Case:04-03642-jdg

Doc #:19 Filed: 11/10/04

Page 1 of 5

UNITED STATES BANKRUPTCY COURT

In re:
Matthew T. and Rebecca L. Fleury,

Case No. SK04-03642

Debtors./

MOTION OF THE UNITED STATES TRUSTEE

Saul Eisen, United States Trustee for Region 9 (Michigan/Ohio), moves this Court to
dismiss this case for the reason that granting the Debtors a discharge under Chapter 7 would
constitute a substantial abuse of the Bankruptcy Code in violation of 11 U.S.C. Section 707(b).
In support of this motion, the U.S. Trustee states as follows:
1. The U.S. Trustee has supervisory jurisdiction over this case under 11 U.S.C. Section
307, 11 U.S.C. Section 707(b), and 28 U.S.C. Section 586(a)(5).
2. On March 23, 2004, the Debtors filed a petition for relief under Chapter 7 of the
Bankruptcy Code. The Debtors 11 U.S.C. Section 341 Meeting was first scheduled for May 14,
2004. The Court has subsequently entered orders extending the time period to file this motion.
3. The petition lists liabilities totaling $302,723. Included in this total are debts of
$146,095 and $31,800, each secured by a mortgage on the Debtors residence; a debt of $30,469
secured by a lien on the Debtors 2004 Honda; a debt of $24,263 secured by a lien on the
Debtors other 2004 Honda; a debt of $7,500 secured by a lien on the Debtors 1999 Smoker

-1-

Case:04-03642-jdg

Doc #:19 Filed: 11/10/04

Page 2 of 5

Craft boat; and forty general unsecured debts totaling $62,594 1/. These debts appear to be
primarily, if not exclusively, consumer debts within the meaning of 11 U.S.C. Section 707(b).
4. The Schedule of Current Income and Expenses filed with the petition describes the
Debtors monthly net (or take-home) income as $4,721, and their monthly expenses as $5,210.
Therefore, the Debtors indicate they expected to earn $70,164 in 2004. The Debtors reported
earning $79,296 in 2002, and $73,579 in 2001. On their 2003 federal income tax return the
Debtors reported wage and salary income of $88,016, but this was reduced by an unspecified
business loss of $45,311, resulting in a tax refund of $9,614. The Debtors have two dependent
children.
5. Upon the face of the petition and its schedules, the Debtors have no disposable income
which they could apply toward repayment of their debts under Chapter 13.
6. However, the Debtors expenses appear to be unreasonable and overstated. The
Debtors currently spend $546 per month to finance their 2004 Honda Odyssey (valued at
$25,000 and subject to a secured claim of $30,469), which debt they recently reaffirmed. The
Debtors have also reaffirmed their debt on the 2004 Honda CRV at $435/mo. (valued at $17,000
and subject to a secured claim of $24,263). According to the Debtors Schedule J, they allocate
$981/mo. for vehicle installment payments. The Debtors could significantly and reasonably
reduce their vehicle expenditures (including insurance of $175/mo.) by surrendering these
vehicles and replacing them with less costly yet reliable transportation. Assuming the Debtors
could replace the 2004 Hondas each with a vehicle costing only $300 per month, the Debtors

1/

The Debtors have failed to state the consideration given for most of these debts in Schedule F as
required by F.R.B.P. 1007(b)(1).
-2-

Case:04-03642-jdg

Doc #:19 Filed: 11/10/04

Page 3 of 5

would save at least $481 per month. Alternately, the Debtors would find that converting to a
Chapter 13 case could be beneficial to them because they would be able to reduce the amount of
the secured debt down to the value of the vehicles.
7. The Debtors expenses include monthly mortgage payments of $1,298. The home is
valued at $175,000, but subject to mortgage claims of $177,896. Because the Debtors have no
equity in this house, they are essentially paying expensive rent to live there. Nevertheless, the
Debtors have indicated they intend to reaffirm their debts on the house to the secured creditor.
If the Debtors were instead to surrender their home, they could likely find comfortable
replacement housing for $1,000/mo., saving an additional $298/mo..
8. The Debtors expense budget includes some generous monthly allowances for such
additional items as electricity and heating fuel ($300/mo.), telephone ($100/mo.), cable/trash
($66/mo.), food ($675/mo.), and piano lessons/Sports/Child Care in summer ($425/mo.).
These items are not reasonably necessary for the Debtors maintenance and support, and could
reasonably be reduced by $100, $50, $40, $175, and $325 (pro rating child care), respectively,
creating $690 per month to further repay creditors.
9. The Debtors Schedule J also includes a $105 monthly student loan payment. Instead,
these funds should be available to pay all other general unsecured creditors as well. If this is a
nondischargeable debt, an appropriate part of this payment could be devoted to their student loan
obligation as part of a Chapter 13 plan.
10. In deciding a motion to dismiss under 11 U.S.C. Section 707(b), the Bankruptcy
Court can also consider the alternatives available to the Debtors, including good, old-fashioned
belt tightening. In re Krohn, 886 F.2d 123, 128 (6th Cir. 1989); See also, Wilson v. U.S. Trustee

-3-

Case:04-03642-jdg

Doc #:19 Filed: 11/10/04

Page 4 of 5

(In re Wilson), 125 B.R. 742, 746-747 (W.D. Mich. 1990). Therefore, the adjustments discussed
in the paragraphs above are appropriate.
11. After making only the changes discussed in paragraphs 6 through 9 above, not
including any possible tax refunds, the Debtors could now fund a Chapter 13 plan which would
pay $39,060 or 62% to their unsecured creditors over 36 months. The Debtors could pay 100%
of their unsecured creditors over 60 months.
12. Moreover, the Debtors purchased their late-model vehicles at a time when the
Debtors had already incurred much of the debt they seek to discharge and therefore knew, or
should have known, that they could not afford new vehicles. The Debtors financed both of their
2004 Hondas in February of 2004, less than two months before their bankruptcy petition was
filed. This unrestrained spending during the months prior to filing bankruptcy constitutes a lack
of good faith and independent grounds for dismissal of this case.
13. Finally, the Debtors have recently reaffirmed the debt on their 1999 Smokercraft
boat, motor, and trailer. As part of that reaffirmation, Debtors counsel signed a statement that
the reaffirmation does not impose an undue hardship on Debtor or a dependent of Debtor. If
so, these funds should instead be available to repay their unsecured creditors because no
hardship would result.
WHEREFORE, since the debts listed in the bankruptcy petition are primarily consumer
debts and since the Debtors have the ability, once their income and expenses are correctly
reported, to repay all or a significant portion of this debt in a Chapter 13 over three years, and
since the Debtors should have known not to purchase a new vehicles in 2004 so soon before
filing bankruptcy, permitting the Debtors to obtain a discharge under Chapter 7 would constitute

-4-

Case:04-03642-jdg

Doc #:19 Filed: 11/10/04

Page 5 of 5

a substantial abuse of the Bankruptcy Code under In re Behlke, 358 F.3d 429 (6th Cir. 2004) and
In re Krohn, 886 F.2d 123 (6th Cir. 1989). For this reason, the United States Trustee for Region
9 (Michigan/Ohio), respectfully moves this Court to conduct a hearing on this motion and to
dismiss, under 11 U.S.C. Section 707(b), the Debtors petition for relief under Chapter 7.

SAUL EISEN
United States Trustee
Region 9 (Michigan/Ohio)

Dated:

11-10-04

By:

/s/
Dean E. Rietberg (P38872)
Trial Attorney
Office of the U.S. Trustee
330 Ionia Ave. NW - Suite 202
Grand Rapids, MI 49503
Tel: (616) 456-2002 ext. 15

-5-