Shannon Q Sturm

OCR transcription for search; preserved printed pages are authoritative

UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OHIO

In Re: )
) JUDGE RICHARD L. SPEER
Shannon Q. Sturm )
) Case No. 10-34829
Debtor(s) )
)
DECISION AND ORDER

This cause comes before the Court on Remand from the District Court in the case Captioned:
Shannon Sturm v. United States Trustee, Case No. 11-CV-199, Judge Zack Zouhary. On remand,
the District Court set forth that this Court shall reconsider two matters pertaining to this Court’s prior
decision in which, on a Motion brought by the United States Trustee, it was determined that, under
the ‘means test’ calculation of § 707(b)(2), a presumption of abuse arose. (Doc. No. 20). Consistent
with this directive, the Court thereafter afforded the Parties the opportunity to submit arguments and
evidence in support of their respective positions on the matters remanded to the Court. (Doc. No.
45). The Parties have since filed their arguments and evidentiary materials which this Court has now
had the opportunity to review. Based upon this review, and for the reasons set forth herein, the Court

finds that the Motion of the United States to Dismiss under § 707(b)(2) should be Granted.
BACKGROUND

On July 15, 2010, the Debtor, Shannon Q. Sturm, filed a petition in this Court for relief under
Chapter 7 of the United States Bankruptcy Code. (Doc. No. 1). At the time she filed her petition for
bankruptcy relief, the Debtor was married, and had no dependents. The Debtor’s husband did not

join with Mrs. Sturm in seeking bankruptcy relief.

AUTHENTICATED J
SINFORMATION “|
“avon: Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 1 of 25

10

In re Shannon Q. Sturm
Case No. 10-34829

At the time she filed her petition, the Debtor, as required by the Bankruptcy Rules, submitted
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 Debtor represented that she was an Ohio resident and had a
gross monthly income of $3,861.93; the Debtor also reported that her non-debtor husband had a
gross monthly income of $3,473.00. Based upon these figures, the Debtor reported a combined gross
annual income of $88,019.16, an amount which exceeded the state median income for a like-size

household.

Only debtors with household income above the state median income are subject to having
their case dismissed based upon a presumption of abuse arising under § 707(b)(2). 11 U.S.C.
§ 707(b)(7). Moreover, a case will only be found to be presumptively abusive if the debtor’s
disposable income, as calculated over a five-year period, satisfies one of these two conditions: (1)
the debtor’s disposable income is greater than $11,725.00; or (2) although less than $1 1,725.00, the
debtor’s disposable income is greater than or equal to $7,025.00 or 25 percent of the debtor’s
nonpriority unsecured debts, whichever is greater.' On a per month basis, the abuse threshold of

$11,725.00, represents $195.42, while the abuse threshold of $7,025.00 represents $117.08.

In applying the ‘means test,’ a debtor’s disposable income is calculated by subtracting those
expenses allowed by clauses (ii), (iii), and (iv) of § 707(b)(2)(A) from the debtor’s current monthly

income. The term current monthly income is defined in § 101(10A), and generally means “the

1

Pursuant to 11 U.S.C. § 104, these amounts are adjusted every three years to reflect changes in
the Consumer Price Index.

Page 2

84829-rls Doc85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 2 of 25

10-!

In re Shannon Q. Sturm
Case No. 10-34829

average monthly income from all sources that the debtor receives” during the six-month period
preceding thecommencement of the case. A debtor whose ‘current monthly income’ falls above the
state-median income is required to itemize their expenses by completing form B22A. Because the
combined gross income of her and her husband exceeded the state median income, the Debtor

completed Form B22A.

In completing Form B22A, the Debtor reported that no presumption of abuse arose in her
case for purposes of § 707(b)(2). The Debtor based this conclusion on the ‘means test’ formula
yielding a deficit in her current monthly income of $888.18 per month. In arriving at this figure, the
Debtor took a number of deductions, including: (1) a monthly of expense of $210.00 for the
operation of a second motor vehicle; (2) a $496.00 monthly expense, representing the
ownership/lease expense of a second vehicle; and (3) a $761.00 mortgage/rent expense. As the basis
for these deductions, the Debtor relied on clause (ii) of § 707(b)(2)(A) which, among other expenses
allows a debtor to deduct from their ‘current monthly income’ the “debtor’s applicable monthly
expense amounts specified under the National Standards and Local Standards . . . issued by the

Internal Revenue Service for the area in which the resides... .”

The Debtor also deducted from her income the sum of $3,473.00, representing the entire
monthly income of her husband. For this deduction, the Debtor relied on § 101(10A)(B) which
addresses the type of situation encountered by the Debtor where only one spouse seeks bankruptcy
relief. In so doing, the definition of ‘current monthly income,’ as used in the ‘means test’ calculation
of § 707(b)(2), is limited to only the “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... .” In other words,
income that a non-debtor spouse utilizes for their own personal obligations, and thus is not
contributed to the debtor’s household, is not included in a debtor’s ‘current monthly income.’ On
Form B22A, this exclusion from a debtor’s ‘current monthly income’ is referred to as the ‘marital

adjustment.’

Page 3

B4829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 3 of 25

10-%

In re Shannon Q. Sturm
Case No. 10-34829

On September 27, 2010, the United States Trustee (hereinafter the “UST”) filed a Motion to
Dismiss the Debtor’s case. (Doc. No. 12). In its Motion, the UST disputed the Debtor’s
determination that no presumption of abuse arose in her case for purposes of 707(b)(2).’ The UST
reached this conclusion after conducting its own ‘means test’ calculation which showed that the
Debtor had a monthly disposable income of $1,455.28, well above the abuse thresholds, supra, set
forth in § 707(b)(2). (Doc. No. 19, Ex. F-8).

An evidentiary hearing was then held on the Motion of the UST to Dismiss. At the
conclusion of the Hearing, the Court deferred ruling on the matters raised by the Parties so as to
afford the opportunity to further consider the positions taken by the Parties. (Doc. No. 18). On
January 7, 2011, the Court entered its decision on the matter, holding that, for purposes of the ‘means
test’ of § 707(b)(2), a presumption of abuse arose in the Debtor’s case. (Doc. No. 20). The Debtor
then filed an appeal of this Court’s determination. (Doc. No. 21).

POSITION OF THE PARTIES

In seeking to have the Debtor’s case dismissed for abuse under the ‘means test’ formulation
of § 707(b)(2), the UST challenged a number of downward adjustments made by the Debtor to her
‘current monthly income.’ First, the UST objected to the Debtor’s allocation of expenses for the
ownership and operation of a second motor vehicle, taking the position that the Debtor should only
be allowed to deduct from her income the expenses associated with a single vehicle. The UST also

challenged two of the itemized expenses claimed by the Debtor as a marital adjustment: (1) a

2

The United States Trustee also predicated its Motion to Dismiss on § 707(b)(3), which provides
for the dismissal of a debtor’s case when the totality of the debtor’s financial circumstances
demonstrate abuse. The Court has yet to rule on this portion of the United States Trustee’s
Motion.

Page 4

B4829-rls Doc85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 4 of 25

10-1

In re Shannon Q. Sturm
Case No. 10-34829

$1,300.00 per month expense, representing payments on her husband’s credit cards; and (2) a
$1,250.00 per.month deduction for housing, representing the mortgage payment encumbering the
property in which the Debtor resides, but for which only the Debtor’s husband has any personal
liability.

As it concerns the adjustment made by the Debtor for her husband’s credit-card obligations,
the UST took the position that payments on these obligations could not be taken as a ‘marital
adjustment’ for purposes of § 101(10A)(B) because the obligations were incurred primarily for the
regular household expenses of both the Debtor and her husband. Concerning the housing deduction,
it was the position of the UST that the deduction should be limited to $489.00 per month,
representing the difference between these two figures: (1) the $761.00 mortgage/rent expense
claimed by the Debtor and the $1,250.00 mortgage payment of the Debtor’s husband which the
Debtor also deducted from her ‘current monthly income’ as a marital adjustment under
§ 101(10A)(B). According to the UST, to allow both deductions in full would amount to “double
dipping.” (Doc. No. 12).

In addition to challenging the above deductions taken by the Debtor, the UST also made
allowance for certain deductions not utilized by the Debtor: (1) health and disability insurance
totaling $315.66 per month; and (2) a potential Chapter 13 administrative expense of $107.86 per
month. (Doc. No. 19, Ex. F). Once all these adjustments were made, the UST put forth that, for
purposes of the ‘means test’ of § 707(b)(2), the Debtor had $1,455.28 in disposable income.

DECISION OF THIS COURT

On January 7, 2011, this Court entered an Order and Decision, addressing the matters raised
by the UST. (Doc. No. 20). In this Decision, the Court first addressed the UST’s objection to the

‘marital adjustments’ made by the Debtor. In doing so, the Court initially observed that the overall

Page 5

54829-rIs Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 5 of 25

10-4

In re Shannon Q. Sturm
Case No. 10-34829

‘marital adjustment’ made by the Debtor had an obvious flaw given that the “amount of the
adjustment corresponds exactly to the gross income of the Debtor’s husband.” Jd. at pg. 7. In other
words, the Debtor was claiming that, despite living with her husband, the ‘means test’ formulation
of § 707(b)(2) countenanced that all of the household expenses of the Debtor should be borne by her
income alone. The Court found this to be a non sequitur given that the Debtor’s husband, who earned

an appreciable level of income, had both a legal and moral duty to help support his wife.’ Jd.

The Court then turned to address the specific objections raised by the UST to the ‘marital
adjustments’ made by the Debtor. First, concerning the $1,250.00 monthly mortgage payment, this
Court adopted the argument of the UST, stating:

the Debtor did not produce any evidence even tending to show that her
husband’s monthly $1,250.00 payment on an equity loan did not go largely
toward the Debtor’s household expenses. To the contrary, the evidence in this
case shows that the Debtor’s spouse is the sole.owner of the marital
residence. The costs associated with the residence are, thus, necessarily paid
by the Debtor’s spouse on a regular basis toward the Debtor’s household
expenses, thereby qualifying the costs as ‘current monthly income’ under §
101(10A)(B). Based on this, the Court can discern no error in the UST’s
assessment that the Debtor should only be allowed to take a marital deduction
of $489.00 for her husband’s equity loan, thereby resulting in a downward
revision in the Debtor’s marital adjustment by $761.00.

Id. at pg. 8.

Regarding the Debtor’s monthly deduction of $1,300.00 for her husband’s credit-card debt,
this Court found the position of the UST, that the expense should be entirely disallowed, partially

persuasive, setting forth:

3

Citing O.R.C. § 3103.03(A) which holds that “[e]ach married person must support the
person’s self and spouse out of the person’s property or by the person’s labor.”

Page 6

B4829-rls Doc85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 6 of 25

10-3

In re Shannon Q. Sturm
Case No. 10-34829

the Debtor’s marital adjustment of $1,300.00 for her husband’s credit-card
payments is not completely warranted. Specifically, while it is true that some
of her husband’s credit-card debt was incurred for personal use — for
example, medical bills and hobby pursuits — the Debtor was unable to
controvert the UST’s assertion that the majority of her husband’s credit card
debt was incurred for household expenses. As a result, the Court finds that
the Debtor should only be allowed a marital adjustment of $300.00 for her
husband’s credit-card obligations.

Id.

Finally, in finding that a presumption of abuse arose in the Debtor’s case for purposes of
§ 707(b)(2), the Court disallowed the Debtor a deduction for the ownership and operating expenses
of a second motor vehicle. This deduction totaled $706.00 per month, representing a monthly
operating expense of $210.00 and a monthly ownership cost of $496.00. On appeal, the Debtor did
not challenge this finding. (Doc. 47, at pg. 4). Instead, as it regards this Court’s conclusions when
applied to the ‘means test’ of § 707(b)(2), three issues were presented to the District Court for

consideration.

First, whether the Debtor could claim, as a deduction against her ‘current monthly income,’
these two monthly expenses together: (1) a $761.00 mortgage/rent expense as provided for under the
Local Standards specified in § 707(b)(2)(A)(ii); and (2) a ‘marital adjustment’ of $1,250.00 for her
husband’s mortgage payment. (Doc. No. 47, at pg. 6)..Second, whether the Debtor may deduct, as
a ‘marital adjustment,’ the entire amount of her husband’s credit-card payments, totaling $1,300.00
per month. /d. Finally, if the entire amount of the credit-card obligations may not be allocated as a
‘marital adjustment,’ whether sufficient evidence exists to support this Court determination that the

Debtor was entitled to only a $300.00 adjustment for her husband’s credit-card debt. Jd.

Page 7

4829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 7 of 25

10-4

In re Shannon Q. Sturm
Case No. 10-34829

DECISION OF THE DISTRICT COURT

For the matters presented on appeal, the District Court began by addressing those deductions
utilized by the Debtor for her housing. These deductions, totaling $2,011.00 per month, represented
the $761.00 mortgage/rent expense as provided for under the Local Standards, and the $1,250.00
‘marital adjustment’ as derived from her husband’s mortgage payment. The District Court addressed

each of these deductions separately.

First, for the latter deduction, the District Court held that the Debtor “is entitled to a Marital
Adjustment for the entirety of her husband’s mortgage payment.” (Doc. No. 47, at pg. 8). Second,
concerning the $761.00 monthly deduction the Debtor utilized as a housing deduction under the
Local Standards prescribed by the ‘means test,’ the District Court held that this Court “is directed
to reconsider [the Debtor’s] entitlement to a Local Standards Housing deduction in light of Ransom.”
Id. at 14. For this purpose, Ransom refers to the United States Supreme Court’s ruling in Ransom
v. FIA Card Servs., N.A., - U.S.—, 131 S.Ct. 716, 178 L.Ed.2d 603 (2011), decided just days after
this Court rendered its decision in this case. In Ransom, the Supreme Court held that a debtor who
is not required to make a loan or lease payment on an automobile is not entitled to utilize the car-
ownership deduction prescribed in the Local Standards of the ‘means test’ when calculating his or

her ‘disposable income.’

The District Court next addressed the second and third issues the Debtor presented on appeal:
Whether the Debtor’s use of a ‘marital adjustment’ for her husband’s credit-card payments, totaling
$1,300.00 per month, was proper. In finding that a presumption of abuse arose under § 707(b)(2),
this Court, not having the benefit of any documentary evidence, determined on the limited evidence
available that the Debtor’s proper ‘marital adjustment’ for her husband’s credit-card debts should
be set at $300.00 per month. The District Court reversed, finding that a determination of the Debtor’s

‘marital adjustment’ for her husband’s credit-card payment should be determined “with detailed

Page 8

34829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 8 of 25

10-3

In re Shannon Q. Sturm
Case No. 10-34829

written information regarding the sources of Mr. Sturm’s credit-card obligations, such as Mr.

Sturm’s credit card statements.” (Doc. No. 47, at pg. 17).

Consistent with the determinations made by the District Court, this Court afforded the Parties
the opportunity to file written arguments in support of their respective positions concerning the
impact of the Supreme Court’s decision in Ransom. The Court also ordered the Debtor to produce
detailed information regarding her husband’s credit-card obligations, including the production of past
credit-card statements. The Debtor has since produced this information. As well, the Parties have
each filed their arguments concerning the implications of the Ransom decision on the monthly
deduction of $761.00 utilized by the Debtor under the Local Standards prescribed by the ‘means
test.’ (Doc. No. 45).

DISCUSSION

In her Form B22A, as filed with the Court, the Debtor claimed that, under the means-test
formulation of § 707(b)(2), she had a deficit in her currency monthly income of ($888.18). After
remand, the UST submitted its own revised means-test calculation, setting forth that, according to
its calculation, the Debtor had a monthly disposable income of $597.27. (Doc. No. 81, Ex. C). In

arriving at this figure, the UST made two adjustments for which the Debtor did not take issue.

First, the UST did not include a deduction of $706.00 for a second automobile,’ a position

which the Debtor subsequently acknowledged on appeal to be correct. (Doc. No. 47, at pg. 4). The

4
Under the Local Standards prescribed by the means test of § 707(b)(2), a debtor may, in some
instances, take a deduction for a second automobile. This deduction includes two components:
(1) operating costs; and (2) ownership costs. At the time the Debtor sought bankruptcy relief,
the allowable amount of these respective costs was $210.00 and $496.00.

Page 9

4829-rls Doc85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 9 of 25

In re Shannon Q. Sturm
Case No. 10-34829

UST also allowed the Debtor a deduction of $315.68 for health and disability insurance, a position
which, as it inured to her benefit, the Debtor did not contest. Once allowance is made for these
adjustments, a comparison between the Parties’ respective means-test calculations shows that the

following two deductions constitute the only remaining points of discrepancy:

Line 17-Marital Adjustment.

Debtor UST
$3,473.00 $3,138.87

Line 20B-Local Standard: housing and utilities; mortgage/rent expense.

Debtor UST
$761.00 $0.00

For these points of discrepancy, the District Court directed that the “bankruptcy court shall
reconsider Sturm’s claim to a Local Standards Housing deduction in light of Ransom and the extent
to which Sturm may claim a marital adjustment for Mr. Sturm’s credit card payments.” (Doc. No.
47, at pg. 4). Pursuant to this directive, this Court will first address the latter issue concerning the

Debtor’s ‘marital adjustment’ for her husband’s creditor-card payments.
Marital Adjustment

In performing the ‘means test’ calculation of § 707(b)(2), a debtor must include in their
‘current monthly income’ “any amount paid by any entity other than the debtor (or in a joint case the
debtor and the debtor’s spouse), on a regular basis for the household expenses of the debtor or the
debtor’s dependents (and in a joint case the debtor’s spouse if not otherwise a dependent), ....” 11

U.S.C. § 101(10A)(B). The effect of this definition is to capture in a debtor’s current monthly

Page 10

10-34829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 10 of 25

10-3

In re Shannon Q. Sturm
Case No. 10-34829

income, any money paid to the debtor by a third party. Typically, such income will come from the

non-filing spouse of the debtor.

Section 101(10A)(B), however, generally limits the scope of such income to only those
amounts actually paid on a regular basis for the household expenses of the debtor or the debtor’s
dependents. In other words, a debtor is only required to include in their ‘current monthly income,’
money paid from a third party, such as a spouse, when the debtor receives a direct and reoccurring
benefit from the payment. Based upon this limitation, Form B22A requires a debtor, when
calculating their ‘current monthly income,’ to claim on line 2 the entirety of a non-filing spouse’s
income, but then allows a debtor to deduct on line 17 those amounts not regularly paid by the non-
filing spouse toward the household expenses of the debtor. The allowance on line 17 is referred to

as the “marital adjustment.”

The amount of a ‘marital adjustment’ claimed by a debtor will have the effect of decreasing
his or her current month income, thereby making it less likely that a presumption of abuse will arise
under § 707(b)(2). As a result, a debtor who does not wish to repay their legal obligations has an
incentive to maximize the amount of the ‘marital adjustment.’ Because of this, line 17 on form B22A

requires a debtor to itemize each of those adjustments claimed by the debtor.

For those itemized expenses claimed by the Debtor as a ‘marital adjustment,’ the UST made

the following changes:

Credit Card

Debtor UST

$1,300.00 $975.00
Page 11

4829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 11 of 25

10-3

i

In re Shannon Q. Sturm
Case No. 10-34829

Car Repair + Gas

Debtor UST
$150.00+ 140.00 $82.00

The UST also allowed the Debtor an expense, labeled “ins umb.,” for $199.00.

Based upon these changes, the UST claims that, after rounding to the nearest dollar, the
Debtor’s ‘marital adjustment’ should be lowered by the amount of $334.00 — i.e., from $3,473.00
to $3,138.87. Of this amount, the sum of $325.00 represents the amount of the disagreement between
the Parties concerning the ‘marital adjustment’ made by the Debtor for her husband’s credit-card
payments. To evaluate the propriety of this adjustment, this Court previously entered an order
providing that the Debtor provide the Court with a “complete accounting, including all discoverable
statements of her husband’s credit-card obligations.” (Doc. No. 56, at pg. 6). Acting on this Order,
the Debtor eventually filed with the Court 28 separate exhibits, totaling 216 pages, of credit-card
statements. According to Debtor, these statements show that for her husband, “the overwhelming
majority of purchases are clearly for his personal use and not toward any household expense.” (Doc.

76, Main Doc. at pg. 2).

In reviewing the credit-card statements, this Court, as it did in its previous decision, finds it
credible that the Debtor’s husband made a vast number of credit-card charges for purchases that were
for his own personal use, and not for the Debtor’s household expense. To give a couple of examples,
the Court has no difficulty ascribing as a non-household expense, charges made by the Debtor’s
husband to “paypal” for collectibles and comic books purchased via the internet. Similarly, the
credit-card statements submitted by the Debtor’s husband show credit-card charges incurred for

charitable contributions, an expenditure which is often personal in nature.

Page 12

4829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 12 of 25

10-3

In re Shannon Q. Sturm
Case No. 10-34829

To be sure, as pointed out by the UST, a number of the charges incurred by the Debtor’s
husband could be construed as being for the Debtor’s household. In particular, the UST, after
conducting its own analysis of the credit-card transactions, correctly pointed out that approximately
25% of the purchases transacted by the Debtor’s husband were made at vendors which supply goods
— €.g., groceries — typically used in a household. (Doc. No. 81). For example, the credit-card
statements provided by the Debtor’s husband show recurring charges made at Best Buy, Big Lots,

Meijer, Target, Wal Mart and Kroger.

However, the theory posited by the UST — that a certain percentage of the Debtor’s husband’s
credit-card transactions should be allocated to the Debtor’s household based upon the nature of the
transactions — was rejected by the District Court. In its Decision, the District Court made it clear:
“the Trustee bears the burden of establishing that Mr. Sturm’s credit card debts were incurred for
Sturm’s household expenses — a burden that may not be met using only a theory of credit card usage

unsupported by evidence.” (Doc. at 84, pg. 16-17).

Moreover, the Debtor’s husband, in an affidavit submitted to the Court, provided
explanations regarding those charges which could be construed as being for the Debtor’s household,
but for which it was claimed were utilized for the personal use of the Debtor’s husband. By way of

example, the Debtor’s husband made these statements in his affidavit:

I would normally purchase VCR tapes and DVD sets from Target, Walmart,
and Barnes & Noble.

I would purchase clothes for myself at JC Penney and Walmart.
I normally would purchase automotive supplies from Meijers . . .

I used the credit cards as various gas stations for my vehicles, e.g. Kroger. .

Page 13

4829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 13 of 25

10-3

K

In re Shannon Q. Sturm
Case No. 10-34829

(Doc. No. 76, att. no. 2).

Even with the above statements, however, the Debtor’s position, that not one iota of her
husband’s credit-card purchases inured to her benefit, does begin to strain credulity. To begin with,
the credit-card statements provided by the Debtor’s husband show hundreds of charges, totaling
$67,768.39. (Doc. No. 81, Ex. B). The scope of these charges, both in number and in amount, make
it difficult to believe that the Debtor’s household did not, on a regular basis, benefit from a certain
percentage of such charges. In addition, to substantiate his claim that practicably all his credit-card
transactions were for his personal use, the Debtor’s husband, a former police officer, made this
statement in his affidavit: “I would purchase soaps and personal toiletries from Bed, Bath and

Beyond.” (Doc. No. 76, att. no. 2).

In the end, however, the theory posited by the UST is not supported by any corroborating
evidence. As such, the Court must reject the position of the UST that the Debtor’s ‘marital
adjustment’ for her husband’s credit-card payments should be adjusted downward by $325.00 to
$975.00. Nevertheless, a slight downward adjustment is still needed in the Debtor’s claim of a

‘marital adjustment’ of $1,300.00 per month for her husband’s credit-card payments.

As pointed out by the UST, the $1,300.00 per month credit-card deduction claimed by the
Debtor as a “marital adjustment” includes expenses incurred by the Debtor’s husband for the
operation of his personal vehicle. The Debtor’s husband, in fact, acknowledged this in his affidavit,
see statements supra, wherein he claimed that he used his credit cards to purchase fuel and auto
supplies. At the same, the Debtor claimed as a separate “marital adjustment” the sum of $290.00 per
month for the operation of his motor vehicle, representing $150.00 for car repairs and $140.00 for

fuel.

Page 14

4829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 14 of 25

10-3

In re Shannon Q. Sturm
Case No. 10-34829

Based upon these circumstances, only one conclusion can be drawn: The Debtor has, to some
extent, impermissibly duplicated the ‘marital adjustment’ regarding the operational expenses
associated with her husband’s motor vehicle. In an analysis performed by the UST, 16% of the
Debtor’s ‘marital adjustment’ of $1,300.00 per month, equating to $208.00, represents payment for
the regular and continuous vehicle expenses charged by the Debtor’s husband to his credit cards. The
Debtor did not contest this analysis. Accordingly, the Court finds that, consistent with the position
of the UST, the Debtor’s ‘marital adjustment’ of $290.00 per month, representing the operational
costs of her husband’s motor vehicle, should be reduced by 208.00, to 82.00 per month. In aggregate,
therefore, the Debtor’s claimed ‘marital adjustment’ of $1,300.00 per month must be reduced to
$1,092.00 per month. For the reasons now explained, however, the Parties’ dispute regarding the
proper amount of the Debtor’s ‘marital adjustment’ ultimately becomes a moot point in light of the
Supreme Court’s decision in light of Ransom v. FIA Card Servs., N.A.,—U.S.—, 131 S.Ct. 716, 178
L.Ed.2d 603 (2011).

Local Standards Housing deduction in light of the Supreme Court’s decision in Ransom

In calculating whether, under the ‘means test’ of § 707(b)(2), granting relief to a debtor under
Chapter 7 of the Bankruptcy Code should be presumed to be abusive, a debtor is directed to deduct
from their ‘current monthly income’ a number of different categories of expenses.” Among the
permissible deductions, are those categories of expenses set forth in § 707(b)(2)(A)(i)(1) which

provides, inter alia:

5

The deductions allowed by § 707(b)(2) may be grouped into six categories: (1) the applicable
amounts specified in the National and Local Standards; (2) the actual amount of expenses for
the categories specified as “Other Necessary Expenses;” (3) the additional expense deductions
enumerated in § 707(b)(2)(A)() — (V); (4) monthly payments on secured debts; (5) payments
of priority claims; and (6) additional actual expenses for which the debtor can establish “special
circumstances”

Page 15

4829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 15 of 25

In re Shannon Q. Sturm
Case No. 10-34829

The debtor’s monthly expenses shall be the debtor’s applicable monthly
expense amounts specified under the National Standards and Local
Standards, and the debtor’s actual monthly expenses for the categories
specified as Other Necessary Expenses issued by the Internal Revenue
Service for the area in which the debtor resides, as in effect on the date of the
order for relief, for the debtor, the dependents of the debtor, and the spouse
of the debtor in a joint case, if the spouse is not otherwise a dependent.

Section 707(b)(2)(A)(ii)(), thus, permits a debtor to deduct from their “current monthly
income” these three categories of expenses issued by the Internal Revenue Service: (1) amounts
specified under the National Standards; (2) amounts specified under the Local Standards; and (3)
expenditures specified as Other Necessary Expenses. For the first two categories,
§ 707(b)(2)(A)(Gi)() specifies that such expenses “shall be the debtor’s applicable monthly expense
amounts .. .” (emphasis added). For the last category, § 707(b)(2)(A)(ii)() provides that such

expenses shall be “the debtor’s actual monthly expenses . . .” (emphasis added).

Under the Local Standards, deductions are authorized for two types of expenses: housing and
transportation. A debtor’s housing deduction is further subdivided into two separate components:
a non-mortgage component and a mortgage/rent component. The non-mortgage component of the
housing deduction is intended to account for a variety of expenses involved in maintaining a
residence, such as utilities, repairs and maintenance. The mortgage/rent component applies to
account for the cost of acquiring a residence.° Each of these components is graduated to account for

the size of the debtor’s household.

6

Advisory Committee Notes to Official Forms 22A, 22B, & 22C. Available at:
http://www.uscourts.gov/FormsAndFees/Forms/BankruptcyForms.aspx.

Page 16

10-34829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 16 of 25

10-3#

In re Shannon Q. Sturm
Case No. 10-34829

At the time she filed her petition for bankruptcy relief, the applicable housing deduction for
a debtor, having two persons in their household and residing in Lucas County, Ohio, was $458.00
for the non-mortgage component of the deduction and $761.00 for the mortgage/rent component of
the deduction.’ The Debtor, in performing her ‘means test’ calculation, utilized both of these
deductions. (Doc. No. 1). For these two deductions, the UST contested only the latter — the Debtor’s
deduction of $761.00 for the mortgage/rent component of the housing allowance as provided in the

Local Standards set forth in § 707(b)(2)(A)Gi)().

The position advance by the UST is predicated on the Supreme Court’s decision in Ransom
v. FIA Card Servs., N.A.,-~U.S.—, 131 S.Ct. 716, 178 L.Ed.2d 603 (2011). In Ransom, the question
presented to the Court was whether, under the means test of § 707(b)(2), “a debtor who does not
make loan or lease payments on his car may claim the deduction for vehicle-ownership costs.”* Id.
at 723. As with the housing allowance, under the Local Standards there exists two components with
respect to a debtor’s allowance for a deduction for transportation costs associated with a motor
vehicle: (1) an operating cost; and (2) an ownership cost. In Ransom, the debtor, although claiming
an ownership cost for his vehicle, did not actually make a loan or lease payment toward his vehicle.

Id.

7

http://www. justice.gov/ust/eo/bapcpa/20100315/bci_data/housing charts/irs housing charts
_OH.htm.

8

The case in Ransom involved the amount a debtor was required to repay under a Chapter 13 plan
of reorganization. This facet of the Ransom case, being a Chapter 13 case, as opposed to a
Chapter 7 case, in no way diminishes its precedential value. The Supreme Court in Ransom was
specifically addressing the provision at issue in this case, 11 U.S.C. § 707(b)(2)(A)(ii)(D. In this
regard, debtors who have income above the state-median income are required in a Chapter 13
case to ascertain their ‘disposable income’ — the amount to be paid into a plan of reorganization
— by reference to the ‘means test’ of § 707(b)(2).

Page 17

1829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 17 of 25

In re Shannon Q. Sturm
Case No. 10-34829

On the question before it, the Court decided against the debtor, holding that the deduction
allowed under the ‘means test’ for the ownership costs of a motor vehicle is applicable to only loan
and lease payments and that because the debtor owned his vehicle free from any debt or obligation,
he was not entitled to claim the allowance. Jd. at 730. In short, the Court stated, a debtor “may not
deduct loan or lease expenses when he does not have any.” Jd. According to the UST, this holding
is equally applicable to this case, and should preclude the Debtor from claiming a deduction of
$761.00 for the mortgage/rent component of the housing allowance provided for under the Local
Standard, because the Debtor is not under any legal obligation to make such a payment, with her

husband being the sole party liable on the mortgage encumbering the marital residence.

It is beyond reproach that the Court’s decision in Ransom has a large measure of symmetry
with the factual circumstances presented in this case. First, both the circumstances in this case and
in Ransom involve the situation where a debtor is seeking to claim a type of expense under the
‘means test’ for which the debtor has no legal obligation to pay. Specifically, both cases involve the
ownership costs associated with what is considered essential property, with Ransom involving a

vehicle, while at issue in this case is a residence.

Second, whether it is the allowance of an expense for transportation or housing, authorization
for both types of deductions is derived from the same source: the Local Standards, as made
applicable to this case by § 707(b)(2)(A)Gi)(). Finally, under the Local Standards, the allowance
afforded to a debtor for both housing and transportation expenses is divided into two similar
components: One involving the ownership/acquisition costs for the property, the other involving the
attendant costs associated with the property. In this case, as in Ransom, the issue before the Court

concerns the former component, the ownership/acquisition costs for the property.

The legal reasoning of the Supreme Court’s decision in Ransom can also be easily extended

to this matter. Of primary importance, the Supreme Court’s determination in Ransom, that a debtor

Page 18

10-34829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 18 of 25

In re Shannon Q. Sturm
Case No. 10-34829

may not deduct the ownership cost of a vehicle where the debtor does not actually make a loan or
lease payment for the vehicle, was foremost premised on its interpretation of the ordinary meaning
of the word “applicable” as used in § 707(b)(2)(A)Gi)(D. In this regard, the word “applicable”
qualifies whether a debtor is entitled to a deduction under the Local Standards, with

§ 707(b)(2)(A)Gi)(D specifying that the “debtor’s monthly expenses shall be the debtor’ s applicable

>

monthly expense amounts specified under the National Standards and Local Standards... .

(emphasis added).

In addressing the term “applicable,” as used in § 707(b)(2)(A)Gii)(), the Supreme Court

explained:

The key word in this provision is ‘applicable’: A debtor may claim not all,
but only “applicable” expense amounts listed in the Standards. Whether
Ransom may claim the $471 car-ownership deduction accordingly turns on
whether that expense amount is ‘applicable’ to him. -

Because the Code does not define ‘applicable,’ we look to the ordinary
meaning of the term. ‘Applicable’ means “capable of being applied: having
relevance” or “fit, suitable, or right to be applied: appropriate.” So an expense
amount is “applicable” within the plain meaning of the statute when it is
appropriate, relevant, suitable, or fit.

What makes an expense amount ‘applicable’ in this sense (appropriate,
relevant, suitable, or fit) is most naturally understood to be its correspondence
to an individual debtor's financial circumstances. Rather than authorizing all
debtors to take deductions in all listed categories, Congress established a
filter: A debtor may claim a deduction from a National or Local Standard
table (like ‘[Car] Ownership Costs’) if but only if that deduction is
appropriate for him. And a deduction is so appropriate only if the debtor has
costs corresponding to the category covered by the table—that is, only if the
debtor will incur that kind of expense during the life of the plan. The statute
underscores the necessity of making such an individualized determination by
referring to ‘the debtor’s applicable monthly expense amounts,’
§ 707(b)(2)(A)ii)(D — in other words, the expense amounts applicable
(appropriate, etc.) to each particular debtor. Identifying these amounts

Page 19

10-34829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 19 of 25

In re Shannon Q. Sturm
Case No. 10-34829

requires looking at the financial situation of the debtor and asking whether a
National or Local Standard table is relevant to him.
Ransom, 131 S.Ct. at 724 (internal quotations and citations omitted). This holding easily lends itself

to the following conclusion:

Because the ownership costs for a residence — i.e., the property’s mortgage/rent expense —
is likewise authorized under the Local Standards, and is thus qualified by the word “applicable,” a
debtor may only deduct a mortgage/rent expense under the ‘means test’ if the “deduction is
appropriate for him,” meaning that the debtor personally incurs a cost for that expense category. In
the words of the Ransom Court: “a debtor should be required to qualify for a deduction by actually

incurring an expense in the relevant category.” /d. at 725.

It is the Debtor’s position, however, that the Court’s decision in Ransom is confined and
“specific to the allowance of the Local Standard motor vehicle ownership deduction allowance on

the Means Test.” (Doc. No. 52, at pg. 4). In the Debtor’s words:

Its [sic] only logical that if the basis for a [sic] expense deduction as car
ownership consists of loan and lease information, then to be an applicable
expense the debtor has to have a loan or lease payment. However, it does not
lead to the same conclusion for housing expense. The Local Housing expense
deduction is not based on figures derived from mortgage loans. It is beyond
the realm of logic and credulity that a person does not qualify for an
applicable housing expense without having a mortgage or lease payment. The
only persons without any housing expense would be the homeless and
certainly Congress in enacting the BAPCPA did not intend such aconclusion.

Id. at pg. 3-4. The Court, however, is not persuaded by this argument.

To conclude otherwise would require this Court to afford the term “applicable” as used

§ 707(b)(2)(A)Gi)(D a different meaning, dependant upon whether, under the Local Standards, a

Page 20

10-34829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 20 of 25

10-3

In re Shannon Q. Sturm
Case No. 10-34829

deduction was being utilized for the cost of acquiring a residence or, instead, was being utilized as
deduction attributable to the cost to own a vehicle. There is nothing in the Court’s decision in
Ransom to suggest that such a distinction should be made or that the Court’s holding in Ransom
should be given such a narrow reading. To the contrary, the Court in Ransom supported its decision
by reference to other supporting principles of bankruptcy law, principles which apply regardless of
whether one is addressing the ownership/acquisition costs (or the lack thereof) of a vehicle or a

residence.

First, the Court in Ransom observed that “[b]ecause Congress intended the means test to
approximate the debtor’s reasonable expenditures on essential items, a debtor should be required to
qualify for a deduction by actually incurring an expense in the relevant category. If a debtor will not
have a particular kind of expense during his plan, an allowance to cover that cost is not ‘reasonably

necessary’ within the meaning of the statute.” Jd.

Second, the Court noted that its reading of the term “applicable” in § 707(b)(2)(A)Gi))
furthers the purpose of the ‘means test’ — that of ensuring that a debtor repays their debts when they

have the ability to do so. As stated in the Court’s decision:

Finally, consideration of BAPCPA’s purpose strengthens our reading of the
term ‘applicable.’ Congress designed the means test to measure debtors’
disposable income and, in that way, to ensure that they repay creditors the
maximum they can afford. This purpose is best-achieved by interpreting the
means test, consistent with the statutory text, to reflect a debtor’s ability to
afford repayment. Requiring a debtor to incur the kind of expenses for which
he claims a means-test deduction thus advances BAPCPA’s objectives.

Id. (internal quotations and citations omitted).’

9

BAPCPA, as delineated in this quotation, refers to the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005, Public Law 109-8, 119 Stat. 23. This Act gave rise to the

Page 21

4829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 21 of 25

In re Shannon Q. Sturm
Case No. 10-34829

Third, the IRS guidelines for the Local Standards, which the Court in Ransom consulted and
found supported its conclusion, prohibit a debtor from claiming an expense for which the debtor is
not actually making a payment. Specifically, in these guidelines, it is provided that for a debtor’s
housing and transportation expenses “[t]he taxpayer is allowed the local standard or the amount

actually paid, whichever is less.” IRM at 5.15.1.7 § 4 (emphasis added).

Finally, contrary to the Debtor’s position, homeless persons would not constitute the only
class of debtors who could be denied the housing allowance for one’s rent/mortgage, The Debtor,
herself, who is not homeless, represents a perfect example of this truism. In this regard, it must be
remembered that the position put forth by the UST does not seek to deny the Debtor her non-
mortgage expense under the Local Standards — e.g., those expenses associated with maintaining a
residence such as utilities and the like. The same was true in Ransom where the debtor was allowed,

without objection, a deduction under the Local Standards for the operating costs of his motor vehicle.

Unless the context of the decision clearly shows otherwise, this Court, when applying
Supreme Court precedent, is not inclined to give the decision a narrow holding. See Siskiyou
Regional Educ. Project v. U.S. Forest Serv., 565 F.3d 545, 549 n.1 (9" Cir. 2009) (even dicta of the
United States Supreme Court should not be considered lightly). And for the reasons just set forth,
this Court can find no appreciable basis to distinguish the situation presented in this particular case
from the issue presented to the Supreme Court in Ransom."° Consequently, under principles of stare

decisis, this Court finds that the Supreme Court’s decision in Ransom applies with equal force to the

‘means test’ of § 707(b)(2).

10

This was the same conclusion reached by the bankruptcy court in the case In re Wilson, 454
B.R. 155 (Bankr.D.Colo.2011), entered just over a month after the Supreme Court rendered it
decision in Ransom.

Page 22

10-34829-rls Doc85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 22 of 25

10-3

In re Shannon Q. Sturm
Case No. 10-34829

situation now before the Court. As such, the Court must disallow the Debtor’s claim of a $761.00

deduction on line 20B of her ‘means test’ calculation on Form B22A.

Summary

In the end, the ultimate question in this matter, as observed by the District Court, is whether
the Debtor’s means-test calculation crosses the presumptive abuse threshold, as provided in
§ 707(b)\ 2A), of $195.42 per month. (Doc. No. 84, at pg. 3, fn. 1). In this matter, having
disallowed the Debtor a Local Standards deduction for housing in the amount of $761.00 per month,
the presumption of abuse arises, notwithstanding the dispute between the Parties concerning the

‘marital adjustment.’

In particular, the UST’s calculation under the ‘means test,’ which resulted in a monthly
‘disposable income’ of $597.27, can only be adjusted downward by at most $334.00, to $263.27,
representing the difference between the Debtor’s claim of a ‘marital adjustment’ in the amount of
$3,473.00 and the UST allowance of a ‘marital adjustment’ in favor of the debtor in the amount of
$3,138.87. Accordingly, as the amount of $263.27 per month exceeds the abuse threshold of $195.42

per month, the presumption of abuse arises in this case for purposes of § 707(b)(2).

In reaching these conclusions, 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.

Page 23

4829-rls Doc85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 23 of 25

In re Shannon Q. Sturm
Case No. 10-34829

Accordingly, it is

ORDERED that, subject to the Debtor’s election to convert this case, the Motion of the
United States Trustee to Dismiss under 11 U.S.C. § 707(b)(1) and § 707(b)(2), 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 Tuesday, October 9, 2012, this case is still proceeding under Chapter 7 of

the United States Bankruptcy Code.

Dated: September 21, 2012

Logdoan

Richard L. Speer
United States
Bankruptcy Judge

Page 24

10-34829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 24 of 25

CERTIFICATE OF SERVICE

Copies were mailed this 21st day of September, 2012 to:

Chase Auto Finance
201 N. Central Ave, Floor 11
Phoenix, AZ 85004

Douglas A Dymarkowski
5431 Main Street
Sylvania, OH 43560

Shannon Q Sturm
4405 283rd St.
Toledo, OH 43611

Gary E Horn
4325 Willys Pkwy
Toledo, OH 43612

Amy Good ust08
201 Superior Avenue, Suite 441
Cleveland, OH 44114

Derrick Rippy ust11
201 Superior Avenue, Suite 441
Cleveland, OH 44114

/s/Jennifer S Huff
Deputy Clerk, U.S. Bankruptcy Court

10-34829-rls Doc 85 FILED 09/21/12 ENTERED 09/21/12 16:26:59 Page 25 of 25