Bankruptcy: In Re Dale E. Anderson

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U.S. Bankruptcy Court, Western District of New York

Bankruptcy

Abusive Filings — Retirement-Conversion to Chapter 13

In Re Dale E. Anderson
10-11161
Judge Bucki

Background: The Office of the United States Trustee has moved to dismiss this Chapter 7 case as an abusive filing under 11 U.S.C. §707(b). Although he concedes income at a level that would satisfy the statutory requirement for a finding of abuse, the debtor asserts that his special circumstances should rebut that presumption, and that in any event, the court should exercise discretion to deny the motion for dismissal.
Anderson filed a petition for relief under Chapter 7 of the Bankruptcy Code on March 26, 2010. In schedules submitted with that petition, Anderson disclosed that he resided with a girlfriend and that he himself earned monthly gross wages of $7,219. Anderson did not disclose his companion’s income on the schedules, although he testified at the meeting of creditors that she earned approximately $100,000 annually. The schedules report unsecured debt of more than $212,000, of which the majority represents cash advances on credit cards. Anderson has represented that he used most of that money to fund a series of loans to an acquaintance who may not now have the ability to repay. The debtor also asserts that the special circumstances of age should serve to rebut the presumption of abuse. Second, he contends that because a liquidation of assets in Chapter 7 might facilitate a recovery for creditors, the court should exercise discretion to deny dismissal.
At the time of his bankruptcy filing, Dale Anderson was 67 years old. Asserting that he is likely to retire sometime during the next 60 months, he anticipates a substantial reduction in income. Meanwhile, prior to retirement, he proposes to pay his entire net disposable income into a pension account, with the consequence that he would have no resources for repayment of creditors.

Ruling: The court notes that it must presume abuse whenever the debtor’s 60-month disposable income exceeds the limits specified by the statute. Without consideration of any wages received by the debtor’s girlfriend, this form showed a presumption of abuse. Indeed, in papers opposing the trustee’s motion to dismiss, the debtor concedes that presumption.
The court further observes that the debtor remains gainfully employed and in good health. “Essentially, his argument suggests that because he would like to retire in the near future, the court should excuse the consequences of his presumptive abuse of the bankruptcy code. We reject this position,” the court states in its decision. If age were to cause a serious medical condition, then that medical condition might constitute a special circumstance that would rebut a presumption of abuse. By itself, however, the debtor’s age does not excuse any obligation to creditors and the court observes that the debtor was gainfully employed on the day of bankruptcy filing, “that he continues his employment at the present time, and that his employment generates a current monthly income that compels a finding of abuse within the meaning of 11 U.S.C. § 707(b)(2)(A).”
Without knowledge of the entire household income and expenses, the court notes its inability to determine the limits of a plan that would satisfy the requirements for confirmation in Chapter 13. For this same reason, it is unable to determine whether the household’s disposable income might compel a Chapter 13 distribution greater than the net liquidation value of outstanding assets. Accordingly, the debtor merely speculates in his comparison of outcomes as between Chapter 7 and Chapter 13.
The court grants the motion of the United States Trustee to dismiss the bankruptcy petition of Dale E. Anderson. If the debtor wishes to resolve his liabilities through means of a structured plan, he may convert this matter into a proceeding under Chapter 13, according to the court. To allow for that possibility, the order of dismissal is made effective on the fourteenth day after its entry, and then only if the debtor fails to complete the conversion of the case.

Joseph W. Allen, assistant United States trustee, for the trustee; Peter D. Grubea for the debtor