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The Court in the case of In re Coup, 2008 WL 2388114 (Bankr.N.D.Ohio)(Whipple, J.) recently examined the issue as the degree that a non-filing spouse's income is taken into consideration when only one spouse files for Chapter 7 relief in the context of a motion to dismiss as an "abuse" based on the "totality of the circumstances." Section 707(b)(3)(B). In this case although the debtor passed the "means test", the UST moved to dismiss the case based on the "totality of the circumstances." The Court ordered the case dismissed unless the Debtor converted the case to chapter 13.
The Court set forth the following factors in makings its determination: the neediness of the debtor, the ability to repay debts out of future earnings, the enjoyment of a stable source of future income, eligibility for Chapter 13, the availability of state remedies, relief obtainable through private negotiations, the ability to lower expenses, and the ability to fund a Chapter 13 plan. The Court found that the debtor and his wife enjoyed a stable source of income and that he was eligible for Chapter 13 relief. The Court also found that although the debtor's budget in schedules I and J reflected a negative monthly cash flow, that the debtor now had a monthly surplus which could be applied t repay a portion of his unsecured debt.
Significantly, the Court noted that there are differing opinions as to the degree of relevance of the non-filing spouse's income. The Court stated that some of the varying opinions are that the non-filing spouse's income is only taken into consideration only to the degree that it is regularly contributed to the household expenses, that it should be considered only if it is so substantial that it would raise the debtor's standard of living to the excess, and that it should be taken into consideration only to the extent of the debtor's living expenses that benefit the non-filing spouse. The Court decided that the most persuasive position is that the non-filing spouse's income must be reviewed to determine what degree a debtor's daily living expenses are shared as co-obligations of the non-debtor spouse or are assumed completely by the non-filing spouse. But the Court made clear that the non-filing spouse's income is not being rendered liable for the debts of the debtor, but is being considered in determining whether the debtor has available discretionary income by virtue of the fact that the debtor and non-filing spouse share a joint household. The Court noted that the case of In re Falke, 284 B.R. 133 (Bankr.D.N.D.1991) held that although Congress did not express an intention to require a non-filing spouse to assist the debtor in paying his debtor, that the non-fling spouse's income should be reviewed in determining whether there is discretionary income available to a debtor. The Falkecourt opined that a court should assume that both parties to a relationship share equally in the family living expenses and that the appropriate measure of a debtor's income for purposes of Section 707(b) would be the debtor's sole income less one-half of the family living expenses.
Based on the application of these principles, the Court found that the debtor's Chapter 7 case was an "abuse" and the case was ordered dismissed unless the debtor converted the case to Chapter 13 within 30 days.Jordan E. Bublick, Miami, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983