). That factor alone may be sufficient to warrant dismissal. For example, a court would not be justified in concluding that a debtor is needy and worthy of discharge, where his disposable income perm its liquidation of his consumer debts with relative ease. Other factors relevant to need include whether the debtor enjoys a stable source of future income, whether he is eligible for adjustment of his debts through Chapter 13 of the Bankruptcy Code, whether there are state remedies with the potential to ease his financial predicament, the degree of relief obtainable through private negotiations, and whether his expenses can be reduced significantly without depriving him of adequate food, clothing, shelter and other necessities."


� In re Caccamise

Bankr. E.D.Va. - No. 09-17165-SSM - - 13 , Below

Google ID#: 16009563107363208963
(Type E : )

Debtor was allowed to pay a small credit card bill outside the plan in order to allow her to keep the card which was necessary to continuing her independent contractor real estate business.

The court said, "there is a rational basis for the classification, and that the classification -- while it may or may not be 'necessary' in the strict sense -- is nevertheless likely to promote the debtors' rehabilitation under Chapter 13. As an independent contractor real estate agent, the [debtor] receives income only when a real estate sale is consummated, and it seems likely that a number of business- related expenses, such as advertising, would often need to be incurred in order to bring about the sale. Since the money to pay the expenses might not materialize for several months after the expense is incurred, having a credit card to which the payment could be charged makes sense."

All Cases A to Z

  • 1n re Kramp, Case No. 10-1681 , (Bankr. N.D. WV ) 2011-09-06, #6183996337396829750
  • In re Allawas, Case No. 07-06058 , (Bankr.D.S.C. ) 2008-03-03, #18373868757828001066
  • In re Boyle, 412 BR 108 , (Bankr.W.D. New York ) 2009-09-11, #15601227414596467207
  • In re Caccamise, No. 09-17165-SSM , (Bankr. E.D.Va. ) , #16009563107363208963
  • In re Castellaw, 401 B.R. 223 , (Bankr.N.D.Texas ) 2009-02-10, #17472080381151798819
  • In re Daniel-Sanders, 420 B.R. 102 , (Bankr.W.D.New York ) 2009-12-30, #2931058598154397293
  • In re Gregory, 452 BR 895 , (Bankr.M.D.Pa ) 2011-07-13, #4240558836887720450
  • In re Meurer, Case No. 09-41446 , (Bankr.N.D.Texas ) 2009-11-18, #3121974087627781095
  • In re Moutousis, 418 B.R. 703 , (E.D. Mich. ) , #7091470619535566465
  • In re Namie, 395 BR 594 , (Bankr. D. South Carolina ) 2008-08-05, #18373868757828001066
  • In re Rhoades, Case No. 08-10758 , (Bankr. M.D.N.C. ) 2009-01-21, #11887776314587604057
  • In re Wick, 421 B.R. 206 , (Bankr.D.Maryland ) 2010-01-05, #2303263416814642886

FAQ/Help:

How to use case law (it can be tricky)

If you're not familiar with what "case law" is, and how to use it, check out Chapter 7 of Nolo's LegalResearch: How to Find and Understand the Law for a guide to how to read through a case to get the parts that matter.

Also, you need to be familiar with the concept of "jurisdiction." Here are some helpful links:

When you read a case, check to make sure that the case's decision applies to your local district. Do this by looking at which court has decided the case -- either the U.S. Supreme Court, a court of appeal (listed here in large type), or a district court (listed in small type).  Your local district court judge is not bound to follow the opinion of judges from other district courts, but often they look to these cases for advice. Your local district, however, is bound  to follow decisions in cases from it governing circuit court. You'll see fairly few Supreme Court case here, but those cases are also binding on all districts."

Are these all the bankruptcy cases there are?

NO! NO! NO! This is a start for your research. New cases are constantly being decided. I update this when I have time. This is only a fraction of the actual published opinions out there. Dozens of cases are handed down nationwide every week. I catalog interesting ones when I have time. They are meant to serve as a starting point for your research -- NOT as a comprehensive listing of the current state of the law.

 

DISCLAIMER. By using this database you acknowledge and agree to the following:

This database does not contain every relevant case in every district on the topics covered; there are high priced services for that. This is free. It is offered to the public "as is" as an adjunct to the Nolo books, How to File Chapter 7 Bankruptcy, and Chapter 13 Bankruptcy: Keep Your Property and Repay Your Debts Over Time (10th Edition, 2010): which I co-author with attorney Stephen Elias.

This database is updated as time permits. Do not assume that it has the latest case in your district. We are still filling holes in the database -- and will always be. Use it as a place to start your reasearch, rather than the final answer to your question.

Some of these issues involve the discretion of the judge which can vary from judge to judge. So, even if you find a case just like yours where a judge went your way, as they say in the car biz, "your mileage may vary..."

If you're not familiar with what "case law" is, and how to use it, check out Chapter 7 of Nolo's LegalResearch: How to Find and Understand the Law for a guide to how to read through a case to get the parts that matter.

For more help, click the "?" tab.

 


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