Andrew D. Conlee and Amy S. Conlee

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AUTHENTICATED
U.S. GOVERNMENT

INFORMATION 7

UNITED STATES BANKRUPTCY COURT On &
FOR THE NORTHERN DISTRICT OF OHIO Ge <
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PA

In Re: ) “Bp a “op $5
) JUDGE RICHARD L2sheER
Andrew/Amy Conlee ) O Up
) Case No. 10-31243
Debtor(s) )
)
DECISION AND ORDER

This cause comes before the Court on the Motion of the United States Trustee to Dismiss this
case pursuant to 11 U.S.C. § 707(b)(1), § 707(b)(2) and § 707(b)(3). (Doc. No. 14). The Debtors filed
a response to the Motion, objecting to the Dismissal of their case. (Doc. No. 19). A Hearing was then
held on the matter. At the conclusion of the Hearing, the Court deferred ruling on the Motion to Dismiss
so as to afford the opportunity to further consider the evidence and arguments submitted by the Parties.
(Doc. No. 20). The Court has now had the opportunity to review all of the arguments and evidence
submitted in this case, and finds, for the reasons now explained, that the Motion of the United States

Trustee to Dismiss has Merit.
DISCUSSION

On March 4, 2010, the Debtors, Andrew and Amy Conlee, filed a petition in this Court for relief
under Chapter 7 of the United States Bankruptcy Code. (Doc. No. 1). The Debtors also, as required by
the Bankruptcy Rules, filed an Official Form B22A, entitled “Chapter 7 Statement of Current Monthly
Income and Means-Test Calculation.” This form implements the requirement of § 707(b)(2)(C),
requiring a debtor to perform the ‘means test’ calculation of § 707(b)(2) so as to determine if granting
relief in the case should be presumed to be an abuse. In completing Form B22A, the Debtors, who
represented that they had a combined gross annual income of approximately $84,000.00, determined that

no presumption of abuse arose in their case, checking then the applicable box on the Form. (Doc. No.

1).

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In re: Andrew and Amy Conlee
Case No. 10-31243

On June 4, 2010, the United States Trustee (hereinafter the “UST”) filed the Motion now before
the Court to Dismiss this case. In the Motion, the UST took issue with two deductions taken by the
Debtors in performing their ‘means test’ calculation on Form B22A: (1) an ownership expense for
transportation in the amount of $340.20 per month; and (2) an expense of $500.00 per month for the
repayment of a student-loan debt in the name of the Debtor, Amy Conlee.

For the last expense, the student-loan payment, the evidence before the Court revealed that the
obligation was incurred by Mrs. Conlee between 2001-2005 to obtain an associate degree in nursing. The
outstanding balance on this loan now stands at approximately $81,000.00, and constitutes 63% of the

Debtors’ outstanding unsecured debt.

After the UST filed its Motion, the Debtors acknowledged that, under the ‘means test’
formulation of § 707(b)(2), they were not entitled to take a $500.00 per month deduction for the
repayment of their student-loan debt. (Doc. No. 19). Furthermore, the Debtors acknowledged that, once
this adjustment was made, the ‘means test’ calculation of § 707(b)(2) yielded a result showing that the
granting of relief in their case should be presumed to be an abuse. Jd. The Debtors, however, take the
position that their Chapter 7 case should not be dismissed, citing to § 707(b)(2)(B) as the basis for their

position.

Under § 707(b)(2)(B), if the presumption of abuse arises when performing the ‘means test’
calculation of § 707(b)(2), it may be rebutted by a debtor demonstrating the existence of “special
circumstances.” According to the Debtors, Mrs. Conlee’s student loan constitutes a “special
circumstance,” justifying an adjustment to the ‘means test’ calculation for two reasons: (1) the student
loan is nondischargeable, and therefore the Debtors have no reasonable alternative but to pay the
obligation; and (2) the student loan constitutes 63% of their unsecured debt, lessening the benefit that
any plan of reorganization will confer upon the Debtors’ general body of unsecured creditors. (Doc. No.

19).

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In re: Andrew and Amy Conlee
Case No. 10-31243

Recently, in the case of In re: Gregory/Jennifer Burggraf, Case No. 10-32297, the Court was
presented with the question of whether the debtors’ student-loan obligations constituted a “special
circumstances” for purposes of § 707(b)(2)(B)? In a written decision entered by the Court, wherein the

issue was addressed in depth, two conclusions were reached.

First, it was determined that expenses associated with a debtor’s student-loan debt could not
constitute a per se “special circumstance” within the meaning of § 707(b)(2)(B)(i). Second, the Court
determined that, under the particular circumstances presented in In re: Gregory/Jennifer Burggraf, the
debtors’ repayment of their student loans did not arise to the level ofa “special circumstance,” justifying
an adjustment to the debtors’ ‘means test’ calculation. These same conclusions are equally applicable
in this particular matter, with a copy of the Court’s decision in In re: Gregory/Jennifer Burggraf

attached hereto, and made a part of this Decision.

In coming to this conclusion, it is first noted that, when compared with In re: Gregory/Jennifer
Burggraf, the Debtors did not advance any new arguments concerning the propriety of allowing expenses
associated with a student loan to be considered as a per se “special circumstance” for purposes of
§ 707(b)(2)(B). As such, this Court’s holding in In re: Gregory/Jennifer Burggraf, disallowing any
automatic link between student loans and the “special circumstances” contemplated by § 707(b)(2)(B),
applies with equal force in the instant case. See Irby v. Preferred Credit (In re Irby), 359 B.R. 859, 861
(2007) (under the doctrine of stare decisis, “a court, in the absence of any intervening change in the law,
is to abide by a principle of law laid down in a past decision to a present case having substantially the

same facts.”).

Similarly, the factual circumstances as they exist in this case are not sufficiently distinguishable
from the facts presented in Jn re: Gregory/Jennifer Burggraf so as to warrant a deviation from this
Court’s prior holding. See Jd. If anything, the particular facts presented in In re: Gregory/Jennifer
Burggraf were more favorable, as compared to this case, to a finding that “special circumstances”
existed. For example, the amount of the student-loan debt presented in Inre: Gregory/Jennifer Burggraf

constituted approximately three times the debtors’ gross annual wages, making its strain on the debtors’

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In re: Andrew and Amy Conlee
Case No. 10-31243

budget much more acute than in this case where the Debtors’ outstanding student loans stand at slightly
less than one year of the Debtors’ gross salary. The Debtors in this matter are also eligible for Chapter
13 relief, while the debtors in In re: Gregory/Jennifer Burggraf were not eligible to be debtors under
Chapter 13.

In conclusion, any expense associated with the Debtors’ repayment of Mrs. Conlee’s student loan
does not constitute a “special circumstance” within the meaning of § 707(b)(2)(B). As a consequence,
the granting of relief in this case must be presumed to be an abuse within the meaning of § 707(b)(2),
with the Court unable to find any fault with the Debtors’ calculation under the ‘means test,’ which shows
that they have the ability to repay at least a portion of their debts. In reaching the conclusions found
herein, the Court has considered all of the evidence, exhibits and arguments of counsel, regardless of

whether or not they are specifically referred to in this Decision.

Accordingly, it is

ORDERED that, subject to the Debtors’ election to convert this case, the Motion of the United
States Trustee to Dismiss, be, and is hereby, GRANTED.

IT IS FURTHER ORDERED that the Clerk, United States Bankruptcy Court, is directed to
prepare for presentation to the Court an order of dismissal under 11 U.S.C. § 707(b)(1) if, at the opening
of business on Friday, August 27, 2010, this case is still proceeding under Chapter 7 of the United States
Bankruptcy Code.

Dated: August 11, 2010

Zo

Richard L. Speer
United States
Bankruptcy Judge

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UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OHIO

In Re: )
) JUDGE RICHARD L. SPEER
Gregory/Jennifer Burggraf )
) Case No. 10-32297
Debtor(s) )
)
DECISION AND ORDER

This cause comes before the Court on the Motion of the United States Trustee to Dismiss this
case pursuant to 11 U.S.C. § 707(b)(1), § 707(b)(2) and § 707(b)(3). (Doc. No. 17). The Debtors
filed a response to the Motion, objecting to the Dismissal of their case. (Doc. No. 23). A Hearing was
then held on the matter. At the conclusion of the Hearing, the Court deferred ruling on the Motion
to Dismiss so as to afford the opportunity to further consider the evidence and arguments submitted
by the Parties. (Doc. No. 22). The Court has now had the opportunity to review all of the arguments
and evidence submitted in this case, and finds, for the reasons now explained, that the Motion of the

United States Trustee to Dismiss has Merit.
DISCUSSION

On April 7, 2010, the Debtors, Gregory and Jennifer Burggraf, filed a petition in this Court
for relief under Chapter 7 of the United States Bankruptcy Code. By filing a petition for relief under
Chapter 7 of the Code, the Debtors are seeking “an immediate unconditional discharge of personal
liabilities for debts in exchange for the liquidation of all non-exempt assets.” Schultz v. U.S., 529
F.3d 343, 346 (6" Cir. 2008). This is in contrast to a bankruptcy brought by an individual under
Chapter 11 or 13 of the Code through which debtors, based on a plan subject to approval by the
court, propose to repay all or a portion of their debts from their assets or future earnings over a period

of time, with a discharge then being entered upon the debtor’s successful completion of the plan.

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In re: Gregory/Jennifer Burggraf
Case No. 10-32297

In any case, the relief provided by the Bankruptcy Code is a legislatively created benefit, not
a constitutional right. United States v. Kras, 409 U.S. 434, 445-446, 93 S.Ct. 631, 637-638, 34
L.Ed.2d 626 (1973). Therefore, no matter the Chapter of the Code, Congress may place reasonable
restrictions on an individual’s ability to obtain bankruptcy relief. To that end, Congress has
prescribed conditions under which a debtor’s bankruptcy case must be dismissed. Jn re AC Rentals,
Inc., 325 B.R. 339 (10 Cir. B.A.P. 2005). When, as here, a debtor seeks relief under Chapter 7 of
the Bankruptcy Code, the conditions mandating dismissal are set forth in § 707, with the Motion to
Dismiss filed by UST relying on the conditions set forth in subsection (b).

Section 707(b)(1) provides that the bankruptcy case of an individual debtor whose debts are
primarily consumer debts may be dismissed if the court finds, after notice and a hearing, that granting
a discharge would be an abuse of the provisions of Chapter 7 of the Bankruptcy Code. Two methods
are then prescribed in § 707(b) to assess whether “abuse” is present: (1) presumed abuse under the
objective ‘means test’ set forth in § 707(b)(2); and (2) a subjective test, found in § 707(b)(3) which
considers whether the debtor filed their petition in bad faith and whether the totality of the

circumstances surrounding the debtor’s financial situation demonstrate abuse.

The first of the methodologies, the ‘means test’ formula of § 707(b)(2), represents the
embodiment of the Congressional policy that debtors with the ability to repay their debts be required
to do so and “that there be an easily applied formula for determining when the Court should presume
that a debtor is abusing the system by filing a Chapter 7 petition.” In re Fowler, 349 B.R. 414, 419
(Bankr. D.Del. 2006). It is purely an objective test, and was intended to eliminate judicial discretion
regarding determinations of abuse under § 707(b)(1). In re Sullivan, 370 B.R. 314, 318 (Bankr.
D:Mont. 2007). Its actual reach, however, is limited to only a certain segment of debtors: those with
income above the state median income for a household of the same size. 11 U.S.C. § 707(b)(7).

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In re: Gregory/Jennifer Burggraf
Case No. 10-32297

Although very detailed in its operation, the ‘means test’ formula of § 707(b)(2) is
conceptually simple. One first determines a debtor’s income and then reduces that amount by those
expenses permitted in the statute. 11 U.S.C. § 707(b)(2)(A). If, after performing this calculation, the
debtor’s remaining income, as calculated over a five-year period, satisfies one of two conditions, the
granting of relief in the case is then presumed to be abusive: (1) the debtor’s income is greater than
$11,725.00; or (2) although less than $11,725.00, the debtor’s income is greater than $7,025.00 and
that amount will pay more than 25% of the debtor’s unsecured debt. On a per month basis, these
income thresholds total $195.42 and $117.08 respectively.

At the Hearing held on the Motion of the UST to Dismiss, the Debtors, who have one minor
child, acknowledged that their annual income exceeded the applicable state median income for a
household of the same size, thus requiring them to perform the ‘means test’ calculation of
§ 707(b)(2). In terms of specific numbers, the Debtors, at the time they sought bankruptcy relief,
reported a combined annual income of $105,816.12, with the lesser amount of $61,552.00!
constituting the applicable median income for a family of three in the state of Ohio. At the Hearing
on Dismissal, the Debtors also stipulated that, according to the ‘means test’ formula of § 707(b)(2),
a presumption arises that granting them relief under Chapter 7 of the Bankruptcy Code would be an

abuse. (Doc. No. 23, § 2).

Upon review, the Court, as an evidentiary matter, can find no fault with the Debtors’
calculation undef the ‘means test,’ showing that a presumption of abuse arises for purposes of

§ 707(b)(2). Under this circumstance, the Bankruptcy Code provides for the dismissal of their case

1
http://www. justice.gov/ust/eo/bapcpa/20100315/bci_data/median_income_table.htm.

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Case No. 10-32297

unless the presumption can be rebutted. See, e.g., Jn re Haman, 366 B.R. 307, 311 (Bankr. D.Del.
2007).”

Section § 707(b)(2)(B) sets forth the exclusive method by which a debtor may rebut a
presumption of abuse which arises based upon the ‘means test’ calculation. The debtor bears the
burden to show to the satisfaction of the court that the requirements of § 707(b)(2)(B) have been met.
Inre Fonash, 401 B.R. 143, 147 (Bank. M.D.Pa. 2008). The requirements of § 707(b)(2)(B) are both

substantive and procedural in character.

First, as a substantive matter, § 707(b)(2)(B) provides:

(i) In any proceeding brought under this subsection, the presumption of abuse
may only be rebutted by demonstrating special circumstances, such as a
serious medical condition or a call or order to active duty in the Armed
Forces, to the extent such special circumstances that justify additional
expenses or adjustments of current monthly income for which there is no

reasonable alternative.
In addition, as a matter of procedure, § 707(b)(2)(B) requires a debtor to “itemize each additional
expense or adjustment of income and . . . provide (1) documentation for such expense or adjustment
to income; and (Il) a detailed explanation of the special circumstances that make such expenses or
adjustment to income necessary and reasonable.” 11 U.S.C. § 707(b)(2)(B)(ii). Additionally, a debtor

2

In their brief to the Court, the Debtors contend that there “is a statutory presumption in favor of
granting the relief sought by Chapter 7 debtor.” (Doc. No. 23, § 5). While this at one time was
true, it is not an accurate statement today. In 2005, when Congress enacted the Bankruptcy
Abuse Prevention and Consumer Protection Act, the statutory presumption in favor of granting
relief to the debtor was deleted from the Code. Furthermore, this Act created the ‘means test’
of § 707(b)(2), which goes further by providing conditions under which a presumption may arise
against granting a debtor a discharge.

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Case No. 10-32297

must “attest under oath to the accuracy of any information provided to demonstrate that additional

expenses or adjustments to income are required.” 11 U.S.C. § 707(b)(2)(B) (iii).

In this matter, the application of the substantive portion of § 707(b)(2)(B) is dispositive as
to the merits of the Parties’ respective positions..Under the substantive portion of § 707(b)(2)(B)(i),
a debtor, to rebut a presumption of abuse, must demonstrate two elements: (1) the existence of
‘special circumstances’ which justify the allowance of an additional expense or adjustment to
income; and (2) the lack of any ‘reasonable alternative’ for making the adjustment. For the first

element, the Debtors called attention to what can be construed as two conditions which give rise to

‘special circumstances.’

First, the Debtors pointed to their aggregate unsecured debt, which they estimated to be
$450,000.00. Based on this amount, the Debtors explained that, although they would have preferred
to repay their creditors, they are not eligible to formulate a repayment plan under Chapter 13 of the
Code, with their unsecured debt exceeding the statutory cap for eligibility under that Chapter of the
Code. See 11 U.S.C. § 109¢).’

But, as their primary basis for a finding of ‘special circumstances,’ the Debtors pointed to
their large amount of student-loan debt, an amount they approximate to be $350,000.00. According
to the Debtors, under a hypothetical plan of reorganization, it would be questionable whether they
could even sustain interest payments on this debt. As a result, the Debtors point out that, because

student-loan obligations are nondischargeable in bankruptcy, the principal balance on their

3In relevant part, this provision provides:
Only an individual with regular income that owes, on the date of the filing
of the petition, noncontingent, liquidated, unsecured debts of less than
$360,475 .. . may be a debtor under chapter 13 of this title.

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In re: Gregory/Jennifer Burggraf
Case No. 10-32297

educational loans could potentially increase duririg the life of any plan, leaving them in a worse
position at the end of their plan. The Debtors further contend that because their student loans
constitute the lion’s share of their unsecured debt, any pro-rata distribution to their general body of

unsecured creditors would be minimal. Each of this points will be addressed.

The Bankruptcy Code does not specifically define what constitutes a “special circumstance”
as applied to § 707(b)(2)(B)(). This provision, however, does provide two examples: (1) a serious
medical condition; or (2) a call to active duty in the Armed Forces. Although these conditions are
not exclusive, this Court — applying the statutory interpretation canon of ejusdem generis, meaning
literally “of the same kind,” — has found that a condition giving rise to a “special circumstance”
should be similar in nature and have characteristics similar to the examples provided in
§ 707(b)(2)(B)(i). In re Castle, 362 B.R. 846, 851 (Bankr. N.D.Ohio 2006). To this end, this Court
has observed that the examples in § 707(b)(2)(B)(i) “do show a commonality [in that] they both
constitute situations which not only put a strain on a debtor’s household budget, but they arise from

circumstances normally beyond the debtor’s control. Jd.

This is in line with jurisprudence formulated by the Sixth Circuit Court of Appeals. In the
case of In re Krohn, the Sixth Circuit, when addressing the propriety of dismissing a case under
§ 707(b), observed that a bankruptcy court should consider whether the debtor “was forced into
Chapter 7 by unforeseen or catastrophic events.” 886 F.2d 123, 126 (6" Cir. 1989). See also In re
Haman, 366 B.R. 307, 314 (Bankr. D.Del. 2007) (expenses incurred merely at debtor’s discretion

are not a ‘special circumstances; rather, there should exist no reasonable alternative but to incur the

expense).
Notwithstanding, nothing in § 707(b)(2)(B)(i) absolutely requires that a ‘special
circumstance’ arise as the result of an event beyond the debtor’s reasonable control. Thus, the Court

will not read into § 707(b)(2)(B)() an involuntariness prerequisite. At the very least, however, it may

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In re: Gregory/Jennifer Burggraf
Case No. 10-32297

be safely stated that a debtor who requests a finding of “special circumstances” seeks preferential

treatment over other similarly situated debtors. In re Stocker, 399 B.R. 522, 531-32 (Bankr. M.D.Fla.
2008), citing S. Rep. No. 106-49, at 6-7 (1999).

Thus, it follows that, where the circumstances are not involuntary, the “special
circumstances” contemplated by § 707(b)(2)(B)(i) must be highly unusual, and of the type not
normally encountered by most debtors. As stated by one bankruptcy court:

Both a reading of the plain unambiguous language of 11 U.S.C. Section

707(b)(2)(B) and the BAPCPA legislative history lead to the same result: A

debtor asserting “special circumstances” in support of additional expenses or

income adjustment must establish the circumstances are extraordinary or

exceptional, are unexpected or involuntary, and place the debtor in dire need

of Chapter 7 relief.
In re Stocker, 399 B.R. at 532. In the end, however, any inquiry concerning the existence of ‘special
circumstances’ is ultimately dependent on the particular facts of each debtor’s situation, and thus
must be conducted on a case-by-case basis. See, e.g., In re Vaccariello, 375 B.R. 809, 813; In re
Siler, 426 B.R. 167, 172-173 (Bankr. W.D.N.C. 2010); in re Champagne, 389 B.R. 191, 200 (Bankr. |

D.Kan. 2008).
Student Loans

Looking first at the Debtors’ student loans, two facts become immediately apparent: First,
} the Debtors incurred their student-loan debt over a long period of time. Second, the Debtors,
particularly Mrs. Burggraf who is responsible for most of the student-loan debt, continued to incur
student-loans leading up to the time she filed for bankruptcy relief.

The Debtors’ student-loan debt, thus, sterns not from unforseen circumstances or from events

beyond their reasonable control. Instead, having been incurred in increments over a substantial period

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of time, the Debtors’ student-loans were incurred in a deliberate manner, with the Debtors being
afforded ample opportunity to reflect on their decision to continue to incur more debt. Yet despite
making the conscious decision to go deeper and deeper into debt, the Debtors now seek to use their
student-loan obligations as a factor mitigating in favor of a finding of “special circumstances,” a use

which strikes this Court as inconsistent with the whole notion of a ‘special circumstance.’

It also cannot be ignored that the Debtors have a meaningful level of income, with the
evidence showing that the Debtors have and will likely continue to have an annual income in excess
of $100,000.00. On this point, it also did not go unnoticed that the Debtors’ present financial
structure does allow them, albeit not always easily, to service their student-loan debts. By seeking
to proceed with a Chapter 7, therefore, the Debtors are attempting to pay their student-loan
obligations at the expense of their other unsecured creditors, a result which, although not absolutely
prohibited, can hardly be countenanced: See Chase Manhattan Mortgage Corp. v. Shapiro, Trustee
(In re Lee), 530 F.3d 458, 463 (6" Cir. 2008) (one of the primary goals of the Bankruptcy Code is
to foster equality of distribution among creditors).

To be sure, there does exist an unignorable reality. The Debtors’ educational debt is very
large and constitutes a significant percentage of their overall unsecured debt. Hence, under any plan
of reorganization proposed by the Debtors, the pro-rata return to their general body of unsecured
creditors would be significantly diminished. This type of situation, where the ratio of educational
debt to the remaining unsecured debt is very high, has been previously addressed by the Court in the
context of a § 707(b) action.

In the case of Jn re Thurston,‘ this Court permitted a debtor to accord preferential treatment,
in her budget, to her student-loan obligations where the debtor’s total unsecured debt totaled

4

Case No. 07-35092, 2008 WL 3414138, at *5 (Bankr. N.D.Ohio 2008).

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In re: Gregory/Jennifer Burggraf
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$180,000, of which $160,000, or almost 90%, constituted student-loan debt. In coming to this
conclusion, this Court relied on the fact that little benefit would inure under a plan of reorganization
to the debtor’s non-student loan creditors while causing the debtor a great deal of harm if interest

accruing on the student loans were continue to be folded into the loans’ principal.

Yet, while the Debtors’ situation is outwardly similar, the facts of In re Thurston are
sufficiently distinguishable so as to make its approach inapplicable in this case. First, the Debtors’
student-loan debt in this case only comprises approximately three-quarters of their total debt, not the
near 90% encountered in Jn re Thurston. Accordingly, under a plan of reorganization, any pro-rata
distribution to the Debtors’ general body of unsecured creditors would be more than a de minimus
amount as compared to the student loans. Secondly, this Court’s analysis in Jn re Thurston was
predicated on the propriety of dismissing a case under § 707(b)(3), based upon the totality of the
debtor’s financial circumstances, not whether, as here, if “special circumstances” exist. In this regard,
a totality of the circumstances approach under § 707(b)(3) allows the Court much more flexibility

than a determination concerning the existence of “special circumstances” under § 707(b)(2)(B)Q).

Inre Haman, 366 B.R. at 315.

In support of proceeding with their Chapter 7 case, the Debtors also took a different tack
regarding their student loans, advocating that, notwithstanding their particular circumstances, student
loans, being nondischargeable debts, should be deemed on that basis alone to constitute a “special
circumstance” within the meaning of § 707(b)(2)(B). Simply put, the Debtors argued that payments
on student loans should automatically be deemed to constitute “special circumstancés.” The Court,
however, must decline the Debtors’ invitation to adopt a per se approach, whereby all expenses
associated with a student-loan debt should be deemed to constitute a “special circumstance” within

the meaning of § 707(b)(2)(B)(i). See In re Carrillo, 421 B.R. 540, 546 (Bankr. D.Ariz. 2009).

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In re: Gregory/Jennifer Burggraf
Case No. 10-32297

To begin with, among debtors who seek bankruptcy relief, student loans are commonplace.
As a consequence, such loans hardly rise to the level of an unusual, extraordinary or exceptional

circumstance, necessitating that a debtor automatically be afforded preferential treatment when it

comes to the application of the § 707(b)(2) ‘means test.’

Additionally, the omission of student loans from the two exemplars provided in
§ 707(b)(2)(B)(i) is not necessarily fortuitous. In enacting bankruptcy law, Congress knew how to
address the issue of student loans, specifically providing that such loans are not subject to discharge
under § 523(a)(8). Yet, in enacting § 707(b)(2), Congress remained silent on this type of debt, raising
the question: if Congress had intended for student loans to constitute a per se “special circumstance,”

why didn’t it do so?

Not all courts have followed this approach, largely on the basis that, because student loans
are nondischargeable, the debtor has no realistic option but to pay the debt. See In re Womer, 427
B.R. 334, 336 (Bankr. M:D.Pa. 2010) (collecting cases). The Court, however, respectively disagrees

with such an approach, finding that it has a logical inconsistency.

First, other debts under the Bankruptcy Code are nondischargeable, and thus, like student
loans, presumably have to be repaid. Such debts can include those relating to fraud (§ 523(a)(2)),
willful and malicious injury to a person or property (§ 523(a)(6)), and death or personal injury
resulting from the operation of a motor vehicle while intoxicated (§ 523(a)(9)). Jn re Vaccariello,
375 B.R. 809, 815 (Bankr. N.D.Ohio 2007). However, one would hardly make the argument that the
repayment of these types of nondischargeable debts would constitute a ‘special circumstance,’

watranting an adjustment to a debtor’s expenses under the ‘means test.’

Debtors with large student loan obligations also have other options available to address their

needs, thereby ameliorating the lack of any viable alternatives when it comes to repaying the debt.

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In re: Gregory/Jennifer Burggraf
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For example, Congress just recently implemented the Income Based Repayment Program. 20 U.S.C.
§ 1098e. Explained in very general terms, if one participates in this program their required payments
on an outstanding student loan are limited to 15% of the debtor’s adjusted gross income that exceeds
150% of the applicable poverty line. The amount of monthly payment due on a student loan could

thus be minimal. Furthermore, if any balance remains on the loan after 25 years, that portion of the

debt is forgiven.

In sum, the Court is not persuaded that the Debtors’ large student-loan obligations qualify
as a ‘special circumstance’ for purposes of § 707(b)(2)(B)(i). As such, the cost incurred by the
Debtors to service their student loans does not justify the allowance of an additional expense when

performing the “means test” calculation of § 707(b)(2)(B)
Ineligibility for Chapter 13 relief

The Debtors’ second point, in support of allowing them to claim “special circumstances”
under § 707(b)(2)(B), concerns their ineligibility for relief under Chapter 13 of the Code. According
to the Debtors, this circumstance constitutes a ‘special circumstance’ because to hold otherwise
would effectively operate to deny them relief under the Bankruptcy Code. The Court, however, while
realizing that the Debtors are probably correct in their assertion that Chapter 13 relief is not
available, is not persuaded that this fact constitutes a ‘special circumstance’ for purposes of this case.

The first reason for this is policy.

Consistent with the Sixth Circuit’s decision’s in In re Krohn, the Court is unwilling to reward
debtors who pile on debt, while punishing debtors who are more frugal with their finances. In Jn re
Krohn the Court remarked:

debtor’s eligibility for Chapter 13 relief should be considered in ascertaining
his ability to repay his debts out of future earnings, However, inability to

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In re: Gregory/Jennifer Burggraf
Case No. 10-32297

qualify under Chapter 13 should not be dispositive of whether there may be

a § 707(b) dismissal, since there are other factors to be considered in deciding

if a debtor is needy. The anomalous result of saying those whose high

unsecured indebtedness renders them ineligible for Chapter 13 treatment can

always avoid § 707(b) dismissal, would be rewarding outrageous abusers of

consumer credit, while denying to those with more moderate consumer debt

the benefits of Chapter 7. Indeed, such a bright-line test could be said to

encourage debtors to run up unsecured debts in excess of $100,000, thereby

avoiding dedication of future earnings to debt retirement under Chapter 13.
While it is true that in In re Krohn was decided in a slightly different context, concerning whether
the circumstances ofa case demonstrated substantial abuse under the former § 707(b), the Court can
discern no reason why its observations would not apply equally to the revised version of the statute

and whether “special circumstances” exist in a case for purposes of § 707(b)(2)(B)(i).

Even setting the Jn re Krohn decision aside, the Debtors’ position, that their ineligibility for
Chapter 13 relief qualifies as a ‘special circumstance,’ has a more inherent flaw. This flaw arises
because the Debtors have a bankruptcy option available: they can seek relief under Chapter 11 of the
Bankruptcy Code.

The Bankruptcy Code, in fact, specifically envisions that debtors, when faced with a motion
to dismiss under § 707(b), may need to convert to a case under Chapter 11, as opposed to Chapter
13, with § 707(b)(1) providing, “the court ... may dismiss a case filed by an individual debtor under
this chapter . . ., or, with the debtor’s consent, convert such a case to a case under chapter I] or 13
of this title, if it finds that the granting of relief would be an abuse of the provisions of this chapter.”
(emphasis added). It is also noted that, while Chapter 11 undoubtably carries with it more
administrative costs, it may provide a debtor, especially those with large amounts of debt, advantages

over a Chapter 13. For example, in a Chapter 11, a plan may be longer than five years.

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In re: Gregory/Jennifer Burggraf
Case No. 10-32297

CONCLUSION

In conclusion, the Court cannot find that, as applied to 11 U.S.C. § 707(b)(2)(B), “special
circumstances,” exist in this case which would justify the allowance by the Debtors of an additional
expense when calculating their disposable income under the ‘means test.’ As such, the Debtors have
not rebutted the presumption of abuse which, pursuant to 11 U.S.C. § 707(b)(2), arises in their case.
Consistent, therefore, with 11 U.S.C. § 707(b)(1), the Motion of the United States Trustee to Dismiss _

will be Granted.

In reaching the conclusions found herein, the Court has considered all of the evidence,

exhibits and arguments of both parties, regardless of whether or not they are specifically referred to

in this Decision.
Accordingly, it is

ORDERED that the Motion of the United States Trustee to Dismiss, be, and is hereby,
GRANTED.

IT IS FURTHER ORDERED that this case, as filed by the Debtors, Gregory and Jennifer
Burggraf, be, and is hereby, DISMISSED.

Dated: August 9, 2010

(he Za

Richard L. Speer
United States
Bankruptcy Judge

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CERTIFICATE OF SERVICE

Copies were mailed this 9" day of August, 2010 to:

Gregory Burggraf
396 Kilbury Road
Marion, OH 43302

Jennifer Marie Burggraf
396 Kilbury Road
Marion, OH 43302

Larry N Heiser
495 S State St
Marion, OH 43302

William L Swope
221 South Main St
Findlay, OH 45840

Dean Wyman

Office of the US Trustee
201 Superior Ave, #441
Cleveland, Oh 44114

/s/Diana Hernandez
Deputy Clerk, U.S. Bankruptcy Court

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